<PAGE>

Prospectus
                                             September 28, 2000

  Managed Municipals Portfolio Inc.

  Common Stock
    Listed on the New York Stock Exchange
    Trading symbol -- MMU

   Managed Municipals Portfolio Inc. is a non-diversified, closed-end
management investment company. The portfolio's investment objective is to seek
as high a level of current income exempt from federal income tax as is
consistent with the preservation of capital. The portfolio invests primarily in
long-term investment grade municipal debt securities issued by state and local
governments, political subdivisions, agencies and public authorities (municipal
obligations).

   Shares of closed-end funds frequently have market prices that are less than
the net asset value per share. For more information about this or other risks
of investing in the portfolio, see "Risk Factors and Special Considerations".

   The prospectus contains important information about the portfolio. For your
benefit and protection, please read it before you invest, and keep it on hand
for future reference.

   The statement of additional information (SAI) provides more detailed
information about the portfolio and is incorporated into this prospectus by
reference. The SAI and shareholder reports can be obtained without charge from
the portfolio by calling 1-800-331-1710 or writing to the portfolio at Seven
World Trade Center, New York, New York 10048. You can review and copy the
portfolio's shareholder reports, prospectus and statement of additional
information at the Securities and Exchange Commission's (the "Commission")
Public Reference Room in Washington, D.C. You can get copies of these materials
for a duplicating fee by writing to the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. Information about the Public Reference
Room may be obtained by calling 1-800-SEC-0330. You can get the same
information free from the Commission's Internet web site at www.sec.gov.

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

Salomon Smith Barney Inc.
SSB Citi Fund Management LLC
Investment Manager and Administrator

                                                                               1
<PAGE>

Table of Contents

<TABLE>
<S>                                                                      <C>
Prospectus Summary                                                         3
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Portfolio Expenses                                                         7
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Financial Highlights                                                       8
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The Portfolio                                                              9
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The Offering                                                               9
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Use of Proceeds                                                            9
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Investment Objective and Policies                                          9
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Risk Factors and Special Considerations                                   14
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Investment Restrictions                                                   18
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Net Asset Value                                                           18
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Share Price Data                                                          19
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Taxation                                                                  20
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Management of the Portfolio                                               21
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Dividends and Distributions; Dividend Reinvestment Plan                   23
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Certain Provisions of the Articles of Incorporation and Market Discount   25
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Description of Common Stock                                               26
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Custodian, Transfer Agent, Dividend-Paying Agent and Registrar            27
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Independent Auditors                                                      27
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Further Information                                                       27
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Appendix A                                                               A-1
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Appendix B                                                               B-1
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</TABLE>

2
<PAGE>

Prospectus Summary

   The following is a summary of more complete information appearing later in
the prospectus. You should read the entire prospectus because it contains
details that are not in the summary. Cross references in the summary to
headings in the prospectus will help you locate information.

   Investment Objective and Primary Investments The portfolio's investment
objective is to seek as high a level of current income exempt from federal
income tax as is consistent with the preservation of capital. The portfolio
invests primarily in long-term investment grade municipal obligations.
Investment grade debt securities are those rated in one of the four highest
rating categories by a nationally recognized statistical rating organization.

   Municipal obligations include bonds and notes such as:

  . General obligation bonds issued for various public purposes and supported
    by the municipal issuer's credit and taxing power.

  . Revenue bonds whose principal and interest is payable only from the
    revenues of a particular project or facility. Industrial revenue bonds
    depend on the credit standing of a private issuer and may be subject to
    the federal alternative minimum tax (AMT).

  . Notes that are short-term obligations of municipalities or agencies sold
    in anticipation of a bond sale, collection of taxes or receipt of other
    revenues.

   Municipal obligations may have all types of interest rate payment and reset
terms, including fixed rate, adjustable rate, zero coupon, payment in kind and
auction rate features. See "Investment Objective and Policies" and Appendix A.

   Tax-Exempt Income The portfolio invests with the objective that dividends
paid by the portfolio may be excluded by shareholders from their gross incomes
for federal income tax purposes. A portion of the portfolio's dividends may be
taxable. The portfolio may invest without limit in private activity bonds.
Income from these bonds may be a special preference item for purposes of the
AMT. The portfolio may not be a suitable investment if you are subject to the
AMT. See "Investment Objective and Policies" and "Taxation."

   The Offering The portfolio's shares of common stock trade on the New York
Stock Exchange. In addition, Salomon Smith Barney may buy and sell the
portfolio's shares and will make a market in the common stock. Salomon Smith
Barney is not obligated to conduct market-making activities and may stop doing
so at any time without notice to the portfolio or its shareholders. See "The
Offering" and "Use of Proceeds."

   Listing New York Stock Exchange (NYSE).

                                                                               3
<PAGE>

Prospectus Summary (continued)


   Symbol MMU.

   Investment Manager SSB Citi Fund Management LLC ("SSB Citi" or "manager").
SSB Citi selects and manages the portfolio's investments in accordance with the
portfolio's investment objective and policies. SSB Citi is also the portfolio's
administrator and oversees the portfolio's non-investment operations and its
relations with its service providers. For these services, SSB Citi receives a
combined fee equal on an annual basis to 0.90% of the portfolio's average daily
net assets.

   SSB Citi and Salomon Smith Barney are subsidiaries of Citigroup Inc.
Citigroup businesses produce a broad range of financial services--asset
management, banking and consumer finance, credit and charge cards, insurance,
investments, investment banking and trading--and use diverse channels to make
them available to consumer and corporate customers around the world. See
"Management of the Portfolio."

   Risk Factors and Special Considerations The value of the portfolio's securi-
ties fluctuate in price and the value of your investment in the portfolio may
both appreciate and decline in value. This means that you could lose money on
your investment in the portfolio or the portfolio could perform less well than
other possible investments. In addition, the price of the shares is determined
by market prices on the NYSE and elsewhere, so you may receive a price that is
less than net asset value when you sell your shares. The principal risks asso-
ciated with an investment in the portfolio are described below.

   Municipal obligations. The portfolio invests primarily in municipal
obligations and may be affected by any of the following:

  . Interest rates rise, causing the value of the portfolio's securities to
    decline.

  . When interest rates are declining, the issuer of a security may exercise
    its right to prepay principal earlier than scheduled, forcing the
    portfolio to reinvest in lower yielding securities. This is known as call
    or prepayment risk.

  . The underlying revenue source for a municipal obligation, other than a
    general obligation bond, is insufficient to pay principal or interest in
    a timely manner.

  . The credit rating of a security owned by the portfolio has its credit
    rating downgraded or there is a default on its payment of principal
    and/or interest.

  . The manager's judgment about the attractiveness, value or income
    potential of a particular bond proves to be incorrect.

  . Municipal obligations fall out of favor with investors.

4
<PAGE>

Prospectus Summary (continued)


  . Unfavorable legislation affects the tax-exempt status of municipal
    obligations.

   Investment grade and unrated securities. The portfolio invests in investment
grade debt securities and up to 20% of its assets in unrated securities that
the manager believes are of comparable quality. The portfolio may experience
more difficulty selling unrated securities because markets for these securities
may be less liquid.

   Concentration and non-diversification. The portfolio may invest more than
25% of its assets in municipal securities that finance the same or similar
facilities or in issuers located in the same state. In addition, the portfolio
is non-diversified within the meaning of the Investment Company Act of 1940.
This means that, compared to a diversified fund, the portfolio may invest a
greater portion of its assets in the obligations of a smaller number of
issuers. As a result, the portfolio may be subject to greater risk than a
diversified fund.

   Possibility of taxable income or gains. It is possible that some of the
portfolio's income and gains may be subject to federal taxation. The portfolio
may realize taxable gains on the sale of its securities, and some of the
portfolio's income may be subject to the federal alternative minimum tax.

   Derivatives. The portfolio may hold securities or use investment techniques
that provide for payments based on or "derived" from the performance of an
underlying asset, index or other economic benchmark.

   Derivatives may be used:

  . To shorten or lengthen the portfolio's effective maturity or duration.

  . As a substitute for purchasing or selling securities.

  . To hedge against adverse changes caused by changing interest rates in the
    market value of securities held or to be bought by the portfolio.

   A derivative contract will obligate or entitle the portfolio to deliver or
receive an asset or cash payment that is based on the change in value of one or
more securities or indices. Even a small investment in derivative contracts can
have a big impact on the portfolio's interest rate exposure. Therefore, using
derivatives can disproportionately increase losses and reduce opportunities for
gains when interest rates are changing. The portfolio may not fully benefit
from or may lose money on derivatives if changes in their value do not corre-
spond accurately to changes in the value of the portfolio's holdings. The other
parties to certain derivative contracts present the same types of default risk
as issuers of fixed income securities. Derivatives can also make the portfolio
less liquid and harder to value, especially in declining markets. Derivatives
include futures and options transactions.

                                                                               5
<PAGE>

Prospectus Summary (continued)


   Closed end investment company. The portfolio is a closed-end investment
company and its shares on the NYSE may trade at a price that is less than its
net asset value.

   Certain provisions in the portfolio's governing documents may limit the
ability of other entities to acquire control of the portfolio. This could
deprive shareholders of the opportunity to sell their shares at a premium over
prevailing market prices.

   See "Risk Factors and Special Considerations" and "Certain Provisions of the
Articles of Incorporation and Market Discount."

   Dividends and Distributions Any dividends from net investment income (that
is, income other than net realized capital gains) are paid monthly and any
distributions of net realized capital gains are paid annually. Your dividends
or distributions are reinvested in additional portfolio shares through
participation in the Dividend Reinvestment Plan, unless you elect to receive
cash. The number of shares issued to you by the plan depends on the price of
the shares. The price of the shares is determined by the market price at the
time the shares are purchased for reinvestment.

<TABLE>
<CAPTION>
                                             Price of Portfolio Shares
                                             Purchased Pursuant to the
  Market Price of Portfolio Shares                      Plan
  --------------------------------          ---------------------------
  <S>                                       <C>
  Greater than or equal to net asset value  Shares issued at net asset
                                            value or 95% of market
                                            price, whichever is greater
  Less than net asset value                 Market price
</TABLE>

   See "Dividends and Distributions; Dividend Reinvestment Plan."

   Custodian PFPC Trust Company is the portfolio's custodian. See "Custodian,
Transfer Agent, Dividend-Paying Agent and Registrar."

   Transfer Agent, Dividend-Paying Agent and Registrar PFPC Global Fund
Services (PFPC) is the portfolio's transfer agent, dividend-paying agent and
registrar. See "Custodian, Transfer Agent, Dividend-Paying Agent and
Registrar."

6
<PAGE>

Portfolio Expenses

   The following table shows the expenses the fund pays. As a shareholder, you
indirectly bear these expenses.
<TABLE>
--------------------------------------------------------------------------------
<S>                                                                        <C>
Annual Expenses
  (as a percentage of net assets)
  Management fees*.......................................................   .90%
  Other expenses**.......................................................   .14%
--------------------------------------------------------------------------------
Total Annual Operating Expenses..........................................  1.04%
--------------------------------------------------------------------------------
</TABLE>

 * On September 1, 1998, SSBC instituted a voluntary waiver of a portion of its
   management fees in order to enable the Portfolio to increase its dividend
   yield. The waiver is a temporary measure and may be terminated at any time
   by SSB Citi. The amount stated above does not reflect this waiver. See "Man-
   agement of the Fund -- Investment Manager and Administrator" in the SAI for
   further details.

** "Other expenses," as shown above are based on actual expenses for the fiscal
   year ending May 31, 2000.

  Example

   An investor would directly or indirectly pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return and (2) reinvestment of all
dividends and distributions at net asset value:

<TABLE>
<CAPTION>
      One Year            Three Years                   Five Years                   Ten Years
----------------------------------------------------------------------------------------------
      <S>                 <C>                           <C>                          <C>
        $10                   $33                          $57                         $127
----------------------------------------------------------------------------------------------
</TABLE>
   This example assumes reinvestment of all dividends and distributions at net
asset value and that the percentage amounts listed under Annual Expenses remain
the same in the years shown. This example should not be considered a
representation of future expenses of the fund. Actual expenses may be more or
less than those shown.

                                                                               7
<PAGE>

Financial Highlights

The following information for the four years ended May 31, 2000 has been
audited by KPMG LLP, independent auditors whose report thereon appears in the
portfolio's annual report dated May 31, 2000. The information for the fiscal
years ended May 31, 1993 through May 31, 1995 has been audited by other
independent auditors. This information should be read in conjunction with the
financial statements and related notes that also appear in the portfolio's
Annual Report, which is incorporated by reference into this prospectus and the
statement of additional information.

For a share of capital stock outstanding throughout each period ended May 31:

<TABLE>
<CAPTION>
                           2000    1999    1998    1997    1996    1995    1994   1993*
-------------------------------------------------------------------------------------------
<S>                       <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Net Asset Value,
 Beginning of Year        $11.97  $12.37  $11.90  $12.11  $12.55  $12.26  $13.00  $12.00
Income (loss) From
Operations:
 Net investment income
 (1)                        0.58    0.58    0.54    0.67    0.67    0.72    0.67    0.63
 Net realized and
 unrealized gain (loss)    (1.14)  (0.32)   0.83    0.08   (0.35)   0.49   (0.23)   0.97
-------------------------------------------------------------------------------------------
Total Income From
Operations                 (0.56)   0.26    1.37    0.75    0.32    1.21    0.44    1.60
-------------------------------------------------------------------------------------------
Offering Cost Charged to
Paid-In Capital             0.12      --      --      --      --      --      --   (0.02)
Less Distributions From:
 Net investment income     (0.60)  (0.54)  (0.61)  (0.66)  (0.75)  (0.67)  (0.67)  (0.55)
 Net realized gains           --   (0.12)  (0.29)  (0.30)  (0.01)  (0.25)  (0.51)  (0.03)
-------------------------------------------------------------------------------------------
Total Distributions        (0.60)  (0.66)  (0.90)  (0.96)  (0.76)  (0.92)  (1.18)  (0.58)
-------------------------------------------------------------------------------------------
Net Asset Value, End of
Year                      $10.93  $11.97  $12.37  $11.90  $12.11  $12.55  $12.26  $13.00
-------------------------------------------------------------------------------------------
Total Return Based on
 Market Value (2)         (3.88)%   0.11%   2.08%   7.89%   8.26%   8.40%   2.98%   7.02%++
-------------------------------------------------------------------------------------------
Total Return, Based on
 Net Asset Value (2)      (2.82)%   2.66%  12.14%   6.59%   2.79%  10.96%   3.45%  13.58%++
-------------------------------------------------------------------------------------------
Net Assets, End of Year
(millions)                  $352    $414    $428    $411    $418    $433    $423    $444
-------------------------------------------------------------------------------------------
Ratios to Average Net
Assets:
 Expenses (1)               0.89%   0.94%   0.99%   1.00%   1.00%   1.02%   1.00%   0.98%+
 Net investment income      5.19    4.72    4.35    5.56    5.35    5.97    5.15    5.48+
-------------------------------------------------------------------------------------------
Portfolio Turnover Rate       35%     23%     87%    113%     45%     93%     72%    169%
-------------------------------------------------------------------------------------------
Market Value, End of
Year                       $9.38  $10.38  $11.00  $11.63  $11.69  $11.50  $11.50  $12.25*
-------------------------------------------------------------------------------------------
</TABLE>

(1) The investment advisor and administrator waived a portion of their fees for
    the years ended May 31, 2000 and 1999. If such fees were not waived, the
    per share decrease in net investment income would have been $0.02 and
    $0.01, respectively. In addition, the ratio of expenses to average net
    assets would have been 1.04% and 1.02%, respectively.
(2) The total return calculation assumes that dividends are reinvested in
    accordance with the Portfolio's dividend reinvestment plan.
* For the period from June 26, 1992 (commencement of operations) to May 31,
  1993.
+ Annualized.
++Total return is not annualized, as it may not be representative of the total
  return for the year.

8
<PAGE>

The Portfolio

   The portfolio was incorporated under the laws of the State of Maryland on
April 9, 1992 and is registered under the 1940 Act. Its principal office is
located at Seven World Trade Center, New York, New York 10048. The portfolio's
telephone number is (800) 331-1710.

The Offering


   Salomon Smith Barney currently makes a market in the common stock. This
prospectus is to be used by Salomon Smith Barney in connection with offers and
sales of the common stock in market-making transactions in the over-the-counter
market at negotiated prices related to prevailing market prices at the time of
the sale. Salomon Smith Barney is not required to make a market in the common
stock and may stop doing so at any time. You should not rely on Salomon Smith
Barney's market making activities to provide an active or liquid trading market
for the common stock.

Use of Proceeds


   The portfolio will not receive any proceeds from the sale of any common
stock offered pursuant to this prospectus. Proceeds received by Salomon Smith
Barney as a result of its market-making in the common stock will be used by
Salomon Smith Barney in connection with its secondary market operations and for
general corporate purposes.

Investment Objective and Policies


   The portfolio's investment objective is to seek as high a level of current
income exempt from federal income taxes as is consistent with the preservation
of principal. The portfolio's investment objective may only be changed with the
affirmative vote of the holders of a "majority of the portfolio's outstanding
voting securities" (as defined in the 1940 Act). In seeking its objective, the
portfolio invests in long-term municipal obligations. The portfolio operates
subject to a fundamental investment policy providing that, under normal
conditions, the portfolio will invest at least 80% of its total assets in
investment grade municipal obligations. No assurance can be given that the
portfolio's investment objective will be achieved.

   The portfolio will normally invest at least 80% of its total assets in
municipal obligations rated investment grade at the time of investment.
Investment grade

                                                                               9
<PAGE>

Investment Objective and Policies (continued)

securities are rated within the highest four rating categories by Moody's
Investors Service, Inc. ("Moody's"), Standard and Poor's Rating Group ("S&P")
and FitchIBCA, Inc. ("Fitch") or another nationally-recognized rating agency
("NRSRO"). A description of Moody's, S&P and Fitch ratings is set forth in the
Appendix to the SAI. Up to 20% of the portfolio's total assets may be invested
in unrated securities that are deemed by the manager to be of a quality
comparable to investment grade. The portfolio will not invest in municipal
obligations that are not rated investment grade by any NRSRO, at the time of
purchase. Although municipal obligations rated Baa by Moody's, BBB by S&P or
BBB by Fitch are considered to be investment grade, they may be subject to
greater risks than other higher rated investment grade securities. Municipal
obligations rated Baa by Moody's, for example, are considered medium grade
obligations that lack outstanding investment characteristics and have
speculative characteristics as well. Municipal obligations rated BBB by S&P are
regarded as having an adequate capacity to pay principal and interest.
Municipal obligations rated BBB by Fitch are deemed to be subject to a higher
likelihood that their rating will fall below investment grade than higher rated
bonds.

   The portfolio is classified as a non-diversified fund under the 1940 Act,
which means that the portfolio is not limited by the 1940 Act in the proportion
of its assets that it may invest in the obligations of a single issuer. The
portfolio intends to conduct its operations, however, so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which will relieve the portfolio of any
liability for federal income tax to the extent its earnings are distributed to
shareholders. To qualify as a regulated investment company, the portfolio will,
among other things, limit its investments so that, at the close of each quarter
of its taxable year (1) not more than 25% of the market value of the
portfolio's total assets will be invested in the securities of a single issuer
and (2) with respect to 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in the
securities of a single issuer. See "Taxation."

   The portfolio generally will not invest more than 25% of its total assets in
any single industry. Governmental issuers of municipal obligations are not
considered part of any "industry." Municipal obligations backed only by the
assets and revenues of non-governmental users may be deemed to be issued by the
non-governmental users, and would be subject to the portfolio's 25% industry
limitation. The portfolio may invest more than 25% of its total assets in a
broad segment of the municipal obligations market, if the manager determines
that the yields available from obligations in a particular segment of the
market justify the additional risks associated with a large investment in the
segment. The portfolio reserves the right to invest more than 25% of its assets
in industrial development bonds or in issuers located in the same state,
although it has no current intention

10
<PAGE>

Investment Objective and Policies (continued)

of investing more than 25% of its assets in issuers located in the same state.
If the portfolio were to invest more than 25% of its total in issuers located
in the same state, it would be more susceptible to adverse economic, business
or regulatory conditions in that state.

   Municipal obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source, but not from the general
taxing power. Notes are short-term obligations of issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal obligations bear fixed, floating and
variable rates of interest, and variations exist in the security of municipal
obligations, both within a particular classification and between
classifications. The types of municipal obligations in which the portfolio may
invest are described in Appendix A to this prospectus.

   The yields on, and values of, municipal obligations are dependent on a
variety of factors, including general economic and monetary conditions, money
market factors, conditions in the municipal obligations markets, size of a
particular offering, maturity of the obligation and rating of the issue.
Consequently, municipal obligations with the same maturity, coupon and rating
may have different yields or values, whereas obligations of the same maturity
and coupon with different ratings may have the same yield or value.

   Opinions relating to the validity of municipal obligations and to the
exemption of interest on them from federal income taxes are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the
portfolio nor the manager will review the procedures relating to the issuance
of municipal obligations or the basis for opinions of counsel. Issuers of
municipal obligations may be subject to the provisions of bankruptcy,
insolvency and other laws, affecting the rights and remedies of creditors. In
addition, the obligations of those issuers may become subject to laws enacted
in the future by Congress, state legislatures or referenda extending the time
for payment of principal and/or interest, or imposing other constraints upon
enforcement of the obligations or upon the ability of municipalities to levy
taxes. The possibility also exists that, as a result of litigation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of, and interest on, its obligations may be materially affected.

   Under normal conditions, the portfolio may hold up to 20% of its total
assets in cash or money market instruments, including taxable money market
instruments (collectively, "taxable investments"). In addition, the portfolio
may take a temporary defensive posture and invest without limitation in short-
term

                                                                              11
<PAGE>

Investment Objective and Policies (continued)

municipal obligations and taxable investments, upon a determination by the
manager that market conditions warrant such a posture. To the extent the
portfolio holds taxable investments, the portfolio may not be fully achieving
its investment objective.

  Investment Techniques

   The portfolio may employ, among others, the investment techniques described
below, which may give rise to taxable income:

   When-Issued and Delayed Delivery Transactions. The portfolio may purchase
municipal securities on a "when-issued" and "delayed delivery" basis and may
purchase or sell municipal securities on a "delayed delivery" basis in order to
hedge against anticipated changes in interest rates and prices. No income
accrues to the portfolio on municipal securities in connection with such
transactions prior to the date the portfolio actually takes delivery of such
securities. These transactions are subject to market fluctuation; the value of
the municipal securities at delivery may be more or less than their purchase
price, and yields generally available on municipal securities when delivery
occurs may be higher than yields on the municipal securities obtained pursuant
to such transactions. Because the portfolio relies on the buyer or seller, as
the case may be, to consummate the transaction, failure by the other party to
complete the transaction may result in the portfolio missing the opportunity of
obtaining a price or yield considered to be advantageous. When the portfolio is
the buyer in such a transaction, however, it will maintain, in a segregated
account, cash or liquid securities, having a value equal to at least the
portfolio's purchase commitments, provided such securities have been determined
by the manager to be unencumbered, and are marked to market daily, pursuant to
guidelines established by the directors. When the portfolio is the seller in
such a transaction, it will cover its commitment to deliver the security by
maintaining positions in portfolio securities that would serve to satisfy or
offset the risk of such obligations. The portfolio will make commitments to
purchase municipal securities on such basis only with the intention of actually
acquiring these securities, but the portfolio may sell such securities prior to
the settlement date if such sale is considered to be advisable.

   To the extent the portfolio engages in "when-issued" and "delayed delivery"
transactions, it will do so for the purpose of acquiring securities for the
portfolio's portfolio consistent with the portfolio's investment objective and
policies. However, although the portfolio does not intend to engage in such
transactions for speculative purposes, purchases of securities on such basis
may involve more risk than other types of purchases. For example, if the
portfolio determines it is necessary to sell the "when-issued" or "delayed
delivery" securities before delivery, it may incur a gain or a loss because of
market fluctuations since the time the commitment to purchase such securities
was made.

12
<PAGE>

Investment Objective and Policies (continued)

Subject to the requirement of maintaining a segregated account, no specified
limitation exists as to the percentage of the portfolio's assets which may be
used to acquire securities on a "when-issued" or "delayed delivery" basis. A
significant percentage of the portfolio's assets committed to the purchase of
securities on a "when-issued" or "delayed delivery" basis may increase the
volatility of the portfolio's net asset value and may limit the flexibility to
manage the portfolio's investments.

   Stand-By Commitments. The portfolio may acquire "stand-by commitments" with
respect to municipal obligations it holds. Under a stand-by commitment, which
resembles a put option, a broker, dealer or bank is obligated to repurchase at
the portfolio's option specified securities at a specified price. Each exercise
of a stand-by commitment, therefore, is subject to the ability of the seller to
make payment on demand. The portfolio will acquire stand-by commitments solely
to facilitate liquidity and does not intend to exercise the rights afforded by
the commitments for trading purposes.

   Financial Futures and Options Transactions. To hedge against a decline in
the value of municipal obligations it owns or an increase in the price of
municipal obligations it proposes to purchase, the portfolio may enter into
financial futures contracts and invest in options on financial futures
contracts that are traded on a U.S. exchange or board of trade. The futures
contracts or options on futures contracts that may be entered into by the
portfolio will be restricted to those that are either based on an index of
municipal obligations or relate to debt securities the prices of which are
anticipated by the manager to correlate with the prices of the municipal
obligations owned or to be purchased by the portfolio. Regulations of the
Commodity Futures Trading Commission ("CFTC") applicable to the portfolio
require that its transactions in futures and options be engaged in for "bona
fide hedging" purposes or other permitted purposes, provided that aggregate
initial margin deposits and premiums required to establish positions other than
those considered by the CFTC to be "bona fide hedging" will not exceed 5% of
the portfolio's net asset value, after taking into account unrealized profits
and unrealized losses on such contracts.

   A financial futures contract provides for the future sale by one party and
the purchase by the other party of a certain amount of a specified property at
a specified price, date, time and place. Unlike the direct investment in a
futures contract, an option on a financial futures contract gives the purchaser
the right, in return for the premium paid, to assume a position in the futures
contract at a specified exercise price at any time prior to the expiration date
of the option. Upon exercise of an option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account,
which represents the amount by which the market price of the futures contract
exceeds, in the case of a

                                                                              13
<PAGE>

Investment Objective and Policies (continued)

call, or is less than, in the case of a put, the exercise price of the option
on the futures contract. The potential loss related to the purchase of an
option on financial futures contracts is limited to the premium paid for the
option (plus transaction costs). The value of the option may change daily and
that change would be reflected in the net asset value of the portfolio.

   Lending Securities. The portfolio is authorized to lend securities it holds
to brokers, dealers and other financial organizations, but it will not lend
securities to any affiliate of the manager unless the portfolio applies for and
receives specific authority to do so from the SEC. Loans of the portfolio's
securities, if and when made, may not exceed 33 1/3% of the value of the
portfolio's total assets. The portfolio's loans of securities will be
collateralized by cash, letters of credit or U.S. government securities that
will be maintained at all times in a segregated account in an amount equal to
the current market value of the loaned securities.

   Repurchase Agreements. The portfolio may enter into repurchase agreement
transactions with banks which are the issuers of instruments acceptable for
purchase by the portfolio and with certain dealers on the Federal Reserve Bank
of New York's 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, the portfolio would acquire an
underlying debt obligation for a relatively short period subject to an
obligation of the seller to repurchase, and the portfolio to resell, the
obligation at an agreed-upon price and time, thereby determining the yield
during the portfolio's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the portfolio's
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.

Risk Factors and Special Considerations


   There are risks associated with an investment in the portfolio. You should
consider whether the portfolio is an appropriate investment for you. The
portfolio invests substantially all of its assets in municipal obligations, and
circumstances or events that affect the value of municipal obligations will
affect the portfolio's net asset value. While certain risks are discussed
elsewhere in this prospectus, the following is intended to provide a summary of
the principal risks of an investment in the fund.

14
<PAGE>

Risk Factors and Special Considerations (continued)


Interest rate sensitivity

   . Municipal obligations are fixed-income securities which are sensitive to
changes in interest rates. Generally, when interest rates are rising, the value
of the portfolio's fixed-income securities can be expected to decrease. When
interest rates are declining, the value of the portfolio's fixed-income
securities can be expected to increase. The portfolio's net asset value may
fluctuate in response to the increasing or decreasing value of the portfolio's
fixed-income securities.

Less liquid markets for some municipal obligations

   . The market for municipal obligations may be less liquid than for corporate
bonds. The market for special obligation bonds, lease obligations,
participation certificates and variable rate instruments, which the portfolio
may purchase, may be less liquid than for general obligation bonds.

   . Less liquid markets tend to be more volatile and react more negatively to
adverse publicity and investor perception than more liquid markets. If markets
are less liquid, the portfolio may not be able to dispose of municipal
obligations in a timely manner and at a fair price.

   . Some of the portfolio's investments may be restricted as to resale.
Although restricted securities may be sold in private transactions, a
security's value may be less than the price originally paid by the portfolio.
The ability of the manager to value illiquid or restricted securities will be
more difficult and the manager's judgment may play a greater role in their
valuation.

Issuer of a municipal obligation may default on its obligation to pay

   . The issuer of a municipal obligation may not be able to make timely
payments of interest and principal because of general economic downturns or
adverse allocation of government cost burdens. If an issuer did not make timely
payments, the portfolio would not receive the anticipated income from the
investment and the value of the investment might be reduced. This could result
in a decrease in the portfolio's net asset value and adversely affect the
fund's ability to pay dividends. This risk of default may be greater for
private activity bonds or other municipal obligation whose payments are
dependent upon a specific source of revenue.

   . Even if the issuer does not actually default, adverse changes in the
issuer's financial condition may negatively affect its credit rating or
presumed creditworthiness. These developments would adversely affect the market
value of the issuer's obligations.

Issuer of a municipal obligation declares bankruptcy

   . The issuer of a municipal obligation might declare bankruptcy and the
portfolio could experience delays collecting interest and principal. To enforce
its

                                                                              15
<PAGE>

Risk Factors and Special Considerations (continued)

rights, the portfolio might be required to take possession of and manage the
assets securing the issuer's obligation. This may increase the portfolio's
expenses, reduce its net asset value and increase the amount of the portfolio's
distribution that is in taxable form.

   . If the portfolio took possession of a bankrupt issuer's assets, income
derived from the portfolio's ownership and management of the assets may not be
tax exempt. Shareholders may receive more of the total distributions from the
portfolio in taxable form.

   . The portfolio might not be able to take possession of the assets of a
bankrupt issuer because of laws protecting state and local institutions, limits
on the investments the portfolio is permitted to make, and the nature of the
income the portfolio is entitled to receive from its investments imposed on it
by the Code. If the portfolio cannot take possession of the assets and enforce
its rights, the value of the security may be greatly diminished. This could
reduce the portfolio's net asset value.

Adverse governmental action

   . The U.S. government has enacted laws that have restricted or diminished
the income tax exemption on some municipal obligations and it may do so again
in the future. If this were to happen, shareholders could receive more of the
distributions from the portfolio in taxable form.

   . There may be less extensive information available about the financial
condition of issuers of municipal obligations than for corporate issuers with
publicly traded securities.

Municipal Obligations Purchased at a Premium

   . The issuer of a municipal obligation may be obligated to redeem the
security at face value, but if the portfolio paid more than face value for the
security, the portfolio may lose money on the security when it is sold.

Municipal Leases

   . These leases frequently contain clauses that permit the governmental
issuer to stop making interest and principal payments if money is not
appropriated by the legislature annually or on some other periodic basis.

   . These leases are less liquid than municipal obligations and may be
difficult to value and to sell at a fair price.

   . If the issuer is foreclosed upon, the assets securing these leases may be
difficult to dispose of.

When-Issued and Delayed Delivery Transactions

   The portfolio may use when-issued and delayed delivery transactions to
purchase securities. The value of securities purchased in these transactions
may decrease before they are delivered to the portfolio. Also, the yield on
securities purchased in these transactions may be higher in the market when the
delivery takes place.

16
<PAGE>

Risk Factors and Special Considerations (continued)


Repurchase Agreements

   The portfolio may use repurchase agreements to manage its cash position. If
the other party to the agreement defaults, the portfolio may not be able to
sell the underlying securities. If the portfolio must assert its rights against
the other party to recover the securities, the portfolio will incur unexpected
expenses, risk losing the income on the security and assume the risk of loss in
the value of the security.

Lending Securities

   If the party borrowing the portfolio's securities fails financially, the
portfolio may be unable to recover the loaned securities.

Financial Futures and Options

   The portfolio may use financial futures contracts and options on these
contracts to protect the portfolio from a decline in the price of municipal
obligations it owns or an increase in the price of a municipal obligation it
plans to buy. There are risks associated with futures and options transactions.

   . Because it is not possible to perfectly correlate the price of the
securities being hedged with the price movement in a futures contract, it is
not possible to provide a perfect offset on losses on the futures contract or
the option on the contract.

   . Because there is imperfect correlation between the portfolio's securities
that are hedged and the futures contract, the hedge may not be fully effective.
Losses on the portfolio's security may be greater than gains on the future
contract, or losses on the futures contract may be greater than gains on the
securities subject to the hedge.

   . To compensate for imperfect correlation, the portfolio may over-hedge or
under-hedge by entering into a futures contract or options on futures contracts
in dollar amounts greater or lesser than the dollar amounts of the securities
being hedged. If market movements are not as anticipated, the portfolio could
lose money from these positions.

   . If the portfolio hedges against an increase in interest rates, and rates
decline instead, the portfolio will lose all or part of the benefit of the
increase in value of the securities it hedged. This loss will occur because it
will have offsetting losses in its futures or options positions. Also, in order
to meet margin requirements, the portfolio may have to sell securities at a
time it would not normally choose.

Concentration and Non-Diversification

   The portfolio may concentrate its assets in municipal securities that
finance the same or similar facilities or in issuers located in the same state.
If the portfolio concentrates its assets, it may be more adversely affected by
events affecting those issuers than if it were investing in a broader range of
securities. In addition,

                                                                              17
<PAGE>

Risk Factors and Special Considerations (continued)

the portfolio is non-diversified within the meaning of the Investment Company
Act of 1940. This means that, compared to a diversified fund, the portfolio may
invest a greater portion of its assets in the obligations of a smaller number
of issuers. As a result, the portfolio may be subject to greater risk than a
diversified fund.

Investment Restrictions


   The portfolio has adopted certain fundamental investment restrictions that
may not be changed without the prior approval of the holders of a "majority of
the outstanding voting securities of the portfolio," within the meaning of the
1940 Act. A "majority of the outstanding voting securities" for this purpose
means the lesser of (1) 67% or more of the shares of the portfolio's common
stock present at a meeting of shareholders, if the holders of 50% of the
outstanding shares are present or represented by proxy at the meeting or (2)
more than 50% of the outstanding shares.

   The following are several of the restrictions applicable to the fund. For a
complete listing of the investment restrictions applicable to the fund, see
"Investment Restrictions" in the SAI. Any percentage limits apply only at the
time of initial investment. The fund is not required to sell securities if the
limits are exceeded after the investment is completed. The fund may not:

  . Borrow money, except for temporary or emergency purposes, and then not in
    amounts that are greater than 15% of total assets (including the amount
    borrowed).

  . Buy more securities if the fund had borrowed money in amounts greater
    than 5% of net assets.

  . Invest more than 25% of total assets in securities of issuers in a single
    industry. This restriction does not apply to the fund's investments in
    municipal obligations and U.S. government securities.

Net Asset Value

   The portfolio's net asset value is calculated as of the close of regular
trading on the NYSE (normally 4:00 p.m., New York time) on the last day on
which the NYSE is open for trading of each week and month. Net asset value is
calculated by dividing the value of the portfolio's net assets (the value of
its assets less its liabilities, exclusive of capital stock and surplus) by the
total number of shares of common stock outstanding. Investments in U.S.
Government securities having a maturity of 60 days or less are valued at
amortized cost. All other securities and assets are taken at fair value as
determined in good faith by or under the direction of the board of directors.

18
<PAGE>


Net Asset Value (continued)


   The valuation of the portfolio's assets is made by the manager after
consultation with an independent pricing service (the "service") approved by
the board of directors. When, in the judgment of the 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, in the judgment of the service,
no readily obtainable market quotation is available (which may constitute a
majority of the portfolio's securities), are carried at fair value as
determined by the service. The service may use electronic data processing
techniques and/or a matrix system to determine valuations. The procedures of
the service are reviewed periodically by the officers of the portfolio under
the general supervision and responsibility of the board of directors, which may
replace the service at any time if it determines it to be in the best interests
of the portfolio to do so.

Share Price Data



   The common stock is listed on the NYSE under the symbol "MMU." Salomon Smith
Barney currently intends to buy and sell the portfolio's shares in order to
make a market in the portfolio's common stock.

   The following table sets forth the high and low sales prices for the common
stock, the net asset value per share and the discount or premium to net asset
value represented by the quotation for each quarterly period during the last
two fiscal years and for the first quarter of 2000.

<TABLE>
<CAPTION>
            Quarterly High Price        Quarterly Low Price
            --------------------        -------------------
          Net Asset  NYSE  Discount  Net Asset  NYSE  Discount
            Value   Price   to NAV     Value   Price   to NAV
---------------------------------------------------------------
<S>       <C>       <C>    <C>       <C>       <C>    <C>
8/31/98     12.36   12.313   (9.25)%   12.39   10.688  (15.92)%
11/30/98    12.44   11.750   (5.87)%   12.45   10.813  (15.14)%
2/28/99     12.44   11.594   (7.30)%   12.24   10.688  (14.52)%
5/31/99     12.25   11.000  (11.36)%   11.97   10.313  (16.07)%
8/31/99     11.79   10.750   (8.82)%   11.27    9.750  (13.49)%
11/30/99    11.35   10.000  (11.89)%   10.85    9.063  (16.47)%
2/29/00     11.12    9.625  (13.44)%   10.75    9.000  (16.28)%
5/31/00     11.31    9.500  (16.00)%   10.77    9.063  (15.85)%
8/31/00     11.59   10.125  (12.64)%   10.98    9.375  (14.62)%
---------------------------------------------------------------
</TABLE>

   As of September 18, 2000, the price of common stock as quoted on the NYSE
was $9.75, representing a (15.44)% discount from the common stock's net asset
value calculated on that day.


                                                                              19
<PAGE>

Taxation


   The following is a summary of the material federal tax considerations
affecting the portfolio and portfolio shareholders. Please refer to the SAI for
further discussion. In addition to the considerations described below and in
the SAI, there may be other federal, state, local, or foreign tax implications
to consider. Because taxes are a complex matter, you are urged to consult your
tax advisor for more detailed information with respect to the consequences of
an investment.

   The portfolio has qualified and intends to qualify, as it has in prior
years, under Subchapter M of the Code for tax treatment as a regulated
investment company so long as such qualification is in the best interests of
its shareholders. In each taxable year that the portfolio qualifies, the
portfolio will pay no federal income tax on its net investment income and long-
term capital gain that is distributed to shareholders. The portfolio also
intends to satisfy conditions that will enable it to pay "exempt-interest
dividends" to shareholders. Exempt-interest dividends are generally not subject
to regular federal income taxes but may be considered taxable for state and
local income (or intangible) tax purposes.

   Exempt-interest dividends attributable to interest received by the portfolio
on certain "private-activity" bonds will be treated as a specific tax
preference item to be included in a shareholder's alternative minimum tax
computation. In addition to the alternative minimum tax, corporate shareholders
must include this percentage as a component in the corporate environmental tax
computation. Exempt-interest dividends derived from the interest earned on
private activity bonds will not be exempt from federal income tax for those
shareholders who are "substantial users" (or persons related to "substantial
users") of the facilities financed by these bonds.

   Shareholders who receive social security or equivalent railroad retirement
benefits should note that exempt-interest dividends are one of the items taken
into consideration in determining the amount of these benefits that may be
subject to federal income tax.

   The interest expense incurred by a shareholder on borrowings made to
purchase, or carry portfolio shares, are not deductible for federal income tax
purposes to the extent related to the exempt-interest dividends received on
such shares.

   Dividends paid by the portfolio from interest income on taxable investments,
net realized short-term securities gains, and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
are subject to federal income tax as ordinary income. Distributions, if any,
from net realized long-term securities gains are taxable as long-term capital
gains, regardless of the length of time a shareholder has owned portfolio
shares.

   Distributions, if any, from net realized long-term securities gains are
taxable as long-term capital gains, regardless of the length of time a
shareholder has owned portfolio shares.

20
<PAGE>

Taxation (continued)


   Shareholders are required to pay tax on all taxable distributions even if
those distributions are automatically reinvested in additional portfolio
shares. None of the dividends paid by the portfolio will qualify for the
corporate dividends received deduction. The portfolio will inform shareholders
of the source and tax status of all distributions promptly after the close of
each calendar year.

   The portfolio is required to withhold ("backup withholding") 31% of all
taxable dividends, capital gain distributions, and the proceeds of any
redemption, regardless of whether gain or loss is realized upon the redemption,
for shareholders who do not provide the portfolio with a correct taxpayer
identification number (social security or employer identification number).
Withholding from taxable dividends and capital gain distributions also is
required for shareholders who otherwise are subject to backup withholding. Any
tax withheld as a result of backup withholding does not constitute an
additional tax, and may be claimed as a credit on the shareholders' Federal
income tax return.

Management of the Portfolio


  Board of Directors

   Overall responsibility for management and supervision of the portfolio rests
with the portfolio's Board of Directors. The Directors approve all significant
agreements with the portfolio's manager, administrator, custodian and transfer
agent. The day-to-day operations of the portfolio are delegated to the
portfolio's manager. The SAI contains background information regarding each
Director and executive officer of the portfolio.

  Investment Manager and Administrator

   SSB Citi, located at Seven World Trade Center, New York, New York 10048,
serves as the portfolio's investment manager. The manager, through its
predecessors, has been in the investment counseling business since 1968 and
renders investment advice to a wide variety of individual, institutional and
investment company clients with aggregate assets under management as of August
31, 2000 in excess of $204 billion. The manager is an affiliate of Salomon
Smith Barney. The manager and Salomon Smith Barney are subsidiaries of
Citigroup Inc. Citigroup businesses produce a broad range of financial
services--asset management, banking and consumer finance, credit and charge
cards, insurance, investments, investment banking and trading--and use diverse
channels to make them available to consumer and corporate customers around the
world.

   Subject to the supervision and direction of the portfolio's board of
directors, the SSB Citi manages the securities held by the portfolio in
accordance with the portfolio's stated investment objective and policies, makes
investment decisions

                                                                              21
<PAGE>


Management of the Portfolio (continued)

for the portfolio, places orders to purchase and sell securities on behalf of
the portfolio and employs managers and securities analysts who provide research
services to the portfolio. The portfolio pays the manager a fee for services
provided to the portfolio that is computed daily and paid monthly at the annual
rate of 0.70% of the value of the portfolio's average daily net assets. In
addition, SSB Citi serves as administrator and is paid a fee by the portfolio
that is computed daily and paid monthly at an annual rate of 0.20% of the value
of the portfolio's average daily net assets.

   Transactions on behalf of the portfolio are allocated to various dealers by
the manager in its best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for their research, statistical
or other services to enable the manager to supplement its own research and
analysis with the views and information of other securities firms. The
portfolio may use Salomon Smith Barney or an affiliate broker in connection
with the purchase or sale of securities when the manager believes that the
broker's charge for the transaction does not exceed usual and customary levels.
The same standard applies to the use of Salomon Smith Barney as a broker in
connection with entering into options and futures contracts. The portfolio paid
no brokerage commissions in the last fiscal year, because transactions in fixed
income securities are executed as principal transactions by the various
dealers.

   Citigroup is a bank holding company subject to regulation under the Bank
Holding Company Act of 1956 (the "BHCA"), the requirements of the Glass-
Steagall Act and certain other laws and regulations.

   Salomon Smith Barney and the manager believe that the manager's investment
management and administration services and the market-making activities
performed by Salomon Smith Barney are not underwriting and are consistent with
the BHCA, the Glass-Steagall Act and other federal and state laws applicable to
Citigroup. However, there is little controlling precedent regarding the
performance of the combination of investment advisory and administrative
activities by subsidiaries of bank holding companies. If Salomon Smith Barney
and the manager, or their affiliates, were to be prevented from acting as the
manager or administrator, the fund would seek alternative means for obtaining
these services. The fund does not expect that shareholders would suffer any
adverse financial consequences as a result of any such occurrence.

22
<PAGE>

Management of the Portfolio (continued)


  Portfolio Management

   Joseph P. Deane, Vice President and Investment Officer of the portfolio, is
primarily responsible for the management of the portfolio's assets. Mr. Deane
has served in this capacity since the portfolio commenced operations in 1992
and manages the day-to-day operations of the portfolio, including making all
investment decisions. Mr. Deane is an Investment Officer of SSB Citi and is the
senior portfolio manager for a number of investment companies and other
accounts investing in tax-exempt securities.

Dividends and Distributions; Dividend Reinvestment Plan


   The portfolio generally expects to pay monthly dividends of net investment
income (income other than net realized capital gains) and to distribute net
realized capital gains, if any, annually. From time to time, when the portfolio
makes a substantial capital gains distribution, it may do so in lieu of paying
its regular monthly dividend. All dividends or distributions with respect to
shares of common stock are reinvested automatically in additional shares
through participation in the portfolio's dividend reinvestment plan (the
"plan"), unless a shareholder elects to receive cash.

   Under the plan, a shareholder whose shares of common stock are registered in
his or her own name will have all distributions from the portfolio reinvested
automatically by PFPC as purchasing agent under the plan, unless the
shareholder elects to receive cash. Distributions with respect to shares
registered in the name of a broker-dealer or other nominee (that is, in "street
name") will be reinvested by the broker or nominee in additional shares under
the plan, unless the service is not provided by the broker or nominee or the
shareholder elects to receive distributions in cash. Investors who own common
stock registered in street name should consult their broker-dealers for details
regarding reinvestment. All distributions to portfolio shareholders who do not
participate in the plan will be paid by check mailed directly to the record
holder by or under the direction of PFPC as dividend paying agent.

   The number of shares of common stock distributed to participants in the plan
in lieu of a cash dividend is determined in the following manner. Whenever the
market price of the common stock is equal to or exceeds the net asset value per
share on the date of valuation, plan participants will be issued shares of
common stock at a price equal to the greater of (1) the net asset value per
share most recently determined as described under "Net Asset Value" or (2) 95%
of the market price.

                                                                              23
<PAGE>


Dividends and Distributions; Dividend Reinvestment Plan (continued)

   If the net asset value per share of common stock at the time of valuation
exceeds the market price of the common stock, or if the portfolio declares a
dividend or capital gains distribution payable only in cash, PFPC will buy
common stock in the open market, on the NYSE or elsewhere, for the
participants' accounts. If, following the commencement of the purchases and
before PFPC has completed its purchases, the market price exceeds the net asset
value of the common stock, PFPC will attempt to terminate purchases in the open
market and cause the portfolio to issue the remaining portion of the dividend
or distribution by issuing shares at a price equal to the greater of (a) net
asset value or (b) 95% of the then current market price. In this case, the
number of shares of common stock received by a plan participant will be based
on the weighted average of prices paid for shares purchased in the open market
and the price at which the portfolio issues the remaining shares. To the extent
PFPC is unable to stop open market purchases and cause the portfolio to issue
the remaining shares, the average per share purchase price paid by PFPC may
exceed the net asset value of the common stock, resulting in the acquisition of
fewer shares than if the dividend or capital gains distribution had been paid
in common stock issued by the portfolio at net asset value. PFPC will begin to
purchase common stock on the open market as soon as practicable after the
payment date of the dividend or capital gains distribution, but in no event
shall such purchases continue later than 30 days after that date, except when
necessary to comply with applicable provisions of the federal securities laws.

   PFPC maintains all shareholder accounts in the plan and furnishes written
confirmations of all transactions in each account, including information needed
by a shareholder for personal and tax records. The automatic reinvestment of
dividends and capital gains distributions will not relieve plan participants of
any income tax that may be payable on the dividends or capital gains
distributions common stock in the account of each plan participant will be held
by PFPC in uncertificated form in the name of each plan participant.

   Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions under the plan. PFPC's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
portfolio. No brokerage charges apply with respect to shares of common stock
issued directly by the portfolio under the plan. Each plan participant will,
however, bear a proportionate share of brokerage commissions incurred with
respect to any open market purchases made under the plan.

   The portfolio reserves the right to amend or terminate the plan as applied
to any dividend or capital gains distribution paid subsequent to written notice
of the change sent to participants at least 30 days before the record date for
the dividend or capital gains distribution. The plan also may be amended or
terminated by PFPC, with the portfolio's prior written consent, on at least 30
days' written notice to plan participants. All correspondence concerning the
plan should be directed by mail to PFPC Global Fund Services, P.O. Box 8030,
Boston, MA 02266-8030 or by telephone at 1-800-331-1710.

24
<PAGE>

Certain Provisions of the Articles of Incorporation and Market Discount


  Anti-Takeover Provisions

   The portfolio presently has provisions in its articles of incorporation and
bylaws (commonly referred to as "anti-takeover" provisions) which may have the
effect of limiting the ability of other entities or persons to acquire control
of the portfolio, to cause it to engage in certain transactions or to modify
its structure.


   The board of directors is classified into three classes, each with a term of
three years with only one class of directors standing for election in any year.
Such classification may prevent replacement of a majority of the directors for
up to a two-year period. Directors may be removed from office only for cause by
vote of at least 75% of the shares entitled to be voted on the matter. In
addition, unless 75% of the fund's non-interested directors approves the
transaction, the affirmative vote of the holders of at least 75% of the shares
will be required to authorize the portfolio's conversion from a closed-end to
an open-end investment company, or generally to authorize any of the following
transactions: (i) merger, consolidation or share exchange of the portfolio with
or into any other corporation; (ii) dissolution or liquidation of the
portfolio; (iii) sale, lease, exchange or other disposition of all or
substantially all of the assets of the portfolio; (iv) change in the nature of
the business of the portfolio so that it would cease to be an investment
company registered under the 1940 Act; or (v) sale, lease or exchange to the
portfolio, in exchange for securities of the portfolio, of any assets of any
entity or person (except assets having an aggregate fair market value of less
than $1,000,000). The affirmative vote of at least 75% of the shares will be
required to amend the articles of incorporation or bylaws to change any of the
foregoing provisions.

   The percentage votes required under these provisions, which are greater than
the minimum requirements under Maryland law or the 1940 Act, will make more
difficult a change in the portfolio's business or management and may have the
effect of depriving shareholders of an opportunity to sell shares at a premium
over prevailing market prices by discouraging a third party from seeking to
obtain control of the portfolio in a tender offer or similar transaction. The
portfolio's board of directors, however, has considered these anti-takeover
provisions and believes they are in the best interests of shareholders.

  Market Discount

   Shares of common stock of closed-end investment companies frequently trade
at a discount from net asset value, although in some cases they may trade at a
premium. Shares of closed-end investment companies investing primarily in
fixed-income securities tend to trade on the basis of income yield on the
market price of the shares and the market price may also be affected by trading
volume, general market conditions and economic conditions and other factors
beyond the control

                                                                              25
<PAGE>

Certain Provisions of the Articles of Incorporation and Market Discount
(continued)

of the portfolio. As a result, the market price of the portfolio's shares may
be greater or less than the net asset value. Since the commencement of the
portfolio's operations, the portfolio's shares have traded in the market at
prices that were at times equal to, but generally were below, net asset value.

   Some closed-end investment companies have taken certain actions, including
the repurchase of common stock in the market at market prices and the making of
one or more tender offers for common stock at net asset value, in an effort to
reduce or mitigate the discount, and others have converted to an open-end
investment company, the shares of which are redeemable at net asset value.

   The portfolio's board of directors has seen no reason to adopt any of the
steps specified above, which some other closed-end portfolios have used to
address the discount. The experience of many closed-end funds suggests that the
effect of many of these steps (other than open-ending) on the discount may be
temporary or insignificant. Accordingly, there can be no assurance that any of
these actions will be taken or, if undertaken, will cause the portfolio's
shares to trade at a price equal to their net asset value. The portfolio's
manager may voluntarily waive its fees from time to time in order to increase
the portfolio's dividend yield in an effort to reduce the discount. Any such
waiver may be terminated at any time, and there can be no assurance that such
actions would be successful at reducing the discount.

Description of Common Stock


<TABLE>
<CAPTION>
                                                               Amount
                                                             Outstanding
                                                            Exclusive of
                                         Amount Held       Shares Held by
                                         by Portfolio     Portfolio for its
                                         for its Own       Own Account as
  Title of Class    Amount Authorized      Account      of September 18, 2000
-----------------------------------------------------------------------------
  <S>               <C>                  <C>            <C>
  Common Stock      500,000,000 shares        --           32,007,443.546
-----------------------------------------------------------------------------
</TABLE>

   No shares, other than those currently outstanding, are offered for sale
pursuant to this prospectus. All shares of common stock have equal non-
cumulative voting rights and equal rights with respect to dividends, assets and
liquidations. Shares of common stock will be fully paid and non-assessable when
issued and have no preemptive, conversion or exchange rights. A majority of the
votes cast at any meeting of shareholders is sufficient to take or authorize
action, except for election of Directors or as otherwise provided in the
portfolio's Articles of Incorporation as described under "Certain Provisions of
the Articles of Incorporation and Market Discount."

26
<PAGE>

Description of Common Stock (continued)


   Under the rules of the NYSE applicable to listed companies, the portfolio is
required to hold an annual meeting of shareholders in each year. If the
portfolio's shares are no longer listed on the NYSE (or any other national
securities exchange the rules of which require annual meetings of
shareholders), the portfolio may decide not to hold annual meetings of
shareholders.

   The portfolio has no current intention of offering additional shares, except
that additional shares may be issued under the plan. See "Dividends and
Distributions; Dividend Reinvestment Plan." Such offerings of shares, if made,
will require approval of the portfolio's board of directors and will be subject
to the requirement of the 1940 Act that shares may not be sold at a price below
the then current net asset value (exclusive of underwriting discounts and
commissions) except in connection with an offering to existing shareholders or
with the consent of a majority of the portfolio's outstanding shares.

Custodian, Transfer Agent, Dividend-Paying Agent and Registrar

   PFPC Trust Company, located at 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103, acts as custodian of the portfolio's investments. PFPC,
located at 101 Federal Street, Boston, Massachusetts 02110, serves as agent in
connection with the plan and serves as the portfolio's transfer agent,
dividend-paying agent and registrar.

Independent Auditors


   The audited financial statements have been incorporated by reference in the
SAI in reliance upon the report of KPMG LLP, independent auditors, and upon the
authority of said firm as experts in accounting and auditing.

Further Information


   This prospectus does not contain all of the information set forth in the
registration statement filed with the SEC. The complete registration statement
may be obtained from the SEC upon payment of any applicable fee prescribed by
its rules and regulations.

                                                                              27
<PAGE>

                    (This page is intentionally left blank.)
<PAGE>

Appendix A

Types of Municipal Obligations

   The portfolio may invest in the following types of municipal obligations and
in such other types of municipal obligations as may be described in the
prospectus.

  Municipal Bonds

   Municipal bonds are debt obligations issued to obtain funds for various
public purposes. The two principal classifications of municipal bonds are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or from another specific
source, such as the user of the facility being financed. Certain municipal
bonds are "moral obligation" issues, which normally are issued by special
purpose public authorities. In the case of such issues, an express or implied
"moral obligation" of a stated government unit is pledged to the payment of the
debt service but is usually subject to annual budget appropriations.

  Industrial Development Bonds and Private Activity Bonds

   Industrial development bonds ("IDBs") and private activity bonds ("PABs")
are municipal bonds issued by or on behalf of public authorities to finance
various privately operated facilities, such as airports or pollution control
facilities. IDBs and PABs generally do not carry the pledge of the credit of
the issuing municipality, but are guaranteed by the corporate entity on whose
behalf they are issued. IDBs and PABs are generally revenue bonds and thus are
not payable from the unrestricted revenue of the issuer. The credit quality of
IDBs and PABs is usually directly related to the credit standing of the user of
the facilities being financed.

  Municipal Lease Obligations

   Municipal lease obligations are municipal obligations that may take the form
of leases, installment purchase contracts or conditional sales contracts, or
certificates of participation with respect to such contracts or leases.
Municipal lease obligations are issued by state and local governments and
authorities to purchase land or various types of equipment and facilities.
Although municipal lease obligations do not constitute general obligations of
the municipality for which the municipality's taxing authority is pledged, they
ordinarily are backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. The leases underlying
certain municipal obligations, however, provide that lease payments are subject
to partial or full

                                                                             A-1
<PAGE>

Appendix A (continued)

abatement if, because of material damage or destruction of the leased property,
there is substantial interference with the lessee's use or occupancy of such
property. This "abatement risk" may be reduced by the existence of insurance
covering the leased property, the maintenance by the lessee of reserve funds or
the provision of credit enhancements such as letters of credit.

   The liquidity of municipal lease obligations varies. Municipal leases held
by the portfolio will be considered illiquid securities unless the portfolio's
board of directors determines on an on-going basis that the leases are readily
marketable. Certain municipal lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In the case of a "non-appropriation" lease, the
portfolio's ability to recover under the lease in the event of non-
appropriation or default will be limited solely to the repossession of the
leased property, without recourse to the general credit of the lessee, and
disposition of the property in the event of foreclosure might be difficult. The
portfolio will not invest more than 5% of its assets in such "non-
appropriation" municipal lease obligations.

  Zero Coupon Obligations

   The portfolio may invest in zero coupon municipal obligations. Such
obligations include "pure zero" obligations, which pay no interest for their
entire life (either because they bear no stated rate of interest or because
their stated rate of interest is not payable until maturity), and "zero/fixed"
obligations, which pay no interest for an initial period and thereafter pay
interest currently. Zero coupon obligations also include securities
representing the principal-only components of municipal obligations from which
the interest components have been stripped and sold separately by the holders
of the underlying municipal obligations. Zero coupon securities usually trade
at a deep discount from their face or par value and will be subject to greater
fluctuations in market value in response to changing rates than obligations of
comparable maturity that make current distributions of interest. While zero
coupon municipal obligations will not contribute to the cash available to the
portfolio, the manager believes that limited investments in such securities may
facilitate the portfolio's ability to preserve capital while generating tax-
exempt income through the accrual of original interest discount. Zero coupon
municipal obligations generally are liquid, although such liquidity may be
reduced from time to time due to interest rate volatility and other factors.
The portfolio may invest up to 10% of its total assets in zero coupon municipal
obligations.

  Floating Rate Obligations

   The portfolio may purchase floating and variable rate municipal notes and
bonds, which frequently permit the holder to demand payment of principal at any

A-2
<PAGE>

Appendix A (continued)

time, or at specified intervals, and permit the issuer to prepay principal,
plus accrued interest, at its discretion after a specified notice period. The
issuer's obligations under the demand feature of such notes and bonds generally
are secured by bank letters of credit or other credit support arrangements.
There frequently will be no secondary market for variable and floating rate
obligations held by the portfolio, although the portfolio may be able to obtain
payment of principal at face value by exercising the demand feature of the
obligation.

  Participation Interests

   The portfolio may invest up to 5% of its total assets in participation
interests in municipal bonds, including IDBs, PABs and floating and variable
rate securities. A participation interest gives the portfolio an undivided
interest in a municipal bond owned by a bank. The portfolio has the right to
sell the instrument back to the bank. If the participation interest is unrated,
it will be backed by an irrevocable letter of credit or guarantee of a bank
that the portfolio's board of directors has determined meets certain credit
quality standards or the payment obligation will otherwise be collateralized by
U.S. government securities. The portfolio will have the right, with respect to
certain participation interests, to draw on the letter of credit on demand,
after specified notice for all or any part of the principal amount of the
portfolio's participation interest, plus accrued interest. Generally, the
portfolio intends to exercise the demand under the letters of credit or other
guarantees only upon a default under the terms of the underlying bond, or to
maintain the portfolio's assets in accordance with its investment objective and
policies. The ability of a bank to fulfill its obligations under a letter of
credit or guarantee might be affected by possible financial difficulties of its
borrowers, adverse interest rate or economic conditions, regulatory limitations
or other factors. The manager will monitor the pricing, quality and liquidity
of the participation interests held by the portfolio and the credit standing of
the banks issuing letters of credit or guarantees supporting such participation
interests on the basis of published financial information reports of rating
services and bank analytical services.

  Custodial Receipts

   The portfolio may acquire custodial receipts or certificates underwritten by
securities dealers or banks that evidence ownership of future interest
payments, principal payments or both on certain municipal obligations. The
underwriter of these certificates or receipts typically purchases municipal
obligations and deposits the obligations in an irrevocable trust or custodial
account with a custodian bank, which then issues receipts or certificates that
evidence ownership of the periodic unmatured coupon payments and the final
principal payment on the obligations. Custodial receipts evidencing specific
coupon or principal payments have the same economic attributes as zero coupon
municipal obligations

                                                                             A-3
<PAGE>

Appendix A (continued)

described above. Although under the terms of the custodial receipt the
portfolio would be typically authorized to assert its rights directly against
the issuer of the underlying obligation, the portfolio could be required to
assert through the custodian bank those rights that may exist against the
underlying issuer. Thus, in the event the underlying issuer fails to pay
principal or interest when due, the portfolio may be subject to delays,
expenses and risks that are greater than those that would have been involved if
the portfolio had purchased a direct obligation of the issuer. In addition, in
the event the trust or custodial account in which the underlying security has
been deposited is determined to be an association taxable as a corporation,
instead of a non-taxable entity, the yield on the underlying security would be
reduced in recognition of any taxes paid.

  Municipal Obligation Components

   The portfolio may invest in municipal obligations, the interest rate on
which has been divided by the issuer into two different and variable
components, which together result in a fixed interest rate. Typically, the
first of the components (the "auction component") pays an interest rate that is
reset periodically through an auction process, whereas the second of the
components (the "residual component") pays a residual interest rate based on
the difference between the total interest paid by the issuer on the municipal
obligation and the auction rate paid on the auction component. The portfolio
may purchase both auction and residual components. Because the interest rate
paid to holders of residual components is generally determined by subtracting
the interest rate paid to the holders of auction components from a fixed
amount, the interest rate paid to residual component holders will decrease as
the auction component's rate increases and increase as the auction component's
rate decreases. Moreover, the extent of the increases and decreases in market
value of residual components may be larger than comparable changes in the
market value of an equal principal amount of a fixed rate municipal obligation
having similar credit quality, redemption provisions and maturity.

A-4
<PAGE>

Appendix B

  Tax-Exempt Income Compared to Taxable Income

   The tables below show individual taxpayers how to translate the tax savings
from investments such as the portfolio into an equivalent return from a taxable
investment. The yields used below are for illustration only and are not
intended to represent current or future yields for the portfolio, which may be
higher or lower than those shown.

<TABLE>
<CAPTION>
                                   Federal         Tax-Exempt Rate
                                   Marginal        ---------------
                                     Rate   2.0%  3.0%  4.0%  5.0%  6.0%  7.0%
--------------------------------------------------------------------------------
 Single                Joint                   Equivalent Taxable Yield
--------------------------------------------------------------------------------
<S>               <C>              <C>      <C>   <C>   <C>   <C>   <C>   <C>
$      0- 25,750  $      0- 43,050   15.0%  2.35% 3.53% 4.71% 5.88% 7.06%  8.24%
  25,751- 62,450    43,051-104,050   28.0   2.78  4.17  5.56  6.94  8.33   9.72
  62,451-130,250   104,051-158,550   31.0   2.90  4.35  5.80  7.25  8.70  10.14
 130,251-283,150   158,551-283,150   36.0   3.13  4.69  6.25  7.81  9.38  10.94
    over 283,150      over 283,150   39.6   3.31  4.97  6.62  8.28  9.93  11.59
--------------------------------------------------------------------------------
</TABLE>

* The Federal tax rates shown are those currently in effect for 2000. The
  calculations assume that no income will be subject to the federal alternative
  minimum tax.

                                                                             B-1
<PAGE>

                                                 SalomonSmithBarney
                                                 ---------------------------
                                                 A member of citigroup[LOGO]

                                                 Managed Municipals Portfolio
                                                 Inc.

                                                 Seven World Trade Center

                                                 New York, New York 10048

                                                 Common Stock

                                                 (Investment Company
                                                 Act File No. 811-6629)

                                                 FD01205 9/00

All dealers effecting transactions in the portfolio's securities, whether or
not participating in this distribution, may be required to give investors a
prospectus.

If someone makes a statement about the portfolio that is not in this
prospectus, you should not rely upon that information. This prospectus does not
offer any security other than the portfolio's shares of common stock. Neither
the portfolio nor Salomon Smith Barney is offering to sell shares of the
portfolio to any person to whom the portfolio may not lawfully sell its shares.

There may be changes in the portfolio's affairs that occur after the date of
the prospectus. The portfolio will publish a supplement to the prospectus if
there are any material changes in its business.


Managed Municipals Portfolio Inc.



Seven World Trade Center
New York, NY  10013
(212) 723-9218

STATEMENT OF ADDITIONAL INFORMATION
September 28, 2000

	Managed Municipals Portfolio Inc. (the "portfolio") is a non-
diversified, closed-end management investment company that seeks as high
a level of current income exempt from federal income tax as is
consistent with the preservation of principal.  Under normal conditions,
the portfolio will, in seeking its investment objective, invest
substantially all of its assets in long-term, investment grade
obligations issued by state and local governments, political
subdivisions, agencies and public authorities ("municipal obligations").
No assurance can be given that the portfolio will be able to achieve its
investment objective.  SSB Citi Fund Management LLC ("SSB Citi" or
"manager"), (successor to SSBC Fund Management Inc.) serves as
investment manager of the portfolio.

	This Statement of Additional Information ("SAI") expands upon and
supplements the information contained in the current prospectus of the
portfolio, dated September 28, 2000, as amended or supplemented from
time to time (the "prospectus"), and should be read in conjunction with
the prospectus.  The prospectus may be obtained from any Salomon Smith
Barney Financial Consultant or by writing or calling the portfolio at
the address or telephone number set forth above.  This SAI, although not
itself a prospectus, is incorporated by reference into the prospectus in
its entirety.

	No person has been authorized to give any information or to make
any representations not contained in the prospectus or this SAI and, if
given or made, such information must not be relied upon as having been
authorized by the portfolio or the portfolio's investment adviser.  The
prospectus and this SAI do not constitute an offer to sell or a
solicitation of any offer to buy any security other than the shares of
common stock.  The prospectus and this SAI do not constitute an offer to
sell or a solicitation of an offer to buy the shares of common stock by
anyone in any jurisdiction in which such offer or solicitation would be
unlawful.  Neither the delivery of the prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the portfolio since the date
hereof.  If any material change occurs while the prospectus is required
by law to be delivered however, the prospectus or this SAI will be
supplemented or amended accordingly.


CONTENTS

Investment Objective and Policies (see in the Prospectus "Appendix")	2
Portfolio Transactions and Turnover 	11
Management of the Portfolio (see in the Prospectus "Management of the
Portfolio"	13
Taxes (see in the Prospectus "Taxation")	17
Stock Purchases and Tenders (see in the Prospectus "Certain Provisions
of the Articles of
  Incorporated" and "Description of Common Stock")	21
Additional Information	23
Financial Statements	24
Appendix	A-1


INVESTMENT OBJECTIVE AND POLICIES

	The prospectus discusses the portfolio's investment objective and
the policies it employs to achieve that objective.  The following
discussion supplements the description of the portfolio's investment
policies in the prospectus.  The portfolio's investment objective is
high tax-exempt current income by investing substantially all of its
assets in municipal obligations.  The portfolio's investment objective
may not be changed without the affirmative vote of the holders of a
majority (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the portfolio's outstanding voting shares.  No
assurance can be given that the portfolio's investment objective will be
achieved.

Use of Ratings as Investment Criteria

	In general, the ratings of Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P") and Fitch IBCA,
Inc. ("Fitch") and other nationally recognized statistical rating
organizations ("NRSROs") represent the opinions of the NRSROs as to the
quality of the municipal obligations and other debt securities they
rate.  It should be emphasized, however, that such ratings are relative
and subjective, are not absolute standards of quality and do not
evaluate the market risk of securities.  These ratings will be used as
initial criteria for the selection of securities, but the portfolio also
will rely upon the independent advice of SSB Citi.   Among the factors
that will also be considered by the manager in evaluating potential
municipal obligations to be held by the portfolio are the price, coupon
and yield to maturity of the obligations, the manager's assessment of
the credit quality of the issuer of the obligations, the issuer's
available cash flow and the related coverage ratios, the property, if
any, securing the obligations, and the terms of the obligations,
including subordination, default, sinking fund and early redemption
provisions.  To the extent the portfolio invests in lower-rated and
comparable unrated securities, the portfolio's achievement of its
investment objective may be more dependent on the manager's credit
analysis of such securities than would be the case for a portfolio
consisting entirely of higher-rated securities.  The Appendix to this
SAI contains information concerning the ratings of Moody's, S&P and
Fitch and their significance.

	Subsequent to its purchase by the portfolio, an issue of municipal
obligations may cease to be rated or its rating may be reduced below the
rating given at the time the securities were acquired by the portfolio.
Neither event will require the sale of such municipal obligations by the
portfolio, but the manager will consider such event in its determination
of whether the portfolio should continue to hold the municipal
obligations.  In addition, to the extent the ratings change as a result
of changes in the rating systems or due to a corporate restructuring of
Moody's, S&P or Fitch the portfolio will attempt to use comparable
ratings as standards for its investments in accordance with its
investment objectives and policies.

	The portfolio will seek to invest substantially all of its assets
in municipal obligations, and under normal conditions at least 80% of
the portfolio's total assets will be invested in investment grade
municipal obligations.

	The portfolio may invest in municipal obligations rated as low as
Baa by Moody's, BBB by S&P or BBB by Fitch or in unrated municipal
obligations deemed to be of comparable quality.  Although such
securities are considered investment grade, they may be subject to
greater risks than other higher-rated investment grade securities.

	While the market for municipal obligations is considered to be
generally adequate, the existence of limited markets for particular
lower-rated and comparable unrated securities may diminish the
portfolio's ability to (1) obtain accurate market quotations for
purposes of valuing such securities and calculating its net asset value
and (2) sell the securities at fair value to respond to changes in the
economy or in the financial markets.  The market for certain lower-rated
and comparable unrated securities is relatively new and has not fully
weathered a major economic recession.  Any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon.

Taxable Investments

	Under normal conditions the portfolio may hold up to 20% of its
assets in cash or money market instruments including taxable money
market instruments (collectively, "Taxable Investments").

	Money market instruments in which the portfolio may invest
include: U.S. government securities; tax-exempt notes of municipal
issuers rated, at the time of purchase no lower than MIG1 by Moody's,
SP-1 by S&P or F-1 by Fitch or, if not rated by issuers having
outstanding unsecured debt then rated within the three highest rating
categories; bank obligations (including certificates of deposit, time
deposits and bankers' acceptances of domestic banks, domestic savings
and loan associations and similar institutions); commercial paper rated
no lower than P-1 by Moody's, A-1 by S&P or F-l by Fitch or the
equivalent from another nationally recognized rating service or, if
unrated, of an issuer having an outstanding, unsecured debt issue then
rated within the three highest rating categories; and repurchase
agreements.  At no time will the portfolio's investments in bank
obligations, including time deposits, exceed 25% of the value of its
assets.

	U.S. government securities in which the portfolio may invest
include direct obligations of the United States and obligations issued
by U.S. government agencies and instrumentalities.  Included among
direct obligations of the United States are Treasury bills, Treasury
notes and Treasury bonds, which differ principally in terms of their
maturities.  Included among the securities issued by U.S. government
agencies and instrumentalities are: securities that are supported by the
full faith and credit of the United States (such as Government National
Mortgage Association certificates); securities that are supported by the
right of the issuer to borrow from the U.S. Treasury (such as securities
of Federal Home Loan Banks); and securities that are supported by the
credit of the instrumentality (such as Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation bonds).

Lending Securities

	By lending its securities, the portfolio can increase its income
by continuing to receive interest on the loaned securities, by investing
the cash collateral in short-term instruments or by obtaining yield in
the form of interest paid by the borrower when U.S. government
securities are used as collateral.  The portfolio will adhere to the
following conditions whenever it lends its securities: (1) the portfolio
must receive at least 100% cash collateral or equivalent securities from
the borrower, which will be maintained by daily marking-to-market; (2)
the borrower must increase the collateral whenever the market value of
the securities loaned rises above the level of the collateral; (3) the
portfolio must be able to terminate the loan at any time; (4) the
portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and
any increase in market value; (5) the portfolio may pay only reasonable
custodian fees in connection with the loan; and (6) voting rights on the
loaned securities may pass to the borrower, except that, if a material
event adversely affecting the investment in the loaned securities
occurs, the portfolio's board of directors must terminate the loan and
retain the portfolio's right to vote the securities.  From time to time,
the portfolio may pay a part of the interest earned from the investment
of collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the portfolio and that is acting
as a "finder."

Repurchase Agreements

	The portfolio may enter into repurchase agreements with certain
member banks of the Federal Reserve System and certain dealers on the
Federal Reserve Bank of New York's list of reporting dealers.  Under the
terms of a typical repurchase agreement, the Portfolio would acquire an
underlying debt obligation for a relatively short period (usually not
more than one week) subject to an obligation of the seller to repurchase
and the portfolio to resell the obligation at an agreed-upon price and
time thereby determining the yield during the portfolio's 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.  The
manager acting under the supervision of the portfolio's board of
directors, reviews on an ongoing basis the value of the collateral and
the creditworthiness of those banks and dealers with which the portfolio
enters into repurchase agreements to evaluate potential risks.  In
entering into a repurchase agreement, the portfolio will bear a risk of
loss in the event that the other party to the transaction defaults on
its obligations and the portfolio is delayed or prevented from
exercising its rights to dispose of the underlying securities, including
the risk of a possible decline in the value of the underlying securities
during the period in which the portfolio seeks to assert its rights to
them, the risk of incurring expenses associated with asserting those
rights and the risk of losing all or a part of the income from the
agreement.

Investments in Municipal Obligation Index and Interest Rate Futures
Contracts and Options on Interest Rate Futures Contracts

	The portfolio may invest in municipal obligation index and
interest rate futures contracts and options on interest rate futures
contracts that are traded on a domestic exchange or board of trade.
Such investments may be made by the portfolio solely for the purpose of
hedging against changes in the value of its portfolio securities due to
anticipated changes in interest rates and market conditions, and not for
purposes of speculation.  Further, such investments will be made only in
unusual circumstances such as when the manager anticipates an extreme
change in interest rates or market conditions.

	Municipal Obligation Index and Interest Rate Futures Contracts.  A
municipal obligation index futures contract is an agreement to take or
make delivery of an amount of cash equal to a specific dollar amount
times the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index
contract is originally written.  No physical delivery of the underlying
municipal obligations in the index is made.  Interest rate futures
contracts are contracts for the future purchase or sale of specified
interest rate sensitive debt securities of the U.S. Treasury, such as
U.S. Treasury bills, bonds and notes, obligations of the Government
National Mortgage Association and bank certificates of deposit.
Although most interest rate futures contracts require the delivery of
the underlying securities, some settle in cash.  Each contract
designates the price date, time and place of delivery.

	The purpose of the portfolio's entering into a municipal
obligation index or interest rate futures contract, as the holder of
long-term municipal obligations, is to protect the portfolio from
fluctuation in interest rates on tax-exempt securities without actually
buying or selling municipal obligations.  The portfolio will, with
respect to its purchases of financial futures contracts establish a
segregated account consisting of cash, U.S. government securities,
equity securites or debt securities of any grade in an amount at least
equal to the total market value of the futures contracts less the amount
of initial margin on deposit for the contracts.

	Unlike the purchase or sale of a municipal obligation, no
consideration is paid or received by the portfolio upon the purchase or
sale of a futures contract.  Initially, the portfolio will be required
to deposit with the futures commission merchant an amount of cash or
cash equivalents equal to approximately 5% of the contract amount (this
amount is subject to change by the board of trade on which the contract
is traded and members of such board of trade may charge a higher
amount).  This amount is known as "initial margin" and is in the nature
of a performance bond or good faith deposit on the contract which is
returned to the portfolio upon termination of the futures contract,
assuming that all contractual obligations have been satisfied.
Subsequent payments known as "variation margin", to and from the futures
commission merchant, will be made on a daily basis as the price of the
index or securities fluctuates making the long and short positions in
the futures contract more or less valuable, a process known as marking-
to-market.  At any time prior to the expiration of the contract, the
portfolio may elect to close the position by taking an opposite
position, which will operate to terminate the portfolio's existing
position in the futures contract.

	There are several risks in connection with the use of municipal
obligation index and interest rate futures contracts as a hedging
device.  Successful use of these futures contracts by the portfolio is
subject to the manager's ability to predict correctly movements in the
direction of interest rates.  Such predictions involve skills and
techniques which may be different from those involved in the management
of a long-term municipal obligation portfolio.  In addition, there can
be no assurance that a correlation would exist between movements in the
price of the municipal obligation index or the debt security underlying
the futures contract and movement in the price of the municipal
obligations which are the subject of the hedge.  The degree of
imperfection of correlation depends upon various circumstances, such as
variations in speculative market demand for futures contracts and
municipal obligations and technical influences on futures trading.  The
portfolio's municipal obligations and the municipal obligations in the
index may also differ in such respects as interest rate levels,
maturities and creditworthiness of issuers. A decision of whether, when
and how to hedge involves the exercise of skill and judgment and even a
well-conceived hedge may be unsuccessful to some degree because of
market behavior or unexpected trends in interest rates.

	Although the portfolio intends to enter into futures contracts
only if an active market exists for such contracts, there can be no
assurance that an active market will exist for a contract at any
particular time, most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices
during a single trading day.  The daily limit establishes the maximum
amount the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit.  The daily
limit governs only price movement during a particular trading day and
therefore does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions.  It is possible that futures
contract prices could move to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses.  In such event it will not be possible to close a
futures position and in the event of adverse price movements, the
portfolio would be required to make daily cash payments of variation
margin.  In such circumstances, an increase in the value of the portion
of the portfolio being hedged, if any, may partially or completely
offset losses on the futures contract.  As described above, however,
there is no guarantee the price of municipal obligations will, in fact,
correlate with the price movements in a futures contract and thus
provide an offset to losses on a futures contract.

	If the portfolio has hedged against the possibility of an increase
in interest rates adversely affecting the value of municipal obligations
it holds and rates decrease instead, the portfolio will lose part or all
of the benefit of the increased value of the municipal obligations it
has hedged because it will have offsetting losses in its futures
positions.  In addition, in such situations, if the portfolio has
insufficient cash, it may have to sell securities to meet daily
variation margin requirements.  Such sales of securities may, but will
not necessarily, be at increased prices which reflect the decline in
interest rates.  The portfolio may have to sell securities at a time
when it may be disadvantageous to do so.

	Options on Interest Rate Futures Contracts.  The portfolio may
purchase put and call options on interest rate futures contracts which
are traded on a domestic exchange or board of trade as a hedge against
changes in interest rates, and may enter into closing transactions with
respect to such options to terminate existing positions.  The portfolio
will sell put and call options on interest rate futures contracts only
as part of closing sale transactions to terminate its options positions.
There is no guarantee such closing transactions can be effected.

	Options on interest rate futures contracts, as contrasted with the
direct investment in such contracts, give the purchaser the right, in
return for the premium paid, to assume a position in interest rate
futures contracts at a specified exercise price at any time prior to the
expiration date of the options.  Upon exercise of an option, the
delivery of the futures position by the writer of the option to the
holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract exceeds, in the
case of a call, or is less than, in the case of a put, the exercise
price of the option on the futures contract.  The potential loss related
to the purchase of an option on interest rate futures contracts is
limited to the premium paid for the option (plus transaction costs).
Because the value of the option is fixed at the point of sale, there are
no daily cash payments to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of the portfolio.

	There are several risks relating to options on interest rate
futures contracts.  The ability to establish and close out positions on
such options will be subject to the existence of a liquid market.  In
addition, the portfolio's purchase of put or call options will be based
upon predictions as to anticipated interest rate trends by the manager
which could prove to be inaccurate.  Even if the manager's expectations
are correct, there may be an imperfect correlation between the change in
the value of the options and of the portfolio's securities.

Municipal Obligations

	General Information.  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 obtain funds to provide privately
operated facilities are included within the term municipal obligations
if the interest paid thereon qualifies as excludable 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.

	The yields on municipal obligations are dependent upon a variety
of factors, including general economic and monetary conditions, general
money market conditions, general conditions of the municipal obligations
market, the financial condition of the issuer, the size of a particular
offering, the maturity of the obligation offered and the rating of the
issue.  Municipal obligations are also subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies
of creditors, such as the Federal Bankruptcy Code, and laws, if any,
that may be enacted by Congress or state legislatures extending the time
for payment of principal or interest, or both, or imposing other
constraints upon enforcement of the obligations or upon the ability of
municipalities to levy taxes.   There is also the possibility that as a
result of litigation or other conditions the power or ability of any one
or more issuers to pay, when due, principal of and interest on its, or
their, municipal obligations may be materially affected.

	The net asset value of the common stock will change with changes
in the value of the portfolio's securities.  Because the portfolio will
invest primarily in fixed-income securities, the net asset value of the
common stock can be expected to change as levels of interest rates
fluctuate; generally, when prevailing interest rates increase, the value
of fixed-income securities held by the portfolio can be expected to
decrease and when prevailing interest rates decrease, the value of the
fixed-income securities held by the portfolio can be expected to
increase.  The value of the fixed-income securities held by the
portfolio and thus the portfolio's net asset value, may also be affected
by other economic, market and credit factors.

	From time to time, the portfolio's investments may include
securities as to which the portfolio, by itself or together with other
funds or accounts managed by the manager holds a major portion or all of
an issue of municipal obligations.  Because relatively few potential
purchasers may be available for these investments and, in some cases,
contractual restrictions may apply on resales, the portfolio may find it
more difficult  to sell these securities at a time when the manager
believes it is advisable to do so.

	When-Issued Securities.  The portfolio may purchase municipal
obligations on a "when-issued" basis (i.e. for delivery beyond the
normal settlement date at a stated price and yield).  The payment
obligation and the interest rate that will be received on the municipal
obligations purchased on a when-issued basis are each fixed at the time
the buyer enters into the commitment.  Although the portfolio will
purchase municipal obligations on a when-issued basis only with the
intention of actually acquiring the securities, the portfolio may sell
these securities before the settlement date if it is deemed advisable as
a matter of investment strategy.

	Municipal obligations are subject to changes in value based upon
the public's perception of the creditworthiness of the issuers and
changes, real or anticipated, in the level of interest rates.  In
general, municipal obligations tend to appreciate when interest rates
decline and depreciate when interest rates rise.  Purchasing municipal
obligations on a when-issued basis, therefore, can involve the risk that
the yields available in the market when the delivery takes place
actually may be higher than those obtained in the transaction itself.
To account for this risk, a separate account of the portfolio will be
established .  Such separate account shall consist of cash, U.S.
government securities, equity securities or debt securities of any grade
equal to or greater than the amount of the when-issued commitments,
provided such securities have been determined by the manager to be
liquid and unencumbered, and are marked to market daily pursuant to
guidelines established by the portfolio's directors.  For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market or fair value.  If the market or
fair value of such securities declines additional cash or securities
will be placed in the account on a daily basis so that the value of the
account will equal the amount of such commitments by the portfolio.
Placing securities rather than cash in the segregated account may have a
leveraging effect on the portfolio's net assets.  That is, to the extent
the portfolio remains substantially fully invested in securities at the
same time it has committed to purchase securities on a when-issued
basis, there will be greater fluctuations in its net assets than if it
had set aside cash to satisfy its purchase commitment.  Upon the
settlement date of the when-issued securities, the portfolio will meet
its obligation from then-available cash flow, sale of securities held in
the segregated account, sale of other securities or, although it would
not normally expect to do so, from the sale of the when-issued
securities themselves (which may have a value greater or less than the
portfolio's payment obligations).  Sales of securities to meet such
obligations may involve the realization of capital gains, which are not
exempt from federal income taxes.

	When the portfolio engages in when-issued transactions, it relies
on the seller to consummate the trade.  Failure of the seller to do so
may result in the portfolio's incurring a loss or missing an opportunity
to obtain a price considered to be advantageous.

	Municipal Leases.  Municipal leases may take the form of a lease
or an installment purchase contract 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 providing that the
governmental issuer of the obligation 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.

	To limit the risks associated with municipal leases, the portfolio
will invest no more than 5% of its total assets in lease obligations
that contain non-appropriation clauses and will only purchase a non-
appropriation lease obligation with respect to which (1) the nature of
the leased equipment or other property is such that its ownership or use
is reasonably essential to a governmental function of the issuing
municipality (2) the lease payments will begin to amortize the principal
balance due at an early date, resulting in an average life of five years
or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or
purchase of similar equipment or other property if lease payments are
not appropriated, (4) the lease obligor has maintained good market
acceptability in the past, (5) the investment is of a size that will be
attractive to institutional investors and (6) the underlying leased
equipment or other property has elements of portability and/or use that
enhance its marketability in the event that foreclosure on the
underlying equipment or other property were ever required.

	Municipal leases that the portfolio may acquire will be both rated
and unrated.  Rated leases that may be held by the portfolio include
those rated investment grade at the time of investment (that is, rated
no lower than Baa by Moody's, BBB by S&P or BBB by Fitch).  The
portfolio may acquire unrated issues that the manager deems to be
comparable in quality to rated issues in which the Portfolio is
authorized to invest.  A determination by the manager that an unrated
lease obligation is comparable in quality to a rated lease obligation
will be made on the basis of, among other things a consideration of
whether the nature of the leased equipment or other property is such
that its ownership or use is reasonably essential to a governmental
function of the issuing municipality.  In addition, all such
determinations made by the manager will be subject to oversight and
approval by the portfolio's board of directors.

	Municipal leases held by the portfolio will be considered illiquid
securities unless the portfolio's board of directors determines on an
ongoing basis that the leases are readily marketable.  An unrated
municipal lease with a non-appropriation risk that is backed by an
irrevocable bank letter of credit or an insurance policy issued by a
bank or insurer deemed by the manager to be of high quality and minimal
credit risk is not deemed to be illiquid solely because the underlying
municipal lease is unrated if the manager determines that the lease is
readily marketable because it is backed by the letter of credit or
insurance policy.

Investment Restrictions

	The portfolio has adopted certain fundamental investment
restrictions that may not be changed without the prior approval of the
holders of a majority of the portfolio's outstanding voting securities.
A "majority of the portfolio's outstanding voting securities" for this
purpose means the lesser of (1) 67% or more of the shares of the
portfolio's common stock present at a meeting of shareholders, if the
holders of 50% of the outstanding shares are present or represented by
proxy at the meeting or (2) more than 50% of the outstanding shares.
For purposes of the restrictions listed below all percentage limitations
apply immediately after a purchase or initial investment, and any
subsequent change in applicable percentage resulting from market
fluctuations will not require elimination of any security from the
portfolio.  Under its fundamental restrictions, the portfolio may not:

1. Purchase securities other than municipal obligations and taxable
investments as those terms are described in the prospectus and this
SAI.
2. Borrow money, except for temporary or emergency purposes, or for
clearance of transactions, and then only in amounts not exceeding
15% of its total assets (not including the amount borrowed) and as
otherwise described in the prospectus and this SAI.  When the
portfolio's borrowings exceed 5% of the value of its total assets,
the portfolio will not make any additional investments.
3. Sell securities short or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of
transactions, but the portfolio may make margin deposits in
connection with transactions in futures and  options on futures.
4. Underwrite any issue of securities, except to the extent that the
purchase of municipal obligations may be deemed to be an
underwriting.
5. Purchase, hold or deal in real estate or oil and gas interests
except that the portfolio may invest in municipal obligations
secured by real estate or interests in real estate.
6. Invest in commodities, except that the portfolio may enter into
futures contracts as described in the prospectus and this SAI.
7. Lend any funds or other assets except through purchasing municipal
obligations or taxable investments, lending portfolio securities
and entering into repurchase agreements consistent with the
portfolio's investment objective.
8. Issue senior securities.
9. Invest more than 25% of its total assets in the securities of
issuers in any single industry, except that this limitation will
not be applicable to the purchase of municipal obligations and U.S.
government securities.
10. Make any investments for the purpose of exercising control or
management of any company.

PORTFOLIO TRANSACTIONS AND TURNOVER

Portfolio Transactions

	Newly issued securities normally are purchased directly from the
issuer or from an underwriter acting as principal.  Other purchases and
sales usually are placed with those dealers from which it appears the
best price or execution will be obtained; those dealers may be acting as
either agents or principals.  The purchase price paid by the portfolio
to underwriters of newly issued securities usually includes a concession
paid by the issuer to the underwriter, and purchases of after-market
securities from dealers normally are executed at a price between the bid
and asked prices.  The portfolio has paid no brokerage commissions since
its commencement of operations.

	Allocation of transactions, including their frequency, to various
dealers is determined by the manager in its best judgment and in a
manner deemed fair and reasonable to shareholders.  The primary
considerations 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 portfolio.  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 such supplemental information.
Such information may be useful to the manager in serving both the
portfolio 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 portfolio.

	The portfolio will not purchase municipal obligations during the
existence of any underwriting or selling group relating thereto of which
Salomon Smith Barney Inc. ("Salomon Smith Barney") or its affiliates are
members except to the extent permitted by the Securities and Exchange
Commission (the "SEC") including under Rule 10f-3 under the 1940 Act.
Under certain circumstances, the portfolio may be at a disadvantage
because of this limitation in comparison with other investment companies
which have a similar investment objective but which are not subject to
such limitation.

	While investment decisions for the portfolio are made
independently from those of the other accounts managed by the manager
investments of the type the portfolio may make also may be made by those
other accounts.  When the portfolio 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 Portfolio or the size of the position obtained or
disposed of by the portfolio.

	The portfolio's board of directors will review periodically the
commissions paid by the portfolio to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits inuring to the portfolio.

Portfolio Turnover

	The portfolio's portfolio turnover rate (the lesser of purchases
or sales of portfolio securities during the last fiscal year, excluding
purchases or sales of short-term securities, divided by the monthly
average value of portfolio securities) generally is not expected to
exceed 100%, but the portfolio turnover rate will not be a limiting
factor whenever the portfolio deems it desirable to sell or purchase
securities.  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 may be
purchased at approximately the same time in order to take advantage of
what the portfolio 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 often-
exempt securities.  For the fiscal years ended May 31, 1998, 1999 and
2000 the portfolio's portfolio turnover rate was 87%, 23% and 35%,
respectively.

MANAGEMENT OF THE PORTFOLIO

	The executive officers of the portfolio are employees of certain
of the organizations that provide services to the portfolio. These
organizations are as follows:

Name	Service

SSB Citi	Investment Manager and
Administrator

Salomon Smith Barney	Market Maker

PNC Bank, National Association.	Custodian
("PNC Bank")

PFPC Global Fund Services	Transfer Agent
("PFPC")

	These organizations and the functions they perform for the
portfolio are discussed in the prospectus and this SAI.

Directors and Executive Officers of the Portfolio

	The overall management of the business and affairs of the
portfolio is vested with its board of directors. The board of directors
approves all significant agreements between the portfolio and persons or
companies furnishing services to it, including the portfolio's
agreements with its investment adviser, administrator, custodian and
transfer agent, dividend paying agent, registrar and plan agent. The
day-to day operations of the portfolio are delegated to its officers and
to the manager and SSB Citi, subject always to the investment objective
and policies of the portfolio and to general supervision by the
portfolio's board of directors.

	The directors and executive officers of the portfolio, their
addresses together with information as to their principal business
occupations during the past five years, are shown below:


Name and Address(Age)
Positions Held
With the Fund
Principal Occupations
During Past 5 Years



*+Heath B. McLendon
(67)
	Seven World Trade
Center
	New York, NY 10048

Chairman of the
Board,
Chief Executive
Officer
And President
Managing Director of Salomon
Smith Barney; Director of 78
investment companies
associated with Citigroup;
President of SSB Citi and
Travelers Investment
Advisers, Inc. ("TIA");
former Chairman of Salomon
Smith Barney Strategy
Advisers Inc.

 +Martin Brody (79)
	c\o HMK Associates
	30 Columbia Turnpike
	Florham Park, NJ
07932

Director
Consultant, HMK Associates;
Retired Vice Chairman of the
Board of Restaurant
Associates Corp.; Director of
Jaclyn, Inc.

 +Allan J. Bloostein
(70)
	717 Fifth Avenue
	21st Floor
	New York, NY 10022

Director
President of Allan J.
Bloostein Associates, a
consulting firm; retired Vice
Chairman and Director of the
Board of May Department
Stores Company; Director of
Taubman Centers, Inc. and CVS
Corporation.

 +Dwight B. Crane (62)
	Harvard Business
School
	Soldiers Field Road
	Boston, MA 02163

Director
Professor, Harvard Business
School Director Peer Review
Analysis, Inc.




 +Robert A. Frankel
(73)
	102 Grand Street
	Croton-on-Hudson
	New York, NY 10520

Director
Managing Partner of Robert A.
Frankel Management
Consultants; formerly
Corporate Vice President of
The Reader's Digest
Association, Inc.




 +William R.
Hutchinson (55)
	Amoco Corp.
	200 East Randolph
Drive
	Chicago, IL  60601



Director
Group Vice President, Mergers
& Acquisitions BP Amoco
p.l.c. since January 1, 1999;
formerly Vice President-
Financial Operations Amoco
Corp.; Director of Associated
Bank and Associated Bank
Corp.
  Joseph P. Deane (56)
	Seven World Trade
Center
	New York. NY 10013


Vice President and
Investment Officer
Managing Director of Salomon
Smith Barney; Investment
Officer of SSB Citi.

  David Fare (38)
	Seven World Trade
Center
	New York, NY 10013

Investment Officer
Investment Officer of SSB
Citi.

  Lewis E. Daidone
(43)
	125 Broad Street
	New York, NY 10124


Senior Vice
President
and Treasurer
Managing Director of Salomon
Smith Barney; Chief Financial
Officer, Director and Senior
Vice President of SSB Citi
and TIA.

  Christina T. Sydor
(49)
	388 Greenwich Street
	New York, NY 10013

Secretary
Managing Director of Salomon
Smith Barney; General Counsel
and Secretary of SSB Citi and
TIA.



*	Directors who are "interested persons" of the portfolio (as defined in
the 1940 Act).
+	Director and/or trustee of other registered investment companies with
which Salomon Smith Barney is affiliated.

	The portfolio pays each of its directors who is not a director,
officer or employee of SSB Citi, or any of its affiliates, an annual fee
of $5,000 plus $500 for each in-person board meeting and $100 for each
telephonic board meeting attended.  In addition, the portfolio will
reimburse these directors for travel and out-of-pocket expenses incurred
in connection with board of directors meetings.  For the fiscal year
ended May 31, 2000, such fees totaled $2,953.24.






Director



Aggregate
Compensation from
Fund
Pension or
Retirement
Benefits
Accrued as
part of
Fund
Expenses

Total
Compensati
on from
Fund and
Fund
Complex

Total
Number of
Funds for
which
Director
Serves
Within Fund
Complex





Martin Brody
6,500
0
138,600
20
Dwight A. Crane
6,500
0
155,363
23
Allan J. Bloostein
7,100
0
 112,483
19
Robert A. Frankel
7,000
0
  79,450
9
William R.
Hutchinson
7,100
0
  49,350
7
Heath B. McLendon*
-----
0
-----
78

*	Designates an "interested person" of the portfolio.
Upon attainment of age 80, portfolio directors are required to change to
emeritus status.  Directors emeritus are entitled to serve in emeritus
status for a maximum of 10 years, during which time they are paid 50%
of the annual retainer fee and meeting fees otherwise applicable to
portfolio directors, together with reasonable out-of-pocket expenses
for each meeting attended.  During the portfolio's last fiscal year,
aggregate compensation paid by the portfolio to directors emeritus
totaled $3,250.

Principal Stockholders

	There are no persons known to the portfolio to be control persons
of the portfolio, as such term is defined in Section 2(a)(9) of the 1940
Act. There is no person known to the portfolio to hold beneficially more
than 5% of the outstanding shares of common stock. The following person
is the only person holding more than 5% of the portfolio's outstanding
shares of common stock as of September 18, 2000;


		Percent
of
Name and Address	Amount of	Common
of Record Owner	Record	Stock
	Ownership
	Outstanding

Cede & Co., as Nominee for The Depository Trust Company
	31,210,054.617
97.5%
P.O. Box 20
Bowling Green Station
New York, New York 10004

	As of September 18, 2000, the directors and officers of the
portfolio, as a group, beneficially owned less than 1% of the
portfolio's outstanding shares of common stock.


Investment Manager and Administrator

	 The manager serves as investment adviser to the portfolio
pursuant to a written agreement dated July 30, 1993 (the "advisory
agreement"), a form of which was most recently approved by the board of
directors, including a majority of those directors who are not
"interested persons" of the portfolio or the manager ("non-interested
directors"), on August 23, 2000.  Unless terminated sooner, the advisory
agreement will continue for successive annual periods provided that such
continuance is specifically approved at least annually: (1) by a
majority vote of the non-interested directors cast in person at a
meeting called for the purpose of voting on such approval; and (2) by
the board of directors or by a vote of a majority of the outstanding
shares of common sock.  The manager is an affiliate of Salomon Smith
Barney and an indirect wholly owned subsidiary of Citigroup Inc.  The
manager pays the salary of any officer or employee who is employed by
both it and the portfolio.  The manager bears all expenses in connection
with the performance of its services as investment adviser.

	For investment adviser services rendered to the portfolio, the
manager receives from the portfolio a fee, computed and paid monthly at
the annual rate 0.70% of the value of the portfolio's average daily net
assets.  For the fiscal years ended May 31, 1998, 1999 and 2000, such
fees amounted to $2,969,275, $2,712,616 and $2,089,549 respectively.
Effective September 1, 1998, the manager instituted a voluntary fee
waiver whereby its advisory fees were received at an annual rate of
0.56% of average daily net assets for the fiscal year ended May 31,
2000.

	Under the advisory agreement, the manager will not be liable for
any error of judgment or mistake of law or for any loss suffered by the
portfolio in connection with the advisory agreement, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the
part of the manager in the performance of its duties or from reckless
disregard of its duties and obligations under the advisory agreement.
The advisory agreement is terminable by vote of the board of directors
or by the holders of a majority of common stock, at any time without
penalty on 60 days written notice to the manager.  The advisory
agreement may also be terminated by the manager on 90 days' written
notice to the portfolio.  The advisory agreement terminates
automatically upon its assignment.

	SSB Citi serves as administrator to the portfolio pursuant to a
written agreement dated June 1, 1994 (the "administration agreement"), a
form of which was most recently approved by the board of directors,
including a majority of non-interested directors, on August 23, 2000.
The services provided by SSB Citi under the administration agreement are
described in the prospectus under "Management of the Portfolio."

	For administrator services rendered to the portfolio, SSB Citi
received from the portfolio a fee computed and paid monthly at the
annual rate 0.20% of the value of the portfolio's average daily assets.
For the fiscal years ended May 31, 1998, 1999 and 2000, SSB Citi or its
predecessor received $848,364, $775,034 and $759,060, respectively, in
administration fees.

	Pursuant to the administration agreement, SSB Citi will exercise
its best judgment in rendering its services to the portfolio.  SSB Citi
will not be liable for any error of judgment or mistake of law or for
any loss suffered by the portfolio in connection with the matters to
which the administration agreement relates, except by reason of SSB
Citi's reckless disregard of its obligations and duties under the
administration agreement.

	The administration agreement will continue automatically for
successive annual periods provided that such continuance is approved at
least annually by the board of directors of the portfolio including a
majority of the non-interested directors by vote cast in person at a
meeting called for the purpose of voting such approval. The
administration agreement is terminable, without penalty, upon 60 days
written notice, by the board of directors of the portfolio or by vote of
holders of a majority of the portfolio's shares of common stock, or upon
90 days' written notice, by the SSB Citi.

	The portfolio bears expenses incurred in its operation including:
fees of the investment, adviser and administrator; taxes, interest,
brokerage fees and commissions, if any; fees of directors who are not
officers, directors shareholders or employees of Salomon Smith Barney;
SEC fees and state blue sky qualification fees; charges of the
custodian; transfer and dividend disbursing agent's fees; certain
insurance premiums; outside auditing and legal expenses; costs of any
independent pricing service; costs of maintaining corporate existence;
costs attributable to investor services (including allocated telephone
and personnel expenses); costs of preparation and printing of
prospectuses and statements of additional information for regulatory
purposes and for distribution to shareholders; shareholders' reports and
corporate meetings of the officers, board of directors and shareholders
of the portfolio.

Code of Ethics

	Pursuant to Rule 17j-1 of the 1940 Act, the fund, its investment
advisers and principal underwriter have adopted codes of ethics that
permit personnel to invest in securities for their own accounts,
including securities that may be purchased or held by the fund.  All
personnel must place the interests of clients first and avoid
activities, interests and relationships that might interfere with the
duty to make decisions in the best interests of the clients.  All
personal securities transactions by employees must adhere to the
requirements of the codes and must be conducted in such a manner as to
avoid any actual or potential conflict of interest, the appearance of
such a conflict, or the abuse of an employee's position of trust and
responsibility.

	A copy of the fund's code of ethics is on file with the SEC.

TAXES

	As described above and in the prospectus, the portfolio is
designed to provide investors with current income which is excluded from
gross income for federal income tax purposes. The portfolio is not
intended to constitute 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 portfolio
would not be suitable for tax-exempt institutions, qualified retirement
plans, H.R. 10 plans and individual retirement accounts because such
investors would not gain any additional tax benefit from the receipt of
tax-exempt income.

	The following is a summary of selected federal income tax
considerations that may affect the portfolio 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 portfolio.


Taxation of the Portfolio and its Investments

	The portfolio has qualified and intends to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of
1986 as amended (the "Code"). In addition, the portfolio intends to
satisfy conditions contained in the Code that will enable interest from
municipal obligations, excluded from gross income for federal income tax
purposes with respect to the portfolio, to retain that tax-exempt status
when distributed to the shareholders of the portfolio (that is, to be
classified as "exempt interest" dividends of the portfolio).

	If it qualifies as a regulated investment company the portfolio
will pay no federal income taxes on its taxable net investment income
(that is, taxable income other than net realized capital gains) and its
net realized capital gains that are distributed to shareholders. To be
taxed as a regulated investment company, the portfolio must among other
things: (1) distribute to its shareholders at least 90% of its taxable
net investment income (for this purpose consisting of taxable net
investment income and net realized short-term capital gains) and 90% of
its tax-exempt net investment income (reduced by certain expenses); (2)
derive at least 90% of its gross income from dividends, interest,
payments with respect to loans of securities, gains from the sale or
other disposition of securities, or other income (including, but not
limited to, gains from options, futures, and forward contracts) derived
with respect to the portfolio's business of investing in securities; and
(3) diversify its holdings so that at the end of each fiscal quarter of
the portfolio (a) at least 50% of the market value of the portfolio's
assets is represented by cash, U.S. government securities and other
securities) with those other securities limited with respect to any one
issuer, to an amount no greater than 5% of the portfolio's assets and
(b) not more than 25% of the market value of the portfolio's assets is
invested in the securities of any one issuer (other than U.S. government
securities or securities of other regulated investment companies) or of
two or more issuers that the portfolio controls and that are determined
to be in the same or similar trades or businesses or related trades or
businesses.  As a regulated investment company, the portfolio will be
subject to a 4% non-deductible excise tax measured with respect to
certain undistributed amounts of ordinary income and capital gain. The
portfolio expects to pay dividends and distributions necessary to avoid
the application of this excise tax.

	As described above in this SAI and in the prospectus, the
portfolio may invest in financial futures contracts and options on
financial futures contracts that are traded on a U.S. exchange or board
of trade. The portfolio anticipates that these investment activities
will not prevent the portfolio from qualifying as a regulated investment
company. As a general rule, these investment activities will increase or
decrease the amount of long-term and short-term capital gains or losses
realized by the portfolio and thus will affect the amount of capital
gains distributed to the portfolio shareholders.

	For federal income tax purposes, gain or loss on the futures and
options described above (collectively referred to as "Section 1256
Contracts") would, as a general rule, be taxed pursuant to a special
"mark-to-market system." Under the mark-to-market system, the portfolio
may be treated as realizing a greater or lesser amount of gains or
losses than actually realized. As a general rule gain or loss on Section
1256 Contracts is treated as 60% long term capital gain or loss and 40%
short-term capital gain or loss, and as a result, the mark-to-market
system will generally affect the amount of capital gains or losses
taxable to the portfolio and the amount of distributions taxable to a
shareholder.  Investments in both Section 1256 Contracts and offsetting
positions to those contracts, may result in the portfolio not being able
to receive the benefit of certain realized losses for an indeterminate
period of time.

Taxation of the Portfolio's Shareholders

	The portfolio anticipates that all dividends it pays, other than
dividends from taxable investments and from income or gain derived from
securities transactions and from the use of certain of the investment
techniques described under "Investment Objective and Policies" will be
derived from interest on municipal obligations and thus will be exempt-
interest dividends that may be excluded by shareholders from their gross
income for federal income tax purposes if the portfolio satisfies
certain asset percentage requirements. Dividends paid from the
portfolio's net investment income and distributions of the portfolio's
net realized short-term capital gains are taxable to shareholders of the
portfolio as ordinary income, whether paid in cash or shares.
Distributions of net long-term capital gains, if any, that the Fund
designates as capital gains dividends are taxable as long-term capital
gains regardless of the length of time shareholders have held shares of
common stock and whether the dividends or distributions are received in
cash or reinvested in additional shares. As a general rule, a
shareholder's gain or loss on a sale of his or her shares of common
stock will be a long-term gain or loss if he or she has held his or her
shares for more than one year and will be a short-term capital gain or
loss if he or she has held his or her shares for one year or less.
Dividends and distributions paid by the portfolio will not qualify for
the federal dividends-received deduction for corporations.

Exempt-Interest Dividends

	Interest on indebtedness incurred by a shareholder to purchase or
carry shares of common stock is not deductible for federal income tax
purposes to the extent it is deemed related to exempt-interest
dividends. If a shareholder receives exempt-interest dividends with
respect to any share of common stock and if the share is held by the
shareholder for six months or less, then any loss on the sale of the
share may, to the extent of the exempt-interest dividends, be
disallowed. The Code may also require a shareholder if he or she
receives exempt-interest dividends to treat as taxable income a portion
of certain otherwise non-taxable social security and railroad retirement
benefit payments. In addition, the portion of any exempt-interest
dividend paid by the portfolio that represents income derived from
private activity bonds held by the portfolio 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. Although the portfolio's exempt-interest dividends may
be excluded by shareholders from their gross income for federal income
tax purposes some or all of the portfolio's 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.  The receipt of dividends and distributions from the portfolio
may affect a foreign corporate shareholder's federal "branch profits"
tax liability and a corporate shareholder's federal "excess net passive
income" tax liability. Shareholders should consult their own tax
advisors to determine whether they are (1) "substantial users" with
respect to a facility or "related" to those users within the meaning of
the Code or (2) subject to the a federal alternative minimum tax, the
federal "branch profits" tax, or the federal "excess net passive income"
tax.

Dividend Reinvestment Plan

	A shareholder of the portfolio receiving dividends or
distributions in additional shares pursuant to the plan should be
treated for federal income tax purposes as receiving a distribution in
an amount equal to the amount of money that a shareholder receiving cash
dividends or distributions receives and should have a cost basis in the
shares received equal to that amount.

Statements and Notices

	Statements as to the tax status of the dividends and distributions
received by shareholders of the portfolio are mailed annually. These
statements show the dollar amount of income excluded from federal income
taxes and the dollar amount, if any, subject to federal income taxes
including the amount, if any, of long-term capital gain distributions.
The statements will also designate the amount of exempt interest
dividends that are a specific preference item for purposes of the
federal individual and corporate alternative minimum taxes. The
portfolio will notify shareholders annually as to the interest excluded
from federal income taxes earned by the portfolio with respect to those
states and possessions in which the portfolio has or had investments.
The dollar amount of dividends paid by the portfolio that is excluded
from federal income taxation and the dollar amount of dividends paid by
the portfolio that is subject to federal income taxation, if any, will
vary for each shareholder depending upon the size and duration of the
shareholder's investment in the portfolio.

Backup Withholding

	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 has provided a correct taxpayer
identification number and that he is not subject to "backup
withholding," the shareholder may be subject to a 31% "backup
withholding" tax with respect to (1) taxable dividends and distributions
and (2) the proceeds of any sales or repurchases of shares of common
stock. An individual's taxpayer identification number is his social
security number. The 31% backup withholding tax is not an additional tax
and may be credited against a taxpayer's federal income tax liability.

STOCK PURCHASES AND TENDERS

	The portfolio may repurchase shares of its common stock in the
open market or in privately negotiated transactions when the portfolio
can do so at prices below their then current net asset value per share
on terms that the portfolio's board of directors believes represent a
favorable investment opportunity.

	The market prices of the portfolio shares may among other things,
be determined by the relative demand for and supply of the shares in the
market, the portfolio's investment performance, the portfolio's
dividends and yield and investor perception of the portfolio's overall
attractiveness as an investment as compared with other investment
alternatives. Any acquisition of common stock by the portfolio will
decrease the total assets of the portfolio and therefore have the effect
of increasing the portfolio's expense ratio. The portfolio may borrow
money to finance the repurchase of shares subject to the limitations
described in the prospectus. Any interest on the borrowings will reduce
the portfolio's net income.

	If a tender offer for the common stock of the portfolio is
authorized to be made by the portfolio by the portfolio's board of
directors, it will be an offer to purchase at a price equal to the net
asset value of all (but not less than all) of the shares owned by the
shareholder (or attributed to him for federal income tax purposes under
Section 38 of the Code). A shareholder who tenders all shares owned or
considered owned by him or her, as required, will realize a taxable gain
or loss depending upon his or her basis in his or her shares. If the
portfolio liquidates securities in order to repurchase shares of common
stock, the Portfolio may realize gains and losses.  The portfolio
turnover rate of the portfolio may or may not be affected by the
portfolio's repurchases of shares of common stock pursuant to a tender
offer.

Certain Provisions of the Articles of Incorporation

	The portfolio's Articles of Incorporation include provisions that
could have the effect of limiting the ability of other entities or
persons to acquire control of the portfolio or to change the composition
of its board of directors and could have the effective of depriving
shareholders of an opportunity to sell their shares of common stock at a
premium over the prevailing market prices by discouraging a third party
from seeking to obtain control of the portfolio.  The board of directors
is divided into three classes.  At the annual meeting of shareholders
each year, the term of one class will expire and each director elected
to the class will hold office for a term of three years.  The
classification of the board of directors in this manner could delay for
up to two years the replacement of majority of the board.  The Articles
of Incorporation provide that the maximum number of directors that may
constitute the portfolio's entire board is 12.  A director may be
removed from office, or the maximum number of directors increased, only
by vote of the holders of at least 75% of shares of common stock
entitled to be voted on the matter.

	The portfolio's Articles of Incorporation require the favorable
vote of the holders of at least two-thirds of the shares of common stock
then entitled to be voted to authorize the conversion of the portfolio
from a closed-end to an open-end investment company's as defined in the
1940 Act, unless two-thirds of the Continuing Directors (as defined
below) approve such a conversion.  In the latter case, the affirmative
vote of a majority of the shares outstanding will be required to approve
the amendment to the portfolio's Articles of Incorporation providing for
the conversion of the portfolio.

	The affirmative votes of a least 75% of the directors and the
holders of at least 75% of the shares of the portfolio are required to
authorize any of the following transactions (referred to individually as
a "Business Combination"): (1) a merger, consolidation or share exchange
of the portfolio with or into any other person (referred to individually
as a "Reorganization Transaction"); (2) the issuance or transfer by the
portfolio (in one or a series of transactions in any 12-month period) of
any securities of the portfolio to any other person or entity for cash,
securities of other property (or combinations thereof) having an
aggregate fair market value of $1,000,000 or more, excluding sales of
securities of the portfolio in connection with a public offering,
issuance of securities of the portfolio pursuant to a dividend
reinvestment plan adopted by the Portfolio and issuance's of securities
of the portfolio upon the exercise for any stock subscriptions rights
distributed by the portfolio; or (3) a sale, lease, exchange, mortgage,
pledge, transfer or other disposition by the portfolio (in one or a
series of transactions in any 12-month period) to or with any person of
any assets of the portfolio having aggregate fair market value of
$1,000,000 or more, except for transactions in securities effected by
the portfolio in the ordinary course of its business (each such sale,
lease, exchange, mortgage, pledge, transfer or other disposition being
referred to individually as a "Transfer Transaction").  The same
affirmative votes are required with respect to: any proposal as to the
voluntary liquidation or dissolution of the portfolio or any amendment
to the portfolio's Articles of Incorporation to terminate its existence
(referred to individually as a "Termination Transaction"); and any
shareholder proposal as to specific investment decisions made or to be
made with respect to the portfolio's assets.

	A 75% shareholder vote will not be required with respect to a
Business Combination if the transaction is approved by a vote of a least
75% of the Continuing Directors (as defined below) or if certain
conditions regarding the consideration paid by the person entering into,
or proposing to enter into, a Business Combination with the portfolio
and various other requirements are satisfied.  In such case, a majority
of the votes entitled to be cast by shareholders of the portfolio will
be required to approve the transaction if it is a Reorganization
Transaction or a Transfer Transaction that involves substantially all of
the portfolio's assets and no shareholder vote will be required to
approve the transaction if it is any other Business Combination.  In
addition, a 75% shareholder vote will not be required with respect to a
Termination Transaction if it is approved by a vote of at least 75% of
the Continuing Directors, in which case a majority of the votes entitled
to be cast by shareholders of the portfolio will be required to approve
the transaction.

	The voting provisions described above could have the effect of
depriving shareholders of the portfolio of an opportunity to sell their
common stock at a premium over prevailing market prices by discouraging
a third party from seeking to obtain control of the Portfolio in a
tender offer or similar transaction.  In the view of the portfolio's
board of directors, however, these provisions offer several possible
advantages including: (1) requiring persons seeking control of the
portfolio to negotiate with its management regarding the price to be
paid for the amount of common sock required to obtain control; (2)
promoting continuity and stability; and (3) enhancing the portfolio's
ability to pursue long-term strategies that are consistent with its
investment objective and management policies.  The board of directors
has determined that the voting requirements under Maryland law and the
1940 Act are in the best interests of shareholders generally.

	A "Continuing Director" as used in the discussion above, is any
member of the portfolio's board of directors (1) who is not person or
affiliate of a person who enters or proposes to enter into a Business
Combination with the portfolio (such person or affiliate being referred
to individually as an "Interested party") and (2) who has been a member
of the board of directors for a period of least 12 months or is a
successor of a Continuing Director who is unaffiliated with an
Interested party and is recommended to succeed a Continuing Director by
a majority of the Continuing Directors.

ADDITIONAL INFORMATION

Legal Matters

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

Independent Auditors

	For the fiscal year ending May 31, 2001, KPMG LLP, 757 Third
Avenue, New York, New York 10017, will serve as auditors of the
portfolio and render an opinion on the Portfolio's financial statements.

Custodian, Transfer Agent, Dividend-Paying Agent and Registrar

	PNC Bank, is located at 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103 and serves as the portfolio's custodian pursuant to a
custody agreement. Under the custody agreement, PNC Bank holds
portfolio's securities and keeps all necessary accounts and records.
The assets of the portfolio are held under bank custodianship in
compliance with the 1940 Act.  PFPC is located at One Exchange Place
Boston, Massachusetts 02109, and serves as the Portfolio's transfer
agent pursuant to a transfer agency agreement.  Under the transfer
agency agreement, PFPC maintains the shareholder account records for the
portfolio, handles certain communications between shareholders and the
portfolio, and distributes dividends and distributions payable by the
portfolio.



FINANCIAL STATEMENTS

	The portfolio sends unaudited semi-annual and audited annual
financial statements of the portfolio to shareholders, including a list
of the investments held by the portfolio.

	The Portfolio's Annual Report for the fiscal year ended May 31,
2000 are incorporated into this SAI by reference in their entirety. A
copy of these Reports may be obtained from any Salomon Smith Barney
Financial Consultant or by calling or writing to the Portfolio at the
telephone number or address set forth on the cover page of this SAI.


APPENDIX

DESCRIPTION OF MOODY'S, S&P AND FITCH RATINGS

Description of Moody's Municipal Bond Ratings:

Aaa - Bonds that are rated Aaa are judged to be of the best quality,
carry the smallest degree of investment risk and are generally referred
to as "gilt edge. " Interest payments with respect to these bonds are
protected by a large or by an exceptionally stable margin, and principal
is secure. Although the various protective elements applicable to these
bonds are likely to change, those changes are most unlikely to impair
the fundamentally strong position of these bonds.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards and together with the Aaa group 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
other elements may be 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 with respect to these bonds
are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the fixture.

Baa - Bonds rated Baa are considered to be medium grade obligations,
that is they are neither highly protected nor poorly secured. Interest
payment 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. These bonds lack outstanding
investment characteristics and may have speculative characteristics as
well.

	Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B. 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.

Description of Moody's Municipal Note Ratings:

	Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG) and for variable
demand obligations are designated Variable Moody's Investment Grade
(VMIG). This distinction recognizes the differences between short- and
long-term credit risk. Loans bearing the designation MIG1/VMIG 1 are of
the best quality, enjoying strong protection from established cash flows
of funds for their servicing or from established and broad-based access
to the market for refinancing, or both. Loans bearing the designation
MIG 2/VMIG 2 are of high quality, with margins of protection ample,
although not as large as the preceding group. Loans bearing the
designation MIG3/VMIG 3 are of favorable quality, with all security
elements accounted for but lacking the undeniable strength of the
preceding grades. Market access for refinancing, in particular, is
likely to be less well established.

Description of Moody's Commercial Paper Ratings:

	The rating Prime-1 is the highest commercial paper rating assigned
by Moody's. Issuers rated Prime- 1 (or related supporting institutions)
are considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) are considered to have a strong capacity for repayment of
short-term promissory obligations, normally evidenced by many of the
characteristics of issuers rated Prime-1 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 alternative liquidity
is maintained.


Description of S&P Municipal Bond Ratings:

AAA - These bonds are the obligations of the highest quality and have
the strongest capacity for timely payment of debt service.

General Obligation Bonds Rated AAA - In a period of economic stress the
issuers of these bonds will suffer the smallest declines in income and
will be least susceptible to autonomous decline. Debt burden is
moderate. A strong revenue structure appears more than adequate to meet
future expenditure requirements. Quality of management appears superior.

Revenue Bonds Rated AAA - Debt service coverage with respect to these
bonds has been, and is expected to remain, substantial. Stability of the
pledged revenues is also exceptionally strong due to the competitive
position of the municipal enterprise or to the nature of the revenues.
Basic security provisions (including rate covenant, earnings test for
issuance of additional bonds, debt service reserve requirements) are
rigorous. There is evidence of superior management.

AA - The investment characteristics of bonds in this group are only
slightly less marked than those of the prime quality issues. Bonds rated
AA have the second strongest capacity for payment of debt service.

A - Principal and interest payments on bonds in this category are
regarded as safe although the bonds are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
bonds in high rated categories. This rating describes the third
strongest capacity for payment of debt service.

General Obligation Bonds Rated A - There is some weakness either in the
local economic base in debt burden, in the balance between revenues and
expenditures or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the
issuer to meet debt obligations at some fixture date.

Revenue Bonds Rated A - Debt service coverage is good but not
exceptional. Stability of the pledged revenues could show some
variations because of increased competition or economic influences on
revenues. Basic security provisions, while satisfactory, are less
stringent. Management performance appears adequate.

BBB - The bonds in this group are regarded as having an adequate
capacity to pay interest and repay principal. Whereas bonds in this
group normally exhibit 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. Bonds rated BBB have the
fourth strongest capacity for payment of debt service.

	S&P's letter ratings may be modified by the addition of a plus or
a minus sign, which is used to show relative standing within the major
rating categories except in the AAA category.

Description of S&P Municipal Note Ratings:

	Municipal notes with maturities of three years or less are usually
given note ratings (designated SP-1 -2 or -3) to distinguish more
clearly the credit quality of notes as compared to bonds. Notes rated
SP- 1 have a very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics are given the designation of SP- 1+. Notes rated SP-2
have a satisfactory capacity to pay principal and interest.

Description of S&P Commercial Paper Ratings:

	Commercial paper rated A- l by S&P indicates that the degree of
safety regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety characteristics
are denoted A-1+. Capacity for timely payment of commercial paper rated
A-2 is strong but the relative degree of safety is not as high as issues
designated A-1.

Description of Fitch Municipal Bond Ratings:

AAA - Bonds rated AAA by Fitch have the lowest expectation of credit
risk. The obligor has an exceptionally strong ability 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
commitments. 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 is economic conditions and
circumstances, however, are more likely to impair this capacity. This is
the lowest investment grade category assigned by Fitch.

	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.

Description of Fitch Short-Term Ratings

	Fitch's 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 investment notes.

	The short-term rating places greater emphasis than a long-term
rating on the existence of liquidity necessary to meet financial
commitments in a timely manner.

Fitch's short-term ratings are as follows:

F-1 + - Issues assigned this rating are regarded as having the strongest
capacity for timely payment of financial commitments. The "+" denotes an
exceptionally strong credit feature.

F-1 - Issues assigned this rating are regarded as having the strongest
capacity for timely payment of financial commitments.

F-2 - 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.

F-3 - 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.