Smith Barney
INVESTMENT TRUST
388 Greenwich Street
New York, New York 10013
(800) 451-2010

	March 30, 1998

This Statement of Additional Information (the 
"SAI")) supplements the information contained 
in the current Prospectus of the Smith Barney 
Large Capitalization Growth Fund (the Fund) 
dated March 30, 1998, as amended or 
supplemented from time to time, and should be 
read in conjunction with the Prospectus.  The 
Prospectus may be obtained by contacting a 
Smith Barney Financial Consultant, or by 
writing or calling Smith Barney Investment 
Trust (the "Trust"), of which the Large 
Capitalization Fund is a series, at the address 
or telephone number set forth above.  This SAI, 
although not in itself a prospectus, is 
incorporated by reference into each Prospectus 
in its entirety.

TABLE OF CONTENTS

For ease of reference, the section headings 
used in this SAI are identical to those used in 
each Prospectus except as noted in parentheses 
below:

Management of the Trust and the Funds	
1
Investment Objectives and Management Policy	
4
Purchase of Shares	
8
Redemption of Shares	
9
Distributor	
10
Valuation of Shares	
11
Exchange Privilege	
12
Performance Data (See in the Prospectus 
"Performance" )	
12
Taxes (See in the Prospectus "Dividend, 
Distribution and Taxes"	)
15
Additional Information	
16
Financial Statements	
17
MANAGEMENT OF THE TRUST AND THE FUND
The executive officers of the Fund are 
employees of certain of the organizations that 
provide services to the Fund.  These 
organizations are as follows:
NAME	SERVICE
Smith Barney Inc. ("Smith Barney" or the 
"Distributor")	
Distributor
Mutual Management Corp. ("MMC" or the 
"Manager")	
Investment Manager
PNC Bank, National Association ("PNC" or the 
"Custodian")	
Custodian
First Data Investor Services Group, Inc.,
("First Data" or the " Custodian")	

Transfer Agent

These organizations and the functions they 
perform for the Fund are discussed in the 
Prospectus and in this SAI.


TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST

The names of the Trustees of the Trust and 
executive officers of the Fund, together with 
information as to their principal business 
occupations, are set forth below.  The 
executive officers of the Fund are employees of 
organizations that provide services to the 
Fund.  Each Trustee who is an "interested 
person" of the Trust, as defined in the 
Investment Company Act of 1940, as amended (the 
"1940 Act"), is indicated by an asterisk.

	Herbert Barg (Age 74). Private Investor.  
His address is 273 Montgomery Avenue, Bala 
Cynwyd, Pennsylvania 19004.

	*Alfred J. Bianchetti, Trustee (Age 75).  
Retired; formerly Senior Consultant to Dean 
Witter Reynolds Inc.  His address is 19 Circle 
End Drive, Ramsey, New Jersey 07466.

	Martin Brody, Trustee (Age 76).  
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, Trustee (Age 60).  
Professor, Harvard Business School.  His 
address is c/o Harvard Business School, 
Soldiers Field Road, Boston, Massachusetts 
02163.

	Burt N. Dorsett, Trustee (Age 67).  
Managing Partner of Dorsett McCabe Management. 
Inc., an investment counseling firm; Trustee 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, Trustee (Age 71).  
Chairman of the Board and President of The 
Dress Barn, Inc.  His address is 30 Dunnigan 
Drive, Suffern, New York 10901.

	Stephen E. Kaufman, Trustee (Age 66).  
Attorney.  His address is 277 Park Avenue, New 
York, New York 10172.

	Joseph J. McCann, Trustee (Age 67).  
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 64).  Managing 
Director of Smith Barney, Chairman of the Board 
of Smith Barney Strategy Advisers Inc. and 
President of MMC and Travelers Investment 
Adviser, Inc. ("TIA"); prior to July 1993, 
Senior Executive Vice President of Shearson 
Lehman Brothers Inc., Vice Chairman of Shearson 
Asset Management.  Mr. McLendon is Chairman of 
the Board of 42 Smith Barney Mutual Funds. His 
address is 388 Greenwich Street, New York, New 
York 10013.

	Cornelius C. Rose, Jr., Trustee (Age 64).  
President, Cornelius C. Rose Associates, Inc., 
financial consultants, and Chairman and Trustee 
of Performance Learning Systems, an educational 
consultant.  His address is Fair Oaks, Enfield, 
New Hampshire 03748.

	James J. Crisona,  Trustee Emeritus.  
Attorney; formerly Justice of the Supreme Court 
of the State of New York.  His address is 118 
East 60th Street,  New York,  New York 10022

	Lewis E. Daidone, Senior Vice President 
and Treasurer (Age 40).  Managing Director of 
Smith Barney, Chief Financial Officer of the 
Smith Barney Mutual Funds; Director and Senior 
Vice President of MMC and TIA. Mr. Daidone 
serves as Senior Vice President and Treasurer 
of 42 Smith Barney Mutual Funds.  His address 
is 388 Greenwich Street, New York, New York 
10013.

	Alan Blake, Vice President and Investment 
Officer (Age 48), Managing Director of Smith 
Barney.  His address is 388 Greenwich Street, 
New York, New York 10013.

	Christina T. Sydor, Secretary (Age 46), 
Managing Director of Smith Barney. General 
Counsel and Secretary of MMC and TIA.  Ms. 
Sydor serves as secretary of 42 Smith Barney 
Mutual Funds.  Her address is 388 Greenwich 
Street, New York, New York 10013.

	No officer, director or employee of Smith 
Barney or any of its affiliates receives any 
compensation from the Trust for serving as an 
officer of the Fund or Trustee of the Trust.  
The Trust pays each Trustee who is not an 
officer, director or employee of Smith Barney 
or any of its affiliates a fee of $8,000 per 
annum plus $500 per in-person meeting and $100 
per telephonic meeting.  Each Trustee emeritus 
who is not an officer, director or employee of 
Smith Barney or its affiliates receives a fee 
of $4,000 per annum plus $250 per in-person 
meeting and $50 per telephonic meeting.  All 
Trustees are reimbursed for travel and out-of-
pocket expenses incurred to attend such 
meetings.

	For the fiscal year ended November 30, 
1997, the Trustees of the Fund were paid the 
following compensation:






Name of Person



Aggregate
Compensation
from Fund #
Total
Pension or
Retirement
Benefits Accured
as part of
Fund Expenses


Compensation
from Fund
and Fund
Complex
Paid to Trustees

Number of
Funds for
Which Trustees
Serves Within
Fund Complex
Herbert Barg
$6,600
$0
$101,600
18
Alfred Bianchetti*
  6,600
  0
49,600
13
Martin Brody
  6,000
  0
119,814
21
Dwight B. Crane
  6,600
  0
133,850
24
Burt N. Dorsett
  6,600
  0
49,600
13
Elliot S. Jaffe
  6,600
  0
48,500
13
Stephen E. Kaufman
  6,600
  0
91,964
15
Joseph J. McCann
  6,600
  0
49,600
13
Heath B. McLendon *
-
-
-
42
Cornelius C. Rose, Jr.
  6,600
  0
49,600
13
	
*      Designates an "interested" Trustee.
#   Upon attainment of age 80, Fund Trustees 
are required to change to emeritus status.  
Trustees 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 Trustees, together with 
reasonable out-of-pocket expenses for each 
meeting attended.  Mr. Crisona is a Trustee 
Emeritus and as such may attend meetings but 
has no voting rights. During the Funds last 
fiscal year,  aggregate compensation paid by 
the Fund to Trustees achieving emeritus status 
totaled $11,423

Investment Manager - MMC

MMC serves as investment manager to the Fund 
pursuant to an investment management agreement 
(the "Investment Management Agreement") with 
the Trust which was approved by the Board of 
Trustees, including a majority of Trustees who 
are not "interested persons" of the Trust or 
the Manager.  The Manager is a wholly owned 
subsidiary of Salomon Smith Barney Holdings 
Inc. ("Holdings"), which in turn, is a wholly 
owned subsidiary of Travelers Group Inc. 
("Travelers").  The services provided by the 
Manager under the Investment Management 
Agreement are described in the prospectus under 
"Management of the Trust and 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.
As compensation for investment management 
services, the Fund pays the Manager a fee 
computed daily and paid monthly at the annual 
rate of 0.75% of the Fund's average daily net 
assets.

Counsel and Auditors

Willkie Farr & Gallagher serves as legal 
counsel to the Trust.  The Trustees who are not 
"interested persons" of the Trust have 
selected Stroock & Stroock & Lavan LLP as their 
counsel.

KPMG Peat Marwick LLP, independent auditors, 
345 Park Avenue, New York, New York 10154, have 
been selected to serve as auditors of the Trust 
and to render opinions on the Funds financial 
statements for the fiscal year ended November 
30, 1998.

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

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 that the Fund may 
utilize and certain risks attendant to such 
investments, policies and strategies.

Money Market Instruments. As stated in the 
Prospectus, the Fund may invest for temporary 
defensive purposes in corporate and government 
bonds and notes and money market instruments.  
Money market instruments in which the Fund may 
invest 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.  The following is a more 
detailed description of such money market 
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.
Domestic commercial banks organized under 
Federal law are supervised and examined by the 
Comptroller of the Currency and are required to 
be members of the Federal Reserve System and to 
be insured by the Federal Deposit Insurance 
Corporation the ("FDIC").  Domestic banks 
organized under state law are supervised and 
examined by state banking authorities but are 
members of the Federal Reserve System only if 
they elect to join.  Most state banks are 
insured by the FDIC (although such insurance 
may not be of material benefit to the Fund, 
depending upon the principal amount of CDs of 
each bank held by the Fund) and are subject to 
Federal examination and to a substantial body 
of Federal law and regulation.  As a result of 
governmental regulations, domestic branches of 
domestic banks are, among other things, 
generally required to maintain specialized 
levels of reserves, and are subject to other 
supervision and regulation designed to promote 
financial soundness.
Obligations of foreign branches of domestic 
banks, such as CDs and TDs, may be general 
obligations of the parent bank in addition to 
the issuing branch, or may be limited by the 
terms of a specific obligation and governmental 
regulation.  Such obligations are subject to 
different risks than are those of domestic 
banks or domestic branches of foreign banks. 
These risks include foreign economic and 
political developments, foreign governmental 
restrictions that may adversely affect payment 
of principal and interest on the obligations, 
foreign exchange controls and foreign 
withholding and other taxes on interest income.  
Foreign branches of domestic banks are not 
necessarily subject to the same or similar 
regulatory requirements that apply to domestic 
banks, such as mandatory reserve requirements, 
loan limitations, and accounting, auditing and 
financial recordkeeping requirements.  In 
addition, less information may be publicly 
available about a foreign branch of a domestic 
bank than about a domestic bank.  CDs issued by 
wholly owned Canadian subsidiaries of domestic 
banks are guaranteed as to repayment of 
principal and interest (but not as to sovereign 
risk) by the domestic parent bank.
Obligations of domestic branches of foreign 
banks may be general obligations of the parent 
bank in addition to the issuing branch, or may 
be limited by the terms of a specific 
obligation and by Federal and state regulation 
as well as governmental action in the country 
in which the foreign bank has its head office.  
A domestic branch of a foreign bank with assets 
in excess of $1 billion may or may not be 
subject to reserve requirements imposed by the 
Federal Reserve System or by the state in which 
the branch is located if the branch is licensed 
in that state.  In addition, branches licensed 
by the Comptroller of the Currency and branches 
licensed by certain states ("State Branches") 
may or may not be required: (a) to pledge to 
the regulator by depositing assets with a 
designated bank within the state, an amount of 
its assets equal to 5% of its total 
liabilities; and (b) to maintain assets within 
the state in an amount equal to a specified 
percentage of the aggregate amount of 
liabilities of the foreign bank payable at or 
through all of its agencies or branches within 
the state.  The deposits of State Branches may 
not necessarily be insured by the FDIC.  In 
addition, there may be less publicly available 
information about a domestic branch of a 
foreign bank than about a domestic bank.
In view of the foregoing factors associated 
with the purchase of CDs and TDs issued by 
foreign branches of domestic banks or by 
domestic branches of foreign banks, the Manager 
will carefully evaluate such investments on a 
case-by-case basis.  Savings and loans 
associations whose CDs may be purchased by the 
Fund are supervised by the Office of Thrift 
Supervision and are insured by the Savings 
Association  Insurance Fund.  As a result, such 
savings and loan associations are subject to 
regulation and examination.

American, European and Continental Depository 
Receipts.  The Fund may invest in the 
securities of foreign and domestic issuers in 
the form of American Depository Receipts 
("ADRs") and European Depository Receipts 
("EDRs").  These securities may not 
necessarily be denominated in the same currency 
as the securities into which they may be 
converted.  ADRs are receipts typically issued 
by a U.S. bank or trust company that evidence 
ownership of underlying securities issued by a 
foreign corporation.  EDRs, which sometimes are 
referred to as Continental Depository Receipts 
("CDRs"), are receipts issued in Europe 
typically by foreign banks and trust companies 
that evidence ownership of either foreign or 
domestic securities.  Generally, ADRs, in 
registered form, are designed for use in U.S. 
securities markets and EDRs and CDRs, in bearer 
form, are designed for use in European 
securities markets.

Miscellaneous Investment Policies

The Fund may invest up to an aggregate amount 
equal to 10% of its net assets of illiquid 
securities, which term includes securities 
subject to contractual or other restrictions on 
resale and other instruments that lack readily 
available markets.

Investment Restrictions

The investment restrictions numbered 1 through 
7 below have been adopted by the Trust as 
fundamental policies of the Fund.  Under the 
1940 Act, a fundamental policy may not be 
changed with respect to a Fund without the vote 
of a majority of the outstanding voting 
securities of the Fund.  Majority is defined in 
the 1940 Act as the lesser of (a) 67% or more 
of the shares present at a Fund meeting, if the 
holders of more than 50% of the outstanding 
shares of the Fund are present or represented 
by proxy, or (b) more than 50% of outstanding 
shares.  Investment restrictions 8 through 13 
may be changed by a vote of a majority of the 
Trusts Board of Trustees at any time.

Under the investment restrictions adopted by 
the Trust with respect to the Fund:  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. Invest more than 25% of its total assets in 
securities, the issuers of which conduct their 
business activities in the same industry. For 
purposes of this limitation, securities of the 
U.S. government (including its agencies and 
instrumentalities) and securities of state or 
municipal governments and their political 
subdivisions are not considered to be issued by 
members of any industry.

3. 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 331/3% 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.

4. 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

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. 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 Funds investment 
objective and policies);  or (d) investing in 
real estate investment trust securities.

7. 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.

8. 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.  

9. Invest in oil, gas or other mineral leases 
or exploration or development programs.

10. Write or sell puts, calls, straddles, 
spreads or combinations of those transactions, 
except as permitted under the Funds investment 
objective and policies.

11. Purchase any security if, as a result 
(unless the security is acquired pursuant to a 
plan of reorganization or an offer of 
exchange), the Fund would own any securities of 
an open-end investment company or more than 3% 
of the total outstanding voting stock of any 
closed-end investment company, or more than 5% 
of the value of the Funds total assets would be 
invested in securities of any one or more 
closed-end investment companies.

12. Purchase a security if, as a result, the 
Fund would then have more than 5% of its total 
assets invested in securities of issuers 
(including predecessors) that have been in 
continuous operation for fewer than three 
years, except that this limitation will be 
deemed to apply to the entity supplying the 
revenues from which the issue is to be paid, in 
the case of private activity bonds purchased.

13. Make investments for the purpose of 
exercising control of management.

Portfolio Transactions 

Decisions to buy and sell securities for the 
Fund are made by the Manager, subject to the 
overall review of the Trusts Board of Trustees.  
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.  
The Trust has paid no brokerage commissions 
since its commencement of operations.

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 Funds 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.

Portfolio Turnover

While the Funds portfolio turnover rate (the 
lesser of purchases or sales of portfolio 
securities during the year, excluding purchases 
or sales of short-term securities, divided by 
the monthly average value of portfolio 
securities) is generally not expected to exceed 
100%, it has in the past exceeded 100%.  The 
rate of turnover will not be a limiting factor, 
however, when the Fund deems it desirable to 
sell or purchase securities.  This policy 
should not result in higher brokerage 
commissions to the Fund, as purchases and sales 
of portfolio securities are usually effected as 
principal transactions.  Securities may be sold 
in anticipation of a rise in interest rates 
(market decline) or purchased in anticipation 
of a decline in interest rates (market rise) 
and later sold.  In addition, a security may be 
sold and another security of comparable quality 
purchased at approximately the same time to 
take advantage of what the Fund believes to be 
a temporary disparity in the normal yield 
relationship between the two securities.  These 
yield disparities may occur for reasons not 
directly related to the investment quality of 
particular issues or the general movement of 
interest rates, such as changes in the overall 
demand for, or supply of, various types of tax-
exempt securities.
The portfolio turnover rate for the period 
ended November 30, 1997 was 1%. 

PURCHASE OF SHARES

Volume Discounts

The schedules of sales charges described in the 
Prospectus apply to purchases of shares of the 
Fund made by any "purchaser," which term is 
defined to include the following: (a) an 
individual; (b) an individuals spouse and his 
or her children purchasing shares for his or 
her own account; (c) a trustee or other 
fiduciary purchasing shares for a single trust 
estate or single fiduciary account; (d) a 
pension, profit-sharing or other employee 
benefit plan qualified under Section 401(a) of 
the Code and qualified employee benefit plans 
of employers who are "affiliated persons" of 
each other within the meaning of the 1940 Act; 
(e) tax-exempt organizations enumerated in 
Section 501(c)(3) or (13) of the Code; or (f) 
any other organized group of persons, provided 
that the organization has been in existence for 
at least six months and was organized for a 
purpose other than the purchase of investment 
company securities at a discount.  Purchasers 
who wish to combine purchase orders to take 
advantage of volume discounts should contact a 
Smith Barney Financial Consultant.

Combined Right of Accumulation

Reduced sales charges, in accordance with the 
schedules in the Prospectus, apply to any 
purchase of shares of a Fund by any 
"purchaser" (as defined above).  The reduced 
sales charge is subject to confirmation of the 
shareholders holdings through a check of 
appropriate records.  The Trust reserves the 
right to terminate or amend the combined right 
of accumulation at any time after written 
notice to shareholders.  For further 
information regarding the right of 
accumulation, shareholders should contact a 
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 a 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 C 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 contingent 
deferred sales charge ("CDSC"), however, is 
imposed on certain redemptions of Class C 
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 Funds financial statements, 
incorporated by reference in their entirety 
into this SAI.

REDEMPTION OF SHARES

Detailed information on how to redeem shares of 
the Fund is included in the Prospectus.  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 New York 
Stock Exchange, Inc.  (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 Funds 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 Funds shareholders.

Distribution in Kind

If the Board of Trustees 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 Funds net assets by 
a distribution in kind of portfolio securities 
in lieu of cash.  Securities issued as a 
distribution in kind may incur brokerage 
commissions when shareholders 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 CDSC will not be 
waived on amounts withdrawn by shareholders 
that exceed 1.00% per month of the value of a 
shareholders shares at the time the Withdrawal 
Plan commences.  (With respect to Withdrawal 
Plans in effect prior to November 7, 1994, any 
applicable CDSC will be waived on amounts 
withdrawn that do not exceed 2.00% per month of 
the value of a shareholders shares at the time 
the Withdrawal Plan commences).  To the extent 
that withdrawals exceed dividends, 
distributions and appreciation of a 
shareholders investment in a Fund, continued 
withdrawal payments will reduce the 
shareholders 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 months 
withdrawal.  For additional information, 
shareholders should contact a Smith Barney 
Financial Consultant.

DISTRIBUTOR

Smith Barney serves as the Trusts distributor 
on a best efforts basis pursuant to a written 
agreement (the Distribution Agreement"), which 
was approved by the Trusts Board of Trustees.  

For the fiscal year ended November 30, 1997, 
the Distributor  received approximately 
$3,023,000 in sales charges for the sale of the 
Funds Class A shares, and did not reallow any 
portion thereof to dealers. 

For the fiscal year ended November 30, 1997, 
the Distributor received approximately $28,000 
representing CDSC on redemption of the Funds 
Class B shares.

For the fiscal year ended November 30, 1997, 
the Distributor received approximately $3,000 
representing CDSC on redemption of the Funds 
Class C shares.

When payment is made by the investor before the 
settlement date, unless otherwise requested in 
writing by the investor, the funds will be held 
as a free credit balance in the investors 
brokerage account and Smith Barney may benefit 
from the temporary use of the funds.  The 
investor may designate another use for the 
funds prior to settlement date, such as an 
investment in a money market fund (other than 
Smith Barney Exchange Reserve Fund) of the 
Smith Barney Mutual Funds.  If the investor 
instructs Smith Barney to invest the funds in a 
Smith Barney money market fund, the amount of 
the investment will be included as part of the 
average daily net assets of both the Fund and 
the money market fund, and affiliates of Smith 
Barney that serve the funds in an investment 
advisory or administrative capacity will 
benefit from the fact that they are receiving 
fees from both such investment companies for 
managing these assets, computed on the basis of 
their average daily net assets.  The Trusts 
Board of Trustees has been advised of the 
benefits to Smith Barney resulting from these 
settlement procedures and will take such 
benefits into consideration when reviewing the 
Investment Management and Distribution 
Agreements for continuance.

For the fiscal year ended November 30, 1997, 
the Distributor incurred distribution expenses 
totaling approximately $10,736,062, consisting 
of approximately $373,258 for advertising, 
$4,583 for printing and mailing of 
prospectuses, $1,811,797 for support services, 
$8,177,797 to Smith Barney Financial 
Consultants, and $368,627 in accruals for 
interest on the excess of Smith Barney expenses 
incurred in distribution of the Funds shares 
over the sum of the distribution fees and CDSC 
received by Smith Barney from the Fund.

For the fiscal year ended November 30, 1997, 
the Distributor, received $551,254 in the 
aggregate from the Plan.

Under its terms, the Plan continues from year 
to year, provided such continuance is approved 
annually by vote of the Board of Trustees, 
including a majority of the Trustees who are 
not interested persons of the Trust and who 
have no direct or indirect financial interest 
in the operation of the Plan or in the 
Distribution Agreement (the "Independent 
Trustees").  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 Trustees including all of the 
Independent Trustees in the manner described 
above.  The Plan may be terminated with respect 
to a Class at any time, without penalty, by 
vote of a majority of the Independent Trustees 
or, with respect to any Fund, by vote of a 
majority of the outstanding voting securities 
of a Fund (as defined in the 1940 Act).  
Pursuant to the Plan, Smith Barney will provide 
the Board of Trustees with periodic reports of 
amounts expended under the Plan and the purpose 
for which such expenditures were made.

Distribution Arrangements

To compensate 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 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 
C shares.  In addition, the Fund pays Smith 
Barney a distribution fee with respect to the 
Class B and Class C shares primarily intended 
to compensate Smith Barney for its initial 
expense of paying Financial Consultants a 
commission upon sales of those shares. The 
Class B and Class C 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.

SERVICE FEES

Year Ended
11/30/97
Class A 
	$  64,109
Class B
	101,125
Class C
	20,661

DISTRIBUTION FEES

Year Ended
11/30/97
Class B 
	$303,375
Class C
	61,984


VALUATION OF SHARES

The net asset value per share of the Funds 
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 Years 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 Trustees.  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 
Trustees.  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'
" Board of Trustees.

EXCHANGE PRIVILEGE

Except as noted below, 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 shares of the Fund may be exchanged 
without a sales charge for Class A shares of 
any of the Smith Barney Mutual Funds.
B. Class C shares of any fund may be exchanged 
without a sales charge.  For purposes of CDSC 
applicability, Class C 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.
Dealers other than Smith Barney must notify the 
Transfer Agent of the investors prior ownership 
of Class A shares of Smith Barney High Income 
Fund and the account number in order to 
accomplish an exchange of shares of Smith 
Barney High Income Fund under paragraph B 
above.
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 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 CDSC, the proceeds are 
immediately invested, at a price as described 
above, in shares of the fund being acquired.  
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.

PERFORMANCE DATA

From time to time, the Trust may quote a Funds 
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 Funds shares.  
Such performance information may include the 
following industry and financial publications- 
Barrons, 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 a Fund 
describes the expenses or performance of any 
Class it will also disclose such information 
for the other Classes.

Average Annual Total Return 

A Funds "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 Funds net investment 
income changes in response to fluctuations in 
interest rates and the expenses of the Fund.

Class A shares average annual total return was 
as follows for the period indicated:

(1.84)% for the period from inception (July 14, 
1997) through November 30, 1997.

The average annual total return figure assumes 
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, the average annual total return 
for Class A shares for the same period would 
have been 3.37%.

Class B shares average annual total return was 
as follows for the period indicated:

(1.80)% for the period from inception (July 14, 
1997) through November 30, 1997.

The average annual total return figure assumes 
that the maximum applicable CDSC has been 
deducted from the investment at the time of 
redemption.  If the maximum CDSC had not been 
deducted, the average annual total return for 
Class B shares for the same period would have 
been 3.20%.

Class C shares average annual total return was 
as follows for the period indicated:

2.2% for the period from inception (July 14, 
1997) through November 30, 1997.

The average annual total return figure assumes 
that the maximum applicable CDSC has been 
deducted from the investment at the time of 
redemption.  If the maximum CDSC had not been 
deducted, the average annual total return for 
Class C shares for the same period would have 
been 3.20%.

Class Y shares average annual total return was 
as follows for the period indicated:
(2.92)% for the period from inception (July 14, 
1997) through November 30, 1997.

Class Y shares do not incur sales charges nor 
CDSCs.

Aggregate Total Return

The Funds "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 shares aggregate total return was as 
follows for the period indicated:

(1.84)% for the period from inception (July 14, 
1997) through November 30, 1997.

The aggregate total returns 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, the aggregate total return for 
Class A shares for the same period would have 
been 3.37%.

Class B shares aggregate total return was as 
follows for the period indicated:

(1.80)% for the period from inception (July 14, 
1997) through November 30, 1997.

The aggregate total returns figures assume that 
the maximum applicable CDSC has been deducted 
from the investment at the time of redemption.  
If the maximum CDSC had not been deducted, the 
aggregate total return for Class B shares for 
the same period would have been 3.20%.

Class C shares average annual total return was 
as follows for the period indicated:

2.20% for the period from inception (July 14, 
1997) through November 30, 1997.

The aggregate total returns figures assume that 
the maximum applicable CDSC has been deducted 
from the investment at the time of redemption.  
If the maximum CDSC had not been deducted, the 
aggregate total return for Class C shares for 
the same period would have been 3.20%.

Class Y shares aggregate total return was as 
follows for the period indicated:

(2.92)% for the period from inception (July 14, 
1997) through November 30, 1997.

Class Y shares do not incur sales charges nor 
CDSCs.

Performance will vary from time to time depends 
upon market conditions, the composition of the 
Funds 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 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 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 certain Federal 
income tax considerations that may affect the 
Fund and its shareholders.  The summary is not 
intended as a substitute for individual tax 
advice and investors are urged to consult their 
own tax advisors as to the tax consequences of 
an investment in the Fund.

The Fund has qualified and intends to continue 
to qualify each year as a regulated investment 
company under the Code.  If the Fund (a) 
qualifies as a regulated investment company and 
(b) distributes to its shareholders at least 
90% of its net investment income (including, 
for this purpose, its net realized short-term 
capital gains), the Fund will not be liable for 
Federal income taxes to the extent that its net 
investment income and its net realized long- 
and short-term capital gains, if any, are 
distributed to its shareholders.

Gains or losses on the sales of stock or 
securities by the Fund generally will be long-
term capital gains or losses if the Fund has 
held the stock or securities for more than one 
year.  Gains or losses on sales of stock or 
securities held for not more than one year 
generally will be short-term capital gains or 
losses.
Any net long-term capital gains realized by the 
Fund will be distributed annually as described 
in the Prospectus.  Such distributions 
("capital gain dividends") will be taxable to 
shareholders as long-term capital gains, 
regardless of how long a shareholder has held 
Fund shares, and will be designated as capital 
gain dividends in a written notice mailed by 
the Fund to shareholders after the close of the 
Funds prior taxable year.  If a shareholder 
receives a capital gain dividend with respect 
to any share and if the share has been held by 
the shareholder for six months or less, then 
any loss on the sale or exchange of such share 
will be treated as a long-term capital loss to 
the extent of the capital gain dividend.

The portion of the dividends received from the 
Fund that qualifies for the dividends-received 
deduction for corporations will be reduced to 
the extent that the Fund holds dividend-paying 
stock for less than 46 days (91 days for 
certain preferred stocks).  The Funds holding 
period will not include any period during which 
the Fund has reduced its risk of loss from 
holding the stock by purchasing an option to 
sell or entering into a short sale of 
substantially identical stock or securities 
convertible into the stock.  The holding period 
for stock may also be reduced if the Fund 
diminishes its risk of loss by holding one or 
more other positions with respect to 
substantially similar or related properties.  
Dividends-received deductions will be allowed 
only with respect to shares that a corporate 
shareholder has held for at least 46 days 
within the meaning of the same holding period 
rules applicable to the Fund.

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 shall be included in the Funds gross 
income as of the later of (a) the date that 
such stock became ex-dividend with respect to 
such dividends (that is, the date on which a 
buyer of the stock would not be entitled to 
receive the declared but unpaid, dividends) or 
(b) the date that 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.

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 (that is 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, 
it will he added to the tax basis in the newly 
acquired shares.  Furthermore, the same rule 
also applies to a disposition of the newly 
acquired or redeemed 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.

Investors considering buying shares of the Fund 
on or just prior to a record date for a taxable 
dividend or capital gain distribution should be 
aware that, regardless of whether the price of 
the Fund shares to be purchased reflects the 
amount of the forthcoming dividend or 
distribution payment, any such payment will be 
a taxable dividend or distribution payment.

If a shareholder fails to furnish a correct 
taxpayer identification number, fails fully to 
report dividend and interest income, or fails 
to certify that he or she has provided a 
correct taxpayer identification number and that 
he or she is not subject to "backup 
withholding," then the shareholder may be 
subject to a 31% backup withholding tax with 
respect to (a) any taxable dividends and 
distributions and (b) the proceeds of any 
redemptions of Fund shares.  An individuals 
taxpayer identification number is his or her 
social security number.  The backup withholding 
tax is not an additional tax and may be 
credited against a shareholders regular 
Federal income tax liability.

The foregoing is only a summary of certain tax 
considerations generally affecting the Fund and 
its shareholders and is not intended as a 
substitute for careful tax planning.  
Shareholders are urged to consult their tax 
advisors with specific reference to their own 
tax situations, including their state and local 
tax liabilities.

ADDITIONAL INFORMATION

The Trust was organized as an unincorporated 
business trust on October 17, 1991 under the 
name Shearson Lehman Brothers Intermediate-Term 
Trust.  On November 20, 1991, July 30, 1993, 
October 14, 1994 and August 16, 1995, the 
Trusts name was changed to Shearson Lehman 
Brothers Income Trust, Smith Barney Shearson 
Income Trust, Smith Barney Income Trust and 
Smith Barney Investment Trust, respectively.

PNC, 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 Funds 
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, located at Exchange Place, Boston, 
Massachusetts 02109, serves as the Trusts 
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.

FINANCIAL STATEMENTS

The Funds Annual Report for the fiscal year 
ended November 30, 1997 is incorporated herein 
by reference in its entirety.



	Smith Barney
	Investment 
	Trust 





















SMITH BARNEY
INVESTMENT TRUST
388 Greenwich Street
New York, NY 10013

	SMITH BARNEY
								      
A Member of Travelers Group

U\LEGAL\SLIT\1998\SECDOCS\LCGSAI98.DOC.
21



Smith Barney
INVESTMENT TRUST
388 Greenwich Street
New York, New York 10013
(800) 451-2010
	March 30, 1998

This Statement of Additional Information (the 
"SAI") supplements the 
information contained in the current 
Prospectuses of the Smith Barney 
Intermediate Maturity California Municipals 
Fund (the "California Fund") and 
the Smith Barney Intermediate Maturity New York 
Municipals Fund (the "New 
York Fund") dated March 30, 1998, as amended or 
supplemented from time to 
time, and should be read in conjunction with 
the Prospectuses.  The 
Prospectuses may be obtained by contacting a 
Smith Barney Financial 
Consultant, or by writing or calling Smith 
Barney Investment Trust (the 
"Trust"), of which each of the California Fund 
and the New York Fund 
(individually referred to as a "Fund" and 
collectively referred to as the 
"Funds") is a series, at the address or 
telephone number set forth above.  
This SAI, although not in itself a prospectus, 
is incorporated by reference 
into each Prospectus in its entirety.

TABLE OF CONTENTS

For ease of reference, the same section 
headings used in this SAI are 
identical to those used in each Prospectus 
except as noted in parentheses 
below:

Management of the Trust and the Funds	
1
Investment Objectives and Management Policies 
the New York & 
California Fund	
6
Purchase of Shares	
24
Redemption of Shares	
25
Distributor	
26
Valuation of Shares	
28
Exchange Privilege	
29
Performance Data (See in the Prospectuses 
"Performance ")	
29
Taxes (See in the Prospectuses "Dividend, 
Distribution and Taxes")	
33
Additional Information	
34
Financial Statements	
35
Appendix	
36
MANAGEMENT OF THE TRUST AND THE FUNDS
The executive officers of the Funds are 
employees of certain of the 
organizations that provide services to the 
Fund.  These organizations are as 
follows:
NAME	SERVICE
Smith Barney Inc. ("Smith Barney" or the 
 " Distributor") )	
Mutual Management Corp.
Distributor
("MMC" "Adviser" "Administrator")	
Investment Adviser and 
Administrator
PNC Bank, National Association ("PNC" or the 
"Custodian)	
Custodian
First Data Investor Services Group, Inc.,	
("First Data" or the "Transfer Agent")
Transfer Agent

These organizations and the functions they 
perform for the Funds are 
discussed in the Prospectuses and in this SAI.
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST

The names of the Trustees of the Trust and 
executive officers of the Funds, 
together with information as to their principal 
business occupations, are set 
forth below.  The executive officers of the 
Funds are employees of 
organizations that provide services to the 
Funds.  Each Trustee who is an 
"interested person" of the Trust, as defined 
in the Investment Company Act of 
1940, as amended (the "1940 Act"), is 
indicated by an asterisk.
	Herbert Barg (Age 74). Private Investor.  
His address is 273 Montgomery 
Avenue, Bala Cynwyd, Pennsylvania 19004.

	*Alfred J. Bianchetti, Trustee (Age 75).  
Retired; formerly Senior 
Consultant to Dean Witter Reynolds Inc.  His 
address is 19 Circle End Drive, 
Ramsey, New Jersey 07466.

	Martin Brody, Trustee (Age 76).  
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, Trustee (Age 60).  
Professor, Harvard Business School.  
His address is c/o Harvard Business School, 
Soldiers Field Road, Boston, 
Massachusetts 02163.

	Burt N. Dorsett, Trustee (Age 67).  
Managing Partner of Dorsett McCabe 
Management. Inc., an investment counseling 
firm; Trustee 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, Trustee (Age 71).  
Chairman of the Board and President 
of The Dress Barn, Inc.  His address is 30 
Dunnigan Drive, Suffern, New York 
10901.

	Stephen E. Kaufman, Trustee (Age 66).  
Attorney.  His address is 277 
Park Avenue, New York, New York 10172.

	Joseph J. McCann, Trustee (Age 67).  
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 
64).  Managing Director of Smith Barney, 
Chairman of the Board of Smith 
Barney Strategy Advisers Inc. and President of 
MMC and Travelers Investment 
Adviser, Inc. ("TIA"); prior to July 1993, 
Senior Executive Vice President of 
Shearson Lehman Brothers Inc., Vice Chairman of 
Shearson Asset Management.  
Mr. McLendon is Chairman of the Board of 42 
Smith Barney Mutual Funds. His 
address is 388 Greenwich Street, New York, New 
York 10013.

	Cornelius C. Rose, Jr., Trustee (Age 64).  
President, Cornelius C. Rose 
Associates, Inc., financial consultants, and 
Chairman and Trustee of 
Performance Learning Systems, an educational 
consultant.  His address is Fair 
Oaks, Enfield, New Hampshire 03748.

	James J. Crisona, Trustee Emeritus.  
Attorney; formerly Justice of the 
Supreme Court of the State of New York.  His 
address is 118 East 60th Street, 
New York, New York 10022

	Lewis E. Daidone, Senior Vice President 
and Treasurer (Age 40).  
Managing Director of Smith Barney, Chief 
Financial Officer of the Smith 
Barney Mutual Funds; Director and Senior Vice 
President of MMC and TIA. Mr. 
Daidone serves as Senior Vice President and 
Treasurer of 42 Smith Barney 
Mutual Funds.  His address is 388 Greenwich 
Street, New York, New York 10013.

Joseph P. Deane, Vice President and Investment 
Officer (Age 49).  
Investment Officer of MMC; Managing Director of 
Smith Barney; prior to July 
1993, Managing Director of Shearson Lehman 
Advisors.  Mr. Deane also serves 
as Investment Officer of 5 Smith Barney Mutual 
Funds.  His address is 388 
Greenwich Street, New York, New York 10013.

Peter Coffey, Vice President and Investment 
Officer (Age 52).  
Investment Officer of MMC; Managing Director of 
Smith Barney; Mr. Coffey also 
serves as Investment Officer of 8 Smith Barney 
Mutual Funds.  His address is 
388 Greenwich Street, New York, New York 10013.

	Christina T. Sydor, Secretary (Age 46), 
Managing Director of Smith 
Barney. General Counsel and Secretary of MMC 
and TIA.  Ms. Sydor serves as 
secretary of 42 Smith Barney Mutual Funds.  Her 
address is 388 Greenwich 
Street, New York, New York 10013.

	No officer, director or employee of Smith 
Barney or any of its 
affiliates receives any compensation from the 
Trust for serving as an officer 
of the Funds or Trustee of the Trust.  The 
Trust pays each Trustee who is not 
an officer, director or employee of Smith 
Barney or any of its affiliates a 
fee of $8,000 per annum plus $500 per in-person 
meeting and $100 per 
telephonic meeting.  Each Trustee emeritus who 
is not an officer, director or 
employee of Smith Barney or its affiliates 
receives a fee of $4,000 per annum 
plus $250 per in-person meeting and $50 per 
telephonic meeting.  All Trustees 
are reimbursed for travel and out-of-pocket 
expenses incurred to attend such 
meetings.

	For the fiscal year ended November 30, 
1997, the Trustees of the Fund 
were paid the following compensation:






Name of Person



Aggregate
Compensat
ion
from Fund 
#
Total
Pension or
Retirement
Benefits 
Accured
as part of
Fund Expenses


Compensatio
n
from Fund
and Fund
Complex
Paid to 
Trustees

Number of
Funds for
Which 
Trustees
Serves 
Within
Fund Complex
Herbert Barg
$6,600
$0
$101,600
18
Alfred 
Bianchetti**
  6,600
  0
49,600
13
Martin Brody
  6,000
  0
119,814
21
Dwight B. Crane
  6,600
  0
133,850
24
Burt N. Dorsett
  6,600
  0
49,600
13
Elliot S. Jaffe
  6,600
  0
48,500
13
Stephen E. 
Kaufman
  6,600
  0
91,964
15
Joseph J. 
McCann
  6,600
  0
49,600
13
Heath B. 
McLendon **
-
-
-
42
Cornelius C. 
Rose, Jr.
  6,600
  0
49,600
13
	
**    Designates an "interested" Trustee.
 #   Upon attainment of age 80, Fund Trustees 
are required to change to 
emeritus status.  Trustees 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 
Trustees, together with reasonable out-of-
pocket expenses for each meeting 
attended.  Mr. Crisona is a Trustee Emeritus 
and as such may attend 
meetings but has no voting rights. During the 
Funds last fiscal year,  
aggregate compensation paid by the Fund to 
Trustees achieving emeritus 
status totaled $11,423

Investment Adviser and Administrator - MMC
The Adviser serves as investment adviser to 
each of the Funds pursuant to an 
investment advisory agreement (the "Investment 
Advisory Agreement") with the 
Trust that was approved by the Board of 
Trustees, including a majority of 
Trustees who are not "interested persons" of 
the Trust or the Adviser.  The 
Adviser is a wholly owned subsidiary of Salomon 
Smith Barney Holdings Inc. 
("Holdings"), which, in turn, is a wholly 
owned subsidiary of Travelers Group 
Inc. ("Travelers").  The services provided by 
the Adviser under the 
Investment Advisory Agreement are described in 
the Prospectuses under 
"Management of the Trust and the Fund." The 
Adviser pays the salary of any 
officer and employee who is employed by both it 
and the Trust.  The Adviser 
bears all expenses in connection with the 
performance of its services.
As compensation for investment advisory 
services, each Fund pays the Adviser 
a fee computed daily and paid monthly at the 
annual rate of 0.30% of the 
Funds average daily net assets.
For the fiscal year ended November 30, 1995, 
the Funds paid the Adviser 
investment advisory fees, and the investment 
adviser waived fees and 
reimbursed expenses as follows: 



Fees Waived


and Expenses
Fund 
Fees Paid 
Reimbursed
California Fund 
$22,385
$65,910
New York Fund 
  82,898
115,831

For the fiscal year ended November 30, 1996, 
the Funds paid the Adviser 
investment advisory fees, and the investment 
adviser waived fees and 
reimbursed expenses as follows:


Fees Waived


and Expenses
Fund 
Fees Paid 
Reimbursed
California Fund 
$       0
$128,361
New York Fund 
32,306
  122,796

For the fiscal year ended November 30, 1997, 
the Funds paid the Adviser 
investment advisory fees, and the investment 
adviser waived fees and 
reimbursed expenses as follows:

Fund 
Fees Paid 
Fees Waived
California Fund 
$20,278
$63,087
New York Fund 
  59,523
  90,299

MMC also serves as administrator to the New 
York and California Funds 
pursuant to a written agreement (the 
"Administration Agreement"), which was 
approved by the Trustees of the Trust, 
including a majority of Trustees who 
are not "interested persons"  of the Trust or 
the Administrator.  The services 
provided by the Administrator under the 
Administration Agreement are 
described in the Prospectuses under "Management 
of the Trust and the Fund." 
The Administrator pays the salary of any 
officer and employee who is employed 
by both it and the Trust and bears all expenses 
in connection with the 
performance of its services.
As compensation for administrative services 
rendered to each Fund, the 
Administrator receives a fee computed daily and 
paid monthly at the annual 
rate of 0.20% of the Funds average daily net 
assets.
Prior to June 26, 1995, and July 10, 1995, for 
New York Fund and California 
Fund, respectively, The Boston Company 
Advisors, Inc. ("Boston Advisors"), an 
indirect wholly owned subsidiary of Mellon Bank 
Corporation, served as the 
Funds sub-administrator.

For the fiscal year ended November 30, 1995 the 
Funds paid the Administrator 
administration fees and the Administrator 
waived fees as follows:


Fees Waived


and Expenses
Fund 
Fees Paid 
Reimbursed
California Fund 
$17,121
$37,626
New York Fund 
  47,695
  65,864

For the fiscal year ended November 30, 1996 the 
Funds paid the Administrator 
administration fees and the Administrator 
waived fees as follows:


Fees Waived


and Expenses
Fund 
Fees Paid 
Reimbursed
California Fund 
$       0
$85,575
New York Fund 
10,906
  92,495
For the fiscal year ended November 30, 1997 the 
Funds paid the Administrator 
administration fees and the Administrator 
waived fees as follows:


Fees Waived


and Expenses
Fund 
Fees Paid 
Reimbursed
California Fund 
$13,518
$42,058
New York Fund 
  33,023
  66,858

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

Counsel and Auditors

Willkie Farr & Gallagher serves as legal 
counsel to the Trust.  The Trustees 
who are not "interested persons" of the Trust 
have selected Stroock & Stroock 
& Lavan LLP as their counsel.
KPMG Peat Marwick LLP, independent auditors, 
345 Park Avenue, New York, New 
York 10154, have been selected to serve as 
auditors of the Trust and to 
render opinions on the Funds financial 
statements for the fiscal year ended 
November 30, 1998.

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES 
FOR THE NEW YORK AND CALIFORNIA FUND

The Prospectuses discuss the investment 
objective of each Fund and the 
principal policies to be employed to achieve 
that objective.  Supplemental 
information is set out below concerning the 
types of securities and other 
instruments in which the Funds may invest, the 
investment policies and 
strategies that the Funds may utilize and 
certain risks attendant to those 
investments, policies and strategies.

United States Government Securities

Securities issued or guaranteed by the United 
States government or one of its 
agencies, authorities or instrumentalities 
("U.S. government securities") in 
which each of the California Fund and the New 
York Fund may invest include 
debt obligations of varying maturities issued 
by the United States Treasury 
or issued or guaranteed by an agency or 
instrumentality of the United States 
government, including the Federal Housing 
Administration, Export-Import Bank 
of the United States, Small Business 
Administration, Government National 
Mortgage Association, General Services 
Administration, Federal Home Loan 
Banks, Federal Home Loan Mortgage Corporation, 
Federal Intermediate Credit 
Banks, Federal National Mortgage Association, 
Maritime Administration, 
Tennessee Valley Authority, District of 
Columbia Armory Board, Student Loan 
Marketing Association, Resolution Trust 
Corporation and various institutions 
that previously were or currently are part of 
the Farm Credit System (which 
has been undergoing a reorganization since 
1987).  Direct obligations of the 
United States Treasury include a variety of 
securities that differ in their 
interest rates, maturities and dates of 
issuance.  Because the United States 
government is not obligated by law to provide 
support to an instrumentality 
that it sponsors, neither of the Funds will 
invest in obligations issued by 
an instrumentality of the United States 
government unless the Adviser 
determines that the instrumentalitys credit 
risk does not make its securities 
unsuitable for investment by the Fund.

Municipal Obligations

Each of the Funds invests principally in debt 
obligations issued by, or on 
behalf of, states, territories and possessions 
of the United States and the 
District of Columbia and their political 
subdivisions, agencies and 
instrumentalities or multistate agencies or 
authorities, the interest from 
which debt obligations is, in the opinion of 
bond counsel to the issuer, 
excluded from gross income for Federal income 
tax purposes ("Municipal 
Obligations").  Municipal Obligations generally 
are understood to include 
debt obligations issued to obtain funds for 
various public purposes, 
including the construction of a wide range of 
public facilities, refunding of 
outstanding obligations, payment of general 
operating expenses and extensions 
of loans to public institutions and facilities.  
Private activity bonds that 
are issued by or on behalf of public 
authorities to finance privately 
operated facilities are considered to be 
Municipal Obligations if the 
interest paid on them qualifies as excluded 
from gross income (but not 
necessarily from alternative minimum taxable 
income) for Federal income tax 
purposes in the opinion of bond counsel to the 
issuer.  Municipal Obligations 
may be issued to finance life care facilities, 
which are an alternative form 
of long-term housing for the elderly that offer 
residents the independence of 
a condominium life-style and, if needed, the 
comprehensive care of nursing 
home services.  Bonds to finance these 
facilities have been issued by various 
state industrial development authorities.  
Because the bonds are secured only 
by the revenues of each facility and not by 
state or local government tax 
payments, they are subject to a wide variety of 
risks, including a drop in 
occupancy levels, the difficulty of maintaining 
adequate financial reserves 
to secure estimated actuarial liabilities, the 
possibility of regulatory cost 
restrictions applied to health care delivery 
and competition from alternative 
health care or conventional housing facilities.

Municipal Leases

Municipal leases are Municipal Obligations that 
may take the form of a lease 
or an installment purchase issued by state and 
local government authorities 
to obtain funds to acquire a wide variety of 
equipment and facilities such as 
fire and sanitation vehicles, computer 
equipment and other capital assets.  
These obligations have evolved to make it 
possible for state and local 
government authorities to acquire property and 
equipment without meeting 
constitutional and statutory requirements for 
the issuance of debt.  Thus, 
municipal leases have special risks not 
normally associated with Municipal 
Obligations.  These obligations frequently 
contain "non-appropriation" 
clauses that provide that the governmental 
issuer of the municipal lease has 
no obligation to make future payments under the 
lease or contract unless 
money is appropriated for such purposes by the 
legislative body on a yearly 
or other periodic basis.  In addition to the 
non-appropriation risk, 
municipal leases represent a type of financing 
that has not yet developed the 
depth of marketability associated with 
Municipal Obligations; moreover, 
although the obligations will be secured by the 
leased equipment, the 
disposition of the equipment in the event of 
foreclosure might prove 
difficult.  In order to limit the risks, the 
Fund will purchase either (a) 
municipal leases that are rated in the four 
highest categories by Moodys 
Investor Services, Inc. ("Moodys") or Standard 
& Poors Corporation ("S&P") or 
(b) unrated municipal leases that are purchased 
principally from domestic 
banks or other responsible third parties that 
have entered into an agreement 
with the Fund providing the seller will either 
remarket or repurchase the 
municipal leases within a short period after 
demand by the Fund.

From time to time, proposals to restrict or 
eliminate the Federal income tax 
exemption for interest on Municipal Obligations 
have been introduced before 
Congress.  Similar proposals may be introduced 
in the future.  In addition, 
the Internal Revenue Code of 1986, as amended, 
(the "Code") currently 
provides that small issue private activity 
bonds will not be tax-exempt if 
the bonds were issued after December 31, 1986, 
and the proceeds were used to 
finance projects other than manufacturing 
facilities.

Special Considerations Relating To California 
Exempt Obligations

As indicated in its Prospectus, the California 
Fund seeks its objective by 
investing principally in a portfolio of 
Municipal Obligations, the interest 
from which is exempt from California State 
personal income taxes ("California 
Exempt Obligations"). 

Some of the significant financial 
considerations relating to the California 
Funds investments in California Exempt 
Obligations are summarized below.  
This summary information is derived principally 
from official statements and 
prospectuses relating to securities offerings 
of the State of California and 
various local agencies in California, available 
as of the date of this SAI 
and does not purport to be a complete 
description of any of the 
considerations mentioned herein.  It is also 
based on the disclosure 
statement filed in the County of Orange 
bankruptcy case.  The accuracy and 
completeness of the information contained in 
such official statements and 
disclosure statement has not been independently 
verified.

Risk Factors
Beginning in the 1990-91 fiscal year, 
California faced the worst economic, 
fiscal and budget conditions since the 1930s.  
Construction, manufacturing 
(especially aerospace), exports and financial 
services, among others, were 
severely affected.  Job losses were the worst 
of any post-war recession and 
have been estimated to exceed 800,000.
The recession seriously affected State tax 
revenues.  It also caused 
increased expenditures for health and welfare 
programs.  The State has also 
faced a structural imbalance in its budget with 
the largest programs 
supported by the General Fund?K-12 schools and 
community colleges, health, 
welfare and corrections?growing at rates higher 
than the growth rates for the 
principal revenue sources of the General Fund.  
(The General Fund, the 
State's main operating fund, consists of 
revenues which are not required to 
be credited to any other fund.)  The State 
experienced recurring budget 
deficits.  The State Controller reported that 
expenditures exceeded revenues 
for the four of the six fiscal years ending 
with 1992-93, and were 
essentially equal in 1993-94.  According to the 
Department of Finance, the 
State suffered a continuing budget deficit of 
approximately $2.8 billion in 
the Special Fund for Economic Uncertainties.  
(Special Funds account for 
revenues obtained from specific revenue 
sources, and which are legally 
restricted to expenditures for specified 
purposes.)  The 1993-94 Budget Act 
incorporated a Deficit Reduction Plan to repay 
this deficit over two years.  
The original budget for 1993-94 reflected 
revenues which exceeded 
expenditures by approximately $2.8 billion.  As 
a result of continuing 
recession, the excess of revenues over 
expenditures for the 1993-94 fiscal 
year was less than $300 million.  The 
accumulated budget deficit at June 30, 
1994 was not able to be retired by June 30, 
1995 as planned.  When the 
economy failed to recover sufficiently in 1993-
94, a second two-year plan was 
implemented in 1994-95.  The accumulated budget 
deficits over the past 
several years, together with expenditures for 
school funding which have not 
been reflected in the budget, and the reduction 
of available internal 
borrowable funds, have combined to 
significantly deplete the State's cash 
resources to pay its ongoing expenses.  In 
order to meet its cash needs, the 
State has had to rely for several years on a 
series of external borrowings, 
including borrowings past the end of a fiscal 
year.  At the end of its 1995-
96 fiscal year, however, the State did not 
borrow moneys into "1995-96 
Budget" the subsequent fiscal year.
Since the severe recession, California's 
economy has been recovering.  
Employment has grown by over 500,000 in 1994 
and 1995, and the precession 
level of total employment is expected to be 
matched by early 1996.  The 
strongest growth has been in export-related 
industries, business services, 
electronics, entertainment and tourism, all of 
which have offset the 
recession-related losses which were heaviest in 
aerospace and defense-related 
industries (accounting for approximately two-
thirds of the job losses), 
finance and insurance.  Residential housing 
construction, with new permits 
for under 100,000 annual new units issued in 
1994 and 1995, is weaker than in 
previous recoveries, but has been growing 
slowly since 1993.
Sectors which are now contributing to 
California's recovery include 
construction and related manufacturing, 
wholesale and retail trade, 
transportation and several service industries 
such as amusements and 
recreation, business services, and management 
consulting.  Electronics is 
showing modest growth and the rate of decline 
in aerospace manufacturing is 
slowly diminishing.  As a result of these 
factors, average 1994 non-farm 
employment exceeded expectations and grew 
beyond 1993 levels.
Many California counties continue to be under 
severe fiscal stress.  Such 
stress has impacted smaller, rural counties and 
larger urban counties such as 
Los Angeles, and Orange County which declared 
bankruptcy in 1994.  Orange 
County has implemented significant reductions 
in services and personnel, and 
continues to face fiscal constraints in the 
aftermath of its bankruptcy.  
However, California has experienced recent 
economic expansion, with growth in 
employment and in early 1998 the state recorded 
its lowest unemployment rate 
since 1990.  There can be no assurance this 
growth trend will continue.
1995-96 Budget
The state began the 1995-96 Fiscal Year with 
strengthening revenues based on 
an improving economy and the smallest nominal 
"budget gap" to be closed in 
many years.
The 1995-96 Budget Act, signed by the Governor 
on August 3, 1995, projects 
General Fund revenues and transfers of $44.1 
billion, about $2.2 billion 
higher than projected revenues in 1994-95.  The 
Budget Act projects Special 
Fund revenues of $12.7 billion, an increase 
from $12.1 billion projected in 
1994-95.
The Department of Finance released updated 
projections for the 1995-96 fiscal 
year in May, 1996, estimating that revenues and 
transfers to be $46.1 
billion, approximately $2 billion over the 
original fiscal year estimate.  
Expenditures also increased, to an estimated 
$45.4 billion, as a result of 
the requirement to expend revenues for schools 
under Proposition 98, and, 
among other things, failure of the federal 
government to budget new aid for 
illegal immigrant costs which had been counted 
on to allow reductions in 
costs.
The principal features of the Budget Act were 
the following:
1. Proposition 98 funding for schools and 
community colleges will increase 
by about $1 billion (General Fund) and $1.2 
billion total above revised 
1994-95 levels.  Because of higher than 
projected revenues in 1994-95, an 
additional $543 million in appropriated to the 
1994-95 Proposition 98 
entitlement.  A significant component of this 
amount is block grant of 
about $54 per pupil for any one-time purpose.  
Per-pupil expenditures are 
projected to increase by another $126 in 1995-
96 to $4,435.  A full 2.7% 
cost of living allowance is funded for the 
first time in several years.  
The budget comprise anticipated a settlement of 
the CTA v. Gould 
litigation.
2. Cuts in health and welfare costs totaling 
about $900 million, some of 
which would require federal legislative 
approval.
3. A 3.5% increase in funding for the 
University of California ($90 
million General Fund) and the California State 
University system ($24 
million General Fund), with no increase in 
student fees.
4. The updated Budget assumes receipt of $494 
million in new federal aid 
for costs of illegal immigrants, in excess of 
federal government 
commitments.
5. General Fund support for the Department of 
Corrections is increased by 
about 8 percent over 1994-95, reflecting 
estimates of increased prison 
population.  This amount is less than was 
proposed in the 1995 Governor's 
Budget.
1996-97 Budget

The 1996-97 Budget Act was signed by the 
Governor on July 15, 1996, and 
projected General Fund revenues and transfers 
of approximately $47.64 billion 
and General Fund expenditures of approximately 
$47.25 billion.  The Governor 
vetoed abut $82 million of appropriations (both 
General Fund and Special 
Fund) and the State has implemented its regular 
cash flow borrowing program 
with the issuance of $3.0 billion of Revenue 
Anticipation Notes to mature on 
or before June 30, 1997.  The 1996-97 Budget 
Act appropriated a budget 
reserve in the Special Fund for Economic 
Uncertainties of $305 million, as of 
June 30, 1997.
The Budget Act contained General Fund 
appropriations totaling $47.251 
billion, a 4.0 percent increase over the final 
estimated 1995-96 
expenditures.  Special Fund expenditures are 
budgeted at $12.6 billion.
The following were the principal features of 
the 1996-97 Budget Act:
1. Proposition 98 funding for schools and 
community colleges will 
increase by about $1.6 billion (General Fund) 
and $1.65 billion total 
above revised 1995-96 level periods.  Almost 
half of this money was 
budgeted to fund class-size reduction in 
kindergarten and grades 1-3.
2. Proposed cuts in health and welfare totaling 
$660 million.  All of 
these cuts require federal law changes 
(including welfare reform), 
federal waivers, or federal budget 
appropriations in order to be 
achieved.  The 1996-97 Budget Act assumes 
approval/action by October, 
1996, with the savings to be achieved beginning 
in November, 1996.  
The 1996-97 Budget Act was based on 
continuation of previously 
approved assistance levels for Aid to Families 
with Dependent Children 
and other health and welfare programs, which 
had been reduced in prior 
years, including suspension of State authorized 
cost of living 
increases.
3. A 4.9 percent increase in funding for the 
University of California 
($130 million General Fund) and the California 
State University system 
($101 million General Fund), with no increases 
in student fees, 
maintaining the second year of the Governor's 
four-year "Compact" with 
the State's higher education units.
4. General Fund support for the Department of 
Corrections was increased 
by about 7 percent over the prior year, 
reflecting estimates of 
increased prison population.
5. With respect to aid to local governments, 
the principal new programs 
included in the 1996-97 Budget Act are $100 
million in grants to 
cities and counties for law enforcement 
purposes, and budgeted $50 
million for competitive grants to local 
governments for programs to 
combat juvenile crime.
The 1996-97 Budget Act did not contain any tax 
increases.  As noted, there 
was a reduction in corporate taxes.  In 
addition, the Legislature approved 
another one-year suspension of the Renters Tax 
Credit, saving $520 million in 
expenditures.
1997-98 Budget
On January 9, 1997, the Governor announced his 
proposed 1997-98 State budget 
detailing plans to cut welfare, increase 
education spending and provide 
certain tax cuts to businesses and banks.  The 
total spending plan in the 
amount of approximately $66.6 billion 
represents an increase of approximately 
4% from the 1996-97 State Budget, with an 
increase in the State's General 
Fund to approximately $50.3 billion.  The 
Governor announced a proposal to 
restructure the State's welfare system, placing 
strict time limits on the 
provisions of assistance and introducing 
penalties, and included a plan to 
increase spending for elementary and secondary 
schools.
On August 11, 1997, the State Legislature 
approved a 1997-98 State Budget of 
approximately $68 billion which included 
approximately $32 billion for public 
schools, an increase of approximately $4 
billion over the prior year.  The 
Budget also included approximately $100 million 
for local law enforcement and 
approximately $75 million in spending to 
subsidize hospitals that care for 
large numbers of uninsured patients, as well as 
approximately $40 million for 
legal immigrants and an increase of 
approximately $223 million in welfare 
spending, including job training. The education 
portion of the State Budget 
approved by the Legislature for 1997-98 
included approximately $850 million 
to expand the class-size reduction program and 
full statutory funding of the 
Revenue Limit COLA comprising a 2.65% COLA, 
consistent with the May Revision, 
Revenue Limit Equalization is as funded in the 
amount of approximately $261 
million for the school district revenue limit 
equalization for 1996-97.
The final State Budget was signed by the 
Governor on August 18, 1997 after 
using his line-item veto authority to veto, 
with reservation until an 
acceptable school testing bill is passed, a 
significant amount of education 
funding from the State Budget approved by the 
Legislature.  Vetoes which 
would be restored if a testing bill acceptable 
to the Governor is passed 
include approximately $955,000 in Department of 
Education spending, and 
approximately $900 million in local assistance.  
Vetoes not relating to the 
testing issue, but which need legislation in 
order to restore the vetoed 
funds, included more than $20 million in 
Department of Education spending.  
The final State Budget also provided 
approximately $377 million for child 
care programs administered by the Department of 
Education and the Department 
of social Services, approximately $160 million 
for welfare-to-work programs, 
approximately $25 million in adult education 
funding and approximately $50 
million in California community colleges, 
approximately $100 million to 
cities and counties to enhance local law 
enforcement, approximately $55 
million in federal funds to local government 
for the construction of 
detention facilities and approximately $1.2 
billion in deferred general fund 
contributions to the Public Employees 
Retirement System.  The final State 
Budget did not include the Governor's proposed 
10% tax cut for bank and 
corporations.
Proposed 1998-99 Budget
In 1997, California experienced employment 
growth exceeding 3 percent - 
approximately 400,000 new jobs - and income 
rose by more than 7 percent.  The 
State's unemployment rate fell during 1997 to a 
low of 5.8% in November.  In 
fiscal year 1996-97, the State General Fund 
collections grew by over 6 
percent to reach $49.2 billion, and revenue for 
the 1997-98 and 1998-99 
fiscal years is expected to reach $52.9 billion 
and $55.4 billion 
respectively.  This represents an annual growth 
of $3.7 billion (7.5 percent) 
for 1997-98 and $2.5 billion (4.7 percent) for 
1998-99.
The 1998-99 Governor's Budget provides $50 
million in General Fund and $200 
million in a proposed bond issue to capitalize 
the Infrastructure and 
Development Bank, which will provide capital to 
local governments to help 
businesses locate and expand in California, and 
$3 million for the small 
business loan guarantee program.  The Budget 
also includes an Early Childhood 
Development Initiative, which is designed to 
improve the health and 
development of children from birth to age three 
and provides additional funds 
for anti-gang programs and for the apprehension 
of sexual predators.  The 
Budget proposes an approximately $7 billion 
investment plan to maintain and 
build the State's system of schools, water 
supply, prisons, natural 
resources, and other Infrastructure.
In addition, the Budget includes approximately 
$40 billion to be devoted to 
California's 999 school districts and 58 county 
offices of education, 
resulting on estimated total per-pupil 
expenditures from all sources of 
$6,620 in fiscal year 1997-98 and $6,749 in 
1998-99.  Projected state 
revenues will contribute to a 7 percent 
increase in Proposition 98 General 
Fund support for K-12 education in 1998-99.  
This level of resources result 
in K-12 Proposition 98 per-pupil expenditures 
of $5,636 in 1998-99, up from 
$5,114 in 1996-97 and $5,414 in 1997-98.  In 
addition, approximately $350 
million has been allocated to lengthen the 
school year to 180 days while 
maintaining sufficient funds for staff 
development days.  The State Budget 
included a 2.22% COLA for revenue limit, 
special education, and child 
development in an amount of $657.4 million 
which includes school district and 
county office of education apportionments 
($470.6 million), summer school 
($4.0 million), special education ($57.8 
million), child development ($14.6 
million), class size reduction ($33.6 million), 
and categorical program COLA 
and growth ($73.7 million); enrollment growth 
funding of $564.4 million; 
class size reduction funding in the amount of 
$547 billion for all pupils in 
grades K-3 at $818 per pupil; and approximately 
$2 billion in state bonds for 
the 1998 election and $2.0 billion for each two 
years thereafter in 2000, 
2002 and 2004 and an additional $135 million 
for deferred maintenance to be 
matched locally.
It cannot be predicted what actions will be 
taken in the future by the State 
Legislature and the Governor to deal with 
changing State revenues and 
expenditures.  The State budget will be 
affected by national and state 
economic conditions and other factors.
THE FOREGOING DISCUSSION IS BASED ON OFFICIAL 
STATEMENTS AND OTHER 
INFORMATION PROVIDED BY THE STATE OF 
CALIFORNIA.  THE STATE HAS INDICATED 
THAT ITS DISCUSSION OF BUDGETARY INFORMATION IS 
BASED ON ESTIMATES AND 
PROJECTIONS OF REVENUES AND EXPENDITURES FOR 
THE CURRENT FISCAL YEAR AND MUST 
NOT BE CONSTRUED AS STATEMENTS OF FACT; THE 
ESTIMATES AND PROJECTIONS ARE 
BASED UPON VARIOUS ASSUMPTIONS WHICH MAY BE 
AFFECTED BY NUMEROUS FACTORS, 
INCLUDING FUTURE ECONOMIC CONDITIONS IN THE 
STATE AND THE NATION, AND THERE 
CAN BE NO ASSURANCE THAT THE ESTIMATES WILL BE 
ACHIEVED.
Recent Voter Initiative
"Proposition 218" or the "Right to vote on 
Taxes Act" (the "Proposition") was 
approved by the California electorate at the 
November, 1996 general election.  
Officially titled "Voter Approval For Local 
Government Taxes, Limitation on 
Fees, Assessments and Charges Initiative 
Constitutional Amendment," the Act 
was approved by a majority of the voters voting 
at the election and adds 
Articles XIIIC and XIIID to the California 
Constitution.
The Proposition, among other things, requires 
local government to follow 
certain procedures in imposing or increasing 
any fee or charge as defined.  
"Fee" or "charge" is defined to mean "any 
levy other than an ad valorem tax, 
a special tax or an assessment imposed by an 
agency upon a parcel or upon a 
person as an incident of property ownership, 
including user fees or charges 
for a property related service."
The procedure required by the Proposition to 
impose or increase any fee or 
charge include a public hearing upon the 
proposed fee or charge and the 
opportunity to present written protests by the 
owners of the parcels subject 
to the proposed fee or charge.  If written 
protests against the proposed fee 
or charge are presented by a majority of owners 
of the identified parcels, 
the local government shall not impose the fee 
or charge.
The Proposition further provides as follows:
"Except for fees or charges for sewer, water, 
and refuse collection 
services, no property related fee or charge 
shall be imposed or increased 
unless and until such fee or charge is 
submitted and approved by a 
majority vote of the property owners of the 
property subject to the fee or 
charge or, at the option of the agency, by a 
two thirds vote of the 
electorate residing in the affected area."
Additionally, the Proposition provides, with 
respect to standby charges, as 
follows:
"No fee or charge may be imposed for a service 
unless that service is 
actually used by, or immediately available to, 
the owner of the property 
in question.  Fees or charges based on 
potential or future use of a 
service are not permitted.  Standby charges, 
whether characterized as 
charges or assessments, shall be classified as 
assessments and shall not 
be imposed without compliance with Section 4 of 
this Article."
The Proposition provides that beginning July 1, 
1997, all fees and charges 
shall comply with the Proposition's 
requirements.
The Proposition is silent with respect to 
future increases of pre-existing 
fees or charges which are pledged to payment of 
indebtedness or obligations 
previously incurred by the local government.  
Presumably, the Proposition 
cannot preempt outstanding contractual 
obligations protected by the contract 
impairment clause of the federal constitution.  
However, with respect to any 
given situation or case, litigation may be the 
method which will settle any 
question concerning the authority of a local 
government to increase fees or 
charges outside of the strictures of the 
Proposition in order to meet 
contractual obligations.
Proposition 218 also contains a new provision 
subjecting "matters of reducing 
or repealing any local tax, assessments and 
charges" to the initiative power.  
This means that no city or local agency revenue 
source is safe from reduction 
or repeal pursuant to the initiative process.
Litigation concerning various elements of the 
Proposition may ultimately 
ensue and clarifying legislation may be 
enacted.
State Appropriations Limit
The State is subject to an annual 
appropriations limit imposed by Article 
XIIIB of the State Constitution (the 
"Appropriations Limit"), and is 
prohibited from spending "appropriations 
subject to limitation" in excess of 
the Appropriations Limit.  Article XIIIB 
originally adopted in 1979, was 
modified substantially by Propositions 98 and 
111 in 1988 and 1990, 
respectively.  "Appropriations subject to 
limitation" are authorizations to 
spend "proceeds of taxes," which consist of 
tax revenues and certain other 
funds, including proceeds from regulatory 
licenses, user charges or other 
fees to the extent that such proceeds exceed 
the reasonable cost of providing 
the regulation, product or service.  The 
Appropriations Limit is based on the 
limit for the prior year, adjusted annually for 
certain changes, and is 
tested over consecutive two-year periods.  Any 
excess of the aggregate 
proceeds of taxes received over such two-year 
period above the combined 
Appropriation Limits for those two years is 
divided equally between transfers 
to K-14 districts and refunds to taxpayers.
Exempted from the Appropriation Limit are debt 
service costs of certain 
bonds, court or federally mandated costs, and, 
pursuant to Proposition 111, 
qualified capital outlay projects and 
appropriations or revenues derived from 
any increase in gasoline taxes and motor 
vehicle weight fees above January 1, 
1990 levels.  Some recent initiatives were 
structured to create new tax 
revenues dedicated to specific uses and 
expressly exempted from the Article 
XIIIB limits.  The Appropriations Limit may 
also be exceeded in cases of 
emergency arising from civil disturbance or 
natural disaster declared by the 
Governor and approved by two-thirds of the 
Legislature.  If not so declared 
and approved, the Appropriations Limit for the 
next three years must be 
reduced by the amount of the excess.
Article XIIIB, as amended by Proposition 98 on 
November 8, 1988, also 
establishes a minimum level of state funding 
for school and community college 
districts and requires that excess revenues up 
to a certain limit be 
transferred to schools and community college 
districts instead of returned to 
the taxpayers.  Determination of the minimum 
level of funding is based on 
several tests set forth in proposition 98.  
During fiscal year 1991-1992 
revenues were smaller than expected, thus 
reducing the payment owed to 
schools in 1991-92 under alternate "test" 
provisions.  In response to the 
changing revenue situation, and to fully fund 
the Proposition 98 guarantee in 
the 1991-1992 and 1992-1993 fiscal years 
without exceeding it, the 
Legislature enacted legislation to reduce 1991-
92 appropriations.  The amount 
budgeted to schools but which exceeded the 
reduced appropriations treated as 
a non-Proposition 98 short-term loan in 1991-
92.  As part of the 1992-93 
Budget, $1.083 billion of the amount budgeted 
to K-14 schools was designated 
to "repay" the prior year loan, thereby 
reducing cash outlays in 1992-93 by 
that amount.  To maintain per-average daily 
attendance ("ADA") funding, the 
1992-93 Budget included loans of $732 million 
to K-12 schools and $241 
million to community colleges, to be repaid 
from future Proposition 98 
entitlements.  The 1993-94 Budget also provided 
new loans to $609 million to 
K-12 schools and $178 million to community 
colleges to maintain ADA funding.  
These loans have been combined with the 1992-93 
fiscal year loans into one 
loan of $1.760 billion, to be repaid from 
future years' Proposition 98 
entitlements, and conditioned upon maintaining 
current funding levels per 
pupil at K-12 schools.
A Sacramento County Superior Court in 
California Teachers Association, et al. 
v Gould, et al., ruled that the 1992-93 loans 
to K-12 schools and community 
colleges violate Proposition 98.  As part of 
the negotiations leading to the 
1995-96 Budget Act, an oral agreement was 
reached to settle this case.  The 
parties reached a conditional final settlement 
of the case in April, 1996.  
The settlement required adoption of legislation 
satisfactory to the parties 
to implement its terms, which has occurred, and 
final approval by the court, 
which was pending in early July, 1996.
The settlement provides, among other things, 
that both the State and K-14 
schools share in the repayment of prior years' 
emergency loans to schools.  
Of the total $1.76 billion in loans, the State 
will repay $935 million by 
forgiveness of the amount owed, while schools 
will repay $825 million.  The 
State share of the repayment will be reflected 
as expenditures above the 
current Proposition 98 base circulation.  The 
schools' share of the repayment 
will count as appropriations that count toward 
satisfying the Proposition 98 
guarantee, or from "below" the current base.  
Repayments are to be spread 
over the eight-year period beginning 1994-95 
through 2002-03.  Once the 
Director of Finance certifies that a settlement 
has occurred, approximately 
$377 million in appropriations from the 1995-96 
fiscal year to schools will 
be disbursed.
Because of the complexities of Article XIIIB, 
the ambiguities and possible 
inconsistencies in its terms, the applicability 
of its exceptions and 
exemptions and the impossibility of predicting 
future appropriations, the 
Trust cannot predict the impact of this or 
related legislation on the bonds 
in the Trust Portfolio.  Other Constitutional 
amendments affecting state and 
local taxes and appropriations have been 
proposed from time to time.  If any 
such initiatives are adopted, the state could 
be pressured to provide 
addition financial assistance to local 
governments or appropriate revenues as 
mandated by such initiatives.  Propositions 
such a Proposition 98 and others 
that may be adopted in the future, may place 
increasing pressure on the 
State's budget over future years, potentially 
reducing resources available 
for other State programs, especially to the 
extent that the Article XIIIB 
spending limit would restrain the State's 
ability to fund such other programs 
by raising taxes.
State Indebtedness
As of September 1, 1997, the State had over 
$17.6 billion aggregate amount of 
its general obligation bonds outstanding.  
General obligation bond 
authorizations in an aggregate amount of 
approximately $8.26 billion remained 
unissued as of September 1, 1997.  As of 
September 1, 1997 the State Finance 
Committee had authorized the issuance of 
approximately $3.6 billion of 
general obligation commercial paper notes, but 
as of that date only $1.2 
billion aggregate principal amount of which was 
issued and outstanding.  The 
State also builds and acquires capital 
facilities through the use of lease 
purchase borrowing.  As of September 1, 1997, 
the State had approximately 
$6.1 billion of outstanding General Fund-
supported Lease-Purchase Debt.
In addition to the general obligation bonds, 
State agencies and authorities 
had approximately $20.86 billion aggregate 
principal amount of revenue bonds 
and notes outstanding as of September 1, 1997.  
Revenue bonds represent both 
obligations payable from State revenue-
producing enterprises and projects, 
which are not payable from the General Fund, 
and conduit obligations payable 
only from various revenues paid by private 
users of facilities financed by 
such revenue bonds.  Such enterprises and 
projects include transportation 
projects, various public works and exposition 
projects, educational 
facilities (including the California State 
University and University of 
California's systems), housing, health 
facilities and pollution control 
facilities.
Litigation
The State is a party to numerous legal 
proceedings.  In addition, the State 
is involved in certain other legal proceedings 
that, if decided against the 
State, might require the State to make 
significant future expenditures or 
impair future revenue sources.  Examples of 
such cases include challenges to 
certain vehicle license fees and challenges to 
the State's use of Public 
Employee Retirement System funds to offset 
future State and local pension 
contributions.  Other cases which could 
significantly impact revenue or 
expenditures involve challenges of payments of 
wages under the Fair Labor 
Standards Act, the method of determining gross 
insurance premiums involving 
health insurance, property tax challenges, 
challenges of transfer of moneys 
from State Treasury special fund accounts to 
the State's General Fund 
pursuant to its Budget Acts for certain fiscal 
years.  Because of the 
prospective nature of these proceedings, it is 
not presently possible to 
predict the outcome of such litigation or 
estimate the potential impact on 
the ability of the State to pay debt service on 
its obligation.

Ratings
During 1996, the ratings of California's 
general obligation bonds was 
upgraded by the following rating agencies.  
Recently Standard & Poor's 
Ratings Group upgraded its rating of such debt 
to A+; the same rating has 
been assigned to such debt by Fitch Investors 
Service.  Moody's Investors 
Service has assigned such debt an A1 rating.  
Any explanation of the 
significance of such ratings may be obtained 
only from the rating agency 
furnishing such ratings.  There is no assurance 
that such ratings will 
continue for any given period of time or that 
they will not be revised 
downward or withdrawn entirely if, in the 
judgment of the particular rating 
agency, circumstances so warrant.
The Trust believes the information summarized 
above describes some of the 
more significant aspects relating to the 
California Trust.  The sources of 
such information are Preliminary Official 
Statements and Official Statements 
relating to the State's general obligation 
bonds and the States revenue 
anticipation notes, or obligations of other 
issuers located in the State of 
California, or other publicly available 
documents.  Although the Trust has 
not independently verified this information, it 
has no reason to believe that 
such information is not correct in all material 
respects.
California Taxes -
In the opinion of LeBoeuf, Lamb, Greene & 
MacRae L.L.P., Los Angeles, 
California, special counsel on California tax 
matters, under existing law:
The California Trust is not taxable as 
corporation for California tax 
purposes.  Interest on the underlying 
Securities owned by the California 
Trust that is exempt from personal income taxes 
imposed by the State of 
California will retain its status as interest 
exempt from personal income tax 
imposed by the State of California.
Each Unit Holder of the California Trust will 
recognize gain or loss on the 
sale, redemption or other disposition of 
Securities within the California 
Trust, or on the sale or other disposition of 
Unit Holders interest in the 
California Trust. As a result, a Unit Holder 
may incur California tax 
liability upon the sale, redemption or other 
disposition of Securities within 
the California Trust or upon the sale or other 
disposition of his or her 
Units.
Special Consideration Relating to New York 
Exempt Obligations

Risk Factors.  The information set forth below 
is derived from the official 
statements and/or preliminary drafts of 
official statements prepared in 
connection with the issuance of New York State 
and New York City municipal 
bonds.  The Trust has not independently 
verified this information.
Economic Trends.  Over the long term, the State 
of New York (the "State") and 
the City of New York (the "City") face serious 
economic problems.  The City 
accounts for approximately 41% of the State's 
population and personal income, 
and the City's financial health affects the 
State in numerous ways.  The 
State historically has been one of the 
wealthiest states in the nation.  For 
decades, however, the State has grown more 
slowly than the nation as a whole, 
gradually eroding its relative economic 
affluence.  Statewide, urban centers 
have experienced significant changes involving 
migration of the more affluent 
to the suburbs and an influx of generally less 
affluent residents.  
Regionally, the older Northeast cities have 
suffered because of the relative 
success that the South and the West have had in 
attracting people and 
business.  The City has also had to face 
greater competition as other major 
cities have developed financial and business 
capabilities which make them 
less dependent on the specialized services 
traditionally available almost 
exclusively in the City.
The State has for many years had a very high 
State and local tax burden 
relative to other states.  The State and its 
localities have used these taxes 
to develop and maintain their transportation 
networks, public schools and 
colleges, public health systems, other social 
services and recreational 
facilities.  Despite these benefits, the burden 
of State and local taxation, 
in combination with the many other causes of 
regional economic dislocation, 
has contributed to the decisions of some 
businesses and individuals to 
relocate outside, or not locate within, the 
State.
Notwithstanding the numerous initiatives that 
the State and its localities 
may take to encourage economic growth and 
achieve balanced budgets, 
reductions in Federal spending could materially 
and adversely affect the 
financial condition and budget projections of 
the State and its localities.
New York City.  The City, with a population of 
approximately 7.3 million, is 
an international center of business and 
culture.  Its non-manufacturing 
economy is broadly based, with the banking and 
securities, life insurance, 
communications, publishing, fashion design, 
retailing and construction 
industries accounting for a significant portion 
of the City's total 
employment earnings.  Additionally, the City is 
the nation's leading tourist 
destination.  The City's manufacturing activity 
is conducted primarily in 
apparel and printing.
The national economic downturn which began in 
July 1990 adversely affected 
the local economy, which had been declining 
since late 1989.  As a result, 
the City experienced job losses in 1990 and 
1991 and real Gross City Product 
("GCP") fell in those two years.  Beginning in 
calendar year 1992, the 
improvement in the national economy helped 
stabilize conditions in the City.  
Employment losses moderated toward year-end and 
real GCP increased, boosted 
by strong wage gains.  After noticeable 
improvements in the City's economy 
during calendar year 1994, economic growth 
slowed in calendar year 1995, and 
thereafter improved during calendar year 1996, 
reflecting improved securities 
industry earnings and employment in other 
sectors.  The City's current four-
year financial plan assumes that moderate 
economic growth will continue 
through calendar year 2001, with moderating job 
growth and wage increases.
For each of the 1981 through 1996 fiscal years, 
the City achieved balanced 
operating results as reported in accordance 
with generally accepted 
accounting principles ("GAAP").  The City has 
been required to close 
substantial budget gaps between forecast 
revenues and forecast expenditures 
in order to maintain balanced operating 
results.  There can be no assurance 
that the City will continue to maintain a 
balanced budget as required by 
State law without additional tax or other 
revenue increases or additional 
reductions in City services or entitlement 
programs, which could adversely 
affect the City's economic base.
Pursuant to the New York State Financial 
emergency Act for the City of New 
York (the "Financial Emergency Act" or the 
"Act"), the City prepares an 
annual four-year financial plan, which is 
reviewed and revised on quarterly 
basis and which includes the City's capital, 
revenue and expense projections 
and outlines proposed gap-closing programs for 
years with projected budget 
gaps.  The City's current four-year financial 
plan projects a surplus in the 
1998 fiscal year (before discretionary 
transfers) and substantial budget gaps 
for each of the 1999, 2000 and 2001 fiscal 
years.  This pattern of current 
year surplus and projected subsequent year 
budget gaps has been consistent 
through virtually the entire period since 1982, 
during which the City has 
achieved balanced operating results for each 
fiscal year.  The City is 
required to submit its financial plans to 
review bodies, including the New 
York State Financial Control Board ("Control 
Board").
The City depends on State aid both to enable 
the City to balance its budget 
and to meet its cash requirements.  The State's 
1995-96 Financial Plan 
projects a balanced General Fund.  There can be 
no assurance that there will 
not be reductions in State aid to the City from 
amounts currently projected 
or that State budgets in future fiscal years 
will be adopted by the April 1 
statutory deadline and that such reductions or 
delays will not have adverse 
effects on the City's cash flow or 
expenditures.  In addition, the Federal 
Budget negotiation process could result in a 
reduction in or a delay in the 
receipt of Federal grants which could have 
additional adverse effects on the 
City's cash flow or revenues.
The Mayor is responsible for preparing the 
City's four-year financial plan, 
including the City's current financial plan for 
the 1998 through 2001 fiscal 
years (the "1998-2001 Financial Plan" or 
"Financial Plan").  The City's 
projections set forth in the Financial Plan are 
based on various assumptions 
and contingencies which are uncertain and which 
may not materialize.  Changes 
in major assumptions could significantly affect 
the City's ability to balance 
its budget as required by State law and to meet 
its annual cash flow and 
financing requirements.  Such assumptions and 
contingencies include the 
condition of the regional and local economies, 
the impact on real estate tax 
revenues of the real estate market, wage 
increases for City employees 
consistent with those assumed in the Financial 
Plan, employment growth, the 
ability to implement proposed reductions in 
City personnel and other cost 
reduction initiatives, the ability of the New 
York City Health and Hospitals 
Corporation ("HHC") and the Board of Education 
("BOE") to take actions to 
offset potential budget shortfalls, the ability 
to complete revenue 
generating transactions, provision of State and 
Federal aid and mandate 
relief and the impact on City revenues and 
expenditures of Federal and State 
welfare reform and any future legislation 
affecting Medicare or other 
entitlements.  Despite these and similar risks 
and uncertainties, the city 
has achieved balanced operation results in each 
of its sixteen years.
Implementation of the Financial Plan is also 
dependent upon the City's 
ability to market its securities successfully.  
The City's financing program 
for fiscal years 1998 through 2001 contemplates 
the issuance of $4.9 billion 
of general obligation bonds and $7.1 billion of 
bonds to be issued by the 
proposed New York City Infrastructure Finance 
Authority ("Finance Authority") 
to finance City capital projects.  The Finance 
Authority was created as part 
of the City's effort to assist in keeping the 
City's indebtedness within the 
forecast level of the constitutional 
restrictions on the amount of debt the 
City is authorized to incur.  In addition, the 
City issues revenue and tax 
anticipation notes to finance its seasonal 
working capital requirements.  The 
success of projected public sales of City bonds 
and notes, New York Municipal 
Water Finance Authority ("Water Authority") 
bonds and Finance Authority bonds 
will be subject to prevailing market 
conditions.  The City's planned capital 
and operation expenditures are dependent upon 
the sale of its general 
obligation bonds and notes, and the Water 
Authority and Finance Authority 
bonds.  Future developments concerning the City 
and public discussion of such 
developments, as well as prevailing market 
conditions, may affect the market 
for outstanding City general obligation bonds 
and notes.
The City's operation results for the 1996 
fiscal year were balanced in 
accordance with GAAP, after taking into account 
a discretionary transfer of 
$224 million, the sixteen the consecutive year 
of GAAP balanced results.
The most recent quarterly modification to the 
City's financial plan for the 
1997 fiscal year, which was submitted to the 
Control Board on June 10, 1997 
(the "1997 Modification"), projects a balanced 
budget in accordance with GAAP 
for the 1997 fiscal year, after taxing into 
account an increase in projected 
tax revenues of $1.2 billion during the 1997 
fiscal year and a discretionary 
prepayment in the 1997 fiscal of $1.3 billion 
of debt service due in the 1998 
and 1999 fiscal years.
On June 10, 1997, the City submitted to the 
Control Board the financial Plan 
for the 1998 through 2001 fiscal years, which 
relates to the City, BOE and 
the City University to New York ("CUNY") and 
reflects the City's expense and 
capital budgets for the 1998 fiscal year, which 
were adopted on June 6, 1997.  
The Financial Plan projects revenues and 
expenditures for the 1998 fiscal 
year balanced in accordance with GAAP.  The 
Financial Plan includes increased 
tax revenue projections; reduced debt service 
costs; the assumed restoration 
of Federal funding for programs, assisting 
certain legal aliens; additional 
expenditures for textbooks, computers, improved 
education programs and 
welfare reform, law enforcement, immigrant 
naturalization, initiative 
proposed by the City Council and other 
initiatives; and a proposed 
discretionary transfer to the 1998 fiscal year 
of $300 million of debt 
service due in the 1999 fiscal year for budget 
stabilization purposes.  In 
addition, the Financial Plan reflects the 
discretionary transfer to the 1997 
fiscal year of $1.3 billion of debt service due 
in the 1998 and 199 fiscal 
years, and includes actions to eliminate a 
previously projected budget gap 
for the 1998 fiscal year.  These gap closing 
actions include (I) additional 
agency actions totaling $621 million; (ii) the 
proposed sale of various 
assets; (iii) additional State aid of $294 
million, including a proposal that 
the State accelerate a $142 million revenue 
sharing payment  to the City from 
March 1999; and (iv) entitlement savings of 
$128 million which would result 
from certain of the reductions in Medicaid 
spending proposed in the 
Governor's 1997-1998 Executive Budget and the 
State making available to the 
City $77 million of additional Federal block 
grant aid, as proposed in the 
Governor's 1997-1998 Executive Budget.  The 
Financial Plan also sets forth 
projections for the 1999 through 2001 fiscal 
years and projects gaps of $1.8 
billion, $2.8 billion for the 1999 through 2001 
fiscal years, respectively.
The Financial Plan assumes approval by the 
State Legislature and the Governor 
of (i) a tax reduction program proposed by the 
City totaling $272 million, 
$435 million, $465 million and $481 million in 
the 1998 through 2001 fiscal 
years, respectively, which includes a proposed 
elimination of the 4% City 
sales tax on clothing items under $500 as of 
December 1, 1997, and (ii) a 
proposed State tax relief program, which would 
reduce the City property tax 
and personal income tax, and which the 
Financial Plan assumes will be offset 
by proposed increased State aid totaling $47 
million, $254 million, $472 
million and $722 million in the 1998 through 
2001 fiscal years, respectively.
The Financial Plan also assumes (i) approval by 
the Governor and the State 
Legislature of the extension of the 14% 
personal income tax surcharge, which 
is scheduled to expire on December 31, 1999 and 
the extension of which is 
projected to provide revenue of $166 million 
and $494 million in the  2000 
and 2001 fiscal years, respectively, and of the 
extension of the 12.5% 
personal income tax surcharge, which is 
scheduled to expire on December 31, 
1998 and the extension of which is projected to 
provide revenue of $188 
million, $527 million and $554 million in the 
1999 through 2001 fiscal years, 
respectively; (ii) collection of the projected 
rent payments for the City's 
airports, totaling $385 million, $175 million, 
and $170 million in the 1999, 
2000, and 2001 fiscal years, respectively, 
which may depend on the successful 
completion of negotiation with the Port 
Authority or the enforcement of the 
City's rights under the existing leases through 
pending legal actions; and 
(iii) State approval of the cost containment 
initiatives and State aid 
proposed by the City for the 1998 fiscal year, 
and $115 million in State aid 
which is assumed in the Financial Plan but was 
not provided for in the 
Governor's 1997-1998 Executive Budget.  The 
Financial Plan reflects the 
increased costs which the City is prepared to 
incur as a result of welfare 
legislation recently enacted by Congress.  The 
Financial Plan provides no 
additional wage increases for City employees 
after their contracts expire in 
fiscal years 2000 and 2001.  In addition, the 
economic and financial 
condition of the City may be affected by 
various financial, social, economic 
and political factors which could have material 
effect on the City.
The City annually prepares a modification to 
its financial plan in October or 
November which amends the financial plan to 
accommodate any revisions to 
forecast revenues and expenditures and to 
specify any additional gap-closing 
initiatives to the extent required to offset 
decreases in projected revenues 
or increases in projected revenues or increases 
in projected expenditures.  
The Mayor is expected to publish the first 
quarter modification (the 
"Modification") for the 1998 fiscal year in 
November.  Since the preparation 
of the Financial Plan, the State has adopted 
its budget for the 1997-1998 
fiscal year.  The State budget enacted a 
smaller sales tax reduction than the 
tax reduction program assumed by the City in 
the Financial Plan, which will 
increase projected City sales tax revenues; 
provided for State aid to the 
City which was less than assumed in the 
Financial Plan; and enacted a State 
funded tax relief program which begins a year 
later than reflected I the 
Financial Plan.  In addition, the net effect of 
tax law changes made in the 
Federal Balanced Budget Act of 1997 are 
expected to increase tax revenues in 
the 1998 fiscal year.  These changes will be 
reflected in the Modification.
The projections for the 1998 through 2001 
fiscal years reflect the costs of 
the settlements with the United Federation of 
Teachers ("UFT") and a 
coalition of unions headed by District Council 
37 of the American Federation 
of State, County and Municipal Employees 
("District Council 37"), which 
together represent approximately two-thirds of 
the City's workforce, and 
assume that the City will reach agreement with 
its remaining municipal unions 
under terms which are generally consistent with 
such settlements.  The 
settlement provides for a wage freeze in the 
first two years, followed by a 
cumulative effective wage increase of 11% by 
the end of the five year period 
covered by the proposed agreements, ending in 
fiscal years 2000 and 2001.  
Additional benefit increases would raise the 
total cumulative effective 
increase to 13% above present costs.  Costs 
associated with similar 
settlements for all City-funded employees would 
total $49 million, $459 
million and $1.2 billion in the 1997, 1998 and 
1999 fiscal years, 
respectively, and exceed $2 billion in each 
fiscal year after the 1999 fiscal 
year.  Subsequently, the City reached 
settlements, through agreements to 
statutory impasse procedures, with bargaining 
units which, together with the 
UFT and District Council 37, represent 
approximately 86% of the City's 
workforce.
In 1975, Standard & Poor's suspended its A 
rating of City bonds.  This 
suspension remained in effect until March 1981, 
at which time the City 
received an investment grade rating of BBB from 
Standard & Poor's.  On July 
2, 1985, Standard & Poor's revised its rating 
of City bonds upward to BBB+ 
and on November 19, 1987, to A-.  On July 10, 
1995, Standard & Poor's revised 
its rating of City bonds downward to BBB+.
Moody's rating of City bonds were revised in 
November 1981 from B (in effect 
since 1977) to Ba1, in November 1983 to Baa, in 
December 1985 to Baa1, in May 
1988 to A and again in February 1991 to Baa1.  
On July 17, 1997, Moody's 
changed its outlook on City bonds to positive 
from stable.  Since July 15, 
1993, Fitch has rated City bonds A-.  since 
July 8, 1997, IBCA Limited has 
rated City bonds A.
New York State and its Authorities.  The 
State's budget for the State's 1997-
1998 fiscal year, commencing on April 1, 1997, 
was adopted by the Legislature 
on August 4, 1997.  Prior to adoption of the 
budget, the Legislature enacted 
appropriations for disbursements for its 1997-
1998 fiscal year considered to 
be necessary for State operations and other 
purposes.  The State Financial 
Plan for the 1997-1998 fiscal year was 
formulated on August 11, 1997 and is 
based on the State's budget as enacted by the 
Legislature, as well as actual 
results for the first quarter of the current 
fiscal year.  The 1997-1998 
State Financial Plan is expected to be updated 
in October and January.  The 
1997-1998 State Financial Plan is projected to 
be balanced on a cash basis.  
Total General Fund receipts and transfers from 
other funds are projected to 
be $35.09 billion, while total General Fund 
disbursements and transfers to 
other funds are projected to be $34.60 billion.  
The adopted 1997-1998 budget 
projects a year-over-year increase in General 
Fund disbursements of 5.2 
percent.  As compared to the Governor's 
proposed budget amended in February 
1997, the State's adopted budget for 1997-1998 
increases General fund 
spending by $1.7 billion, primarily due to 
increase for local assistance 
($1.3 billion).  Resources used to fund these 
additional expenditures include 
increased revenues projected for the 1997-1998 
fiscal year, increases 
resources produced in the 1996-1997 fiscal year 
that will be utilized in 
1997-1998, reestimates of social service, 
fringe benefit and other spending, 
and certain non-recurring resources.
the 1997-1998 adopted budget includes multi-
year tax reductions, including a 
State funded property and local income tax 
reduction program, estate tax 
relief, utility gross receipts tax reductions, 
permanent reduction in the 
State sales tax on clothing, and elimination of 
assessments on medical 
providers.  The various elements of the State 
and local tax and assessment 
reductions have little or no impact on the 
1997-1998 Financial Plan, and do 
not begin to materially affect the out-year 
projections until the State's 
1999-2000 fiscal year.
The economic and financial condition of the 
State may be affected by various 
financial, social, economic and political 
factors.  Those factors can be very 
complex, may vary from fiscal year to fiscal 
year, and are frequently the 
result of actions taken not only by the State 
and its agencies and 
instrumentalities, but also by entities, such 
as the Federal government, that 
are not under the control of the State.  In 
addition, the State Financial 
Plan is based upon forecasts of national and 
State economic activity.  
Economic forecasts have frequently failed to 
predict accurately the timing 
and magnitude of changes in the national and 
the State economics.  Actual 
results could differ materially and adversely 
from projections and those 
projections may be changed materially and 
adversely from time to time.
The State closed projected budget gaps of $5.0 
billion, $3.9 billion and $2.3 
billion for its 1995-1996, 1996-1997 and 1997-
1998 fiscal years, 
respectively.  The 1998-1999 budget gap was 
projected at $1.68 billion 
(before the application of any assumed 
efficiencies) in the out-year 
projections submitted to the Legislature in 
February 1997.  As a result of 
changes made in the adopted budget, the 1998-
1999 gap is now expected by the 
State to be about the same or smaller than the 
amount previously projected, 
after application of the $530 million reserve 
for future needs.  The Governor 
has indicated that he will propose to close any 
potential imbalance primarily 
through General Fund expenditure reductions and 
without increases in taxes or 
deferrals of scheduled tax reductions.  The 
revised expectations for the 
1998-199 fiscal year reflect the loss of $1.4  
billion in surplus resources 
from 1996-1997 operations that are being 
utilized to finance current year 
spending, an incremental effect of 
approximately $300 million in legislated 
State and local tax reductions in the out-year 
and other factors.
In recent years, State actions affecting the 
level of receipts and 
disbursements, the relative strength of the 
State and regional economy, 
actions of the Federal government and other 
factors have created structural 
budget gaps for the State.  These gaps resulted 
from a significant disparity 
between recurrent revenues and the costs of 
maintaining or increasing the 
level of support for State programs. To address 
a potential imbalance in any 
given fiscal year, the State would be required 
to take actions to increase 
receipts and/or reduce disbursements as it 
enacts the budget for that year, 
and under the State Constitution, the Governor 
is required to propose a 
balanced budget each year.  There can be no 
assurance, however, that the 
Legislature will enact the Governor's proposals 
or that the State's actions 
will be sufficient to preserve budgetary 
balance in a given fiscal year or to 
align recurring receipts and disbursements in 
future fiscal years.
Other actions taken in the 1997-1998 adopted 
budget add further pressure to 
future State budget balance.  For example, the 
fiscal effects of tax 
reductions adopted in the 1997-1998 budget are 
projected to grow more 
substantially beyond the 1998-1999 fiscal year.  
The full annual cost of the 
enacted tax reduction package is estimated by 
the State at approximately $4.8 
billion when fully effective in State fiscal 
year 2001-2002.  In addition, 
the 1997-1998 budget included multi-year 
commitments for school aid pre-
kindergarten early learning programs which 
could add as much as $1.4 billion 
in costs when fully annualized in fiscal year 
2001-2002.  These spending 
commitments are subject to annual 
appropriation.
On September 11, 1997, the New York State 
Comptroller issued a report which 
noted that the ability to deal with future 
budget gaps could become a 
significant issue in the State's 2000-2001 
fiscal year, when the cost of tax 
cuts increases by $1.9 billion.  The report 
contained projections that, based 
on current economic conditions and current law 
for taxes and spending, showed 
a gap in the 2000-2001 State fiscal year of 
$5.6 billion and of $7.4 billion 
in the 2001-2001 State fiscal year.  The report 
noted that these gaps would 
be smaller if recurring spending reductions 
produce savings in earlier years.  
The State Comptroller has also state that if 
Wall Street earnings moderate 
and the State experiences a moderate recession, 
the gap for the 2001-2002 
State fiscal year could grow to nearly $12 
billion.
In recent years, the State has failed to adopt 
a budget prior to the 
beginning of its fiscal year.  A prolonged 
delay in the adoption of the 
State's budget beyond the statutory April 1 
deadline without interim 
appropriations could delay the projected 
receipt by the City of State aid, 
and there can be no assurance that State 
budgets in future fiscal years will 
be adopted by the April 1 statutory deadline.
On August 28, 1997, Standard & Poor's revised 
its ratings on the State's 
general obligation bonds from A- to A and, in 
addition, revised its ratings 
on the State's moral obligation, lease 
purchase, guaranteed and contractual 
obligation debt.  On January 6, 1992, Moody's 
reduced its ratings on 
outstanding limited-liability State lease 
purchase and contractual 
obligations from A to Baa1.  On February 10, 
1997, Moody's confirmed its A2 
rating on the State's general obligation long-
term indebtedness.
Litigation.  A number of court actions have 
been brought involving State 
finances.  The court actions in which the State 
is a defendant generally 
involve State programs and miscellaneous tort, 
real property, and contract 
claims.  While the ultimate outcome and fiscal 
impact, if any, on the State 
of those proceedings and claims are not 
currently predictable, adverse 
determinations in certain of them might have a 
material adverse effect upon 
the State's ability to maintain a balanced 
1997-98 State Financial Plan.
The claims involving the City other than 
routine litigation incidental to the 
performance of their governmental and other 
functions and certain other 
litigation arise out of alleged constitutional 
violations, torts, breaches of 
contract and other violations of law and 
condemnation proceedings.  While the 
ultimate outcome and fiscal impact, if any, on 
the City of those proceedings 
and claims are not currently predictable, 
adverse determinations in certain 
of them might have a material adverse effect 
upon the City's ability to carry 
out the 1998-2001 Financial Plan.  The City has 
estimated that its potential 
future liability on account of outstanding 
claims against it as of June 30, 
1996 amounted to approximately $2.8 billion.
New York Taxes -
Under the income tax laws of the State and City 
of New York, the Trust is not 
an association taxable as a corporation and 
income received by the Trust will 
be treated as the income of the Holders in the 
same manner as for Federal 
income tax purposes.  Accordingly, each Holder 
will be considered to have 
received the interest on his pro rata portion 
of each Bond when interest will 
be exempt from New York State and City personal 
income taxes except where 
such interest is subject to Federal income 
taxes (see Taxes).  A noncorporate 
Holder who is not a New York State resident 
will not be subject to New York 
State or City personal income taxes on any such 
gain unless such Units are 
attributable to a business, trade, profession 
or occupation carried on in New 
York.  A New York State (and City) resident 
should determine his tax 
purposes.  Interest income on, as well as any 
gain recognized on the 
disposition of, a Holder's pro rata portion of 
the Bonds is generally not 
excludable from income in computing New York 
State and City corporate 
franchise taxes.
Ratings as Investment Criteria
In general, the ratings of Moodys, S&P and 
Fitch IBCA, Inc. ("Fitch") 
represent the opinions of those agencies as to 
the quality of debt 
obligations that they rate.  These ratings, 
however, are relative and 
subjective, are not absolute standards of 
quality and do not evaluate the 
market risk of securities.  Ratings will be 
used with respect to the Funds as 
initial criteria for the selection of portfolio 
securities; the Funds will 
also rely upon the independent advice of the 
Adviser to evaluate potential 
investments.  Among the factors that will be 
considered by the Adviser are 
the long-term ability of the issuer to pay 
principal and interest and general 
economic trends.  The Appendix to this SAI 
contains further information 
concerning the ratings of Moodys, S&P and 
Fitch, together with a brief 
discussion of the significance of those 
ratings.

An issue of debt obligations may, subsequent to 
its purchase by a Fund, cease 
to be rated or its ratings may be reduced below 
the minimum required for 
purchase by the Fund.  Neither event will 
require the sale of the debt 
obligation by a Fund, but the Adviser will 
consider the event in its 
determination of whether the Fund should 
continue to hold the obligation.  In 
addition, to the extent that ratings change as 
a result of changes in rating 
organizations or their rating systems or as a 
result of a corporate 
restructuring of Moodys, S&P or Fitch, the 
Adviser will attempt to use 
comparable ratings as standards for each Funds 
investments.
Miscellaneous Investment Policies
Each Fund may invest up to an aggregate amount 
equal to 10% of its net assets 
of illiquid securities, which term includes 
securities subject to contractual 
or other restrictions on resale and other 
instruments that lack readily 
available markets.

Repurchase Agreements
Both the Funds may engage in repurchase 
agreement transactions with banks 
which are the issuers of instruments acceptable 
for purchase by the Fund and 
certain dealers on the Federal Reserve Bank of 
New Yorks list of reporting 
dealers.  A repurchase agreement is a contract 
under which the buyer of a 
security simultaneously commits to resell the 
security to the seller at an 
agreed-upon price on an agreed-upon date.
Under the terms of a typical repurchase 
agreement, a Fund would acquire an 
underlying debt obligation for a relatively 
short period subject to an 
obligation of the seller to repurchase, and the 
Fund to resell, the 
obligation at an agreed-upon price and time, 
thereby determining the yield 
during the Funds holding period.  This 
arrangement results in a fixed rate of 
return that is not subject to market 
fluctuations during the Funds holding 
period.  Under each repurchase agreement, the 
selling institution will be 
required to maintain the value of the 
securities subject to the repurchase 
agreement at not less than their repurchase 
price.  Although the amount of a 
Funds assets that may be invested in purchase 
agreements terminable in less 
than seven days is not limited, repurchase 
agreements maturing in more than 
seven days, together with other securities 
lacking readily available markets 
held by the Fund, will not exceed 10% of the 
Funds net assets.
The value of the securities underlying a 
repurchase agreement of a Fund will 
be monitored on an ongoing basis by the Adviser 
to ensure that the value is 
at least equal at all times to the total amount 
of the repurchase obligation, 
including interest.  The Adviser will also 
monitor, on an ongoing basis to 
evaluate potential risks, the creditworthiness 
of the banks and dealers with 
which a Fund enters into repurchase agreements.

When-Issued and Delayed-Delivery Transactions - 
Both Funds
When a Fund engages in when-issued or delayed-
delivery securities 
transactions, it will rely on the other party 
to consummate the trade.  
Failure of the seller to do so may result in a 
Funds incurring a loss or 
missing an opportunity to obtain a price 
considered to be advantageous.
Investment Restrictions
The investment restrictions numbered 1 through 
7 below have been adopted by 
the Trust as fundamental policies of the Funds.  
Under the 1940 Act, a 
fundamental policy may not be changed with 
respect to a Fund without the vote 
of a majority of the outstanding voting 
securities of the Fund.  Majority is 
defined in the 1940 Act as the lesser of (a) 
67% or more of the shares 
present at a Fund meeting, if the holders of 
more than 50% of the outstanding 
shares of the Fund are present or represented 
by proxy, or (b) more than 50% 
of outstanding shares.  Investment restrictions 
13 through 17 may be changed 
by a vote of a majority of the Trusts Board of 
Trustees at any time.

Under the investment restrictions adopted by 
the Trust with respect to the 
Funds:  No Fund will
1. Purchase securities other than Municipal 
Obligations and Taxable 
Investments as those terms are defined in the 
Prospectuses or this SAI.
 
2. Invest more than 25% of its total assets in 
securities, the issuers of 
which conduct their principal business 
activities in the same industry. For 
purposes of this limitation, securities of the 
U.S. government (including its 
agencies and instrumentalities) and securities 
of state or municipal 
governments and their political subdivisions 
are not considered to be issued 
by members of any industry.
 
3. 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.
 
4. 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
 
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. 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 Funds investment 
objective and policies); or (d) 
investing in real estate investment trust 
securities.
 
7. 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.
 
8. 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. 
 
9. No Fund will invest in oil, gas or other 
mineral leases or exploration or 
development programs.
 
10. No Fund may write or sell puts, calls, 
straddles, spreads or combinations 
of those transactions, except as permitted 
under the Funds investment 
objective and policies.
 
11. No Fund will purchase any security if, as a 
result (unless the security is 
acquired pursuant to a plan of reorganization 
or an offer of exchange), the 
Fund would own any securities of an open-end 
investment company or more than 
3% of the total outstanding voting stock of any 
closed-end investment 
company, or more than 5% of the value of the 
Funds total assets would be 
invested in securities of any one or more 
closed-end investment companies.
 
12. No Fund will purchase a security if, as a 
result, the Fund would then have 
more than 5% of its total assets invested in 
securities of issuers (including 
predecessors) that have been in continuous 
operation for fewer than three 
years, except that this limitation will be 
deemed to apply to the entity 
supplying the revenues from which the issue is 
to be paid, in the case of 
private activity bonds purchased.
 
13. No Fund may make investments for the 
purpose of exercising control of 
management.
Portfolio Transactions 
Decisions to buy and sell securities for each 
Fund are made by the Adviser, 
subject to the overall review of the Trusts 
Board of Trustees.  Although 
investment decisions for each Fund are made 
independently from those of the 
other accounts managed by the Adviser, 
investments of the type that a Fund 
may make also may be made by those other 
accounts.  When a Fund and one or 
more other accounts managed by the Adviser 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 Adviser 
to be equitable to each.  In some cases, this 
procedure may adversely affect 
the price paid or received by a Fund or the 
size of the position obtained or 
disposed of by a Fund.  The Trust has paid no 
brokerage commissions since its 
commencement of operations.
Allocation of transactions on behalf of the 
Funds, including their frequency, 
to various dealers is determined by the Adviser 
in its best judgment and in a 
manner deemed fair and reasonable to the Funds 
shareholders.  The primary 
considerations of the Adviser 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 Adviser may receive 
orders for portfolio transactions 
by a Fund.  Information so received is in 
addition to, and not in lieu of, 
services required to be performed by the 
Adviser, and the fees of the Adviser 
are not reduced as a consequence of their 
receipt of the supplemental 
information.  The information may be useful to 
the Adviser in serving both a 
Fund and other clients, and conversely, 
supplemental information obtained by 
the placement of business of other clients may 
be useful to the Adviser in 
carrying out its obligations to a Fund.
No Fund will purchase U.S. government 
securities or Municipal Obligations 
during the existence of any underwriting or 
selling group relating to the 
securities, of which the Adviser is a member, 
except to the extent permitted 
by the SEC.  Under certain circumstances, a 
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.
Portfolio Turnover
While a Funds portfolio turnover rate (the 
lesser of purchases or sales of 
portfolio securities during the year, excluding 
purchases or sales of short-
term securities, divided by the monthly average 
value of portfolio 
securities) is generally not expected to exceed 
100%, it has in the past 
exceeded 100% with respect to these funds.  The 
rate of turnover will not be 
a limiting factor, however, when a Fund deems 
it desirable to sell or 
purchase securities.  This policy should not 
result in higher brokerage 
commissions to a Fund, as purchases and sales 
of portfolio securities are 
usually effected as principal transactions.  
Securities may be sold in 
anticipation of a rise in interest rates 
(market decline) or purchased in 
anticipation of a decline in interest rates 
(market rise) and later sold.  In 
addition, a security may be sold and another 
security of comparable quality 
purchased at approximately the same time to 
take advantage of what the Fund 
believes to be a temporary disparity in the 
normal yield relationship between 
the two securities.  These yield disparities 
may occur for reasons not 
directly related to the investment quality of 
particular issues or the 
general movement of interest rates, such as 
changes in the overall demand 
for, or supply of, various types of tax-exempt 
securities.


The portfolio turnover rates are as follows: 

Year 
Year

Ended 
Ended
Fund 
11/30/97 
11/30/96
California Fund 
9%
15%
New York Fund 
52%
67%

PURCHASE OF SHARES
Volume Discounts
The schedules of sales charges described in the 
Prospectuses apply to 
purchases of shares of each Fund made by any 
"purchaser," which term is 
defined to include the following: (a) an 
individual; (b) an individuals 
spouse and his or her children purchasing 
shares for his or her own account; 
(c) a trustee or other fiduciary purchasing 
shares for a single trust estate 
or single fiduciary account; (d) any other 
organized group of persons, 
provided that the organization has been in 
existence for at least six months 
and was organized for a purpose other than the 
purchase of investment company 
securities at a discount.  Purchasers who wish 
to combine purchase orders to 
take advantage of volume discounts should 
contact a Smith Barney Financial 
Consultant.
Combined Right of Accumulation
Reduced sales charges, in accordance with the 
schedules in the Prospectuses, 
apply to any purchase of shares of a Fund by 
any "purchaser" (as defined 
above).  The reduced sales charge is subject to 
confirmation of the 
shareholders holdings through a check of 
appropriate records.  The Trust 
reserves the right to terminate or amend the 
combined right of accumulation 
at any time after written notice to 
shareholders.  For further information 
regarding the right of accumulation, 
shareholders should contact a Smith 
Barney Financial Consultant.
Determination of Public Offering Price
The Funds offer their shares to the public on a 
continuous basis.  The public 
offering price for a Class A and Class Y share 
of a 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 C 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 contingent deferred sales 
charge ("CDSC"), however, is imposed on 
certain redemptions of Class C 
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 Funds 
financial statements, incorporated by reference 
in their entirety into this 
SAI. 

REDEMPTION OF SHARES
Detailed information on how to redeem shares of 
the Funds is included in the 
Prospectuses.  The right of redemption of 
shares of each Fund may be 
suspended or the date of payment postponed (a) 
for any periods during which 
the New York Stock Exchange, Inc. (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 Funds 
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 Funds shareholders.

Distribution in Kind
If the Board of Trustees 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, a 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 
Funds net assets by a distribution in kind of 
portfolio securities in lieu of 
cash.  Securities issued as a distribution in 
kind may incur brokerage 
commissions when shareholders subsequently sell 
those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the 
"Withdrawal Plan") is available to 
shareholders of any 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 
CDSC will not be waived on 
amounts withdrawn by shareholders that exceed 
1.00% per month of the value of 
a shareholders shares at the time the 
Withdrawal Plan commences.  (With 
respect to Withdrawal Plans in effect prior to 
November 7, 1994, any 
applicable CDSC will be waived on amounts 
withdrawn that do not exceed 2.00% 
per month of the value of a shareholders shares 
at the time the Withdrawal 
Plan commences).  To the extent that 
withdrawals exceed dividends, 
distributions and appreciation of a 
shareholders investment in a Fund, 
continued withdrawal payments will reduce the 
shareholders 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 
months withdrawal.  For additional information, 
shareholders should contact a 
Smith Barney Financial Consultant.

DISTRIBUTOR

Smith Barney serves as the Trusts distributor 
on a best efforts basis 
pursuant to a written agreement (the 
"Distribution Agreement"), which was 
approved by the Trusts Board of Trustees.  
For the fiscal years ended November 30, 1995, 
1996, and 1997, the Distributor 
or its predecessor Shearson Lehman Brothers 
received approximately the 
following in sales charges for the sale of each 
Funds Class A shares, and did 
not reallow any portion thereof to dealers: 

Year 
Year 
Year

Ended 
Ended 
Ended
Fund 
11/30/97
11/30/96 
11/30/95
California Fund 
$37,000
$39,000
$22,000
New York Fund 
$46,000
48,000
32,000

For the fiscal years ended November 30, 1995, 
1996, and 1997, the Distributor 
or Shearson Lehman Brothers received 
approximately the following representing 
CDSC on redemption of each Funds Class A 
shares: 

Year 
Year 
Year

Ended 
Ended 
Ended
Fund 
11/30/97 
11/30/96 
11/30/95
California Fund 
$--
--
$3,800
New York Fund 
$1,000
  2,000
  8,000

For the fiscal years ended November 30, 1995, 
1996, and 1997, the Distributor 
or Shearson Lehman Brothers received 
approximately the following representing 
CDSC on redemption of each Funds Class C 
shares: 

Year 
Year 
Year

Ended 
Ended 
Ended
Fund 
11/30/97 
11/30/96 
11/30/95
California Fund 
$1,000
--
$200
New York Fund 
$1,000
-
-
* The inception dates for Class C shares of 
California Fund and New York Fund 
are November 8, 1994 and December 5, 1994, 
respectively 
When payment is made by the investor before the 
settlement date, unless 
otherwise requested in writing by the investor, 
the funds will be held as a 
free credit balance in the investors brokerage 
account and Smith Barney may 
benefit from the temporary use of the funds.  
The investor may designate 
another use for the funds prior to settlement 
date, such as an investment in 
a money market fund (other than Smith Barney 
Exchange Reserve Fund) of the 
Smith Barney Mutual Funds.  If the investor 
instructs Smith Barney to invest 
the funds in a Smith Barney money market fund, 
the amount of the investment 
will be included as part of the average daily 
net assets of both the Fund and 
the money market fund, and affiliates of Smith 
Barney that serve the funds in 
an investment advisory or administrative 
capacity will benefit from the fact 
that they are receiving fees from both such 
investment companies for managing 
these assets, computed on the basis of their 
average daily net assets.  The 
Trusts Board of Trustees has been advised of 
the benefits to Smith Barney 
resulting from these settlement procedures and 
will take such benefits into 
consideration when reviewing the Advisory, 
Administration and Distribution 
Agreements for continuance.

For the fiscal year ended November 30, 1997, 
Smith Barney incurred 
distribution expenses totaling approximately 
$184,083 consisting of 
approximately $16,558 for advertising, $26,243 
for printing and mailing of 
prospectuses, $56,767 for support services, 
$83,151 to Smith Barney Financial 
Consultants, and $1,334 in accruals for 
interest on the excess of Smith 
Barney expenses incurred in distribution of the 
Funds shares over the sum of 
the distribution fees and CDSC received by 
Smith Barney from the Fund.
Distribution Arrangements for the New York and 
California Fund
To compensate Smith Barney for the services it 
provides and for the expense 
it bears under the Distribution Agreement, the 
Trust has adopted a services 
and distribution plan (the "Plan") pursuant to 
Rule 12b-1 under the 1940 Act.  
Under the Plan, both the New York and 
California Fund pays Smith Barney a 
service fee, accrued daily and paid monthly, 
calculated at the annual rate of 
0.15% of the value of the Funds average daily 
net assets attributable to the 
Funds Class A and Class C shares.  In addition, 
each Fund pays Smith Barney a 
distribution fee with respect to the Class C 
shares primarily intended to 
compensate Smith Barney for its initial expense 
of paying its Financial 
Consultants a commission upon sales of those 
shares.  The Class C 
distribution fee is calculated at the annual 
rate of 0.20% of the value of 
each Funds average net assets attributable to 
the shares of the Class.



The following service and distribution fees 
were incurred during the periods 
indicated: 
SERVICE FEES
California Fund:




Year
Year 
Year 

Ended
Ended 
Ended 

11/30/97
11/30/96 
11/30/95
Class A
37,151
$37,644 
$36,511 
Class C
4,112
   3,583 
    1,017
New York Fund:




Year
Year 
Year 

Ended
Ended 
Ended 

11/30/97
11/30/96 
11/30/95
Class A 
72,443
$76,380 
$84,263 
Class C*
2,468
     1,171
      203
*The inception dates for Class C of California 
Fund and New York Fund are 
November 8, 1994 and December 5, 1994, 
respectively.
DISTRIBUTION FEES
California Fund:




Year 
Year 
Year 

Ended 
Ended 
Ended 

11/30/97
11/30/96
11/30/95
Class C 
5,484
$4,778
$1,356

New York Fund: 




Year 
Year 


Ended 
Ended 


11/30/97
11/30/96
11/30/95*
Class C
$3,290
$1,562
      
$271
* The inception dates for Class C shares of 
California Fund and New York Fund 
are November 8, 1994 and December 5, 1994, 
respectively.
For the fiscal years ended November 30, 1995, 
1996 and 1997 Smith Barney, 
received $123,621, $125,117, and $124,948 
respectively, in the aggregate from 
the Plan.
Under its terms, the Plan continues from year 
to year, provided such 
continuance is approved annually by vote of the 
Board of Trustees, including 
a majority of the Trustees who are not 
interested persons of the Trust and 
who have no direct or indirect financial 
interest in the operation of the 
Plan or in the Distribution Agreement (the 
"Independent Trustees").  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 Trustees including all of 
the Independent Trustees in the 
manner described above.  The Plan may be 
terminated with respect to a Class 
at any time, without penalty, by vote of a 
majority of the Independent 
Trustees or, with respect to any Fund, by vote 
of a majority of the 
outstanding voting securities of a Fund (as 
defined in the 1940 Act).  
Pursuant to the Plan, Smith Barney will provide 
the Board of Trustees 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 each Funds 
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 
Years 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.

In carrying out valuation policies adopted by 
the Trusts Board of Trustees 
for the New York and California Fund the 
Administrator, may consult with an 
independent pricing service (the Pricing 
Service) retained by the Trust.  
Debt securities of domestic issuers (other than 
U.S. government securities 
and short-term investments), including 
Municipal Obligations, are valued by 
the Adviser after consultation with the Pricing 
Service.  U.S. government 
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 Trusts 
Board of Trustees.  With respect to other 
securities held by the Fund, when, 
in the judgment of the Pricing Service, quoted 
bid prices for investments are 
readily available and are representative of the 
bid side of the market, these 
investments are valued at the mean between the 
quoted bid prices and asked 
prices.  Investments for which no readily 
obtainable market quotations are 
available, in the judgment of the Pricing 
Service, are carried at fair value 
as determined by the Pricing Service.  The 
procedures of the Pricing Service 
are reviewed periodically by the officers of 
the Trust under the general 
supervision and responsibility of the Board of 
Trustees.

EXCHANGE PRIVILEGE

Except as noted below, 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 shares of the Fund may be exchanged 
without a sales charge 
for Class A shares of any of the Smith Barney 
Mutual Funds.
B. Class C shares of any fund may be exchanged 
without a sales charge.  
For purposes of CDSC applicability, Class C 
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.
Dealers other than Smith Barney must notify the 
Transfer Agent of the 
investors prior ownership of Class A shares of 
Smith Barney High Income Fund 
and the account number in order to accomplish 
an exchange of shares of Smith 
Barney High Income Fund under paragraph B 
above.
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 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 CDSC, the 
proceeds are immediately 
invested, at a price as described above, in 
shares of the fund being 
acquired.  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.

PERFORMANCE DATA

From time to time, the Trust may quote a Funds 
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 each Funds shares.  Such performance 
information may include the 
following industry and financial publications- 
Barrons, 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 a Fund 
describes the expenses or 
performance of any Class it will also disclose 
such information for the other 
Classes.
Yield and Equivalent Taxable Yield
A Funds 30-day yield described in the 
Prospectuses is calculated according to 
a formula prescribed by the SEC, expressed as 
follows: 


Where:	a  =  Dividends and interest earned 
during the 
period
b  =  Expenses accrued for the period (net of 
reimbursements)
c  =  The average daily number of shares 
outstanding during 
the period
        that were entitled to receive dividends
d  =  The maximum offering price per share on 
the last day 
of the period
For the purpose of determining the interest 
earned (variable a in the 
formula) on debt obligations that were 
purchased by a Fund at a discount or 
premium, the formula generally calls for 
amortization of the discount or 
premium; the amortization schedule will be 
adjusted monthly to reflect 
changes in the market values of the debt 
obligations.
A Funds equivalent taxable 30-day yield for 
a Class is computed by dividing 
that portion of the Class 30-day yield which is 
tax-exempt by one minus a 
stated income tax rate and adding the product 
to that portion, if any, of the 
Class yield that is not tax-exempt.
The yield on municipal securities is dependent 
upon a variety of factors, 
including general economic and monetary 
conditions, conditions of the 
municipal securities market, size of a 
particular offering, maturity of the 
obligation offered and rating of the issue.  
Investors should recognize that, 
in periods of declining interest rates, a Funds 
yield for each Class of 
shares will tend to be somewhat higher than 
prevailing market rates, and in 
periods of rising interest rates a Funds yield 
for each Class of shares will 
tend to be somewhat lower.  In addition, when 
interest rates are falling, the 
inflow of net new money to a Fund from the 
continuous sale of its shares will 
likely be invested in portfolio instruments 
producing lower yields than the 
balance of the Funds portfolio, thereby 
reducing the current yield of the 
Fund.  In periods of rising interest rates, the 
opposite can be expected to 
occur.
The yields for the 30-day period ended November 
30, 1997 for California Funds 
Class A, Class C and Class Y shares were 6.13 
%, 5.92% and 6.52%, 
respectively.  The yields for the 30-day period 
ended November 30, 1997 for 
New York Funds Class A and Class C shares were 
6.46% and 6.27%, respectively.
The equivalent taxable yields for the 30-day 
period ended November 30, 1997 
assuming payment of Federal income taxes at the 
rate of 31.0%; California 
income taxes at the rate of 9.3% for the 
California Fund shareholders; and 
New York State and City income taxes at a rate 
of 10.5% for the New York Fund 
shareholders would have been as follows: 
California Funds Class A, Class C 
and Class Y shares: 4.65%, 4.54% and 4.62%, 
respectively, and New York Funds 
Class A and Class C shares: 4.61% and 4.5%, 
respectively.

Average Annual Total Return 

A Funds 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 Funds net 
investment income changes in response 
to fluctuations in interest rates and the 
expenses of the Fund.
The following total returns assume that the 
maximum Class A 2.00% sales 
charge has been deducted from the investment at 
the time of purchase and have 
been restated to show the change in the maximum 
sales charge.  The Funds 
average annual total return for Class A shares 
were as follows: 
ONE YEAR PERIOD
ENDED NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales 
Charge)
California Fund 
6.13%
New York Fund 
6.23%

The Funds average annual total return for Class 
C shares were as follows: 
ONE YEAR PERIOD
ENDED NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales 
Charge)
California Fund 
5.92%
New York Fund*
6.00%
* For the period from December 5, 1994 
(inception date) to November 30, 1995 

PER ANNUM FOR THE PERIOD FROM
COMMENCEMENT OF OPERATIONS
(NOVEMBER 8, 1994) THROUGH NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales Charge)
California Fund
8.36%
New York Fund
7.83%


The Funds average annual total return for Class 
Y shares were as follows:

ONE YEAR PERIOD
ENDED NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales Charge)
California Fund* 
6.20%

* 	For the period from September 8, 1995 
(inception date) to November 30, 
1997. 
**	As of November 30, 1997, no Class Y 
shares of New York Fund had been sold.

Aggregate Total Return

A Funds 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.
The Funds aggregate total return for Class A 
shares were as follows: 
ONE YEAR PERIOD
ENDED NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales 
Charge)
California Fund 
6.13%
New York Fund
6.23%

PER ANNUM FOR THE PERIOD FROM
COMMENCEMENT OF OPERATIONS
(DECEMBER 31, l991)THROUGH NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales 
Charge)
California Fund 
45.21%
New York Fund 
45.73%


The Funds aggregate total return for Class C 
shares were as follows: 

ONE YEAR PERIOD
ENDED NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales 
Charge)
California Fund 
5.92%
New York Fund*
6.00%

* For the period from December 5, 1994 
(inception date) to November 30, l997 

PER ANNUM FOR THE PERIOD FROM
COMMENCEMENT OF OPERATIONS
(NOVEMBER 8, 1994) THROUGH NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales 
Charge)
California Fund 
27.90%
New York Fund
25.36%

The Funds aggregate total return for Class Y 
shares were as follows: 

ONE YEAR PERIOD
ENDED NOVEMBER 30, 1997

Total Return
Fund 
(Without Sales Charge)
California Fund 
15.01%

*	For the period from September 8, 1995 
(inception date) to November 30, 
l997. 
**	As of November 30, 1997, no Class Y 
shares of New York Fund had been sold.
It is important to note that the total return 
figures set forth above are 
based on historical earnings and are not 
intended to indicate future 
performance.  Each Class net investment income 
changes in response to 
fluctuations in interest rates and the expenses 
of the Fund.  Performance 
will vary from time to time depends upon market 
conditions, the composition 
of the Funds 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 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 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 selected Federal 
income tax considerations that 
may affect the Trust and its shareholders.  The 
summary is not intended as a 
substitute for individual tax advice and 
investors are urged to consult their 
own tax advisors as to the tax consequences of 
an investment in the Trust.
As described above and in the Prospectuses, 
each Fund is designed to provide 
investors with current income which is excluded 
from gross income for Federal 
income tax purposes, and the California Fund 
and the New York Fund are 
designed to provide investors with current 
income exempt from otherwise 
applicable state and/or local personal income 
taxes.  The Trust is not 
intended to be a balanced investment program 
and is not designed for 
investors seeking capital gains or maximum tax-
exempt income irrespective of 
fluctuations in principal.  Investment in the 
Trust would not be suitable for 
tax-exempt institutions, qualified retirement 
plans, H.R. 10 plans and 
individual retirement accounts because those 
investors would not gain any 
additional tax benefit from the receipt of tax-
exempt income.
Each Fund has qualified and intends tocontinue 
to qualify each year as a 
regulated investment company under the Code.  
Provided that a Fund (a) is a 
regulated investment company and (b) 
distributes to its shareholders at least 
90% of its taxable net investment income 
(including, for this purpose, its 
net realized short-term capital gains) and 90% 
of its tax-exempt interest 
income (reduced by certain expenses), the Fund 
will not be liable for Federal 
income taxes to the extent its taxable net 
investment income and its net 
realized long-term and short-term capital 
gains, if any, are distributed to 
its shareholders.  Any such taxes paid by a 
Fund would reduce the amount of 
income and gains available for distribution to 
shareholders.
Because the Fund may distribute exempt-interest 
dividends, interest on 
indebtedness incurred by a shareholder to 
purchase or carry shares of a Fund 
is not deductible for Federal income tax 
purposes.  In addition, the 
indebtedness is not deductible by a shareholder 
of the California Fund for 
California State personal income tax purposes, 
nor by a New York Fund 
shareholder for New York State and New York 
City personal income tax 
purposes.  If a shareholder receives exempt-
interest dividends with respect 
to any share of a Fund and if the share is held 
by the shareholder for six 
months or less, then any loss on the sale or 
exchange of the share may, to 
the extent of the exempt-interest dividends, be 
disallowed.  In addition, the 
Code may require a shareholder that receives 
exempt-interest dividends to 
treat as taxable income a portion of certain 
otherwise non-taxable social 
security and railroad retirement benefit 
payments.  Furthermore, the portion 
of any exempt-interest dividend paid by a Fund 
that represents income derived 
from private activity bonds held by the Fund 
may not retain its tax-exempt 
status in the hands of a shareholder who is a 
substantial user of a 
facility financed by the bonds, or a related 
person of the substantial 
user.  Moreover, as noted in the Prospectuses 
(a) some or all of a Funds 
exempt-interest dividends may be a specific 
preference item, or a component 
of an adjustment item, for purposes of the 
Federal individual and corporate 
alternative minimum taxes and (b) the receipt 
of a Funds dividends and 
distributions may affect a corporate 
shareholders Federal environmental tax 
liability if the environment tax is reinstated 
as proposed by President 
Clinton.  In addition, the receipt of a Funds 
dividends and distributions may 
affect a foreign corporate shareholders Federal 
branch profits tax 
liability and the Federal and California 
excess net passive income tax 
liability of a Subchapter S corporation.  
Shareholders should consult their 
own tax advisors to determine whether they are 
(a) substantial users with 
respect to a facility or related to those 
users within the meaning of the 
Code or (b) subject to a Federal alternative 
minimum tax, the Federal 
"environmental" tax, the Federal "branch 
profits" tax, or the Federal or 
California "excess net passive income" tax.  
As a general rule, a Funds gain 
or loss on a sale or exchange of an investment 
will be a long-term capital 
gain or loss if the Fund has held the 
investment for more than one year and 
will be a short-term capital gain or loss if it 
has held the investment for 
one year or less.  Furthermore, as a general 
rule, a shareholders gain or 
loss on a sale or redemption of shares of a 
Fund will be a long-term capital 
gain or loss if the shareholder has held his or 
her Fund shares for more than 
one year and will be a short-term capital gain 
or loss if he or she has held 
the Fund shares for one year or less.  
Shareholders of each Fund will 
receive, as more fully described in the 
Prospectuses, an annual statement as 
to the income tax status of his or her 
dividends and distributions for the 
prior calendar year.  Each shareholder will 
also receive, if appropriate, 
various written notices after the close of a 
Funds prior taxable year as to 
the Federal income tax status of certain 
dividends or distributions which 
were received from the Fund during the Funds 
prior taxable year.
The dollar amount of dividends paid by a Fund 
that is excluded from Federal 
income taxation and the dollar amount of 
dividends paid by a Fund that is 
subject to federal income taxation, if any, 
will vary for each shareholder 
depending upon the size and duration of each 
shareholders investment in a 
Fund.
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 mutual 
fund for which the otherwise applicable sales 
charge is reduced by reason of 
an reinvestment right (that is 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, it will be 
added to the tax basis in the newly acquired 
shares.  Furthermore, the same 
rule also applies to disposition of the newly 
acquired or redeemed 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.
Investors considering buying shares of a Fund 
on or just prior to the record 
date for a capital gain distribution should be 
aware that the amount of the 
forthcoming distribution payment will be a 
taxable distribution payment.  
If a shareholder fails to furnish a correct 
taxpayer identification number, 
fails to report fully dividend or interest 
income or fails to certify that he 
or she has provided a correct taxpayer 
identification number and that he or 
she is not subject to backup withholding, 
then the shareholder may be 
subject to a 31% backup withholding tax with 
respect to (a) taxable 
dividends and distributions and (b) the 
proceeds of any redemptions of shares 
of a Fund.  An individuals taxpayer 
identification number is his or her 
social security number.  The backup withholding 
tax is not an additional tax 
and may be credited against a taxpayers regular 
Federal income tax liability.
The discussion above is only a summary of 
certain tax considerations 
generally affecting a Fund and its 
shareholders, and is not intended as a 
substitute for careful tax planning.  
Shareholders are urged to consult their 
tax advisors with specific reference to their 
own tax situations, including 
their state and local tax liabilities.

ADDITIONAL INFORMATION

The Trust was organized as an unincorporated 
business trust on October 17, 
1991 under the name Shearson Lehman Brothers 
Intermediate-Term Trust.  On 
November 20, 1991, July 30, 1993, October 14, 
1994 and August 16, 1995, the 
Trusts name was changed to Shearson Lehman 
Brothers Income Trust, Smith 
Barney Shearson Income Trust, Smith Barney 
Income Trust and Smith Barney 
Investment Trust, respectively.

PNC, 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 Funds 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, is located at Exchange Place, 
Boston, Massachusetts 02109, and 
serves as the Trusts 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.



FINANCIAL STATEMENTS

The Funds Annual Report for the fiscal year 
ended November 30, 1997 is 
incorporated herein by reference in its 
entirety.


APPENDIX
RATINGS ON DEBT OBLIGATIONS
BOND (AND NOTES) RATINGS
Moodys Investors Service, Inc.
	Aaa - Bonds that are rated Aaa are 
judged to be of the best quality. 
They carry the smallest degree of investment 
risk and are generally referred 
to as gilt edged. Interest payments are 
protected by a large or by an 
exceptionally stable margin and principal is 
secure. While the various 
protective elements are likely to change, such 
changes as can be visualized 
are most unlikely to impair the fundamentally 
strong position of such issues.
	Aa - Bonds that are rated Aa are 
judged to be of high quality by all 
standards. Together with the Aaa group they 
comprise what are generally 
known as high grade bonds. They are rated lower 
than the best bonds because 
margins of protection may not be as large as in 
Aaa securities or 
fluctuation of protective elements may be of 
greater amplitude or there may 
be other elements present that make the long 
term risks appear somewhat 
larger than in "Aaa" securities.
	A - Bonds that are rated "A" possess 
many favorable investment 
attributes and are to be considered as upper 
medium grade obligations. 
Factors giving security to principal and 
interest are considered adequate but 
elements may be present that suggest a 
susceptibility to impairment sometime 
in the future.
	Baa - Bonds that are rated "Baa" are 
considered as medium grade 
obligations, i.e., they are neither highly 
protected nor poorly secured. 
Interest payments and principal security appear 
adequate for the present but 
certain protective elements may be lacking or 
may be characteristically 
unreliable over any great length of time. Such 
bonds lack outstanding 
investment characteristics and in fact have 
speculative characteristics as 
well.
	Ba - Bonds which are rated Ba are judged 
to have speculative elements; 
their future cannot be considered as well 
assured. Often the protection of 
interest and principal payments may be very 
moderate and thereby not well 
safeguarded during both good and bad times over 
the future. Uncertainty of 
position characterizes bonds in this class.
	B - Bonds which are rated B generally 
lack characteristics of the 
desirable investment. Assurance of interest and 
principal payments or of 
maintenance of other terms of the contract over 
any long period of time may 
be small.
	Caa - Bonds which are rated Caa are of 
poor standing. Such issues may 
be in default or there may be present elements 
of danger with respect to 
principal or interest.
	Ca - Bonds which are rated Ca represent 
obligations which are 
speculative in a high degree. Such issues are 
often in default or have other 
marked shortcomings.
	C - Bonds which are rated C are the 
lowest class of bonds and issues so 
rated can be regarded as having extremely poor 
prospects of ever attaining 
any real investment standing.
	Note: The modifier 1 indicates that the 
security ranks in the higher 
end of its generic rating category; the 
modifier 2 indicates a mid-range 
ranking; and the modifier 3 indicates that the 
issue ranks in the lower end 
of its generic rating category.

Standard & Poors
	AAA - Debt rated AAA has the highest 
rating assigned by Standard & 
Poors. Capacity to pay interest and repay 
principal is extremely strong.
	AA - Debt rated AA has a very strong 
capacity to pay interest and 
repay principal and differs from the highest 
rated issues only in small 
degree.
	A - Debt rated A has a strong capacity 
to pay interest and repay 
principal although it is somewhat more 
susceptible to the adverse effects of 
changes in circumstances and economic 
conditions than debt in higher rated 
categories.
	BBB - Debt rated "BBB" is regarded as 
having an adequate capacity to 
pay interest and repay principal. Whereas it 
normally exhibits adequate 
protection parameters, adverse economic 
conditions or changing circumstances 
are more likely to lead to a weakened capacity 
to pay interest and repay 
principal for debt in this category than in 
higher rated categories.
	BB, B, CCC, CC, C - Debt rated `BB', `B', 
`CCC', `CC' or `C' is 
regarded, on balance, as predominantly 
speculative with respect to capacity 
to pay interest and repay principal in 
accordance with the terms of the 
obligation. `BB' indicates the lowest degree of 
speculation and `C' the 
highest degree of speculation. While such debt 
will likely have some quality 
and protective characteristics, these are 
outweighed by large uncertainties 
or major risk exposures to adverse conditions.
	Plus (+) or Minus (-): The ratings from 
`AA' to `B' may be modified by 
the addition of a plus or minus sign to show 
relative standing within the 
major rating categories.
	Provisional Ratings: The letter "p" 
indicates that the rating is 
provisional. A provisional rating assumes the 
successful completion of the 
project being financed by the debt being rated 
and indicates that payment of 
debt service requirements is largely or 
entirely dependent upon the 
successful and timely completion of the 
project. This rating, however, while 
addressing credit quality subsequent to 
completion of the project, makes no 
comment on the likelihood of, or the risk of 
default upon failure of, such 
completion. The investor should exercise 
judgment with respect to such 
likelihood and risk.
	L - The letter "L" indicates that the 
rating pertains to the principal 
amount of those bonds where the underlying 
deposit collateral is fully 
insured by the Federal Savings & Loan Insurance 
Corp. or the Federal Deposit 
Insurance Corp.
	+ - Continuance of the rating is 
contingent upon S&P's receipt of 
closing documentation confirming investments 
and cash flow.
	* - Continuance of the rating is 
contingent upon S&P's receipt of an 
executed copy of the escrow agreement.
	NR - Indicates no rating has been 
requested, that there is insufficient 
information on which to base a rating, or that 
S&P does not rate a particular 
type of obligation as a matter of policy.
Fitch IBCA, Inc.
	AAA - Bonds rated AAA by Fitch have the 
lowest expectation of credit 
risk. The obligor has an exceptionally strong 
capacity for timely payment of 
financial commitments which is highly unlikely 
to be adversely affected by 
foreseeable events.
	AA - Bonds rated AA by Fitch have a very 
low expectation of credit 
risk. They indicate very strong capacity for 
timely payment of financial 
commitment. This capacity is not significantly 
vulnerable to foreseeable 
events.

	A - Bonds rated A by Fitch are considered 
to have a low expectation of 
credit risk. The capacity for timely payment of 
financial commitments is 
considered to be strong, but may be more 
vulnerable to changes in economic 
conditions and circumstances than bonds with 
higher ratings.
	BBB - Bonds rated BBB by Fitch currently 
have a low expectation of 
credit risk. The capacity for timely payment of 
financial commitments is 
considered to be adequate. Adverse changes in 
economic conditions and 
circumstances, however, are more likely to 
impair this capacity. This is the 
lowest investment grade category assigned by 
Fitch.
	BB - Bonds rated BB by Fitch carry the 
possibility of credit risk 
developing, particularly as the result of 
adverse economic change over time. 
Business or financial alternatives may, 
however, be available to allow 
financial commitments to be met. Securities 
rated in this category are not 
considered by Fitch to be investment grade.
	B - Bonds rated B by Fitch carry 
significant credit risk, however, a 
limited margin of safety remains. Although 
financial commitments are 
currently being met, capacity for continued 
payment depends upon a sustained, 
favorable business and economic environment.
	CCC, CC, C - Default on bonds rated 
CCC,CC, and C by Fitch is a real 
possibility. The capacity to meet financial 
commitments depends solely on a 
sustained, favorable business and economic 
environment. Default of some kind 
on bonds rated CC appears probable, a C rating 
indicates imminent default.
	Plus and minus signs are used by Fitch to 
indicate the relative 
position of a credit within a rating category. 
Plus and minus signs however, 
are not used in the AAA category.
COMMERCIAL PAPER RATINGS
Moodys Investors Service, Inc.
	Issuers rated "Prime-1" (or related 
supporting institutions) have a 
superior capacity for repayment of short-term 
promissory obligations. Prime-1 
repayment will normally be evidenced by the 
following characteristics: 
leading market positions in well-established 
industries; high rates of return 
on funds employed; conservative capitalization 
structures with moderate 
reliance on debt and ample asset protection; 
broad margins in earnings 
coverage of fixed financial changes and high 
internal cash generation; well-
established access to a range of financial 
markets and assured sources of 
alternate liquidity.
	Issuers rated "Prime-2" (or related 
supporting institutions) have 
strong capacity for repayment of short-term 
promissory obligations. This will 
normally be evidenced by many of the 
characteristics cited above but to a 
lesser degree. Earnings trends and coverage 
ratios, while sound, will be more 
subject to variation. Capitalization 
characteristics, while still 
appropriate, may be more affected by external 
conditions. Ample alternate 
liquidity is maintained.
Standard & Poor's
	A-1 - This designation indicates that the 
degree of safety regarding 
timely payment is either overwhelming or very 
strong. Those issuers 
determined to possess overwhelming safety 
characteristics will be denoted 
with a plus (+) sign designation.
	A-2 - Capacity for timely payment on 
issues with this designation is 
strong. However, the relative degree of safety 
is not as high as for issues 
designated A-1.
Fitch IBCA, Inc.
	Fitchs short-term ratings apply to debt 
obligations that are payable 
on demand or have original maturities of 
generally up to three years, 
including commercial paper, certificates of 
deposit, medium-term notes, and 
municipal and investment notes.
	The short-term rating places greater 
emphasis than a long-term rating 
on the existence of liquidity necessary to meet 
financial commitment in a 
timely manner.
	Fitchs short-term ratings are as 
follows:
	F1+ - Issues assigned this rating are 
regarded as having the strongest 
capacity for timely payments of financial 
commitments. The + denotes an 
exceptionally strong credit feature.
	F1 - Issues assigned this rating are 
regarded as having the strongest 
capacity for timely payment of financial 
commitments.
	F2 - Issues assigned this rating have a 
satisfactory capacity for 
timely payment of financial commitments, but 
the margin of safety is not as 
great as in the case of the higher ratings.
	F3 - The capacity for the timely payment 
of financial commitments is 
adequate; however, near-term adverse changes 
could result in a reduction to 
non investment grade.
Duff & Phelps Inc.
	Duff 1+ - Indicates the highest certainty 
of timely payment: short-term 
liquidity is clearly outstanding, and safety is 
just below risk-free United 
States Treasury short-term obligations.
	Duff 1 - Indicates a high certainty of 
timely payment.
	Duff 2 - Indicates a good certainty of 
timely payment: liquidity 
factors and company fundamentals are sound.
The Thomson BankWatch ("TBW")
	TBW-1 - Indicates a very high degree of 
likelihood that principal and 
interest will be paid on a timely basis.
	TBW-2 - While the degree of safety 
regarding timely repayment of 
principal and interest is strong, the relative 
degree of safety is not as 
high as for issues rated TBW-1.



	Smith Barney
	Investment 
	Trust 





















SMITH BARNEY
INVESTMENT TRUST
388 Greenwich Street
New York, NY 10013

	SMITH BARNEY
								      
A Member of Travelers Group

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