As filed with the Securities and Exchange Commission on June 29, 1998

Registration Nos. 33-18779
811-5486

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933     X     

Pre-Effective Amendment No.                         

Post-Effective Amendment No.          18            X     

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY 
      ACT OF 1940     X     

Amendment No.      20             X    


SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
(Exact name of Registrant as specified in Charter)

388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
(212) 816-6474          
(Registrant's telephone number, including Area Code)
Christina T. Sydor
Secretary

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

Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.

It is proposed that this filing will become effective: 

_____	immediately upon filing pursuant to Paragraph (b)

__X__	On July 29, 1998 pursuant to paragraph (b)

_____	60 days after filing pursuant to paragraph (a) (1)

_____	On (date) pursuant to paragraph (a)(1)

_____	75 days after filing pursuant to paragraph (a) (2)

_____	On (date) pursuant to paragraph (a) (2)of rule 485

If appropriate, check the following box:

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

Title of Securities Being Registered: Shares of Common Stock


SMITH BARNEY NEW JERSEY MUNICIPAL FUND INC.

CONTENTS OF REGISTRATION STATEMENT

This registration statement contains the following pages and 
document:

Front Cover

Contents Page

Cross-Reference Sheet

Part A-Prospectus

Part B-Statement of Additional Information

Part C-Other Information

Signature Page

Exhibits


SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.

FORM N-1A

CROSS REFERENCE SHEET

PURSUANT TO RULE 495(a)

Part A.
Item No.				Prospectus Caption

1. Cover Page			Cover Page

2. Synopsis				Prospectus Summary

3. Condensed Financial
Information				Financial Highlights; 
					Performance

4. General Description
of Registrant			Cover Page; Prospectus 
					Summary;
					Purchase of Shares; 
					Investment Objective and
					Management Policies; 
					Additional Information

5. Management of the Fund	Management of the Fund; 
					Distributor;
					Additional Information

6. Capital Stock
and Other Securities		Purchase of Shares;
					Dividends, 
					Distributions and Taxes;
					Additional Information

7. Purchase of Securities	Purchase of Shares; 
					Valuation of Shares;
					Redemption of Shares; 
					Exchange Privilege;
					Distributor; Additional 
					Information

8. Redemption or Repurchase	Purchase of Shares; 
					Redemption of Shares

9. Legal Proceedings		Not Applicable

Part B				Statement of 
Item No.				Additional Information 
					Caption

10. Cover				Cover Page

11. Table of Contents		Table of Contents

12. General Information		Additional Information; 
Distributor

13. Investment Objective
and Policies			Investment Objective 
					and Management Policies

14. Management of the Fund	Management of the Fund; 
					Distributor

15. Control Persons and Principal	Management of the Fund
    Holders of Securities			

16. Investment Advisory
and Other Services		Management of the Fund; 
					Distributor

17. Brokerage Allocation	Investment Objective 
and Management Policies

18. Capital Stock and
Other Securities			Purchase of Shares; 
					Redemption of Shares;
					Taxes

19. Purchase, Redemption
and Pricing of Securities	Purchase of Shares; 
Being Offered			Redemption of Shares
					Distributor; Valuation 
					of Shares;
					Exchange Privilege

20. Tax Status			Taxes

21. Underwriters			Distributor

22. Calculation of
Performance Data			Performance Data

23. Financial Statements	Financial Statements

SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.

PART A


PROSPECTUS

                                                                    SMITH BARNEY

                                                                      New Jersey
                                                                      Municipals
                                                                       Fund Inc.

   
                                                                   JULY 29, 1998
    

                                                   Prospectus begins on page one

[LOGO] Smith Barney Mutual Funds
       Investing for your future.
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<PAGE>

   
--------------------------------------------------------------------------------
Prospectus                                                         July 29, 1998
--------------------------------------------------------------------------------

      Smith Barney
      New Jersey Municipals Fund Inc.
      388 Greenwich Street
      New York, New York 10013
      800-451-2010
    

      Smith Barney New Jersey Municipals Fund Inc. (the "Fund") is a
non-diversified municipal fund that seeks to provide New Jersey investors with
as high a level of dividend income exempt from Federal income taxes and New
Jersey state personal income tax as is consistent with prudent investment
management and the preservation of capital.

   
      This Prospectus concisely sets forth certain information about the Fund,
including sales charges, distribution and service fees and expenses, that
investors will find helpful in making an investment decision. Investors are
encouraged to read this Prospectus carefully and retain it for future reference.

      Additional information about the Fund is contained in a Statement of
Additional Information (the "SAI") dated July 29, 1998, as amended or
supplemented from time to time, that is available upon request and without
charge by calling or writing the Fund at the telephone number or address set
forth above or by contacting a Smith Barney Financial Consultant. The SAI has
been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus in its entirety.
    

SMITH BARNEY INC.
Distributor

   
Mutual Management Corp.
Investment Adviser and Administrator

      THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
    


                                                                               1
<PAGE>

--------------------------------------------------------------------------------
Table of Contents
--------------------------------------------------------------------------------

Prospectus Summary                                                             3
--------------------------------------------------------------------------------
Financial Highlights                                                          10
--------------------------------------------------------------------------------
Investment Objective and Management Policies                                  14
--------------------------------------------------------------------------------
New Jersey Municipal Securities                                               21
--------------------------------------------------------------------------------

   
Valuation of Shares                                                           23
--------------------------------------------------------------------------------
Dividends, Distributions and Taxes                                            23
--------------------------------------------------------------------------------
Purchase of Shares                                                            25
--------------------------------------------------------------------------------
Exchange Privilege                                                            32
--------------------------------------------------------------------------------
Redemption of Shares                                                          35
--------------------------------------------------------------------------------
Minimum Account Size                                                          38
--------------------------------------------------------------------------------
Performance                                                                   38
--------------------------------------------------------------------------------
Management of The Fund                                                        39
--------------------------------------------------------------------------------
Distributor                                                                   41
--------------------------------------------------------------------------------
Additional Information                                                        42
--------------------------------------------------------------------------------
    

================================================================================
      No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the Fund or
the Distributor. This Prospectus does not constitute an offer by the Fund or the
Distributor to sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction.
================================================================================


2
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary
--------------------------------------------------------------------------------

   
      The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the SAI. Cross references in this
summary are to headings in the Prospectus. See "Table of Contents."
    

INVESTMENT OBJECTIVE The Fund is an open-end, non-diversified, management
investment company that seeks to provide New Jersey investors with as high a
level of dividend income exempt from Federal income taxes and New Jersey state
personal income tax as is consistent with prudent investment management and the
preservation of capital. Its investments consist primarily of intermediate- and
long-term investment grade municipal securities issued by or on behalf of the
State of New Jersey or any of its instrumentalities, and its political
subdivisions, agencies and public authorities and certain other municipal
issuers such as the Commonwealth of Puerto Rico, the Virgin Islands and Guam
("New Jersey Municipal Securities") that pay interest which is excluded from
gross income for Federal income tax purposes and exempt from New Jersey state
personal income taxes. Intermediate- and long-term municipal securities have
remaining maturities at the time of purchase of three to in excess of twenty
years. See "Investment Objective and Management Policies."

   
ALTERNATIVE PURCHASE ARRANGEMENTS The Fund offers several classes of shares
("Classes") to investors designed to provide them with the flexibility of
selecting an investment best suited to their needs. The general public is
offered three Classes of shares: Class A shares, Class B shares and Class L
shares, which differ principally in terms of sales charges and rate of expenses
to which they are subject. A fourth Class of shares, Class Y shares, is offered
only to investors meeting an initial investment minimum of at least $15,000,000.
See "Purchase of Shares" and "Redemption of Shares."
    

      Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.00% and are subject to an annual service fee of 0.15% of
the average daily net assets of the Class. The initial sales charge may be
reduced or waived for certain purchases. Purchases of Class A shares of $500,000
or more will be made at net asset value with no initial sales charge, but will
be subject to a contingent deferred sales charge ("CDSC") of 1.00% on
redemptions made within 12 months of purchase. See "Prospectus Summary --
Reduced or No Initial Sales Charge."

      Class B Shares. Class B shares are offered at net asset value subject to a
maximum CDSC of 4.50% of redemption proceeds, declining by 0.50% the first year
after purchase and by 1.00% each year thereafter to zero. This CDSC may be
waived for certain redemptions. Class B shares are subject to an annual service
fee of 0.15% and an annual distribution fee of 0.50% of the average daily net
assets of this Class. The Class B shares' distribution fee may cause that Class
to have higher expenses and pay lower dividends than Class A shares.


                                                                               3
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

      Class B Shares Conversion Feature. Class B shares will convert
automatically to Class A shares, based on relative net asset value, eight years
after the date of the original purchase. Upon conversion, these shares will no
longer be subject to an annual distribution fee. In addition, a certain portion
of Class B shares that have been acquired through the reinvestment of dividends
and distributions ("Class B Dividend Shares") will be converted at that time.
See "Purchase of Shares -- Deferred Sales Charge Alternatives."

   
      Class L Shares. Class L shares are sold at net asset value plus an initial
sales charge of 1.00% of the purchase price. They are subject to an annual
service fee of 0.15% and an annual distribution fee of 0.55% of the average
daily net assets of the Class L shares, and investors pay a CDSC of 1.00% if
they redeem Class L shares within 12 months of purchase. This CDSC may be waived
for certain redemptions. The Class L shares' distribution fee may cause that
Class to have higher expenses and pay lower dividends than Class A shares.
Purchases of Fund shares, which when combined with current holdings of Class L
shares of the Fund, equal or exceed $500,000 in the aggregate, should be made in
Class A shares at net asset value with no sales charge, and will be subject to a
CDSC of 1.00% on redemptions made within 12 months of purchase.

      Class Y Shares. Class Y shares are available only to investors meeting an
initial investment minimum of $15,000,000. Class Y shares are sold at net asset
value with no initial sales charge or CDSC. Class Y shares are not subject to
any service or distribution fees.
    

      In deciding which Class of Fund shares to purchase, investors should
consider the following factors, as well as any other relevant facts and
circumstances:

   
      Intended Holding Period. The decision as to which Class of shares is more
beneficial to an investor depends on the amount and intended duration of his or
her investment. Shareholders who are planning to establish a program of regular
investment may wish to consider Class A shares; as the investment accumulates
shareholders may qualify for reduced sales charges and the shares are subject to
lower ongoing expenses over the term of the investment. As an alternative, Class
B shares are sold without any initial sales charge so the entire purchase price
is immediately invested in the Fund. Any investment return on these additional
invested amounts may partially or wholly offset the higher annual expenses of
this Class. Because the Fund's future return cannot be predicted, however, there
can be no assurance that this would be the case. Finally, Class L shares which
have a lower upfront sales charge but are subject to higher distribution fees
than Class A shares, are suitable for investors who are not investing or
intending to invest an amount which would receive a substantive sales charge
discount and who have a short-term or undetermined time frame.
    


4
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

   
      Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, while Class L shares have a shorter CDSC period than Class B
shares, they do not have a conversion feature and, therefore, are subject to an
ongoing distribution fee. Thus, Class B shares may be more attractive than Class
L shares to investors with longer term investment outlooks.

      Reduced or No Initial Sales Charge. The initial sales charge on Class A
shares may be waived for certain eligible purchasers, and the entire purchase
price will be immediately invested in the Fund. In addition, Class A share
purchases of $500,000 or more will be made at net asset value with no initial
sales charge, but will be subject to a CDSC of 1.00% on redemptions made within
12 months of purchase. The $500,000 investment may be met by adding the purchase
to the net asset value of all Class A shares offered with a sales charge held in
funds sponsored by Smith Barney Inc. ("Smith Barney") listed under "Exchange
Privilege." Class A share purchases may also be eligible for a reduced initial
sales charge. See "Purchase of Shares." Because the ongoing expenses of Class A
shares may be lower than those for Class B and Class C shares, purchasers
eligible to purchase Class A shares at net asset value or at a reduced sales
charge should consider doing so.

      Smith Barney Financial Consultants may receive different compensation for
selling different Classes of shares. Investors should understand that the
purpose of the CDSC on the Class B and Class L shares is the same as that of an
initial sales charge.
    

      See "Purchase of Shares" and "Management of the Fund" for a complete
description of the sales charges and service and distribution fees for each
Class of shares and "Valuation of Shares," "Dividends, Distributions and Taxes"
and "Exchange Privilege" for other differences between the Classes of shares.

PURCHASE OF SHARES Shares may be purchased through the Fund's distributor, Smith
Barney, a broker that clears securities transactions through Smith Barney on a
fully disclosed basis (an "Introducing Broker") or an investment dealer in the
selling group. See "Purchase of Shares."

   
INVESTMENT MINIMUMS Investors in Class A, Class B and Class L shares may open an
account by making an initial investment of at least $1,000 for each account.
Investors in Class Y shares may open an account for an initial investment of
$15,000,000. Subsequent investments of at least $50 may be made for all Classes.
The minimum initial investment requirement for Class A, Class B and Class L
shares and the subsequent investment requirement for all Classes through the
Systematic Investment Plan are described below. There is no minimum investment
requirement in Class A for unitholders who invest distributions from a unit
investment trust ("UIT") sponsored by Smith Barney. See "Purchase of Shares."
    


                                                                               5
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

   
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic Investment
Plan under which they may authorize the automatic placement of a purchase order
each month or quarter for Fund shares. The minimum investment requirement for
Class A, Class B and Class L shares and the subsequent investment requirements
for all classes for shareholders purchasing shares through the Systematic
Investment Plan on a monthly basis is $25 and on a quarterly basis is $50. See
"Purchase of Shares."
    

REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares" and
"Redemption of Shares."

   
MANAGEMENT OF THE FUND Mutual Management Corp. ("MMC" or the "Adviser")
(formerly known as Smith Barney Mutual Funds Management Inc.) serves as the
Fund's investment adviser and administrator. The Adviser provides investment
advisory and management services to investment companies affiliated with Smith
Barney. The Adviser is a wholly owned subsidiary of Salomon Smith Barney
Holdings Inc. ("Holdings"). Holdings is a wholly owned subsidiary of Travelers
Group Inc. ("Travelers"), a diversified financial services holding company
engaged, through its subsidiaries, principally in four business segments:
Investment Services, including Asset Management, Consumer Finance Services, Life
Insurance Services and Property & Casualty Insurance Services. See "Management
of the Fund."
    

EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
class of certain other Smith Barney Mutual Funds at the respective net asset
values next determined. See "Exchange Privilege."

VALUATION OF SHARES Net asset value of the Fund for the prior day generally is
quoted daily in the financial section of most newspapers and is also available
from Smith Barney Financial Consultants. See "Valuation of Shares."

   
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are paid
monthly. Distributions of net realized capital gains, if any, are declared and
paid annually. See "Dividends, Distributions and Taxes."
    

REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a Class
will be reinvested automatically, unless otherwise specified by an investor, in
additional shares of the same Class at current net asset value. Shares acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a pro
rata basis. See "Dividends, Distributions and Taxes."

RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no assurance that the Fund
will achieve its investment objective. Assets of the Fund also may be invested
in the municipal securities of non-New Jersey municipal issuers ("Other


6
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

   
Municipal Securities" and, together with New Jersey Municipal Securities,
"Municipal Securities"). Dividends paid by the Fund that are derived from
interest attributable to New Jersey Municipal Securities will be excluded from
gross income for Federal income tax purposes and exempt from New Jersey state
personal income taxes (but not from New Jersey state franchise tax or New Jersey
state corporate income tax), provided the Fund is a qualified investment fund
under New Jersey law. Dividends derived from interest on Other Municipal
Securities will be exempt from Federal income taxes, but may be subject to New
Jersey state personal income taxes. Dividends derived from certain Municipal
Securities (including New Jersey Municipal Securities), however, may be a
specific tax preference item for Federal alternative minimum tax purposes. The
Fund may invest without limit in securities subject to the Federal alternative
minimum tax. See "Investment Objective and Management Policies" and "Dividends,
Distributions and Taxes."

      The Fund is more susceptible to factors adversely affecting issuers of New
Jersey Municipal Securities than is a municipal bond fund that does not
emphasize these issuers. See "New Jersey Municipal Securities" in the Prospectus
and "Special Considerations Relating to New Jersey Municipal Securities" in the
SAI for further details about the risks of investing in New Jersey obligations.

      The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), which means that
the Fund 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 Fund's assumption of large
positions in the obligations of a small number of issuers may cause the Fund's
share price to fluctuate to a greater extent than that of a diversified company
as a result of changes in the financial conditions or in the market's assessment
of the issuers. See "Investment Objective and Management Policies."

      The Fund generally will invest at least 75% of its assets in securities
rated investment grade, and may invest the remainder of its assets in securities
rated as low as C by Moody's Investors Service, Inc. ("Moody's") or D by
Standard & Poor's Ratings Group ("S&P"), or have an equivalent rating by any
nationally recognized statistical rating organization ("NRSRO"), or in unrated
obligations deemed by the Adviser to be of comparable quality. Securities in the
fourth highest rating category, though considered to be investment grade, have
speculative characteristics. Securities rated as low as D are extremely
speculative and are in actual default of interest and/or principal payments.
    

      There are several risks in connection with the use of when-issued
securities, municipal bond index and interest rate futures contracts and put and
call options thereon as hedging devices, and municipal leases. See "Investment
Objective and Management Policies -- Certain Portfolio Strategies."


                                                                               7
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

THE FUND'S EXPENSES The following expense table lists the costs and expenses an
investor will incur either directly or indirectly as a shareholder of the Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and, unless otherwise noted, the Fund's operating
expenses for its most recent fiscal year:

   
                                       Class A    Class B    Class L*   Class Y
================================================================================
Shareholder Transaction Expenses
 Maximum sales charge imposed on
  purchases (as a percentage of
  offering price) ...................   4.00%      None       1.00%       None
 Maximum CDSC (as a  percentage of
  original cost or redemption
  proceeds, whichever is lower) .....   None**      4.50%      1.00%       None
================================================================================
Annual Fund Operating Expenses
 (as a percentage of average net
 assets)
  Management fees ...................   0.50%      0.50%      0.50%       0.50%
  12b-1 fees*** .....................   0.15       0.65       0.70        None
  Other expenses**** ................   0.10       0.12       0.19        0.10
================================================================================
Total Fund Operating Expenses .......   0.75%      1.27%      1.39%       0.60%
================================================================================

*     Class L shares were previously named Class C shares. For shareholders who
      owned Class C shares of the Fund, Class L shares may be purchased without
      including the 1% initial sales charge until June 15, 1999.
**    Purchase of Class A shares of $500,000 or more will be made at net asset
      value with no sales charge, but will be subject to a CDSC of 1.00% on
      redemptions made within 12 months of purchase.
***   Upon conversion of Class B shares to Class A shares, such shares will no
      longer be subject to a distribution fee. Class L shares do not have a
      conversion feature and, therefore, are subject to an ongoing distribution
      fee. As a result, long-term shareholders of Class L shares may pay more
      than the economic equivalent of the maximum front-end sales charge
      permitted by the National Association of Securities Dealers, Inc.
****   For Class Y shares, "Other expenses" have been estimated based on
       expenses incurred by Class A shares because no Class Y shares had
       been purchased as of March 31, 1998.
    

      Class A shares of the Portfolio purchased through the Smith Barney
AssetOne Program will be subject to an annual asset-based fee, payable
quarterly, in lieu of the initial sales charge. The fee will vary to a maximum
of 1.50%, depending on the amount of assets held through the Program. For more
information, please call your Smith Barney Financial Consultant.

   
      The sales charge and CDSC set forth in the above table are the maximum
charges imposed on purchases or redemptions of Fund shares and investors may
actually pay lower or no charges depending on the amount purchased and, in the
case of Class B, Class L and certain Class A shares, the length of time the
shares are held. See "Purchase of Shares" and "Redemption of Shares." Smith
Barney receives an annual 12b-1 service fee of 0.15% of the value of average
daily net assets of Class A shares. Smith Barney also receives, with respect to
Class B shares, an annual 12b-1 fee of 0.65% of the value of average daily net
assets of that Class,
    


8
<PAGE>

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

   
consisting of a 0.50% distribution and a 0.15% service fee. With respect to
Class L shares, Smith Barney receives an annual 12b-1 fee of 0.70% of the value
of average daily net assets of the Class, consisting of a 0.55% distribution fee
and a 0.15% service fee. "Other expenses" in the above table include fees for
shareholder services, custodial fees, legal and accounting fees, printing costs
and registration fees.
    

EXAMPLE

      The following example is intended to assist an investor in understanding
the various costs that an investor in the Fund will bear directly or indirectly.
The example assumes payment by the Fund of operating expenses at the levels set
forth in the table on the preceding page. See "Purchase of Shares," "Redemption
of Shares" and "Management of the Fund."

   
New Jersey Municipals Fund Inc.              1 Year  3 Years  5 Years  10 Years*
--------------------------------------------------------------------------------
An investor would pay the following
expenses on a $1,000 investment, assuming
(1) 5.00% annual return and (2) redemption
at the end of each time period:

      Class A ..............................   $47    $63      $80      $129
      Class B ..............................    58     70       80       139
      Class L ..............................    34     54       85       175
      Class Y ..............................     6     19       33        75
--------------------------------------------------------------------------------
An investor would pay the following expenses
on the same investment, assuming the same
annual return and no redemption:

      Class A ..............................   $47    $63      $80      $129
      Class B ..............................    13     40       70       139
      Class L ..............................    24     54       85       175
      Class Y ..............................     6     19       33        75
--------------------------------------------------------------------------------
    

*     Ten-year figures assume conversion of Class B shares to Class A shares at
      the end of the eighth year following the date of purchase.

     The example also provides a means for the investor to compare expense
levels of funds with different fee structures over varying investment periods.
To facilitate such comparison, all funds are required to utilize a 5.00% annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. This example should not be considered a
representation of past or future expenses and actual expenses may be greater or
less than those shown.


                                                                               9
<PAGE>

--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------

   
      The following information has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon for the three year period ended March
31, 1998 appears in the Fund's Annual Report dated March 31, 1998. The
information for the fiscal years ended March 31, 1989 through March 31, 1995 has
been audited by other auditors. The information set out below should be read in
conjunction with the financial statements and related notes that also appear in
the Fund's Annual Report, which is incorporated by reference into the SAI. As of
March 31, 1998, no Class Y shares were outstanding and, accordingly, no
comparable information is available at this time for that Class.
    

For a share of each class of capital stock outstanding throughout each year:

   
<TABLE>
<CAPTION>
New Jersey Municipals Fund Inc. 

Class A Shares                               1998     1997     1996     1995      1994     1993     1992
==========================================================================================================
<S>                                        <C>      <C>      <C>      <C>       <C>      <C>      <C>   
Net Asset Value, Beginning of Year         $12.92   $12.88   $12.62   $12.55    $13.16   $12.44   $12.17
----------------------------------------------------------------------------------------------------------
Income From Operations:
  Net investment income(1)                   0.70     0.70     0.70     0.70      0.70     0.75     0.77
  Net realized and unrealized gain/(loss)    0.59     0.02     0.26     0.07     (0.46)    0.87     0.44
----------------------------------------------------------------------------------------------------------
Total Income From Operations                 1.29     0.72     0.96     0.77      0.24     1.62     1.21
==========================================================================================================
Less Distributions From:
  Net investment income                     (0.71)   (0.68)   (0.70)   (0.70)    (0.70)   (0.75)   (0.77)
  Net realized gains                        (0.06)      --       --       --     (0.15)   (0.14)   (0.13)
  Capital                                      --       --       --       --        --    (0.01)   (0.04)
----------------------------------------------------------------------------------------------------------
Total Distributions                         (0.77)   (0.68)   (0.70)   (0.70)    (0.85)   (0.90)   (0.94)
----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year               $13.44   $12.92   $12.88   $12.62    $12.55   $13.16   $12.44
----------------------------------------------------------------------------------------------------------
Total Return                                10.20%    5.74%    7.77%    6.37%     1.66%   13.49%   10.22%
----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions)         $  158   $  148   $  154   $  107    $  120   $  116   $   93
----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
  Expenses(1)                                0.75%    0.76%    0.84%    0.88%*    0.83%    0.74%    0.67%*
  Net investment income                      5.22     5.44     5.41     5.61      5.17     5.76     6.18
----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate                        55%      36%      22%      32%       32%      58%      98%
==========================================================================================================
</TABLE>

(1)   The investment adviser waived all or part of its fees for the fiscal years
      ended March 31, 1992, 1993 and 1994. If such fees had not been waived, the
      per share effects on net investment income and the expense ratios would
      have been as follows:
    

                         Per Share Decreases                 Expense Ratios
                      in Net Investment Income            Without Fee Waivers
                      ------------------------            -------------------

                       1994    1993    1992                1994   1993   1992
                       ----    ----    ----                ----   ----   ----

Class A               $0.01   $0.02   $0.02                0.88%  0.90%  0.83%

   
*     Expense ratios exclude interest expense. Expense ratios including interest
      expense would have been 0.89% and 0.68% for the years ended March 31, 1995
      and March 31, 1992, respectively.
    


10
<PAGE>

--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------

For a share of each class of capital stock outstanding throughout each year:

New Jersey Municipals Fund Inc.

Class A Shares                                1991       1990       1989*
===========================================================================
Net Asset Value, Beginning of Year          $11.92     $11.67     $11.40
---------------------------------------------------------------------------
Income From Operations:
  Net investment income***                    0.82       0.83       0.82
  Net realized and unrealized gain/(loss)     0.32       0.27       0.28
---------------------------------------------------------------------------
Total From Operations                         1.14       1.10       1.10
===========================================================================
Less Distributions From:
  Net investment income                      (0.83)     (0.82)     (0.82)
  Net realized gains                         (0.05)     (0.03)     (0.01)
  Capital                                    (0.01)        --         --
---------------------------------------------------------------------------
Total Distributions                          (0.89)     (0.85)     (0.83)
---------------------------------------------------------------------------
Net Asset Value, End of Year                $12.17     $11.92     $11.67
---------------------------------------------------------------------------
Total Return                                  9.89%      9.62%      9.84%++
---------------------------------------------------------------------------
Net Assets, End of Year (millions)          $   65     $   39     $   29
---------------------------------------------------------------------------
Ratios to Average Net Assets:
  Expenses                                    0.57%      0.55%      0.52%**
  Net investment income                       6.74       6.89       7.23**
---------------------------------------------------------------------------
Portfolio Turnover Rate                         44%        42%        25%
===========================================================================

*     The Fund commenced operations on April 22, 1988. Those shares in existence
      prior to November 6, 1992 were designated as Class A shares.
**    Annualized.
***   Net investment income before waiver of fees and/or reimbursement of
      expenses by the investment adviser, sub-investment adviser and/or
      administrator for the years ended March 31, 1991, 1990, and 1989 would
      have been $.78, $.77, and $.74, respectively.
++    Total return is not annualized, as it may not be representative of the
      total return for the year.


                                                                              11
<PAGE>

--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------

For a share of each class of capital stock outstanding throughout each year:

New Jersey Municipals Fund Inc.

   
<TABLE>
<CAPTION>
Class B Shares                              1998     1997     1996     1995      1994   1993(1)
=================================================================================================
<S>                                       <C>      <C>      <C>      <C>       <C>      <C>   
Net Asset Value, Beginning of Year        $12.92   $12.88   $12.62   $12.55    $13.16   $12.75
-------------------------------------------------------------------------------------------------
Income From Operations:
 Net investment income(2)                   0.63     0.64     0.63     0.63      0.64     0.28
 Net realized and unrealized gain/(loss)    0.59     0.02     0.26     0.06     (0.47)    0.55
-------------------------------------------------------------------------------------------------
Total Income From Operations                1.22     0.66     0.89     0.69      0.17     0.83
=================================================================================================
Less Distributions From:
 Net investment income                     (0.64)   (0.62)   (0.63)   (0.62)    (0.63)   (0.27)
 Net realized gains                        (0.06)      --       --       --     (0.15)   (0.14)
 Capital                                      --       --       --       --        --    (0.01)
-------------------------------------------------------------------------------------------------
Total Distributions                        (0.70)   (0.62)   (0.63)   (0.62)    (0.78)   (0.42)
-------------------------------------------------------------------------------------------------
Net Asset Value, End of Year              $13.44   $12.92   $12.88   $12.62    $12.55   $13.16
-------------------------------------------------------------------------------------------------
Total Return                                9.66%    5.23%    7.20%    5.76%     1.15%    6.60%++
-------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions)        $   66   $   62   $   63   $   55    $   48   $   16
-------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(2)                                1.27%    1.28%    1.36%    1.39%*    1.36%    1.33%+
 Net investment income                      4.70     4.92     4.90     5.09      4.64     5.17+
-------------------------------------------------------------------------------------------------
Portfolio Turnover Rate                       55%      36%      22%      32%       32%      58%
=================================================================================================
</TABLE>
    

(1)   For the period from November 6, 1992 (inception date) to March 31, 1993.

   
(2)   The investment adviser waived all or part of its fees for each of the
      years ended March 31, 1993 and 1994. If such fees had not been waived, the
      per share effects on net investment income and the expense ratios would
      have been as follows:
    

                       Per Share Decreases                Expense Ratios
                    in Net Investment Income            Without Fee Waivers
                    ------------------------            -------------------

                        1994      1993                    1994      1993
                        ----      ----                    ----      ----
Class B                 $0.01     $0.01                   1.41%     1.49%+

   
*     Expense ratios exclude interest expense. The expense ratio including
      interest expense would have been 1.40% for the year ended March 31, 1995.
    

++    Total return is not annualized, as it may not be representative of the
      total return for the year.
+     Annualized.


12
<PAGE>

--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------

For a share of each class of capital stock outstanding throughout each year:

New Jersey Municipals Fund Inc.

   
Class L Shares                         1998       1997       1996     1995(1)
==============================================================================
Net Asset Value, Beginning of Year   $12.92     $12.88     $12.62     $11.86
------------------------------------------------------------------------------
Income From Operations:
  Net investment income                0.61       0.63       0.62       0.20
  Net realized and unrealized gain     0.59       0.02       0.27       0.74
------------------------------------------------------------------------------
Total Income From Operations           1.20       0.65       0.89       0.94
==============================================================================
Less Distributions From:
  Net investment income               (0.63)     (0.61)     (0.63)     (0.18)
  Net realized gains                  (0.06)        --         --         --
------------------------------------------------------------------------------
Total Distributions                   (0.69)     (0.61)     (0.63)     (0.18)
------------------------------------------------------------------------------
Net Asset Value, End of Year         $13.43     $12.92     $12.88     $12.62
------------------------------------------------------------------------------
Total Return                           9.50%      5.17%      7.17%      8.01%++
------------------------------------------------------------------------------
Net Assets, End of Year (millions)   $    6     $    5     $    4     $  0.3
------------------------------------------------------------------------------
Ratios to Average Net Assets:
  Expenses                             1.39%      1.32%      1.41%      1.44%+
  Net investment income                4.58       4.88       4.82       5.05+
------------------------------------------------------------------------------
Portfolio Turnover Rate                  55%        36%        22%        32%
==============================================================================
    

(1)   For the period from December 13, 1994 (inception date) to March 31, 1995.
++    Total return is not annualized, as it may not be representative of the
      total return for the year.
+     Annualized.


                                                                              13
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies
--------------------------------------------------------------------------------

      The investment objective of the Fund is to provide New Jersey investors
with as high a level of income exempt from Federal and New Jersey personal
income taxes as is consistent with prudent investment management and the
preservation of capital. This investment objective may not be changed without
the approval of the holders of a majority of the Fund's outstanding shares.
There can be no assurance that the Fund's investment objective will be achieved.

   
      The Fund operates subject to an investment policy providing that, under
normal market conditions, the Fund will invest at least 80% of its net assets in
Municipal Securities and at least 65% of the aggregate principal amount of the
Fund's investments in New Jersey Municipal Securities. Whenever less than 80% of
the Fund's assets are invested in New Jersey Municipal Securities, the Fund, in
order to maintain its status as a "qualified investment fund" under New Jersey
law, will seek to invest in debt obligations which, in the opinion of counsel to
the issuers, are free from state or local taxation under New Jersey or Federal
laws ("Tax-Exempt Obligations"). The Fund's investments in New Jersey Municipal
Securities and Tax-Exempt Obligations will represent at least 80% of the
aggregate principal amount of all of its investments, excluding cash and cash
items (including receivables). Subject to these minimum investment requirements,
the Fund also may acquire intermediate- and long-term debt obligations
consisting of Other Municipal Securities, the interest on which is at least
exempt from Federal income taxation (not including the possible applicability of
the alternative minimum tax). When the Adviser believes that market conditions
warrant adoption of a temporary defensive investment posture, the Fund may
invest without limit in Other Municipal Securities and in "Temporary
Investments" as described below.

      The Fund generally will invest at least 75% of its total assets in
investment grade debt obligations rated no lower than Baa, MIG 3 or Prime-1 by
Moody's or BBB, SP-2 or A-1 by S&P, or have the equivalent ratings by any NRSRO
or in unrated obligations of comparable quality. Unrated securities will be
considered to be of investment grade if deemed by the Adviser to be comparable
in quality to instruments so rated, or if other outstanding obligations of the
issuers of the unrated securities are rated Baa or better by Moody's or BBB or
better by S&P. The balance of the Fund's assets may be invested in securities
rated as low as C by Moody's or D by S&P or have the equivalent ratings by any
NRSRO, or deemed by the Adviser to be comparable unrated securities which are
sometimes referred to as "junk bonds." Securities in the fourth highest rating
category, though considered to be investment grade, have speculative
characteristics. Securities rated as low as D are extremely speculative and are
in actual default of interest and/or principal payments. A description of the
rating systems of Moody's and S&P is contained in the SAI.

      The Fund's average weighted maturity will vary from time to time based on
the judgment of the Adviser. The Fund intends to focus on intermediate- and
long-term
    


14
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

obligations, that is, obligations with remaining maturities at the time of
purchase of three to in excess of twenty years. Obligations which are rated Baa
by Moody's or BBB by S&P and those which are rated lower than investment grade
are subject to greater market fluctuation and more uncertainty as to payment of
principal and interest, and therefore generate higher yields, than obligations
rated above Baa or BBB.

      The value of debt securities varies inversely to changes in the direction
of interest rates. When interest rates rise, the value of debt securities
generally falls, and when interest rates fall, the value of debt securities
generally rises.

   
      Low and Comparable Unrated Securities. While the market values of
lower-rated and comparable unrated securities tend to react less to fluctuations
in interest rate levels than the market values of higher-rated securities, the
market values of certain lower-rated and comparable unrated municipal securities
also tend to be more sensitive than higher-rated securities to short-term
corporate and industry developments and changes in economic conditions
(including recession) in specific regions or localities or among specific types
of issuers. In addition, lower-rated securities and comparable unrated
securities generally present a higher degree of credit risk. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower-rated and comparable unrated securities to service their payment
obligations, meet projected goals or obtain additional financing may be
impaired. The risk of loss due to default by such issuers is significantly
greater because lower-rated and comparable unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness. The Fund may incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal or interest
on its portfolio holdings.
    

      While the market for municipal bonds is considered to be generally
adequate, the existence of limited markets for particular lower-rated and
comparable unrated securities may diminish the Fund's ability to (a) obtain
accurate market quotations for purposes of valuing such securities and
calculating its net asset value and (b) sell the securities at fair value either
to meet redemption requests or to respond to changes in the economy or in the
financial markets. A severe economic recession would likely disrupt the market
for such securities and adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon.

      Fixed-income securities, including lower-rated securities and comparable
unrated securities, frequently have call or buy-back features that permit their
issuers to call or repurchase the securities from their holders, such as the
Fund. If an issuer exercises these rights during periods of declining interest
rates, the Fund may have to replace the security with a lower yielding security,
thus resulting in a decreased return to the Fund.


                                                                              15
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

   
      Because many issuers of New Jersey Municipal Securities may choose not to
have their obligations rated, it is possible that a large portion of the Fund's
portfolio may consist of unrated obligations. Unrated obligations are not
necessarily of lower quality than rated obligations, but to the extent the Fund
invests in unrated obligations, the Fund will be more reliant on the Adviser's
judgment, analysis and experience than would be the case if the Fund invested
only in rated obligations.

      Municipal Lease Obligations. The Fund may invest without limit in
participations in municipal lease obligations or installment purchase contract
obligations (collectively, "municipal lease obligations") of state and local
governments or authorities to finance the acquisition of equipment or
facilities. The interest on such obligations is, in the opinion of counsel to
the issuers, excluded from gross income for Federal and New Jersey state
personal income tax purposes provided the liability for payments of principal
and interest is solely that of a New Jersey governmental entity. Although lease
obligations do not constitute general obligations of the municipality for which
the municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to budget for, appropriate and make the
payments due under the lease obligation. However, certain 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. Although
"non-appropriation" lease obligations are often secured by the underlying
property, disposition of the property in the event of foreclosure might prove
difficult. There is no limitation on the percentage of the Fund's assets that
may be invested in municipal lease obligations. In evaluating municipal lease
obligations, the Adviser will consider such factors as it deems appropriate,
which may include: (a) whether the lease can be canceled; (b) the ability of the
lease obligee to direct the sale of the underlying assets; (c) the general
creditworthiness of the lease obligor; (d) the likelihood that the municipality
will discontinue appropriating funding for the leased property in the event such
property is no longer considered essential by the municipality; (e) the legal
recourse of the lease obligee in the event of such a failure to appropriate
funding; (f) whether the security is backed by a credit enhancement such as
insurance; and (g) any limitations which are imposed on the lease obligor's
ability to utilize substitute property or services rather than those covered by
the lease obligation.
    

      Zero Coupon Securities. The Fund may also invest in zero coupon
securities. Such bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Fund will realize no cash until
the cash payment date unless a portion of such securities is sold and, if the
issuer defaults, the Fund may obtain no return at all on its investment.

      Private Activity Bonds. The Fund may invest without limit in private
activity bonds. Interest income on certain types of private activity bonds
issued after August


16
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

7, 1986 to finance non-governmental activities is a specific tax preference item
for purposes of the Federal individual and corporate alternative minimum taxes.
Individual and corporate shareholders may be subject to a Federal alternative
minimum tax to the extent the Fund's dividends are derived from interest on
those bonds. Dividends derived from interest income on Municipal Securities are
a component of the "current earnings" adjustment item for purposes of the
Federal corporate alternative minimum tax.

      The Fund is classified as a non-diversified investment company under the
1940 Act, which means that the Fund 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 Fund intends to conduct its operations 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 Fund of any liability for
Federal income tax to the extent its earnings are distributed to shareholders.
The Fund must qualify as a regulated investment company to be a qualified
investment fund under New Jersey law. To so qualify, among other requirements,
the Fund will limit its investments so that, at the close of each quarter of the
taxable year, (a) not more than 25% of the market value of the Fund's total
assets will be invested in the securities of a single issuer and (b) 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 and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. The Fund's assumption of large positions in the
obligations of a small number of issuers may cause the Fund's share price to
fluctuate to a greater extent than that of a diversified company as a result of
changes in the financial condition or in the market's assessment of the issuers.

      The Fund may invest without limit in debt obligations that are repayable
out of revenue streams generated from economically related projects or
facilities. Revenue securities may also include private activity bonds which may
be issued by or on behalf of public authorities to finance various privately
operated facilities and are not payable from the unrestricted revenues of the
issuer. Sizable investments in such obligations could involve an increased risk
to the Fund should any of the related projects or facilities experience
financial difficulties. The Fund also may invest up to 15% of its total assets
in securities with contractual or other restrictions on resale and other
instruments which are not readily marketable. Notwithstanding the foregoing, the
Fund will not invest more than 10% of its assets in securities (excluding those
subject to Rule 144A under the Securities Act of 1933, as amended) that are
restricted. The Fund does not expect to invest more than 5% of its assets in
repurchase agreements. In addition, the Fund may invest up to 5% of its assets
in the securities of issuers which have been in continuous operation for less
than three years. The Fund also is authorized to borrow in an amount of up to
10% of its total assets (including the amount borrowed) valued at market less
liabilities


                                                                              17
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

(not including the amount borrowed) in order to meet anticipated redemptions and
to pledge its assets to the same extent in connection with the borrowings.

   
      Further information about the Fund's investment policies, including a list
of those restrictions on the Fund's investment activities that cannot be changed
without shareholder approval, appears in the SAI.
    

      CERTAIN PORTFOLIO STRATEGIES

      In attempting to achieve its investment objective, the Fund may employ,
among others, the following strategies:

   
      When-Issued Securities. New issues of Municipal Securities frequently are
offered on a when-issued basis, which means that delivery and payment for the
securities normally take place 15 to 45 days after the date of the commitment to
purchase. The payment obligation and interest rate that will be received on
when-issued securities are fixed at the time that the buyer enters into the
commitment. As a result, the yields obtained on the securities may be higher or
lower than the yields available in the market on the dates when the instruments
are actually delivered to the buyers. In addition, during the period before
delivery and payment, there is no accrual of interest and there may be
fluctuations in the price of the securities so that there may be an unrealized
loss at the time of delivery. The Fund will establish a segregated account with
the Fund's custodian consisting of cash, debt securities of any grade or equity
securities, having a value equal to or greater than the Fund's purchase
commitments, provided such securities have been determined by the Adviser to be
liquid and unencumbered, and are marked to market daily, pursuant to guidelines
established by the Directors. Placing securities rather than cash in the
segregated account may have a leveraging effect on the Fund's net assets. The
Fund generally will make commitments to purchase Municipal Securities and other
tax-exempt obligations on a when-issued basis with the intention of actually
acquiring the securities, but the Fund may sell the securities before the
delivery date if it is deemed advisable.

      Temporary Investments. Under normal market conditions, the Fund may hold
up to 20% of its total assets in cash or money market instruments, including
taxable money market instruments ("Temporary Investments"). In addition, when
the Adviser believes that market conditions warrant, including when acceptable
New Jersey Municipal Securities are unavailable, the Fund may take a temporary
defensive posture and invest without limitation in Temporary Investments. To the
extent the Fund holds Temporary Investments, it will not achieve its investment
objective. Tax-exempt securities eligible for short-term investment by the Fund
under such circumstances are municipal notes rated at the time of purchase
within the three highest grades by Moody's or S&P or have the equivalent rating
by any NRSRO or, if not rated, issued by issuers with outstanding debt
securities rated within the three highest grades by Moody's or S&P or have the
equivalent rating by
    


18
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

   
any NRSRO. Any Temporary Investments made for defensive purposes will be made in
conformity with the requirements of a qualified investment fund under New Jersey
law. Since the commencement of its operations, the Fund has not found it
necessary to invest in taxable Temporary Investments.

      Financial Futures and Options Transactions. To hedge against a decline in
the value of Municipal Securities it owns or an increase in the price of
Municipal Securities it proposes to purchase, the Fund may enter into financial
futures contracts and invest in options on financial futures contracts that are
traded on a domestic exchange or board of trade. The futures contracts or
options on futures contracts that may be entered into by the Fund will be
restricted to those that are either based on an index of Municipal Securities or
relate to debt securities the prices of which are anticipated by the Adviser to
correlate with the prices of the Municipal Securities owned or to be purchased
by the Fund.
    

      In entering into a financial futures contract, the Fund will be required
to deposit with the broker through which it undertakes the transaction an amount
of cash or cash equivalents equal to approximately 5% of the contract amount.
This amount, which is known as "initial margin," is subject to change by the
exchange or board of trade on which the contract is traded, and members of the
exchange or board of trade may charge a higher amount. Initial margin is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. In accordance with a process known
as "marking-to-market," subsequent payments, known as "variation margin," to and
from the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable. At any time prior to the
expiration of a futures contract, the Fund may elect to close the position by
taking an opposite position, which will operate to terminate the Fund's existing
position in the contract.

      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 financial
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 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


                                                                              19
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

option may change daily and that change would be reflected in the net asset
value of the Fund.

      Regulations of the Commodity Futures Trading Commission applicable to the
Fund require that its transactions in financial futures contracts and options on
financial futures contracts be engaged in for bona fide hedging purposes, or if
the Fund enters into futures contracts for speculative purposes, that the
aggregate initial margin deposits and premiums paid by the Fund will not exceed
5% of the market value of its assets. In addition, the Fund will, with respect
to its purchases of financial futures contracts, establish a segregated account
consisting of cash or cash equivalents in an amount equal to the total market
value of the futures contracts, less the amount of initial margin on deposit for
the contracts. The Fund's ability to trade in financial futures contracts and
options on financial futures contracts may be limited to some extent by the
requirements of the Code applicable to a regulated investment company, in
addition to the requirements of a qualified investment fund under New Jersey
law, that are described below under "Dividends, Distributions and Taxes."

      Although the Fund intends to enter into financial futures contracts and
options on financial futures contracts that are traded on a domestic exchange or
board of trade only if an active market exists for those instruments, no
assurance can be given that an active market will exist for them at any
particular time. If closing a futures position in anticipation of adverse price
movements is not possible, the Fund would be required to make daily cash
payments of variation margin. In those circumstances, an increase in the value
of the portion of the Fund's investments being hedged, if any, may offset
partially or completely, losses on the futures contract. No assurance can be
given, however, that the price of the securities being hedged will correlate
with the price movements in a futures contract and, thus, provide an offset to
losses on the futures contract or option on the futures contract. In addition,
in light of the risk of an imperfect correlation between securities held by the
Fund that are the subject of a hedging transaction and the futures or options
used as a hedging device, the hedge may not be fully effective because, for
example, losses on the securities held by the Fund may be in excess of gains on
the futures contract or losses on the futures contract may be in excess of gains
on the securities held by the Fund that were the subject of the hedge. In an
effort to compensate for the imperfect correlation of movement in the price of
the securities being hedged and movements in the price of futures contracts, the
Fund may enter into financial futures contracts or options on financial futures
contracts in a greater or lesser dollar amount than the dollar amount of the
securities being hedged if the historical volatility of the futures contract has
been less or greater than that of the securities. This "over hedging" or "under
hedging" may adversely affect the Fund's net investment results if market
movements are not as anticipated when the hedge is established.


20
<PAGE>

--------------------------------------------------------------------------------
Investment Objective and Management Policies (continued)
--------------------------------------------------------------------------------

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

   
      Year 2000. The investment management services provided to the Fund by the
Adviser and the services provided to shareholders by Smith Barney depend on the
smooth functioning of their computer systems. Many computer software systems in
use today cannot recognize the year 2000, but revert to 1900 or some other date,
due to the manner in which dates were encoded and calculated. That failure could
have a negative impact on the Fund's operations, including the handling of
securities trades, pricing and account services. The Adviser and Smith Barney
have advised the Fund that they have been reviewing all of their computer
systems and actively working on necessary changes to their systems to prepare
for the year 2000 and expect that their systems will be compliant before that
date. In addition, the Adviser has been advised by the Fund's custodian,
transfer agent and accounting service agent that they are also in the process of
modifying their systems with the same goal. There can, however, be no assurance
that the Adviser, Smith Barney or any other service provider will be successful,
or that interaction with other non-complying computer systems will not impair
Fund services at that time.

      In addition, the ability of issuers to make timely payments of interest
and principal or to continue their operations or services may be impaired by the
inadequate preparation of their computer systems for the year 2000. This may
adversely affect the market values of securities of specific issuers or of
securities generally if the inadequacy of preparation is perceived as widespread
or as affecting trading markets.
    

--------------------------------------------------------------------------------
New Jersey Municipal Securities
--------------------------------------------------------------------------------

      As used in this Prospectus, the term "New Jersey Municipal Securities"
generally refers to intermediate- and long-term investment grade municipal
securities issued by the State of New Jersey and its political subdivisions,
agencies and public authorities (together with certain other governmental
issuers such as the Commonwealth of Puerto Rico, the Virgin Islands and Guam) to
obtain funds for various public purposes. The interest on such obligations is,
in the opinion of bond counsel to the issuers, excluded from gross income for
Federal income tax purposes and exempt under the New Jersey Gross Income Tax
Act. For that reason, interest on these obligations is generally fixed at a
lower rate than it would be if it were subject


                                                                              21
<PAGE>

--------------------------------------------------------------------------------
New Jersey Municipal Securities (continued)
--------------------------------------------------------------------------------

to such taxes. Interest income on certain New Jersey Municipal Securities is a
specific tax preference item for purposes of the Federal individual and
corporate alternative minimum taxes. See "Dividends, Distributions and Taxes."

      CLASSIFICATIONS

      The two principal classifications of New Jersey Municipal Securities are
"general obligation bonds" 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 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 other specific revenue
source, but not from the general taxing power. In addition, certain types of
"private activity bonds" issued by or on behalf of public authorities to obtain
funds for privately operated facilities are included in the term New Jersey
Municipal Securities, so long as the interest paid on the bonds qualifies as
excluded from gross income for Federal income tax purposes and exempt under the
New Jersey Gross Income Tax Act. Private activity bonds are in most cases
revenue bonds and generally do not carry the pledge of the full faith, credit
and taxing power of the issuing entity.

      SPECIAL CONSIDERATIONS

      Economic, financial and other conditions relating to the State of New
Jersey have an obvious impact upon the state's general obligation bonds. These
conditions, to varying degrees, also will affect the bonds issued by the state's
political subdivisions, agencies and public authorities, including special
obligation bonds. In general, the State of New Jersey has a diversified economic
base consisting of, among others, commerce, construction and service industries,
selective commercial, agriculture, insurance, tourism, petroleum refining and
manufacturing, although New Jersey's manufacturing industry has shown a downward
trend in the last few years. While New Jersey's economic base has become more
diversified over time and thus its economy appears to be less vulnerable during
recessionary periods, a recurrence of high levels of unemployment could
adversely affect New Jersey's overall economy and its ability to meet its
financial obligations.

      New Jersey maintains a balanced budget, which generally restricts total
appropriation increases to only 5% annually to any municipality or county or an
index rate determined annually by the Director of the Division of Local
Government Services, whichever is less. New Jersey law provides for those
situations where the index percentage rate exceeds 5%. As a result, the balanced
budget plan may adversely affect a municipality's or county's ability to repay
its obligations. Of course, each municipality, county or other political
subdivision will be subject to different economic, financial and other
conditions, which will affect its ability to pay the principal and interest on
its bonds. Similarly, special obligation or revenue bonds payable from revenues
generated by particular projects or other specific revenue sources also will be
subject to unique economic, financial and other


22
<PAGE>

--------------------------------------------------------------------------------
New Jersey Municipal Securities (continued)
--------------------------------------------------------------------------------

conditions. If New Jersey or any of its political subdivisions, agencies or
public authorities is unable to meet its financial obligations, the income
derived by the Fund, the ability to preserve or realize appreciation of the
Fund's capital and the Fund's liquidity could be adversely affected.

--------------------------------------------------------------------------------
Valuation of Shares
--------------------------------------------------------------------------------

      The Fund's net asset value per share is determined as of the close of
regular trading on the NYSE, on each day that the NYSE is open, by dividing the
value of the Fund's net assets attributable to each Class by the total number of
shares of that Class outstanding.

   
      When, in the judgment of the pricing service, quoted bid prices for
investments are readily available and are representative of the bid side of the
market, these investments are valued at the mean between the quoted bid and
asked prices. Investments for which, in the judgment of the pricing service,
there is no readily obtainable market quotation (which may constitute a majority
of the portfolio securities) are carried at fair value of securities of similar
type, yield and maturity. Pricing services generally determine value by
reference to transactions in municipal obligations, quotations from municipal
bond dealers, market transactions in comparable securities and various
relationships between securities. Short-term investments that mature in 60 days
or less are valued at amortized cost whenever the Board of Directors determines
that amortized cost is fair value. Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
the fluctuating interest rates on the market value of the instrument. Securities
and other assets that are not priced by a pricing service and for which
quotations are not available will be valued in good faith at fair value by or
under the direction of the fund's Board of Directors. Further information
regarding the Fund's valuation policies is contained in the SAI.
    

--------------------------------------------------------------------------------
Dividends, Distributions and Taxes
--------------------------------------------------------------------------------

   
      Dividends and Distributions

      The Fund's policy is to declare and pay exempt-interest dividends monthly.
Dividends from net realized capital gains, if any, will be distributed annually.
The Fund may also pay additional dividends shortly before December 31 from
certain amounts of undistributed ordinary income and capital gains, in order to
avoid a Federal excise tax liability. If a shareholder does not otherwise
instruct, exempt-interest dividends and capital gain distributions will be
reinvested automatically in additional shares of the same Class at net asset
value, with no additional sales charge or CDSC.
    


                                                                              23
<PAGE>

--------------------------------------------------------------------------------
Dividends, Distributions and Taxes (continued)
--------------------------------------------------------------------------------

   
      The per share amounts of the exempt-interest dividends on Class B and
Class L shares may be lower than on Class A and Class Y shares, mainly as a
result of the distribution fees applicable to Class B and Class L shares.
Similarly, the per share amounts of exempt-interest dividends on Class A shares
may be lower than on Class Y shares, as a result of the service fee attributable
to Class A shares. Capital gain distributions, if any, will be the same across
all Classes of Fund shares (A, B, L and Y).

      TAXES

      The following is a summary of the material federal tax considerations
affecting the Fund and Fund 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 applications to
consider. Because taxes are a complex matter, prospective shareholders are urged
to consult their tax advisors for more detailed information with respect to the
tax consequences of any investment.

      The Fund intends to qualify, as it has in prior years, under Subchapter M
of the Internal Revenue Code (the "Code") for tax treatment as a regulated
investment company. In each taxable year that the Fund qualifies, so long as
such qualification is in the best interests of its shareholders, the Fund will
pay no federal income tax on its net investment income and long-term capital
gain that is distributed to shareholders. The Fund 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, although they may be considered taxable for certain state
and local income (or intangible) tax purposes. Exempt-interest dividends derived
from interest on exempt-interest dividends derived from interest, as well as any
capital gain distribution attributable to the disposition of New Jersey
obligations, will be exempt from New Jersey state personal income taxes.

      Exempt-interest dividends attributable to interest received by the Fund 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. All
exempt-interest dividends will be a component of the "current earnings"
adjustment item for purposes of the Federal corporate alternative minimum tax.
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.
    


24
<PAGE>

--------------------------------------------------------------------------------
Dividends, Distributions and Taxes (continued)
--------------------------------------------------------------------------------

   
      The interest expense incurred by a shareholder on borrowing made to
purchase, or carry, Fund 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 Fund 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 derived from the sale of bonds held by
the Fund for more than one year, are taxable as long-term capital gains,
regardless of the length of time a shareholder has owned Fund shares.

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

      A shareholder's gain or loss on the disposition of Fund shares (whether by
redemption, sale or exchange), generally will be a long-term or short-term gain
or loss depending on the length of time the shares had been owned at
disposition. Losses realized by a shareholder on the disposition of Fund shares
owned for six months or less will be treated as a long-term capital loss to the
extent a capital gain dividend had been distributed on such shares.

      The Fund 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 Fund 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.
    

--------------------------------------------------------------------------------
Purchase of Shares
--------------------------------------------------------------------------------

      GENERAL

   
      The Fund currently offers four Classes of shares. Class A shares are sold
to investors with an initial sales charge and Class B shares are sold without an
initial sales charge but are subject to a CDSC payable upon certain redemptions.
Class L shares are sold to investors with an initial sales charge and are
subject to a CDSC payable upon certain redemptions. Class Y shares are sold
without an initial sales
    


                                                                              25
<PAGE>

--------------------------------------------------------------------------------
Purchase of Shares (continued)
--------------------------------------------------------------------------------

   
charge or CDSC and are available only to investors investing a minimum of
$15,000,000 (except purchases of Class Y shares by Smith Barney Concert
Allocation Series Inc., for which there is no minimum purchase amount). Until
June 25, 1999 purchases of Class L shares by investors who were holders of Class
C shares of the Fund on June 12, 1998 will not be subject to the 1% front-end
sales charge. See "Prospectus Summary -- Alternative Purchase Arrangements" for
a discussion of factors to consider in selecting which Class of shares to
purchase.

      Purchases of Fund shares must by made through a brokerage account
maintained with Smith Barney, an Introducing Broker or an investment dealer in
the selling group. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A, Class B, Class L or Class Y shares. Smith
Barney and other broker/dealers may charge their custsomers an annual account
maintenance fee in connection with a brokerage account through which an investor
purchases or holds shares. Accounts held directly at the Fund's transfer agent,
First Data Investor Services Group, Inc. (the "Transfer Agent") are not subject
to a maintenance fee.

      Investors in Class A, Class B and Class L shares may open an account in
the Fund by making an initial investment of at least $1,000. Investors in Class
Y shares may open an account by making an initial investment of $15,000,000.
Subsequent investments of at least $50 may be made for all Classes. For
shareholders purchasing shares of the Fund through the Systematic Investment
Plan on a monthly basis, the minimum initial investment requirement for Class A,
Class B and Class L shares and subsequent investment requirement for all Classes
is $25. For shareholders purchasing shares of the Fund through the Systematic
Investment Plan on a quarterly basis, the minimum initial investment required
for Class A, Class B and Class L shares and the subsequent investment
requirement for all Classes is $50. There are no minimum investment requirements
for Class A shares for employees of Travelers and its subsidiaries, including
Smith Barney, unitholders who invest distributions from a UIT sponsored by Smith
Barney, and Directors/Trustees of any of the Smith Barney Mutual Funds and their
spouses and children. The Fund reserves the right to waive or change minimums,
to decline any order to purchase its shares and to suspend the offering of
shares from time to time. Shares purchased will be held in the shareholder's
account by the Transfer Agent. Share certificates are issued only upon a
shareholder's written request to the Transfer Agent. It is not recommended that
the Fund be used as a vehicle for Keogh, IRA or other qualified retirement
plans.

      Purchase orders received by the Fund or Smith Barney prior to the close of
regular trading on the NYSE, on any day the Fund calculates its net asset value,
are priced according to the net asset value determined on that day (the "trade
date"). Orders received by dealers or Introducing Brokers prior to the close of
regular trading on the NYSE on any day the Fund calculates its net asset value,
are priced according to the net asset value determined on that day, provided the
order is
    


26
<PAGE>

--------------------------------------------------------------------------------
Purchase of Shares (continued)
--------------------------------------------------------------------------------

   
received by the Fund or Smith Barney prior to Smith Barney's close of business.
For shares purchased through Smith Barney or Introducing Brokers purchasing
through Smith Barney, payment for Fund shares is due on the third business day
after the trade date. In all other cases, payment must be made with the purchase
order.
    

      SYSTEMATIC INVESTMENT PLAN

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

      INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES

      The sales charges applicable to purchases of Class A shares of the Fund
are as follows:

                           Sales Charge     Sales Charge          Dealer's
                            as a % of        as a % of       Reallowance as % of
Amount of Investment       Transaction     Amount Invested     Offering Price
================================================================================
Less than - $25,000           4.00%             4.17%              3.60%
$ 25,000 - $49,999            3.50              3.63               3.15
$ 50,000 - $99,999            3.00              3.09               2.70
$100,000 - $249,999           2.50              2.56               2.25
$250,000 - $499,999           1.50              1.52               1.35
$500,000 and over               *                 *                  *
================================================================================

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

      Members of the selling group may receive up to 90% of the sales charge and
may be deemed to be underwriters of the Fund as defined in the Securities Act of
1933, as amended.

      The reduced sales charges shown on the preceding page apply to the
aggregate


                                                                              27
<PAGE>

--------------------------------------------------------------------------------
Purchase of Shares (continued)
--------------------------------------------------------------------------------

of purchases of Class A shares of the Fund made at one time by "any person,"
which includes an individual and his or her immediate family, or a trustee or
other fiduciary of a single trust estate or single fiduciary account.

      INITIAL SALES CHARGE WAIVERS

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

      RIGHT OF ACCUMULATION

   
      Class A shares of the Fund may be purchased by "any person" (as defined
above) at a reduced sales charge or at net asset value determined by aggregating
the dollar amount of the new purchase and the total net asset value of all Class
A shares of the Fund and of funds sponsored by Smith Barney which are offered
with a sales charge as currently listed under "Exchange Privilege" then held by
such person and applying the sales charge applicable to such aggregate. In order
to obtain such discount, the purchaser must provide sufficient information at
the time of purchase
    


28
<PAGE>

--------------------------------------------------------------------------------
Purchase of Shares (continued)
--------------------------------------------------------------------------------

to permit verification that the purchase qualifies for the reduced sales charge.
The right of accumulation is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.

      GROUP PURCHASES

      Upon completion of certain automated systems, a reduced sales charge or
purchase at net asset value will also be available to employees (and partners)
of the same employer purchasing as a group, provided each participant makes the
minimum initial investment required. The sales charge applicable to purchases by
each member of such a group will be determined by the table set forth above
under "Initial Sales Charge Alternative--Class A Shares" and will be based upon
the aggregate sales of Class A shares of Smith Barney Mutual Funds offered with
a sales charge to, and share holdings of, all members of the group. To be
eligible for such reduced sales charges or to purchase at net asset value, all
purchases must be pursuant to an employee or partnership sanctioned plan meeting
certain requirements. One such requirement is that the plan must be open to
specified partners or employees of the employer and its subsidiaries, if any.
Such plan may, but is not required to, provide for payroll deductions. Smith
Barney may also offer a reduced sales charge or net asset value purchase for
aggregating related fiduciary accounts under such conditions that Smith Barney
will realize economies of sales efforts and sales related expenses. An
individual who is a member of a qualified group may also purchase Class A shares
of the Fund at the reduced sales charge applicable to the group as a whole. The
sales charge is based upon the aggregate dollar value of Class A shares offered
with a sales charge that have been previously purchased and are still owned by
the group, plus the amount of the current purchase. A "qualified group" is one
which (a) has been in existence for more than six months, (b) has a purpose
other than acquiring Fund shares at a discount and (c) satisfies uniform
criteria which enable Smith Barney to realize economies of scale in its costs of
distributing shares. A qualified group must have more than 10 members, must be
available to arrange for group meetings between representatives of the Fund and
the members, and must agree to include sales and other materials related to the
Fund in its publications and mailings to members at no cost to Smith Barney. In
order to obtain such reduced sales charge or to purchase at net asset value, the
purchaser must provide sufficient information at the time of purchase to permit
verification that the purchase qualifies for the reduced sales charge. Approval
of group purchase reduced sales charge plans is subject to the discretion of
Smith Barney.

      LETTER OF INTENT

      Class A Shares. A Letter of Intent for an amount of $50,000 or more
provides an opportunity for an investor to obtain a reduced sales charge by
aggregating investments over a 13 month period, provided that the investor
refers to such Letter when placing orders. For purposes of a Letter of Intent,
the "Amount of Invest-


                                                                              29
<PAGE>

--------------------------------------------------------------------------------
Purchase of Shares (continued)
--------------------------------------------------------------------------------

ment" as referred to in the preceding sales charge table includes (i) all Class
A shares of the Fund and other Smith Barney Mutual Funds offered with a sales
charge acquired during the term of the Letter plus (ii) the value of all Class A
shares previously purchased and still owned. Each investment made during the
period receives the reduced sales charge applicable to the total amount of the
investment goal. If the goal is not achieved within the period, the investor
must pay the difference between the sales charges applicable to the purchases
made and the charges previously paid, or an appropriate number of escrowed
shares will be redeemed. The term of the Letter will commence upon the date the
Letter is signed, or at the option of the investor, up to 90 days before such
date. Please contact a Smith Barney Financial Consultant or the Transfer Agent
to obtain a Letter of Intent application.

   
      Class Y Shares. A Letter of Intent may also be used as a way for investors
to meet the minimum investment requirement for Class Y shares (except purchases
of Class Y shares by Smith Barney Concert Allocation Series Inc., for which
there is no minimum purchase amount). Such investors must make an initial
minimum purchase of $5,000,000 in Class Y shares of the Fund and agree to
purchase a total of $15,000,000 of Class Y shares of the Fund within 13 months
from the date of the Letter. If a total investment of $15,000,000 is not made
within the 13 month period, all Class Y shares purchased to date will be
transferred to Class A shares, where they will be subject to all fees (including
a service fee of 0.15%) and expenses applicable to the Fund's Class A shares,
which may include a CDSC of 1.00%. Please contact a Smith Barney Financial
Consultant or the Transfer Agent for further information.
    

      DEFERRED SALES CHARGE ALTERNATIVES

   
      "CDSC Shares" are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, may be imposed on
certain redemptions of these shares. "CDSC Shares" are: (a) Class B shares; (b)
Class L shares; and (c) Class A shares that were purchased without an initial
sales charge but are subject to a CDSC.

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

      Class L shares and Class A shares that are CDSC Shares are subject to a
1.00% CDSC if redeemed within 12 months of purchase. In circumstances in which
the
    


30
<PAGE>

--------------------------------------------------------------------------------
Purchase of Shares (continued)
--------------------------------------------------------------------------------

CDSC is imposed on Class B shares, the amount of the charge will depend on the
number of years since the shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of determining the number of years
since a purchase payment, all purchase payments made during a month will be
aggregated and deemed to have been made on the last day of the preceding Smith
Barney statement month. The following table sets forth the rates of the charge
for redemptions of Class B shares by shareholders.

     Year Since Purchase
     Payment Was Made                                                  CDSC
================================================================================
     First                                                             4.50%
     Second                                                            4.00
     Third                                                             3.00
     Fourth                                                            2.00
     Fifth                                                             1.00
     Sixth and thereafter                                              0.00

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

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

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


                                                                              31
<PAGE>

--------------------------------------------------------------------------------
Purchase of Shares (continued)
--------------------------------------------------------------------------------

      WAIVERS OF CDSC

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

      CDSC waivers will be granted subject to confirmation (by Smith Barney in
the case of shareholders who are also Smith Barney clients or by the Transfer
Agent in the case of all other shareholders) of the shareholder's status or
holdings, as the case may be.

--------------------------------------------------------------------------------
Exchange Privilege
--------------------------------------------------------------------------------

   
      Except as otherwise noted below, shares of each Class may be exchanged at
the net asset value next determined for shares of the same Class in the
following Smith Barney Mutual Funds, to the extent shares are offered for sale
in the shareholder's state of residence. Exchanges of Class A, Class B and Class
L shares are subject to minimum investment requirements and all shares are
subject to other requirements of the fund into which exchanges are made.
    

      FUND NAME

   
      Growth Funds
      Concert Peachtree Growth Fund
      Concert Social Awareness Fund
      Smith Barney Aggressive Growth Fund Inc.
      Smith Barney Appreciation Fund Inc.
      Smith Barney Balanced Fund
      Smith Barney Contrarian Fund
      Smith Barney Convertible Fund
      Smith Barney Fundamental Value Fund Inc.
      Smith Barney Funds, Inc. -- Large Cap Value Fund
      Smith Barney Large Cap Blend Fund
    


32
<PAGE>

--------------------------------------------------------------------------------
Exchange Privilege (continued)
--------------------------------------------------------------------------------

   
     Smith Barney Large Capitalization Growth Fund
     Smith Barney Mid Cap Blend Fund
     Smith Barney Natural Resources Fund Inc.
     Smith Barney Premium Total Return Fund
     Smith Barney Small Cap Blend Fund, Inc.
     Smith Barney Special Equities Fund

     Taxable Fixed-Income Funds
 **  Smith Barney Adjustable Rate Government Income Fund
     Smith Barney Diversified Strategic Income Fund
+++  Smith Barney Funds, Inc. -- Short-Term U.S. Treasury Securities Fund
     Smith Barney Funds, Inc. -- U.S. Government Securities Fund
     Smith Barney Government Securities Fund
     Smith Barney High Income Fund
     Smith Barney Investment Grade Bond Fund
     Smith Barney Managed Governments Fund Inc.
     Smith Barney Total Return Bond Fund

     Tax-Exempt Funds
     Smith Barney Arizona Municipals Fund Inc.
     Smith Barney California Municipals Fund Inc.
  *  Smith Barney Intermediate Maturity California Municipals Fund
  *  Smith Barney Intermediate Maturity New York Municipals Fund
     Smith Barney Managed Municipals Fund Inc.
     Smith Barney Massachusetts Municipals Fund
     Smith Barney Municipal High Income Fund
     Smith Barney Muni Funds -- Florida Portfolio
     Smith Barney Muni Funds -- Georgia Portfolio
  *  Smith Barney Muni Funds -- Limited Term Portfolio
     Smith Barney Muni Funds -- National Portfolio
     Smith Barney Muni Funds -- New York Portfolio
     Smith Barney Muni Funds -- Pennsylvania Portfolio
     Smith Barney Oregon Municipals Fund

     Global-International Funds
     Smith Barney Hansberger Global Small Cap Value Fund
     Smith Barney Hansberger Global Value Fund
     Smith Barney World Funds, Inc. -- Emerging Markets Portfolio
     Smith Barney World Funds, Inc. -- European Portfolio
     Smith Barney World Funds, Inc. -- Global Government Bond Portfolio
     Smith Barney World Funds, Inc. -- International Balanced Portfolio
     Smith Barney World Funds, Inc. -- International Equity Portfolio
     Smith Barney World Funds, Inc. -- Pacific Portfolio
    


                                                                              33
<PAGE>

--------------------------------------------------------------------------------
Exchange Privilege (continued)
--------------------------------------------------------------------------------

   
     Smith Barney Concert Allocation Series Inc.
     Smith Barney Concert Allocation Series Inc. -- Balanced Portfolio
     Smith Barney Concert Allocation Series Inc. -- Conservative Portfolio
     Smith Barney Concert Allocation Series Inc. -- Global Portfolio
     Smith Barney Concert Allocation Series Inc. -- Growth Portfolio
     Smith Barney Concert Allocation Series Inc. -- High Growth Portfolio
     Smith Barney Concert Allocation Series Inc. -- Income Portfolio

     Money Market Funds
  +  Smith Barney Exchange Reserve Fund
 ++  Smith Barney Money Funds, Inc. -- Cash Portfolio
 ++  Smith Barney Money Funds, Inc. -- Government Portfolio
***  Smith Barney Money Funds, Inc. -- Retirement Portfolio
 ++  Smith Barney Municipal Money Market Fund, Inc.
 ++  Smith Barney Muni Funds -- California Money Market Portfolio
 ++  Smith Barney Muni Funds -- New York Money Market Portfolio

*    Available for exchange with Class A, Class B and Class Y shares of the
     Fund.
**   Available for exchange with Class A and Class B shares of the Fund.
***  Available for exchange with Class A shares of the Fund.
+    Available for exchange with Class B and Class L shares of the Fund.
++   Available for exchange with Class A and Class Y shares of the Fund.
    

      Class B Exchanges. In the event a Class B shareholder wishes to exchange
all or a portion of his or her shares in any of the funds imposing a higher CDSC
than that imposed by the Fund, the exchanged Class B shares will be subject to
the higher applicable CDSC. Upon an exchange, the new Class B shares will be
deemed to have been purchased on the same date as the Class B shares of the Fund
that have been exchanged.

   
      Class L Exchanges. Upon an exchange, the new Class L shares will be deemed
to have been purchased on the same date as the Class L shares of the Fund that
have been exchanged.
    

      Class A and Class Y Exchanges. Class A and Class Y shareholders of the
Fund who wish to exchange all or a portion of their shares for shares of the
respective Class in any of the funds identified above may do so without
imposition of any charge.

   
      Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions can
be detrimental to the Fund's performance and its shareholders. The Adviser may
determine that a pattern of frequent exchanges is excessive and contrary to the
best interests of the Fund's other shareholders. In this event, the Fund may, at
its discretion, decide to limit additional purchases and/or exchanges by a
shareholder. Upon such a determination, the Fund will provide notice in writing
or by telephone
    


34
<PAGE>

--------------------------------------------------------------------------------
Exchange Privilege (continued)
--------------------------------------------------------------------------------

to the shareholder at least 15 days prior to suspending the exchange privilege
and during the 15 day period the shareholder will be required to (a) redeem his
or her shares of the Fund or (b) remain invested in the Fund or exchange into
any of the Smith Barney Mutual Funds ordinarily available, which position the
shareholder would be expected to maintain for a significant period of time. All
relevant factors will be considered in determining what constitutes an abusive
pattern of exchanges.

      Certain shareholders may be able to exchange shares by telephone. See
"Redemption of Shares -- Telephone Redemption and Exchange Program." Exchanges
will be processed at the net asset value next determined. Redemption procedures
discussed below are also applicable for exchanging shares, and exchanges will be
made upon receipt of all supporting documents in proper form. If the account
registration of the shares of the fund being acquired is identical to the
registration of the shares of the fund exchanged, no signature guarantee is
required. A capital gain or loss for tax purposes will be realized upon the
exchange, depending upon the cost or other basis of shares redeemed. Before
exchanging shares, investors should read the current prospectus describing the
shares to be acquired. The Fund reserves the right to modify or discontinue
exchange privileges upon 60 days' prior notice to shareholders.

--------------------------------------------------------------------------------
Redemption of Shares
--------------------------------------------------------------------------------

      The Fund is required to redeem the shares of the Fund tendered to it, as
described below, at a redemption price equal to their net asset value per share
next determined after receipt of a written request in proper form at no charge
other than any applicable CDSC. Redemption requests received after the close of
regular trading on the NYSE are priced at the net asset value next determined.

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


                                                                              35
<PAGE>

--------------------------------------------------------------------------------
Redemption of Shares (continued)
--------------------------------------------------------------------------------

      Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than those
held by Smith Barney as custodian may be redeemed through an investor's
Financial Consultant, Introducing Broker or dealer in the selling group or by
submitting a written request for redemption to:

   
      Smith Barney New Jersey Municipals Fund Inc.
      Class A, B, L or Y (please specify)
      c/o First Data Investor Services Group, Inc.
      P.O. Box 5128
      Westborough, Massachusetts 01581-5128

      A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are registered.
If the shares to be redeemed were issued in certificate form, the certificates
must be endorsed for transfer (or be accompanied by an endorsed stock power) and
must be submitted to the Transfer Agent together with the redemption request.
Any signature appearing on a share certificate, stock power or a written request
in excess of $10,000, must be guaranteed by an eligible guarantor institution
such as a domestic bank, savings and loan institution, domestic credit union,
member bank of the Federal Reserve System or member firm of a national
securities exchange. Written redemption requests of $10,000 or less do not
require a signature guarantee unless more than one such redemption request is
made in any 10-day period. Redemption proceeds will be mailed to an investor's
address of record. The Transfer Agent may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees or guardians. A redemption request will not be deemed properly received
until the Transfer Agent receives all required documents in proper form.
    

      TELEPHONE REDEMPTION AND EXCHANGE PROGRAM FOR SHAREHOLDERS
      WHO DO NOT HAVE A SMITH BARNEY BROKERAGE ACCOUNT

   
      Shareholders who do not have a Smith Barney brokerage account may be
eligible to redeem and exchange Fund shares by telephone. To determine if a
shareholder is entitled to participate in this program, he or she should contact
the Transfer Agent at (800) 451-2010. Once eligibility is confirmed, the
shareholder must complete and return a Telephone/Wire Authorization form,
including a signature guarantee, that will be provided by the Transfer Agent
upon request. (Alternatively, an investor may authorize telephone redemptions on
the new account application with a signature guarantee when making his/her
initial investment in the Fund.)
    

      Redemptions. Redemption requests of up to $10,000 of any class or classes
of the Fund's shares may be made by eligible shareholders by calling the
Transfer Agent at (800) 451-2010. Such requests may be made between 9:00 a.m.
and 4:00


36
<PAGE>

--------------------------------------------------------------------------------
Redemption of Shares (continued)
--------------------------------------------------------------------------------

   
p.m. (Eastern time) on any day the NYSE is open. Redemptions of shares for which
certificates have been issued are not permitted under this program.
    

      A shareholder will have the option of having the redemption proceeds
mailed to his/her address of record or wired to a bank account predesignated by
the shareholder. Generally, redemption proceeds will be mailed or wired, as the
case may be, on the next business day following the redemption request. In order
to use the wire procedures, the bank receiving the proceeds must be a member of
the Federal Reserve System or have a correspondent relationship with a member
bank. The Fund reserves the right to charge shareholders a nominal fee for each
wire redemption. Such charges, if any, will be assessed against the
shareholder's account from which shares were redeemed. In order to change the
bank account designated to receive redemption proceeds, a shareholder must
complete a new Telephone/Wire Authorization Form and, for the protection of the
shareholder's assets, will be required to provide a signature guarantee and
certain other documentation.

   
      Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of the fund being acquired is identical to the registration
of the shares of the fund exchanged. Such exchange requests may be made by
calling the Transfer Agent at (800) 451-2010 between 9:00 a.m. and 4:00 p.m.
(Eastern time) on any day on which the NYSE is open.

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

      AUTOMATIC CASH WITHDRAWAL PLAN

   
      The Fund offers shareholders an automatic cash withdrawal plan, under
which shareholders who own shares with a value of at least $10,000 many elect to
receive cash payments of at least $50 monthly or quarterly. The withdrawal plan
will be carried over on exchanges between funds or Classes of the Fund. Any
applicable CDSC will not be waived on amounts withdrawn by a shareholder that
exceed 1.00% per month of the value of the shareholder's shares subject to the
CDSC at the time the withdrawal plan commences. (With respect to withdrawal
plans in effect prior to November 7, 1994, any applicable CDSC will be waived on
amounts withdrawn that do not exceed 2.00% per month of the shareholder's shares
subject to the CDSC.) For further information regarding the automatic cash
withdrawal plan, shareholders should contact a Smith Barney Financial Consultant
or their financial consultant, introducing broker or dealer in the selling
group.
    


                                                                              37
<PAGE>

--------------------------------------------------------------------------------
Minimum Account Size
--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------
Performance
--------------------------------------------------------------------------------

      YIELD

      From time to time, the Fund may advertises the 30-day "yield" and
"equivalent taxable yield" of each Class of shares. The yield refers to the
income generated by an investment in those shares of the Fund over the 30-day
period identified in the advertisement and is computed by dividing the net
investment income per share earned by the Class during the period by the maximum
public offering price per share on the last day of the period. This income is
"annualized" by assuming that the amount of income is generated each month over
a one-year period and is compounded semi-annually. The annualized income is then
shown as a percentage of the net asset value.

      The equivalent taxable yield demonstrates the yield on a taxable
investment necessary to produce an after-tax yield equal to the Fund's
tax-exempt yield for each Class. It is calculated by increasing the yield shown
for the Class to the extent necessary to reflect the payment of taxes at
specified tax rates. Thus, the equivalent taxable yield always will exceed the
Fund's yield. For more information on equivalent taxable yields, please refer to
the table under "Dividends, Distributions and Taxes."

      TOTAL RETURN

   
      From time to time the Fund may include its total return, average annual
total return and current dividend return in advertisements and/or other types of
sales literature. These figures are computed separately for Class A, Class B,
Class L and Class Y shares of the Fund. These figures are based on historical
earnings and are not intended to indicate future performance. Total return is
computed for a specified period of time assuming deduction of the maximum sales
charge, if any, from the initial amount invested and reinvestment of all income
dividends and capital gain distributions on the reinvestment dates at prices
calculated as stated in this Prospectus, then dividing the value of the
investment at the end of the period so calculated by the initial amount invested
and subtracting 100%. The standard average annual total return, as prescribed by
the SEC, is derived from this total
    


38
<PAGE>

--------------------------------------------------------------------------------
Performance (continued)
--------------------------------------------------------------------------------

return, which provides the ending redeemable value. Such standard total return
information may also be accompanied with nonstandard total return information
for differing periods computed in the same manner but without annualizing the
total return or taking sales charges into account. The Fund calculates current
dividend return for each Class by annualizing the most recent monthly
distribution and then dividing by the net asset value or the maximum public
offering price (including sales charge) on the last day of the period for which
current dividend return is presented. The current dividend return for each Class
may vary from time to time depending on market conditions, the composition of
the Fund's investment portfolio and operating expenses. These factors and
possible differences in the methods used in calculating current dividend return
should be considered when comparing a Class' current return to yields published
for other investment companies and other investment vehicles. The Fund may also
include comparative performance information in advertising or marketing its
shares. Such performance information may include data from Lipper Analytical
Services, Inc. or similar independent services that monitor the performance of
mutual funds, or other industry publications.

--------------------------------------------------------------------------------
Management of the Fund
--------------------------------------------------------------------------------

      BOARD OF DIRECTORS

   
      Overall responsibility for management and supervision of the Fund rests
with the Fund's Board of Directors. The Directors approve all significant
agreements between the Fund and the companies that furnish services to the Fund,
including agreements with the Fund's distributor, investment adviser and
administrator, custodian and Transfer Agent. The day-to-day operations of the
Fund are delegated to the Fund's investment adviser and administrator. The SAI
contains general background information regarding each Director and executive
officer of the Fund.

      INVESTMENT ADVISER AND ADMINISTRATOR -- THE ADVISER

      The Fund's investment adviser, MMC, is a registered investment adviser
whose principal executive offices are located at 388 Greenwich Street, New York,
New York 10013. MMC was incorporated in March, 1968 under the laws of Delaware
and renders investment advice to a wide variety of individual, institutional and
investment company clients that had aggregate assets under management as of June
30, 1998 of approximately $100 billion.

      Subject to the supervision and direction of the Fund's Board of Directors,
the Adviser manages the Fund's portfolio in accordance with the Fund's
investment objective and policies, makes investment decisions for the Fund,
places orders to purchase and sell securities and employs professional portfolio
managers and securities analysts who provide research services to the Fund. For
investment
    


                                                                              39
<PAGE>

--------------------------------------------------------------------------------
Management of the Fund (continued)
--------------------------------------------------------------------------------

   
advisory services rendered, the Fund pays the Adviser an investment advisory fee
at the annual rate of 0.30% of the Fund's average daily net assets. Prior to
November 17, 1995, the Fund paid the Adviser investment advisory fees at the
following annual rates: 0.35% of the value of the Fund's average daily net
assets up to $500 million and 0.32% of the value of the Fund's average daily net
assets in excess of $500 million. For the fiscal year ended March 31, 1998, the
Adviser was paid investment advisory fees equal to 0.30% of the value of the
average daily net assets of the Fund.

      MMC also serves as the Fund's administrator and oversees all aspects of
the Fund's administration. For administration services rendered, the Fund pays
MMC a fee at the following annual rates of average daily net assets: 0.20% to
$500 million; and 0.18% in excess of $500 million. This fee is computed daily
and paid monthly. For the fiscal year ended March 31, 1998, the Fund paid
administration fees equal to 0.20% of its average daily net assets.
    

      PORTFOLIO MANAGEMENT

   
      Lawrence T. McDermott, an Investment Officer of MMC and a Managing
Director of Smith Barney, has served as Vice President and Investment Officer of
the Fund since it commenced operations, and manages the day-to-day operations of
the Fund, including making all investment decisions.

      Management's discussion and analysis, and additional performance
information regarding the Fund during the fiscal year ended March 31, 1998, are
included in the Annual Report dated March 31, 1998. A copy of the Annual Report
may be obtained upon request and without charge from a Smith Barney Financial
Consultant or by writing or calling the Fund at the address or telephone number
listed on page one of this Prospectus.

      On April 6, 1998, Travelers announced that it had entered into a Merger
Agreement with Citicorp. The transaction, which is expected to be completed
during the third quarter of 1998, is subject to various regulatory approvals,
including approval by the Federal Reserve Board. The transaction is also subject
to approval by the stockholders of each of Travelers and Citicorp. Upon
consummation of the merger, the surviving corporation would be 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. Although the effects of the merger of Travelers and Citicorp and
compliance with the requirements of the BHCA and the Glass-Steagall Act are
still under review, the Adviser does not believe that its compliance with
applicable law following the merger of Travelers and Citicorp will have a
material adverse effect on its ability to continue to provide the Fund with the
same level of investment advisory services that it currently receives.
    


40
<PAGE>

--------------------------------------------------------------------------------
Distributor
--------------------------------------------------------------------------------

   
      Smith Barney is located at 388 Greenwich Street, New York, New York 10013.
Smith Barney distributes shares of the Fund as principal underwriter and as such
conducts a continuous offering pursuant to a "best efforts" arrangement
requiring Smith Barney to take and pay for only such securities as may be sold
to the public. Pursuant to a plan of distribution adopted by the Fund under Rule
12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid a service fee with
respect to Class A, Class B and Class L shares of the Fund at the annual rate of
0.15% of the average daily net assets of the respective Class. Smith Barney is
also paid a distribution fee with respect to Class B and Class L shares at the
annual rate of 0.50% and 0.55%, respectively, of the average daily net assets
attributable to those Classes. Class B shares which automatically convert to
Class A shares eight years after the date of original purchase will no longer be
subject to a distribution fee. The fees are used by Smith Barney to pay its
Financial Consultants for servicing shareholder accounts and, in the case of
Class B and Class L shares, to cover expenses primarily intended to result in
the sale of those shares. These expenses include: advertising expenses; the cost
of printing and mailing prospectuses to potential investors; payments to and
expenses of Smith Barney Financial Consultants and other persons who provide
support services in connection with the distribution of shares; interest and/or
carrying charges; and indirect and overhead costs of Smith Barney associated
with the sale of Fund shares, including lease, utility, communications and sales
promotion expenses.

      The payments to Smith Barney Financial Consultants for selling shares of a
Class include a commission or fee paid by the investor or Smith Barney at the
time of sale and, with respect to Class A, Class B and Class L shares, a
continuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
    

      Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney and the payments
may exceed distribution expenses actually incurred. The Fund's Board of
Directors will evaluate the appropriateness of the Plan and its payment terms on
a continuing basis and in so doing will consider all relevant factors, including
expenses borne by Smith Barney, amounts received under the Plan and proceeds of
the CDSC.

   
      The Glass-Steagall Act currently prohibits certain financial institutions
from underwriting securities of open-end investment companies, such as the Fund.
Therefore, in connection with the anticipated merger of Travelers and Citicorp
and as a consequence of the anticipated applicability of the BHCA and the
Glass-Steagall Act, the Fund plans to retain the services of a new entity (which
is not otherwise affiliated with Travelers) to act as distributor of the
Portfolio's shares.
    


                                                                              41
<PAGE>

--------------------------------------------------------------------------------
Additional Information
--------------------------------------------------------------------------------

      The Fund was incorporated under the laws of the State of Maryland on
November 12, 1987, and is registered with the SEC as a non-diversified, open-end
management investment company.

   
      The Fund offers shares of common stock currently classified into four
Classes -- A, B, L and Y. Each Class of the Fund's shares has a par value of
$.001 per share and represents an identical interest in the Fund's investment
portfolio. As a result, the Classes have the same rights, privileges and
preferences, except with respect to: (a) the designation of each Class; (b) the
effect of the respective sales charges, if any, for each Class; (c) the
distribution and/or service fees, if any, borne by each Class; (d) the expenses
allocable exclusively to each Class; (e) voting rights on matters exclusively
affecting a single Class; (f) the exchange privilege of each Class; and (g) the
conversion feature of the Class B shares. The Board of Directors does not
anticipate that there will be any conflicts among the interests of the holders
of the different Classes. The Directors, on an ongoing basis, will consider
whether any such conflict exists and, if so, will take appropriate action.
    

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

   
      PNC Bank, National Association, located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, serves as custodian of the Fund's investments.

      First Data, located at Exchange Place, Boston, Massachusetts 02109, serves
as the Fund's transfer agent.
    

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


42
<PAGE>

                                                                    SMITH BARNEY

                                           A Member of the TravelersGroup [LOGO]


                                                                    Smith Barney
                                                                      New Jersey
                                                                      Municipals
                                                                      Funds Inc.


                                                            388 Greenwich Street
                                                        New York, New York 10013


   
                                                                     FD0231 7/98
    

SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.

PART B

Smith Barney
New Jersey Municipals Fund Inc.
388 Greenwich Street
New York, New York 10013
800-451-2010

Statement of Additional Information
   
July 29, 1998
    

   

This Statement of Additional Information (the "SAI") 
expands upon and supplements the information contained in 
the current Prospectus of Smith Barney New Jersey Municipals 
Fund Inc. (the "Fund''), dated July 29, 1998, as amended or 
supplemented from time to time, and should be read in 
conjunction with the Fund's Prospectus.  The Fund's 
Prospectus may be obtained from a Smith Barney Financial 
Consultant or by writing or calling the Fund at the address 
or telephone number set forth above.  This SAI, although not 
in itself a prospectus, is incorporated by reference into 
the Prospectus in its entirety.
    

TABLE OF CONTENTS
For ease of reference the same section headings are used 
in both the Prospectus and the SAI, except where shown 
below:

   
Management of the Fund		1
Investment Objective and
Management Policies		5
Municipal Bonds
(See in the Prospectus
"New Jersey 
Municipal Securities'')		9
Purchase of Shares		19
Redemption of Shares		19
Distributor				20
Valuation of Shares		22
Exchange Privilege		22
Performance Data
(See in the Prospectus
 "Performance'') 			23
Taxes (See in the
Prospectus "Dividends,
Distributions 
and Taxes'') 			26
Additional Information		28
Financial Statements		29
Appendix		A-1
    

MANAGEMENT OF THE FUND

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

   
Name
Service
Smith Barney Inc.
("Smith Barney'' or "Distributor")	
Distributor

Mutual Management Corp.
("MMC" or  "Adviser" or "Administrator")	
Investment Adviser and 
Administrator

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

First Data Investor Services Group, Inc.
("First Data" or the "Transfer Agent")	
Transfer Agent
    

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

Directors and Executive Officers of the Fund

The names of the Directors and executive officers of the 
Fund, together with information as to their principal 
business occupations during the past five years, are shown 
below. Each Director who is an ''interested person'' of the 
Fund, as defined in the Investment Company Act of 1940, as 
amended (the "1940 Act''), is indicated by an asterisk.

   

Herbert Barg, Director (Age 75).  Private Investor.  His 
address is 273 Montgomery Avenue, Bala Cynwyd, Pennsylvania 
19004.

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

Martin Brody, Director (Age 76).  Consultant, HMK 
Associates; Retired Vice Chairman of the Board of Restaurant 
Associates Corp.;  His address is c/o HMK Associates, 30 
Columbia Turnpike, Florham, New Jersey 07068. 

Dwight B. Crane, Director (Age 60).  Professor, Harvard 
Business School. His address is c/o Harvard Business School, 
Soldiers Field Road, Boston, Massachusetts 02163. 

Burt N. Dorsett, Director (Age 67).  Managing Partner of 
Dorsett, McCabe Capital Management, Inc., an investment 
counseling firm; Director of Research Corporation 
Technologies, Inc., a non-profit patent-clearing and 
licensing firm.  His address is 201 East 62nd Street, New 
York, New York 10021. 

Elliot S. Jaffe, Director (Age 72).  Chairman of the 
Board and President of The Dress Barn, Inc.  His address is 
30 Dunnigan Drive, Suffern, New York 10901. 

Stephen E. Kaufman, Director (Age 66). Attorney.  His 
address is 277 Park Avenue, New York, New York 10017. 

Joseph J. McCann, Director (Age 67).  Financial 
Consultant. Retired Financial Executive, Ryan Homes, Inc.  
His address is 200 Oak Park Place, Pittsburgh, Pennsylvania 
15243. 

*Heath B. McLendon, Chairman of the Board, President and 
Chief Executive Officer (Age 65). Managing Director of Smith 
Barney, Chairman of the Board of Smith Barney Strategy 
Advisors Inc. and President of MMC and Travelers Investment 
Adviser, Inc. ("TIA").  Mr. McLendon is Chairman or Co-
Chairman of the Board and Director of 58 investment 
companies associated with Salomon Smith Barney Holdings Inc. 
Prior to July 1993, Senior Executive Vice President of 
Shearson Lehman Brothers Inc., Vice Chairman of Shearson 
Asset Management, Director of PanAgora Asset Management, 
Inc. and PanAgora Asset Management Limited.  His address is 
388 Greenwich Street, New York, New York 10013.

Cornelius C. Rose, Jr., Director (Age 64). President, 
Cornelius C. Rose Associates, Inc., financial consultants, 
and Chairman and Director of Performance Learning Systems, 
an educational consultant. His address is Meadowbrook 
Village, Building 4, West Lebanon, New Hampshire 03784.


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

Lawrence T. McDermott, Vice President and Investment 
Officer (Age 48).  Investment Officer of MMC; prior to July 
1993, Managing Director of Shearson Lehman Advisors.  Mr. 
McDermott serves as Investment Officer of 11 Smith Barney 
Mutual Funds. His address is 388 Greenwich Street, New York, 
New York 10013. 

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

As of July 14, 1998, the Directors and officers of the 
Fund as a group owned less than 1.00% of the outstanding 
common stock of the Fund. To the best knowledge of the 
Directors, as of July 14, 1998 no shareholder or "group" (as 
such term is defined in Section 13(d) of the Securities 
Exchange Act of 1934, as amended) owned beneficially or of 
record more than 5% of the shares of the Funds.

No Director, officer or employee of Smith Barney or of 
any of its affiliates receives any compensation from the 
Fund for serving as an officer or Director of the Fund. The 
Fund pays each Director who is not an officer, director or 
employee of Smith Barney or any of its affiliates a fee of 
$1,000 per annum plus $100 per in-person meeting.  Each 
Director emeritus who is not an officer, director or 
employee of Smith Barney or any of its affiliates receives a 
fee of $500 per annum plus $50 per in-person meeting. The 
Fund reimburses all Directors for travel and out-of-pocket 
expenses incurred to attend meetings.  For the fiscal year 
ended March 31, 1998, such expenses totaled $11,423.05

For the fiscal year ended March 31, 1998, the Directors 
of the Fund were paid the following compensation: 

Name    Aggregate     Total         Compensation  Number of
Of      Compensation  Pension       from Fund     Funds for
Person  From the      or            and Fund      Which
        Fund          Retirement    Complex       Directors
                      Benefits      Paid to       Serves
                      Accrued as    Directors     within
                      As part of                  Fund
                      Fund Expenses               Complex
Herbert
Barg         $1,500      $0         $101,600       16

Alfred
Bianchetti*  1,500        0          49,600        11

Martin
Brody        1,500        0         119,814        29

Dwight B.
Crane        1,500         0         133,850       22

Burt N.
Dorsett     1,500          0         49,600       11

Elliot S.
Jaffe       1,500          0        48,500        11

Stephen E.
Kaufman     1,500         0         91,964        13

Joseph J.
McCann     1,500         0          49,600        11

Heath B.
 McLendon *   -          -            -           58

Cornelius C.
Rose, Jr.   1,500        0         18,825          11

*    Designates an "interested" Director.
Upon attainment of age 80, Fund Directors are required to 
change to emeritus status.  Directors Emeritus are entitled 
to serve in emeritus status for a maximum of 10 years, 
during which time they are paid 50% of the annual retainer 
fee and meeting fees otherwise applicable to Fund Directors, 
together with reasonable out-of-pocket expenses for each 
meeting attended.  A Director Emeritus may attend meetings 
but has no voting rights. During the Fund's last fiscal 
year, aggregate compensation paid by the Fund to Directors 
achieving emeritus status totaled $750.

    

Investment Adviser and Administrator -- MMC
   

MMC serves as investment adviser to the Fund pursuant to 
an investment advisory agreement (the "Investment Advisory 
Agreement") with the Fund  which was approved by the Board 
of Directors, including a majority of those Directors who 
are not "interested persons" of the Fund or Smith Barney 
("Independent Directors").  The Adviser is a wholly owned 
subsidiary of Salomon Smith Barney Holdings Inc. 
("Holdings''). Holdings is a wholly owned subsidiary of 
Travelers Group Inc. ("Travelers''). The services provided 
by the Adviser under the Advisory Agreement are described in 
the Prospectus under "Management of the Fund.''  The Adviser 
pays the salary of any officer or employee who is employed 
by both it and the Fund.

As compensation for investment advisory services, the 
Fund pays the Adviser a fee computed daily and paid monthly 
at the annual rate of 0.30% of the Fund's average daily net 
assets.  For the 1996, 1997 and 1998 fiscal years, the 
investment advisory fees paid to the Adviser and its 
predecessors amounted to $612,606, $651,616 and $665,651, 
respectively.

MMC also serves as administrator to the Fund pursuant to 
a written agreement (the "Administration Agreement'') which 
was approved by the Fund's Board of Directors, including a 
majority of the Independent Directors.  The services 
provided by the Administrator under the Administration 
Agreement are described in the Prospectus under "Management 
of the Fund.''  The Administrator pays the salary of any 
officer and employee who is employed by both it and the Fund 
and bears all expenses in connection with the performance of 
its services. 

As compensation for administration services rendered to 
the Fund, the Administrator receives a fee paid at the 
following annual rates: 0.20% of average daily net assets up 
to $500 million; and 0.18% of average daily net assets in 
excess of $500 million. For the fiscal year ended March 31, 
1997 and 1998, administration fees paid to the Administrator 
equaled $434,410 and $443,768, respectively.

Prior to June 12, 1995, The Boston Company Advisors, Inc. 
("Boston Advisors"), an indirect wholly-owned subsidiary of 
Mellon Bank Corporation, served as the Fund's sub-
administrator.  For the fiscal year ended March  31, 1996 
the Fund paid Boston Advisors $65,523 in sub-investment 
advisory and/or administration fees.

MMC maintains office facilities for the Fund, furnishes 
the Fund with statistical and research data, clerical help 
and accounting, data processing, bookkeeping, internal 
auditing and legal services and certain other services 
required by the Fund, prepares reports to the Fund's 
shareholders, and prepares tax returns, reports to and 
filings with the Securities and Exchange Commission (the 
"SEC'') and state Blue Sky authorities.

The Fund bears expenses incurred in its operations, 
including: taxes, interest, brokerage fees and commissions, 
if any; fees of Directors who are not officers, directors, 
shareholders or employees of Smith Barney or MMC; SEC fees 
and state Blue Sky qualification fees; charges of 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 for regulatory purposes and for distribution to 
existing shareholders; costs of shareholders' reports and 
shareholder meetings and meetings of the officers or Board 
of Directors of the Fund. 
Counsel and Auditors

Willkie Farr & Gallagher serves as legal counsel to the 
Fund.  The Independent Directors of the Fund have selected 
Stroock & Stroock & Lavan LLP as their legal counsel. 

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

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The Prospectus discusses the Fund's investment objective 
and the policies it employs to achieve that objective. The 
following discussion supplements the description of the 
Fund's investment policies in the Prospectus. For purposes 
of this SAI, obligations of non-New Jersey municipal 
issuers, the interest on which is at least exempt from 
Federal income taxation ("Other Municipal Securities''), and 
obligations of the State of New Jersey and its political 
subdivisions, agencies and public authorities (together with 
certain municipal issuers such as the Commonwealth of Puerto 
Rico, the Virgin Islands and Guam) that pay interest which 
is excluded from gross income for Federal income tax 
purposes and exempt from New Jersey personal income taxes 
("New Jersey Municipal Securities'') are collectively 
referred to as "Municipal Bonds.''

As noted in the Prospectus, the Fund is classified as a 
non-diversified investment company under the 1940 Act, which 
means that the Fund is not limited by the 1940 Act in the 
proportion of its assets that may be invested in the 
obligations of a single issuer. The identification of the 
issuer of Municipal Bonds generally depends upon the terms 
and conditions of the security. When the assets and revenues 
of an agency, authority, instrumentality or other political 
subdivision are separate from those of the government 
creating the issuing entity and the security is backed only 
by the assets and revenues of such entity, such entity would 
be deemed to be the sole issuer. Similarly, in the case of a 
private activity bond, if  that bond is backed only by the 
assets and revenues of the nongovernmental user, then such 
nongovernmental user is deemed to be the sole issuer. If in 
either case, however, the creating government or some other 
entity guarantees a security, such a guarantee would be 
considered a separate security and would be treated as an 
issue of such government or other entity. 

Ratings as Investment Criteria

   

In general, the ratings of Moody's Investors Service, 
Inc. ("Moody's''), Standard & Poor's Ratings Group ("S&P'') 
or another nationally recognized statistical ratings 
organization ("NRSRO") represent the opinions of those 
agencies as to the quality of the Municipal Bonds and short-
term investments which 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 by 
the Fund as initial criteria for the selection of portfolio 
securities, but the Fund also will rely upon the independent 
advice of the Adviser to evaluate potential investments.  
Among the factors that will be considered are the long-term 
ability of the issuer to pay principal and interest and 
general economic trends.  To the extent the Fund invests in 
lower-rated and comparable unrated securities, the Fund's 
achievement of its investment objective may be more 
dependent on the Adviser's credit analysis of such 
securities than would be the case for a portfolio consisting 
entirely of higher-rated securities.

Subsequent to its purchase by the Fund, an issue of 
Municipal Bonds may cease to be rated or its rating may be 
reduced below the rating given at the time the securities 
were acquired by the Fund. Neither event will require the 
sale of such Municipal Bonds by the Fund, but the Adviser 
will consider such event in its determination of whether the 
Fund should continue to hold the Municipal Bonds.  In 
addition, to the extent the ratings change as a result of 
changes in such organizations or their rating systems or due 
to a corporate restructuring of Moody's, S&P or other 
NRSROs, the Fund will attempt to use comparable ratings as 
standards for its investments in accordance with its 
investment objective and policies.  The Appendix contains 
information concerning the ratings of Moody's, S&P and other 
NRSROs and their significance. 

Temporary Investments

The Fund may invest in short-term investments ("Temporary 
Investments'') consisting of (a) the following tax-exempt 
securities: notes of municipal issuers having, at the time 
of purchase, a rating within the three highest grades of 
Moody's, S&P or the equivalent from another NRSRO or, if not 
rated, having an issue of outstanding Municipal Bonds rated 
within the three highest grades by Moody's, S&P or the 
equivalent from another NRSRO and (b) the following taxable 
securities: obligations of the United States government, its 
agencies or instrumentalities ("U.S. government 
securities''), repurchase agreements, other debt securities 
rated within the three highest grades by Moody's, S&P or the 
equivalent from another NRSRO, commercial paper rated in the 
highest grade by either of such rating services, and 
certificates of deposit of domestic banks with assets of $1 
billion or more.  The Fund intends to purchase tax-exempt 
Temporary Investments pending the investment of the proceeds 
of the sale of portfolio securities or shares of the Fund's 
common stock, or in order to have highly liquid securities 
available to meet anticipated redemptions.  At no time will 
more than 20% of the Fund's total assets be invested in 
Temporary Investments unless the Fund has adopted a 
defensive investment policy; provided, however, that the 
Fund will seek, to the extent that it makes Temporary 
Investments for defensive purposes, to make such investments 
in conformity with the requirements of a qualified 
investment fund under New Jersey law.
    

Repurchase Agreements. As a defensive position only, the 
Fund may enter into repurchase agreements with banks which 
are the issuers of instruments acceptable for purchase by 
the Fund 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 Fund would 
acquire an underlying debt obligation for a relatively short 
period (usually not more than seven days) subject to an 
obligation of the seller to repurchase, and the Fund to 
resell, the obligation at an agreed-upon price and time, 
thereby determining the yield during the Fund's holding 
period.  This arrangement results in a fixed rate of return 
that is not subject to market fluctuations during the Fund'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. Repurchase agreements 
could involve certain risks in the event of default or 
insolvency of the other party, including possible delays or 
restrictions upon the Fund's ability to dispose of the 
underlying securities, the risk of a possible decline in the 
value of the underlying securities during the period in 
which the Fund seeks to assert its rights to them, the risk 
of incurring expenses associated with asserting those rights 
and the risk of losing all or part of the income from the 
agreement.  The Adviser, acting under the supervision of the 
Fund'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 Fund enters into repurchase 
agreements to evaluate potential risks.

   
Investment Restrictions

The Fund has adopted the following investment 
restrictions for the protection of shareholders. 
Restrictions 1 through 6 below cannot be changed without the 
approval of the holders of a majority of the outstanding 
shares of the Fund, defined as the lesser of (a) 67% of the 
Fund's shares present at a meeting, if the holders of more 
than 50% of the outstanding shares are present in person or 
by proxy, or (b) more than 50% of the Fund's outstanding 
shares.  The remaining restrictions may be changed by the 
Board of Directors at any time. The Fund may not:

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

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

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

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

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

6.	Purchase or sell real estate, real estate mortgages, 
commodities or commodity contracts, but this 
restriction shall not prevent the Fund from (a) 
investing in securities of issuers engaged in the real 
estate business or the business of investing in real 
estate (including interests in limited partnerships 
owning or otherwise engaging in the real estate 
business or the business of investing in real estate) 
and securities which are secured by real estate or 
interests therein; (b) holding or selling real estate 
received in connection with securities it holds or 
held; (c) trading in futures contracts and options on 
futures contracts (including options on currencies to 
the extent consistent with the Fund's investment 
objective and policies); or (d) investing in real 
estate investment trust securities.
 
7.	Purchase any securities on margin (except for such 
short-term credits as are necessary for the clearance 
of purchases and sales of portfolio securities) or sell 
any securities short (except "against the box").  For 
purposes of this restriction, the deposit or payment by 
the Fund of underlying securities and other assets in 
escrow and collateral agreements with respect to 
initial or maintenance margin in connection with 
futures contracts and related options and options on 
securities, indexes or similar items is not considered 
to be the purchase of a security on margin. 

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

9.	Purchase or sell oil and gas interests. 

10.	Invest more than 5% of the value of its total assets 
in the securities of issuers having a record, 
including predecessors, of less than three years of 
continuous operation, except U.S. government 
securities. (For purposes of this restriction issuers 
include predecessors, sponsors, controlling persons, 
general partners, guarantors and originators of 
underlying assets.) 

11.	Invest in companies for the purpose of exercising 
control. 

12. 
	
Invest in securities of other investment companies, 
except as they may be acquired as part of a merger, 
consolidation or acquisition of assets and except to 
the extent permitted by Section 12 of the 1940 Act 
(currently, up to 5% of the total assets of the Fund 
and no more than 3% of the total outstanding voting 
stock of any one investment company). 

13.	Engage in the purchase or sale of put, call, straddle 
or spread options or in the writing of such options, 
except that the Fund may engage in transactions 
involving municipal bond index and interest rate 
futures contracts and options thereon after approval 
of these investment strategies by the Board of 
Directors and notice thereof to the Fund's 
shareholders. 
    

Certain restrictions listed above permit the Fund to 
engage in investment practices that the Fund does not 
currently pursue. The Fund has no present intention of 
altering its current investment practices as otherwise 
described in the Prospectus and this SAI and any future 
change in those practices would require Board of Directors' 
approval and appropriate disclosure to investors.

If a percentage restriction is complied with at the time 
of an investment, a later increase or decrease in the 
percentage of assets resulting from a change in the values 
of portfolio securities or in the amount of the Fund's 
assets will not constitute a violation of such restriction. 
In order to permit the sale of the Fund's shares in certain 
states, the Fund may make commitments more restrictive than 
the restrictions described above. Should the Fund determine 
that any such commitment is no longer in the best interests 
of the Fund and its shareholders, it will revoke the 
commitment by terminating sales of its shares in the state 
involved. 

Portfolio Transactions

Decisions to buy and sell securities for the Fund are 
made by the Adviser subject to the overall supervision and 
review of the Fund's Board of Directors.  Portfolio 
securities transactions are effected by or under the 
supervision of the Adviser.

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 that the best price or 
execution will be obtained; those dealers may be acting as 
either agents or principals.  The purchase price paid by the 
Fund 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 Fund has paid no brokerage commissions since its 
commencement of operations.

Allocation of transactions, including their frequency, to 
various dealers is determined by the Adviser in its best 
judgment and in a manner deemed fair and reasonable to 
shareholders. The primary considerations are the 
availability of the desired security and prompt execution of 
orders in an effective manner at the most favorable prices.  
Subject to these considerations, dealers who provide 
supplemental investment research and statistical or other 
services to the Adviser may receive orders for portfolio 
transactions by the Fund.  Information so received enables 
the Adviser to supplement its own research and analysis with 
the views and information of other securities firms.  Such 
information may be useful to the Adviser in serving both the 
Fund and its other clients, and, conversely, supplemental 
information obtained by the placement of business of other 
clients may be useful to the Adviser in carrying out its 
obligations to the Fund. 

The Fund will not purchase Municipal Bonds during the 
existence of any underwriting or selling group relating 
thereto of which Smith Barney is a member, except to the 
extent permitted by the SEC. Under certain circumstances, 
the Fund may be at a disadvantage because of this limitation 
in comparison with other investment companies which have a 
similar investment objective but which are not subject to 
such limitation.  The Fund also may execute portfolio 
transactions through Smith Barney and its affiliates in 
accordance with rules promulgated by the SEC. 

While investment decisions for the Fund are made 
independently from those of the other accounts managed by 
the Adviser, investments of the type that the Fund may make 
also may be made by such other accounts.  When the Fund and 
one or more other accounts managed by the Adviser are 
prepared to invest in, or desire to dispose of, the same 
security, available investments or opportunities for sales 
will be allocated in a manner believed by the Adviser to be 
equitable to each.  In some cases, this procedure may 
adversely affect the price paid or received by the Fund or 
the size of the position obtained or disposed of by the 
Fund. 

   
Portfolio Turnover

The Fund's portfolio turnover rate (the lesser of 
purchases or sales of portfolio securities during the year 
excluding purchases or sales of short-term securities 
divided by the monthly average value of portfolio 
securities) generally is not expected to exceed 100%, but 
the portfolio turnover rate will not be a limiting factor 
whenever the Fund 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 Fund believes to be a temporary disparity in the 
normal yield relationship between the two securities. These 
yield disparities may occur for reasons not directly related 
to the investment quality of particular issues or the 
general movement of interest rates, such as changes in the 
overall demand or supply of various types of tax-exempt 
securities.  For the fiscal years ended March 31, 1997 and 
1998, the Fund's portfolio turnover rate was 36% and 55%, 
respectively.
    

MUNICIPAL BONDS

General Information

Municipal Bonds generally are understood to include debt 
obligations issued to obtain funds for various public 
purposes, including the construction of a wide range of 
public facilities, refunding of outstanding obligations, 
payment of general operating expenses and extensions of 
loans to public institutions and facilities.  Private 
activity bonds that are issued by or on behalf of public 
authorities to finance privately operated facilities are 
included within the term Municipal Bonds 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 Bonds are dependent upon a 
variety of factors, including general economic and monetary 
conditions, general money market factors, the financial 
condition of the issuer, the general conditions of the 
Municipal Bond market, the size of a particular offering, 
the maturity of the obligation offered and the rating of the 
issue.  Municipal Bonds are 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.  The possibility 
also exists 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 Bonds may be materially and adversely 
affected. 

Zero Coupon Securities 

Zero coupon securities involve special considerations.  
Zero coupon securities are debt obligations which do not 
entitle the holder to any periodic payments of interest 
prior to maturity of a specified cash payment date when the 
securities begin paying current interest (the "cash payment 
date") and therefore are issued and traded at a discount 
from their face amounts or par values.  The discount varies 
depending on the time remaining until maturity or cash 
payment date, prevailing interest rates, liquidity of the 
security and the perceived credit quality of the issuer.  
The discount, in the absence of financial difficulties of 
the issuer, decreases as the final maturity or cash payment 
date of the security approaches.  The market prices of zero 
coupon securities generally are more volatile than the 
market prices of other debt securities that pay interest 
periodically and are likely to respond to changes in 
interest rates to a greater degree than do debt securities 
having similar maturities and credit quality.  The credit 
risk factors pertaining to low-rated securities also apply 
to low-rated zero coupon bonds.  Such zero coupon bonds 
carry an additional risk in that, unlike bonds which pay 
interest throughout the period to maturity, the Fund will 
realize no cash until the cash payment date unless a 
portfolio of such securities is sold and, if the issuer 
defaults, the Fund may obtain no return at all on its 
investment.

Current Federal income tax laws may require the holder of 
a zero coupon security to accrue income with respect to that 
security prior to the receipt of cash payments.  To maintain 
its qualification as a registered investment company and 
avoid liability for Federal income taxes, the Fund may be 
required to distribute income accrued with respect to zero 
coupon securities and may have to dispose of portfolio 
securities under disadvantageous circumstances in order to 
generate cash to satisfy these distribution requirements.


When-Issued Securities

The Fund may purchase Municipal Bonds 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 Bonds 
purchased on a when-issued basis are each fixed at the time 
the buyer enters into the commitment. Although the Fund will 
purchase Municipal Bonds on a when-issued basis only with 
the intention of actually acquiring the securities, the Fund 
may sell these securities before the settlement date if it 
is deemed advisable as a matter of investment strategy.

Municipal Bonds 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 Bonds tend to 
appreciate when interest rates decline and depreciate when 
interest rates rise. Purchasing Municipal Bonds on a when-
issued basis, therefore, can involve the risk that the 
yields available in the market when the delivery takes place 
may actually be higher than those obtained in the 
transaction itself.  To account for this risk, a segregated 
account of the Fund consisting of cash or liquid debt 
securities equal to the amount of the when-issued 
commitments will be established at the Fund's custodian 
bank.  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 daily so that the value of the 
account will equal the amount of such commitments by the 
Fund.  Placing securities rather than cash in the segregated 
account may have a leveraging effect on the Fund's net 
assets.  That is, to the extent the Fund 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 
commitments.  Upon the settlement date of the when-issued 
securities, the Fund will meet its obligations from then-
available cash flow, sale of securities held in the 
segregated account, sale of other securities or, although it 
normally would not expect to do so, from the sale of the 
when-issued securities themselves (which may have a value 
greater or less than the Fund's payment obligations).  Sales 
of securities to meet such obligations may involve the 
realization of capital gains, which may not be exempt from 
New Jersey personal income taxes, and from Federal income 
taxes. 

When the Fund 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 Fund's incurring a loss or 
missing an opportunity to obtain a price considered 
advantageous. 

Special Considerations Relating to New Jersey Municipal 
Securities

Some of the significant financial considerations relating 
to the investments of the Fund are summarized below. The 
following information constitutes only a brief summary, does 
not purport to be a complete description and is largely 
based on information drawn from official statements relating 
to securities offerings of New Jersey municipal obligations 
available as of the date of this SAI.  The accuracy and 
completeness of the information contained in such offering 
statements has not been independently verified.

   
Risk Factors: Prospective investors should consider the 
recent financial difficulties and pressures which the State 
of New Jersey (the "State") and certain of its public 
authorities have undergone.  

National Economy-Overview The performance of the national 
economy in 1997 was, by almost any measure, extraordinary.  
Real Gross Domestic Product (GDP) grew at 3.7%, the fastest 
annual growth since 1986.  The expansion continued into its 
82nd month with both strong employment growth (2.3%) and low 
inflation (1.8% over the last 12 months).  Strong profits 
growth combined with falling interest rates helped propel 
Wall Street to another record year with the Standard & 
Poor's 500 Index of equity prices up 31.7%.

This is a mature economic expansion, and growth cannot 
continue to exceed long-run trends.  The problems of the 
Asian economies, are expected to help slow the U.S. growth 
in 1998, perhaps enough to forestall any action by the 
Federal Reserve to raise interest rates.  Most forecasters 
expect the Asian problems to have a limited impact on the 
U.S. financial markets, and consumer confidence are the 
primary threats to our stable growth.

The 1998 GDP growth is anticipated to slow to a more 
moderate level of 2.5% and settle into a sustainable 2.2% 
range in the 1999-2003 period. Consumer spending is expected 
to remain high in 1998 at 2.9%, just slightly behind the 
3.3% pace of 1997.  Concern over high consumer debt levels 
is beginning to wane.  Income growth is anticipated to 
remain strong, reflecting continued growth in employment 
levels. Business investment in durable equipment is expected 
to remain steady in 1998 at a real growth rate of just over 
13%.

	New Jersey Economy-Overview The New Jersey economy 
enjoyed its most balanced and overall best year since the 
current expansion began in 1993. Strong employment growth of 
1.7% drove employment to a level of 3.7 million, more than 
40,000 jobs above the 1989 pre-recession high.  Personal 
income grew 5.2%, the third year of better than 4.7% growth.  
Gross State Product (GSP) continued to gain momentum, 
growing 5% in 1997, an increase from 3.6% and 4.8% in 1995 
and 1996, respectively.

Employment growth has been strong since mid-1996 with 
growth for the past six quarters ranging between 1.5% and 
2.0%.  This is the best growth in the mid-Atlantic region.  
Although the New Jersey employment growth rate has been 
below the national rate since 1987, the gap substantially 
narrowed in 1997.  Construction jobs started growing again 
after two weak years and manufacturing declines shrunk from 
2-3% rates in 1995-1996 to 0.6% in 1997.  Aggregate growth 
in the service sector remained strong at 2.6% but that masks 
growth rates in some business service sectors that are above 
the comparable national rates.

The strong employment and income picture, supplemented by 
the three year boom in the financial markets, fueled a 
resurgence in consumer spending.  Vehicle registrations grew 
steadily through the first three quarters of the year and 
should generate the fastest annual pace since 1994.


Economic Forecast: National economic growth will continue 
in 1998 and beyond at a more moderate but sustainable pace, 
with GDP growth in the range of 2.5% to 2.2%.  The economic 
problems of Asia carry a 20%-25% probability that they could 
worsen and reduce GDP growth to 2.0%.  Inflationary 
pressures are expected to remain in check as the impact of 
tightening labor markets is offset by the impact of softer 
export demand and cheaper import.  The Consumer Price Index 
is anticipated to increase 2.3% in 1998 and 2.7% in 1999.

Continuing high levels of employment, steady income 
growth, and low interest rates will continue to support 
strong consumer and business spending.  The National 
Employment growth is expected to moderate slightly 2.3% in 
1998 and then gradually slow to 1% by 2000.  Personal income 
growth is projected to also moderate in 1998 to 5.0% and 
then remain in that range thereafter.  Consumer durable 
expenditures are projected to increase in 1998 and remain in 
the 4-5% range thereafter.

  The New Jersey economy is expected to track the National 
trend to slightly less vigorous growth in 1998 and more 
moderate sustainable growth in 1999. Employment growth is 
projected to remain virtually unchanged in 1998 at 1.5% 
before easing to 0.9% in 1999.  Personal income growth is 
expected to remain in the 4.7% range for the next 2 years. 
Housing starts are expected to ease back to 1997 levels and 
to stabilize in the 23,000 to 23,700 unit range.  Automobile 
sales are projected to remain close to 1997 levels of 
340,000 units

Revenue Forecast: Revisions to the fiscal 1998 anticipated 
revenue.

	The current estimate of $16.9 billion in total fiscal 
1998 revenue is $610 million more than when revenues were 
certified by the Governor in June 1997.

The three largest taxes, gross income, sales and use, and 
corporate business, account for 67% of total revenues and 
are now forecast to yield $11.4 billion.  This is an 
increase of $507 million and primarily reflects an upward 
revision in the income tax and the sales tax estimates.  The 
total revenues from other major taxes are revised upward by 
$103 million primarily to incorporate the impact of 
increasing the cigarette excise tax and the year-to-date 
collection patterns of the estate tax and the corporate 
business tax on banks and financial institutions.

The gross income tax forecast is revised to $5.3 billion, 
and increase of $304 million.  Stronger than anticipated 
income and employment growth in 1997 accounts for part of 
the change.  Personal income is now projected to grow 5.2%, 
compared to the 4.8% estimated in June.  Employment growth 
of 1.7% compares to the 1.3% originally projected.  The 
Budget estimate assumed that capital gains realizations 
would remain at their historic high level.  The revised 
estimate assumed that the volatility of the financial 
markets in the last half of 1997, combined with the new 
reduced federal tax rate on long-term capital gains income, 
will result in continued strong growth in capital gains 
income.

The property tax deduction/credit program, which was 
phased-in during the 1996 tax year, was originally expected 
to reduce collections by $120 million in fiscal 1997 and 
another $80 million in fiscal 1998.  Recently available data 
from the 1996 tax year indicates that the fiscal 1997 cost 
is $100 million, leading to a revised fiscal 1998 cost 
increase of $6.7 million, for a total cost of $167 million 
in fiscal 1998.

	Fiscal 1999 revenue projections:  Revenues for fiscal 
1999 are expected to increase more modestly as the national 
economy slows to more sustainable long-run growth levels.

Sales Tax:  The forecast of $4.9 billion for fiscal 1999 
sales tax revenue is an increase of $208 million, or 4.4%, 
compared to fiscal 1998.  This reflects an expectation of 
continued growth but a moderation of the underlying economic 
forces compared to fiscal 1998.  Spending in the two key 
consumer sectors of housing and autos is expected to pull 
back somewhat from the 1997 levels and to remain fairly flat 
for the next two years.

The reform of the gross receipts and franchise tax will 
subject energy sales to the sales tax starting in 1998.  
This additional revenue is not included in the estimate.

	Corporate Business Tax: The forecast of $1.4 billion for 
fiscal 1999 Corporate Business Tax  (CBT)  revenue is an 
increase of $116 million, or 8.8%, compared to fiscal 1998.  
This includes $81 million from the energy tax reform and $35 
million in base growth.  The base increase assumes that the 
growth of U.S. corporate before-tax profits, which is a 
proxy for New Jersey business profitability, will slow 
significantly to about 3% in 1998.  This reflects the 
continued cycle slowing of the national economy from the 
strong 16% profit growth in 1995 to more moderate levels of 
9% and 8% in 1996 and 1997, respectively.  Profit growth is 
anticipated to remain in the low single digits through the 
year 2000.

Gross Income Tax: The forecast of $5.9 billion for fiscal 
1999 is an increase of $520 million, or 9.7%, over fiscal 
1998 revenue.  This represents a moderation of the 5.2% 
growth in New Jersey personal income forecast for 1997 to 
about 4.7% in both 1998 and 1999.  Growth in wage income and 
proprietors' (business) income is expected to continue 
strong in 1998, but start to ease back in 1999 and beyond.  
Capital gains income, which has been growing at about 21% 
per year from 1991-1996, is projected to reach that trend 
level in 1998 and then grow slightly faster in the out-
years.  All the major tax policy changes are now phased in 
with one exception.  The 1998 property tax deduction will 
increase to 10,000, or a $50 credit.  This is expected to 
reduce the fiscal 1999 collections by about $67 million 
compared to fiscal 1998.

	Other Revenues The cigarette excise tax and the wholesale 
tax on other tobacco products were doubled, effective 
January 1, 1998.  The cigarette excise tax is anticipated to 
generate an additional $77 million during the last half of 
fiscal 1998.  The other tobacco products tax is anticipated 
to increase revenues by at least 50%.  The fiscal 1998 and 
1999 estimates are increased by $2 and $4 million, 
respectively.
    

The State's 1997 fiscal year budget became law on June 27, 
1997.

Effective January 1, 1994, New Jersey personal income tax 
rates were cut by 5% for all taxpayers.  Effective January 1, 
1995, the personal income tax rates were cut by an additional 
10% for most taxpayers.  By a bill signed into law on July 4, 
1995, New Jersey personal income tax rates have been further 
reduced so that coupled with the prior rate reductions, 
beginning with tax year 1996, personal income tax rates will 
be , depending on a taxpayer's level of income and filing 
status, 30%, 15% or 9% lower than 1993 rates.  At this time, 
the effect of the tax reductions cannot be evaluated.

Reflecting the downturn, the rate of unemployment in the 
State rose from a low of 3.6% during the first quarter of 
1989 to a recessionary peak of 8.5% during 1992. Since then, 
the unemployment rate fell to an average of 6.4% in 1995 and 
6.1% for the four month period from May 1996 through August 
1996.

For the recovery period as a whole, May 1992 to August 
1996, service-producing employment in New Jersey has expanded 
by 228,500 jobs. Hiring has been reported by food stores, 
auto dealers, wholesale distributors, trucking and 
warehousing firms, utilities, business and 
engineering/management service firms, hotels/hotel casinos, 
service agencies and health care providers other than 
hospitals.  Employment growth was particularly strong in 
business services and its personnel supply component with 
increases of 17,500 and 8,100, respectively, in the 12 month 
period ended August 1996.

In the manufacturing sector, the employment losses slowed 
between 1992 and 1994. After an average annual job loss of 
33,500 from 1989 through 1992, New Jersey's factory job 
losses fell to 13,300 during 1993 and 7,300 during 1994.  
During 1995, however, manufacturing job losses increased 
slightly to 9,100, reflecting a slowdown in national 
manufacturing production activity.  While experiencing growth 
in the number of production workers in 1994, the number 
declined in 1995 at the same time that managerial and office 
staff were also reduced as a part of nationwide downsizing.  
Through August 1996 layoffs of white collar workers and 
corporate downsizing appears to be abating.

Conditions have slowly improved in the construction 
industry, where employment has risen by 15,600 since its low 
in May 1992.  Between 1992 and 1995, this sector's hiring 
rebound was driven primarily by increased homebuilding and 
nonresidential projects.  During 1996, public works projects 
and homebuilding became the growth segment while 
nonresidential construction lessened.

Nonresidential construction activity, as measured by 
contract awards, grew by 9.7% in 1993, 19.6% in 1994 and 3.0% 
in 1995.  More recently, nonresidential building construction 
contracts fell by 20.5% in the first eight months of 1996.  
This decline is largely attributable to an abundance of 
large, one-time contract awards during 1995, including a 
$202.9 million contract for the construction of a state 
prison.

Residential construction contracts through August 1996, 
despite monthly fluctuations, increased by 1.4% for the first 
eight months of 1996 as compared to the first eight months of 
1995($1,502 million and $1,481 million, respectively).  
Nonbuilding or infrastructure construction rose by 17.8% 
during this period. Despite these increases, total 
construction contracts declined by 3.9% when comparing the 
first eight months of 1995 and 1996.

Improvements in overall employment opportunities and the 
economy in general have led to an increased consumer spending 
during the recovery.  While overall retail sales in New 
Jersey grew by only 1.6% during 1993, they performed much 
better in 1994, advancing by 7.8% which exceeded the 7.5% 
growth registered nationwide.  During 1995, especially the 
winter months, consumer confidence and actual consumer 
spending moderated both nationally and in the State.  For all 
of 1995, retail sales in New Jersey grew by 2.3%.  Retail 
sales regained momentum in 1996 and have been on a moderate 
upward trend, rising to an annual rate of $76.5 billion 
through June.  The State's pickup in growth after a blizzard-
related January decline resulted in sales growth of 4.2% when 
comparing the first six months of 1995 with those of 1996.  
The rising trend in retail sales has translated into steady 
increases in retail trade jobs (both full- and part-time) 
with a rise in retail employment from December 1995 to August 
1996 of 6,900 jobs.

Total new vehicle registrations (new passenger cars and 
light trucks and vans) rose robustly in 1993 by more than 18% 
and in 1994 by 5.8%, but declined by 4.4% in 1995. Through 
July 1996 however, total new vehicle registration rose by 
3.5% compared to the same time period in 1995.

Unemployment in the State through August 1996 has been 
receding.  According to the U.S. Bureau of Labor Statistics, 
the jobless rate dropped from 7.5% in 1993 to 6.8% in 1994 
and to 6.4% in 1995.  Subsequently it has dropped to 6.1% for 
the four-month period from May 1996 through August 1996.

The insured unemployment rate, i.e., the number of 
individuals claming benefits as a percentage of the number of 
workers covered by unemployment insurance, declined from 3.9% 
during calendar years 1991 and 1992 to 3.3% during 1993 and 
then averaged 3.2% throughout 1994, 1995 and the first six 
months of 1996.  As of August 1, 1996 the State's 
unemployment insurance trust fund balance stood at $2.1 
billion.

State Aid to Local Governments is the largest portion of 
fiscal year 1997 appropriations.  In fiscal year 1997, 
$6,419.0 million of the State's appropriations consisted of 
funds which are distributed to municipalities, counties and 
school districts.  The largest State Aid appropriation, in 
the amount of $4,877.4 million, was provided for local 
elementary and secondary education programs.  Of this amount, 
$2,721.7 million is provided as foundation aid to school 
districts by formula based upon the number of students and 
the ability of a school district to raise taxes from its own 
base.  In addition, the State provided $601.1 million for 
special education programs for children with disabilities.  A 
$292.9 million program was also funded for pupils at risk of 
educational failure, including basic skills improvement.  The 
State appropriated $667.4 million on behalf of school 
districts as the employer share of the teachers' pension and 
benefits programs, $247.2 million to pay for the cost of 
pupil transportation.

Appropriations to the Department of Community Affairs 
("DCA") total $840.4 million in State Aid monies for fiscal 
year 1997.   Many of the DCA State Aid programs and many 
Treasury State Aid appropriations to the State Department of 
the Treasury total $212.4 million in State Aid monies for 
fiscal year 1997.  The principal programs funded by these 
appropriations are: aid to county colleges ($128.8 million), 
the cost of senior citizens, disabled and veterans property 
tax deductions and exemptions ($55.8 million); the State 
contribution to the Consolidated Police and Firemen's Pension 
fund ($9.7 million) and aid to densely populated 
municipalities ($9.0 million).

The second largest portion of appropriations in fiscal 
1997 is applied to Direct State Services, the operation of 
State government's 16 departments, the Executive Office, 
several commissions, the State Legislature and the Judiciary.  
In fiscal 1997, appropriations for Direct State Services 
aggregate $5,175.7 million.  Some of the major appropriations 
for Direct State Services during fiscal 1997 are detailed 
below.

$602.1 million was appropriated for programs administered 
by the Department of Human Services.  Of that amount, $439.2 
million is appropriated for mental health and developmentally 
disabled programs, including the operation of seven 
psychiatric institutions and eight development centers.

The Department of Health and Senior Services was 
appropriated $45.1 million for the prevention and treatment 
of diseases, alcohol and drug abuse programs, regulation of 
health care facilities, and the uncompensated care program, 
and senior services programs.

$732.9 million is appropriated for the support of nine 
State colleges, Rutgers University, the New Jersey Institute 
of Technology and the University of Medicine and Dentistry of 
New Jersey.

$908.4 million was appropriated to the Department of Law 
and Public Safety and the Department of Corrections.

$159.4 million was appropriated to the Department of 
Transportation for the various programs it administers, such 
as the maintenance and improvement of the State highway 
systems and the registration and regulation of motor vehicles 
and licensed drivers.

$179.9 million was appropriated to the Department of 
Environmental Protection for the protection of air, land, 
water, forest, wildlife and shellfish resources and for the 
provision of outdoor recreational facilities.

The primary method for State financing of capital projects 
is through the sale of the general obligation bonds of the 
State.  These bonds are backed by the full faith and credit 
of the State.  State tax revenues and certain other fees are 
pledged to meet the principal and interest payments and, if 
provided, redemption premium payments, if any required to 
fully pay the bonds.  The appropriation for debt servicing 
obligation on outstanding indebtedness is $446.9 million for 
fiscal 1997 required to pay the debt fully.  No general 
obligation debt can be issued by the State without prior 
voter approval, except that no voter approval is required for 
any law authorizing the creation of a debt for the purpose of 
refinancing all or a portion of outstanding debt of the 
State, so long as such law requires that the refinancing 
provide a debt service savings.

Taxes:  By the end of June 1997, Governor Christine Todd 
Whitman claims that tax cut savings will total $2.8 billion.  
By the end of the next fiscal year, those savings will rise 
to $4.4 Billion.  Even though she has cut taxes 10 times, 
total revenues have gone up by $1.2 billion.

In fact, between school funding, county court takeover, 
transportation aid, and other forms of assistance, the State 
will provide nearly $750 million more property tax relief 
this year than when she took office.  The 1997-1998 budget 
preserves the 30% income tax cut, the property tax 
deduction, and all other tax cuts, as well as maintaining a 
$550mm surplus.

Revenues:  The budget reflects an estimated bottom line 
loss for fiscal year ended June 30, 1997 of $419million with 
total state revenues equaled to $15.7 billion and total 
state expenditures equaled to $16.2 billion.  The largest 
decrease in sources of revenues are in the Miscellaneous 
Taxes, Fees and Revenue category, primarily the 1) Executive 
Branch, a (80.31%) decrease; 2) Department of Health and 
Senior Services, a (40.26%) decrease; Department of Human 
Services, a (20.50%) decrease; 4) Department of Labor, a 
(42.96%) decrease; 5) the Judicial Branch, a (27.31%) 
decrease.  The Revenue Fund also decreased (8.22%) to 
$313million.  Major Tax revenues decreased (0.47%) from 
fiscal year 1996 to fiscal year 1997.

Expenditures:  On the expenditure side, total state 
expenditures have decreased (0.80%) from fiscal year 1996 to 
fiscal year 1997.  The largest decrease in expenditures are 
in the Executive Branch, primarily the 1) Department of 
Agriculture, a (15.99%) decrease; 2) Department of Labor, a 
(15.99%) decrease; 2) Department of Labor, a  (14.59%) 
decrease; 3) Department of Military and VA, a (23.27%) 
decrease; and 4) Department of Personnel, a (15.25%) 
decrease.

Increased spending occurred in the following categories: 
the Department of Commerce and Economic Development, a 
10.61% increase; 2) the Department of Education, a 17.06% 
increase; and 3) Department of Transportation, 11.34% 
increase.

Litigation. At any given time, there are various numbers 
of claims and cases pending against New Jersey, New Jersey 
agencies and employees, seeking recovery of monetary damages 
that are primarily paid out of the fund created pursuant to 
the Tort Claims Act, N.J.S.A. 59:1-1 et seq. (the "Tort 
Claims Act''). At any given time there are various contract 
and other claims against New Jersey and New Jersey agencies, 
including environmental claims arising from the alleged 
disposal of hazardous waste, seeking recovery of monetary 
damages or other relief which would require the expenditure 
of funds. In addition, at any given time there are various 
numbers of claims and cases pending against the University 
of Medicine and Dentistry of New Jersey and its employees, 
seeking recovery of monetary damages or other relief which 
would require the expenditure of funds. New Jersey is unable 
to estimate its exposure for these claims. 

As of August, 1994, the following cases are presently 
pending or threatened in which New Jersey has the potential 
for either a significant loss of revenue or significant 
unanticipated expenditures: Abbot v. Burke, challenging the 
constitutionality of the Quality Education Act of 1990, 
which was found to be unconstitutional by the Trial Court 
and was recently affirmed by the New Jersey Supreme Court 
and requires that a funding formula be adopted by September, 
1996 which will achieve by the 1997-98 school year the 
mandated parity in spending and will address the special 
educational needs of children in poor and urban school 
districts; County of Essex v. Waldman, et al. and similar 
cases involving eleven other counties, challenging the 
methods by which the New Jersey Department of Human Services 
shares with county governments and maintenance recoveries 
and costs for residents in New Jersey psychiatric hospitals 
and residential facilities for the developmentally disabled, 
all of which are on appeal in the New Jersey courts; County 
of Essex v. Commissioner of Human Services, et al. and 
similar cases involving ten other counties, in which the 
Appellate Division ruled that all counties were entitled to 
100% of Social Security benefits and other maintenance 
recoveries received by New Jersey and were entitled to 
credits for payments made to New Jersey for the maintenance 
of Medicare and Medicaid-eligible county residents of 
certain New Jersey facilities, which is on petition for 
review by the New Jersey Supreme Court; New Jersey 
Association of Health Care Facilities, Inc., et al. v. 
Gibbs, et al., a class action on behalf of all New Jersey 
long-term care facilities providing services to Medicaid 
patients, seeking a declaration that the New Jersey 
Department of Human Services has violated Federal law in the 
setting and paying of 1990 long-term care facility Medicaid 
payment rates, where the Third Circuit affirmed the District 
Court's denial of plaintiff's motion for preliminary 
injunction, and the parties are currently negotiating the 
form of an order to dismiss the action with prejudice; Exxon 
v. Hunt and related cases, where taxpayers sought refund of 
taxes paid to the Spill Compensation Fund and the New Jersey 
Supreme Court, on remand from the U.S. Supreme Court, ruled 
that plaintiffs would receive refunds only in the event the 
New Jersey Legislature refused to reimburse the Spill 
Compensation Fund for expenditures for preempted purposes 
and, after exhaustion of appeals and other legal avenues, a 
motion by the State for dismissal of all such claims is 
pending before the Tax Court; Fair Automobile Insurance 
Reform Act ("FAIR Act'') litigation challenging various 
portions of FAIR Act, including surtax and assessment 
provisions, is still pending; County of Passaic v. State of 
New Jersey alleging tort and contractual claims against New 
Jersey and the New Jersey Department of Environmental 
Protection in connection with a resource recovery facility 
plaintiffs had planned to build in Passaic County, seeking 
approximately $30 million in damages; Pelletier, et al., v. 
Waldman, et al., a challenge by State Medicaid-eligible 
children to the adequacy of Medicaid reimbursement for 
services rendered by doctors and dentists, is currently in 
mediation; Barnett Memorial Hospital v. Commissioner of 
Health, an appeal by several hospitals of the Commissioner's 
calculation of the hospital assessment required by the 
Health Care Cost Reduction Act of 1991, was decided against 
the Commission and successful claimants were refunded the 
amount of their overpayment in April, 1994, which amount 
totaled $4,636,576; New Jersey Hospital Association, et al. 
v. Leonard Fishman, seeking the same relief as in Barnett; 
Robert E. Brennan v. Richard Barry, et al., a suit filed 
against two members of the New Jersey Bureau of Securities 
alleging causes of action for defamation, injury to 
reputation, abuse of process and improper disclosure, based 
on the Bureau's investigation of certain publicly-traded 
securities to which the state has filed a motion to dismiss 
and/or for summary judgment; Camden Co. v. Waldman, et al., 
now consolidated with similar suits filed by Middlesex, 
Monmouth and Atlantic Counties, seeking reimbursement of 
federal funds received by New Jersey for disproportionate 
share hospital payments made to county psychiatric 
facilities from July 1, 1988 through July 1, 1991 has been 
transferred to the Appellate Division; Interfaith Community 
Organization v. Fox, et al., a suit filed by a coalition of 
churches and church leaders in Hudson County against the 
Governor, the Commissioners of the Department of 
Environmental Protection and Energy and the Department of 
Health, concerning chromium contamination in Liberty State 
Park in Jersey City; American Trucking Associations, Inc. 
and Tri-State Motor Transit v. State of New Jersey, 
challenging the constitutionality of annual hazardous and 
solid waste licensure fees collected by the Department of 
Environmental Protection, seeking a permanent injunction 
enjoining future collection of fees and refund of all 
renewal fees, fines and penalties collected; and Waste 
Management of Pennsylvania, et al. v. Shinn, et al., an 
action filed in federal district court seeking declaratory 
and injunctive relief and compensatory damages from 
Department of Environmental Protection Commissioner Shinn 
and Acting Commissioner Fox, alleging violations of the 
Commerce Clause and the Contracts Clause of the United 
States Constitution based on emergency redirection orders 
and a draft permit. 

In addition to litigation against New Jersey, at any 
given time there are various numbers of claims and cases 
pending or threatened against the political subdivisions of 
New Jersey, including but not limited to New Jersey 
authorities, counties, municipalities and school districts, 
which have potential for either a significant loss of 
revenue or significant unanticipated expenditures. 

Ratings.  There is no assurance that the ratings of New 
Jersey General Obligation Bonds will continue for any given 
period of time or that they will not be revised downward or 
withdrawn entirely. Any such downward revision or withdrawal 
could have an adverse effect on the market prices of New 
Jersey's general obligation bonds.

The various political subdivisions of New Jersey are 
rated independently by S&P and/or Moody's. These ratings are 
based upon information supplied to the rating agency by the 
political subdivision. There is no assurance that such 
ratings will continue for any given period of time or that 
they will not be revised downward or withdrawn entirely. Any 
such downward revision or withdrawal could have an adverse 
effect on the market prices of bonds issued by the political 
subdivision. 

PURCHASE OF SHARES 

Volume Discounts

The schedule of sales charges on Class A shares described 
in the Prospectus applies to purchases made by any 
"purchaser,'' which is defined to include the following: (a) 
an individual; (b) an individual and his or her immediate 
family purchasing shares for his or her own account; (c) a 
trustee or other fiduciary purchasing shares for a single 
trust estate or single fiduciary account; and (d) a trustee 
or other professional fiduciary (including a bank, or an 
investment adviser registered with the SEC under the 
Investment Advisers Act of 1940, as amended) purchasing 
shares of the Fund for one or more trust estates or 
fiduciary accounts. Purchasers who wish to combine purchase 
orders to take advantage of volume discounts should contact 
a Smith Barney Financial Consultant. 

Combined Right of Accumulation

Reduced sales charges, in accordance with the schedule in 
the Prospectus, apply to any purchase of Class A shares if 
the aggregate investment in Class A shares of the Fund and 
in Class A shares of other Smith Barney Mutual Funds that 
are offered with a sales charge, including the purchase 
being made, of any purchaser is $25,000 or more.  The 
reduced sales charge is subject to confirmation of the 
shareholder's holdings through a check of appropriate 
records.  The Fund reserves the right to terminate or amend 
the combined right of accumulation at any time after written 
notice to shareholders.  For further information regarding 
the right of accumulation, shareholders should contact a 
Smith Barney Financial Consultant. 

Determination of Public Offering Price

   
The Fund offers its shares to the public on a continuous 
basis.  The public offering price for a Class A and Class Y 
share of the Fund is equal to the net asset value per share 
at the time of purchase, plus for Class A shares an initial 
sales charge based on the aggregate amount of the 
investment.  The public offering price for a Class B and 
Class L share (and Class A share purchases, including 
applicable rights of accumulation, equaling or exceeding 
$500,000), is equal to the net asset value per share plus 
for Class L shares an initial sales charge of 1% at the time 
of purchase.  A contingent deferred sales charge ("CDSC''), 
however, is imposed on certain redemptions of Class B and 
Class L shares, and Class A shares when purchased in amounts 
exceeding $500,000.  The method of computation of the public 
offering price is shown in the Fund's financial statements, 
incorporated by reference in their entirety into this SAI.
    


REDEMPTION OF SHARES 

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


Distribution in Kind

If the Board of Directors of the Fund determines that it 
would be detrimental to the best interests of the remaining 
shareholders of the Fund to make a redemption payment wholly 
in cash, the Fund may pay, in accordance with SEC rules, any 
portion of a redemption in excess of the lesser of $250,000 
or 1% of the Fund's net assets by a distribution in kind of 
portfolio securities in lieu of cash.  Securities issued as 
a distribution in kind may incur brokerage commissions when 
shareholders subsequently sell those securities.

Automatic Cash Withdrawal Plan

An automatic cash withdrawal plan (the "Withdrawal 
Plan'') is available to shareholders who own shares with a 
value of at least $10,000 and who wish to receive specific 
amounts of cash monthly or quarterly.  Withdrawals of at 
least $100 may be made under the Withdrawal Plan by 
redeeming as many shares of the Fund as may be necessary to 
cover the stipulated withdrawal payment.  Any applicable 
CDSC will not be waived on amounts withdrawn by shareholders 
that exceed 1.00% per month of the value of a shareholder's 
shares at the time the Withdrawal Plan commences.  (With 
respect to Withdrawal Plans in effect prior to November 7, 
1994, any applicable CDSC will be waived on amounts 
withdrawn that do not exceed 2.00% per month of the value of 
a shareholder's shares at the time the Withdrawal Plan 
commences.)  To the extent withdrawals exceed dividends, 
distributions and appreciation of a shareholder's investment 
in the Fund, there will be a reduction in the value of the 
shareholder's investment, and continued withdrawal payments 
will reduce the shareholder's investment and may ultimately 
exhaust it.  Withdrawal payments should not be considered as 
income from investment in the Fund.  Furthermore, as it 
generally would not be advantageous to a shareholder to make 
additional investments in the Fund at the same time he or 
she is participating in the Withdrawal Plan, purchases by 
such shareholders in amounts of less than $5,000 ordinarily 
will not be permitted.

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

DISTRIBUTOR
   

Smith Barney serves as the Fund's distributor on a best 
efforts basis pursuant to a written agreement (the 
"Distribution Agreement'') which was approved by the Fund's 
Board of Directors, including a majority of the Independent 
Directors. For the fiscal years ended March 31, 1996, 1997 
and 1998, Smith Barney received $154,000, $139,000 and 
$236,000, respectively, in sales charges from the sale of 
the Fund's Class A shares, and did not reallow any portion 
thereof to dealers.  For the fiscal years ended March 31, 
1996, 1997 and 1998, Smith Barney received $117,000, 
$160,000 and $99,000, respectively, representing CDSC on 
redemptions of the Fund's Class B and Class L shares.

For the fiscal year ended March 31, 1998, Smith Barney 
incurred distribution expenses totaling approximately 
$682,245, consisting of approximately $44,330 for 
advertising, $4,620 for printing and mailing of 
Prospectuses, $304,859 for support services, $287,282 to 
Smith Barney Financial Consultants, and $8,728 in accruals 
for interest on the excess of Smith Barney expenses incurred 
in distributing the Fund's shares over the sum of the 
distribution fees and CDSC received by Smith Barney from the 
Fund.
    

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

Distribution Arrangements
   
To compensate Smith Barney for the services it provides 
and for the expense it bears under the Distribution 
Agreement, the Fund has adopted a services and distribution 
plan (the "Plan'') pursuant to Rule 12b-1 under the 1940 
Act. Under the Plan, the Fund pays Smith Barney a service 
fee, accrued daily and paid monthly, calculated at the 
annual rate of 0.15% of the value of the Fund's average 
daily net assets attributable to the Class A, Class B and 
Class L shares. In addition, the Fund pays Smith Barney a 
distribution fee primarily intended to compensate Smith 
Barney for its initial expense of paying Financial 
Consultants a commission upon sales of the respective 
shares. The Class B distribution fee is calculated at the 
annual rate of 0.50% of the value of the Fund's average net 
assets attributable to the shares of the Class. The Class L 
distribution fee is calculated at the annual rate of 0.55% 
of the value of the Fund's average net assets attributable 
to the shares of the Class. 

The following service and distribution fees were incurred 
during the fiscal years ended as indicated:


Service and Distribution Fees


   3/31/98
     3/31/97
       3/31/96
Class A	
$228,814
	$224,109
	$185,007
Class B	
  415,461
	393,386
	387,729
Class L	
    37,970
	30,638
           9,805
    
Under its terms, the Plan continues from year to year, 
provided such continuance is approved annually by vote of 
the Fund's Board of Directors, including a majority of the 
Independent Directors who have no direct or indirect 
financial interest in the operation of the Plan or in the 
Distribution Agreement. The Plan may not be amended to 
increase the amount of the service and distribution fees 
without shareholder approval, and all material amendments of 
the Plan also must be approved by the Directors and the 
Independent Directors in the manner described above. The 
Plan may be terminated with respect to a Class at any time, 
without penalty, by vote of a majority of the Independent 
Directors or by a vote of a majority of the outstanding 
voting securities of the Class (as defined in the 1940 Act). 
Pursuant to the Plan, Smith Barney will provide the Board of 
Directors with periodic reports of amounts expended under 
the Plan and the purpose for which such expenditures were 
made.

VALUATION OF SHARES

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

The valuation of the Fund's assets is made by the Advisor 
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 and asked prices. Investments for 
which, in the judgment of the Service, there is no readily 
obtainable market quotation (which may constitute a majority 
of the portfolio securities) are carried at fair value as 
determined by the Service. For the most part, such 
investments are liquid and may be readily sold. The Service 
may employ 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 
Fund under the general supervision and responsibility of the 
Board of Directors, which may replace any such Service at 
any time if it determines it to be in the best interests of 
the Fund to do so. 

EXCHANGE PRIVILEGE 

Except as noted below, shareholders of certain Smith 
Barney Mutual Funds may exchange all or part of their shares 
for shares of the same class of other Smith Barney Mutual 
Funds, to the extent such shares are offered for sale in the 
shareholder's state of residence, on the basis of relative 
net asset value per share at the time of exchange as 
follows: 
   

A.	Class A and Class Y shareholders of the Fund who wish 
to exchange all or a portion of their shares for 
shares of the respective Class in any of the funds of 
the Smith Barney Mutual Fund Complex may do so without 
imposition of any charge. 

B.	Class B shares of any fund may be exchanged without a 
sales charge.  Class B shares of the Fund exchanged 
for Class B shares of another fund will be subject to 
the higher applicable CDSC of the two funds.  Upon an 
exchange, the new Class B shares will be deemed to 
have been purchased on the same date as the Class B 
shares of the Fund that have been exchanged. 

C.	Upon exchange, the new Class L shares will be deemed 
to have been purchased on the same date as the Class L 
shares of the fund that have been exchanged. 
    

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

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

PERFORMANCE DATA
   

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


Average Annual Total Return

"Average annual total return'' figures described below 
are computed according to a formula prescribed by the SEC. 
The formula can be expressed as follows:

	P (1+T)n = ERV

	Where:	P =	a hypothetical initial payment of $1,000. 
		T =	average annual total return. 
		n =	number of years. 
		ERV =	Ending Redeemable Value of a hypothetical 
$1,000 investment made at the beginning of a 
1-, 5- or 10-year period at the end of the 
1-, 5- or 10-year period (or fractional 
portion thereof), assuming reinvestment of 
all dividends and distributions. 

The following total return figures for Class A shares 
assume that the maximum 4.00% sales charge has been deducted 
from the investment at the time of purchase and have been 
restated to show the change in the maximum sales charge. The 
average annual total return for Class A shares was as 
follows for the period indicated: 

5.77% for the one-year period beginning April 1, 1997 
through March 31, 1998.

5.44% per annum during the five-year period beginning on 
April 1, 1993 through March 31, 1998.

8.03% per annum during the period from the Fund's 
commencement of operations on April 22, 1988 through March 
31, 1998.

These total return figures assume that the maximum 4.00% 
sales charge assessed by the Fund on purchases of Class A 
shares has been deducted from the investment at the time of 
purchase. Had the investment advisory, sub-investment 
advisory and/or administration fees not been partially 
waived (and assuming that the maximum 4.00% sales charge had 
not been deducted), the Class A's average annual total 
return would have been 10.20%, 6.31% and 8.48%, 
respectively, for those same periods.


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

5.16% for the one-year period from April 1, 1997 through 
March 31, 1998.

5.60% for the five-year period from April 1, 1993 through 
March 31, 1998.

6.58% per annum for the period from November 6, 1992 
(commencement of operations) through March 31, 1998.

These average annual total return figures assume that the 
applicable maximum CDSC has been deducted from the 
investment. Had the investment advisory and sub-investment 
advisory and/or administration fees not been partially 
waived and the CDSC had not been deducted, the average 
annual total return on the Fund's Class B shares would have 
been 9.66%, 5.76% and 6.58%, respectively, for those same 
periods.

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

8.50% for the one year period from April 1, 1997 through 
March 31, 1998; and
9.11% per annum for the period from December 13, 1994 
(commencement of operations) through March 31, 1998.

These average annual total return figures assume that the 
applicable CDSC has been deducted from the investment.  Had 
the CDSC not been deducted, the average annual total return 
on the Fund's Class L shares would have been 9.50% and 
9.11%, respectively, for those same periods.

Aggregate Total Return

Aggregate total return figures described below represent 
the cumulative change in the value of an investment in the 
Class for the specified period and are computed by the 
following formula:

	ERV-P
	    P

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

The aggregate total return for Class A shares was as 
follows for the periods indicated (reflecting the partial 
waiver of the investment advisory and sub-investment 
advisory and/or administration fees):

5.77% for the one-year period beginning April 1, 1997 
through March 31, 1998.

30.35% for the five-year period from April 1, 1993 through 
March 31, 1998; and

115.63% for the period from the Fund's commencement of 
operations on April 22, 1988 through March 31, 1998.

These aggregate total return figures assume that the 
maximum 4.00% sales charge assessed by the Fund on purchases 
of Class A shares has been deducted from the investment at 
the time of purchase. If the maximum sales charge had not 
been deducted at the time of purchase, the Fund's aggregate 
total return reflecting the partial waiver of the investment 
advisory and sub-investment advisory and/or administration 
fees for those same periods would have been 10.20%, 35.79% 
and 124.71%, respectively. 

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

5.16% for the one-year period from April 1, 1997 through 
March 31, 1998; and

31.33% for the five-year period from April 1, 1993 through 
March 31, 1998; and

41.07% for the period beginning on November 6, 1992 
(commencement of operations) through March 31, 1998.

These figures assume that the applicable maximum 4.50% 
CDSC has been deducted from the investment at the time of 
purchase. If the investment advisory and sub-investment 
advisory and/or administration fees had not been partially 
waived and the maximum CDSC had not been deducted at the 
time of purchase, the Fund's aggregate total returns for the 
same period would have been 9.66%, 32.33%, and 41.07% 
respectively, for those same periods.

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

7.41% for the one year period from April 1, 1997 through 
March 31, 1998; and
31.98% per annum for the period from December 13, 1994 
(commencement of operations) through March 31, 1998.

These aggregate total return figures assume that the 
applicable CDSC has been deducted from the investment.  Had 
the CDSC not been deducted, the average annual total return 
on the Fund's Class L shares would have been 9.50% and 
33.31%, respectively, for those same periods.

It is important to note that the total return figures set 
forth above are based on historical earnings and are not 
intended to indicate future performance. Each Class' net 
investment income changes in response to fluctuation in 
interest rates and the expenses of the Fund. Performance 
will vary from time to time depending upon market 
conditions, the composition of the Fund's portfolio and its 
operating expenses and the expenses exclusively attributable 
to the Class. Consequently, any given performance quotation 
should not be considered representative of the Class' 
performance for any specified period in the future. In 
addition, because the performance will vary, it may not 
provide a basis for comparing an investment in the Class 
with certain bank deposits or other investments that pay a 
fixed yield for a stated period of time. Investors comparing 
a Class' performance with that of other mutual funds should 
give consideration to the quality and maturity of the 
respective investment companies' portfolio securities.
    


TAXES
   

The following is a summary of selected Federal income tax 
considerations that may affect the Fund and its 
shareholders. This summary is not intended as a substitute 
for individual tax advice and investors are urged to consult 
their own tax advisors as to the tax consequences of an 
investment in the Fund.

As described above and in the Prospectus, the Fund is 
designed to provide shareholders with current income which 
is excluded from gross income for Federal income tax 
purposes and exempt from New Jersey state personal income 
taxes.  The Fund 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 Fund 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 Fund has qualified and intends to continue to qualify 
each year as a "regulated investment company" under the 
Code. Provided that the Fund (a) qualifies as a regulated 
investment company and (b) distributes at least 90% of its 
taxable net investment income and net realized short-term 
capital gains and 90% of its tax-exempt interest income 
(reduced by certain expenses), the Fund will not be liable 
for Federal and New Jersey state income or franchise taxes 
to the extent its taxable net investment income and its net 
realized capital gains, if any, are distributed to its 
shareholders.

Because the Fund will distribute exempt-interest 
dividends, interest on indebtedness incurred by a 
shareholder to purchase or carry Fund shares is not 
deductible for Federal and New Jersey state income tax 
purposes.  If a shareholder receives exempt-interest 
dividends with respect to any share and if such share is 
held by the shareholder for six months or less, then for 
Federal and New Jersey state income tax purposes, any loss 
on the sale or exchange of such share, to the extent of such 
exempt-interest dividend, may be disallowed.  In addition, 
the Code may 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. Furthermore, that 
portion of any exempt-interest dividends paid by the Fund 
which represents income derived from private activity bonds 
held by the Fund may not retain its Federal tax-exempt 
status in the hands of a shareholder who is a "substantial 
user" of a facility financed by such bonds or a "related 
person" thereof. Similar rules are applicable for New Jersey 
state personal income tax purposes. Moreover (a) some or all 
of the Fund's dividends and distributions may be a specific 
tax preference item, or a component of an adjustment item, 
for purposes of the Federal individual and corporate 
alternative minimum taxes and (b) the receipt of the Fund's 
dividends and distributions may affect a corporate 
shareholder's Federal "environmental" tax liability if such 
tax is reinstated as proposed by President Clinton. In 
addition, the receipt of Fund dividends and distributions 
may affect a foreign corporate shareholder's Federal "branch 
profits" tax liability and the Federal and New Jersey state 
"excess net passive income" tax liability of a shareholder 
of a Subchapter S corporation. Shareholders should consult 
their own tax advisors as to whether they are (a) 
substantial users with respect to a facility or related to 
such users within the meaning of the Code and (b) subject to 
a Federal alternative minimum tax, the Federal environmental 
tax, the Federal branch profits tax or the Federal and New 
Jersey state excess net passive income tax.

As described above and in the Fund's Prospectus, the Fund 
may invest in exchange-traded municipal bond index futures 
contracts and options on interest rates futures contracts.  
As a general rule, these investment activities will increase 
or decrease the amount of long-and short-term capital gains 
or losses realized by the Fund and, accordingly, will affect 
the amount of capital gains distributed to the Fund's 
shareholders. For Federal and New Jersey state income tax 
purposes, gain or loss on the futures contracts and options 
(collectively referred to herein as "section 1256 
contracts") is taxed pursuant to a special "mark-to-market 
system." Under the mark-to-market system, these instruments 
are treated as if sold at the Fund's fiscal year end for 
their fair market value. As a result, the Fund will be 
recognizing gains or losses before they are 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, accordingly, 
the mark-to-market system generally will affect the amount 
of capital gains or losses taxable to the Fund and the 
amount of distributions taxable to a shareholder. Moreover, 
if the Fund invests in both section 1256 contracts and 
offsetting positions in such contracts which together 
constitute a straddle, then the Fund may be required to 
defer certain realized losses.  The Fund expects that its 
activities with respect to section 1256 contracts and 
offsetting positions in such contracts will not cause it to 
be treated as recognizing a materially greater amount of 
capital gains than actually realized and will permit it to 
use substantially all of the losses of the Fund for the 
fiscal years in which such losses actually occur.

Long term capital gains, if any, realized by the Fund 
will be distributed annually as described in the Prospectus. 
Such distributions ("capital gain dividends") will be 
taxable to shareholders as long-term capital gains, 
regardless of how long they have held Fund shares, and will 
be designated as capital gain dividends in a written notice 
mailed to shareholders after the close of the Fund's taxable 
year. If a shareholder receives a capital gain dividend with 
respect to any share and if the share has been held by the 
shareholder for six months or less, then any loss (to the 
extent not disallowed pursuant to the other six-month rule 
described above relating to exempt-interest dividends) on 
the sale or exchange of such share will be treated as a 
long-term capital loss to the extent of the capital gain 
dividend.

If a shareholder incurs a sales charge when acquiring 
shares of the Fund, disposes of those shares within 90 days 
and then acquires shares in a mutual fund for which the 
otherwise applicable sales charge is reduced by reason of a 
reinvestment right (i.e., exchange privilege), the original 
sales charge will not be taken into account when computing 
gain or loss on the original shares to the extent the 
subsequent sales charge is reduced. The portion of the 
original sales charge that does not increase the 
shareholder's tax basis in the original shares will be 
treated as incurred with respect to the second acquisition 
and, as a general rule, will increase the shareholder's tax 
basis in the newly acquired shares. Furthermore, the same 
rule also applies to a disposition of the newly acquired 
shares made within 90 days of the second acquisition. This 
provision prevents a shareholder from immediately deducting 
the sales charge by shifting his or her investment in a 
family of mutual funds.

Each shareholder will receive after the close of the 
calendar year an annual statement as to the Federal income 
tax and New Jersey state personal income tax status of his 
or her dividends and distributions from the Fund for the 
prior calendar year. Dividends attributable to New Jersey 
Municipal Securities and any other obligations which, when 
held by an individual, the interest therefrom would be 
exempt from taxation by New Jersey, will be exempt from New 
Jersey state personal income taxation ("New Jersey exempt-
interest dividends"). Any dividends attributable to interest 
on municipal obligations that are not New Jersey Municipal 
Securities generally will be taxable as ordinary dividends 
for New Jersey state personal income tax purposes even if 
such dividends are excluded from gross income for Federal 
income tax purposes.  These statements also will designate 
the amount of exempt-interest dividends that is a specific 
preference item for purposes of the Federal individual and 
corporate alternative minimum taxes. Each shareholder also 
will receive, if appropriate, written notice after the close 
of the Fund's taxable year as to the Federal income tax 
status of his or her dividends and distributions.  
Shareholders should consult their tax advisors as to any 
other state and local taxes that may apply to these 
dividends and distributions.  The dollar amount of dividends 
excluded or exempt from Federal income taxation or New 
Jersey state personal income taxation and the dollar amount 
subject to Federal income taxation or New Jersey state 
personal income taxation, if any, will vary for each 
shareholder depending upon the size and duration of each 
shareholder's investment in the Fund. 

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

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

The foregoing is only a summary of certain tax 
considerations generally affecting the Fund and its 
shareholders, and is not intended as a substitute for 
careful tax planning. Further, it should be noted that, for 
New Jersey state tax purposes, the portion of any Fund 
dividends constituting New Jersey exempt-interest dividends 
is exempt from income for New Jersey state personal income 
tax purposes only. Dividends (including New Jersey exempt-
interest dividends) paid to shareholders subject to New 
Jersey state franchise tax or New Jersey state corporate 
income tax may therefore be taxed as ordinary dividends to 
such shareholders, notwithstanding that all or a portion of 
such dividends is exempt from New Jersey state personal 
income tax. Potential shareholders in the Fund, including, 
in particular, corporate shareholders which may be subject 
to either New Jersey franchise tax or New Jersey corporate 
income tax, should consult their tax advisors with respect 
to (a) the application of such corporate and franchise taxes 
to the receipt of Fund dividends and as to their own New 
Jersey state tax situation in general, (b) the application 
of other state and local taxes to the receipt of Fund 
dividends and distributions and (c) their own specific tax 
situations.
    

ADDITIONAL INFORMATION

The Fund was incorporated under the laws of the State of 
Maryland on November 12, 1987. The Fund commenced operations 
on April 22, 1988 under the name Shearson Lehman New Jersey 
Municipals Inc. On December 15, 1988, March 31, 1992, July 
30, 1993 and October 14, 1994, the Fund changed its name to 
SLH New Jersey Municipals Fund Inc., Shearson Lehman 
Brothers New Jersey Municipals Fund Inc., Smith Barney 
Shearson New Jersey Municipals Fund Inc. and Smith Barney 
New Jersey Municipals Fund Inc., respectively. 

PNC, located at 17th and Chestnut Streets, Philadelphia, 
Pennsylvania 19101, serves as  the Fund's custodian pursuant 
to a custody agreement. Under the custody agreement, PNC 
holds the Fund's portfolio securities and keeps all 
necessary accounts and records. For its services, PNC 
receives a monthly fee based upon the month-end market value 
of securities held in custody and also receives securities 
transaction charges. The assets of the Fund are held under 
bank custodianship in compliance with the 1940 Act. 

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

FINANCIAL STATEMENTS
   

The Fund's Annual Report for the fiscal year ended March 
31, 1998 is incorporated herein by reference in its 
entirety.

    



APPENDIX A
   

Description of S&P and Moody's ratings:

S&P Ratings for Municipal Bonds

S&P's Municipal Bond ratings cover obligations of states 
and political subdivisions. Ratings are assigned to 
general obligation and revenue bonds. General 
obligation bonds are usually secured by all resources 
available to the municipality and the factors outlined 
in the rating definitions below are weighed in 
determining the rating. Because revenue bonds in 
general are payable from specifically pledged 
revenues, the essential element in the security for a 
revenue bond is the quantity and quality of the 
pledged revenues available to pay debt service.

Although an appraisal of most of the same factors that 
bear on the quality of general obligation bond credit 
is usually appropriate in the rating analysis of a 
revenue bond, other factors are important, including 
particularly the competitive position of the municipal 
enterprise under review and the basic security 
covenants. Although a rating reflects S&P's judgment 
as to the issuer's capacity for the timely payment of 
debt service, in certain instances it may also reflect 
a mechanism or procedure for an assured and prompt 
cure of a default, should one occur, i.e., an 
insurance program, Federal or state guarantee or the 
automatic withholding and use of state aid to pay the 
defaulted debt service.

The ratings are based, in varying degrees, on the following 
considerations:

I. Likelihood of default - capacity and willingness 
of the obligor as to the timely payment of 
interest and repayment of principal in 
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position 
of, the obligation in the event of bankruptcy, 
reorganization or other arrangement under the 
laws of bankruptcy and other laws affecting 
creditors' rights.

AAA - This is the highest rating assigned by S&P to a 
debt obligation and indicates an extremely strong capacity 
to pay interest and repay principal.

AA - Bonds rated AA have a very strong capacity to pay 
interest and repay principal, and in the majority of 
instances they differ from AAA issues only in small degrees.

A - Bonds rated A have a strong capacity to pay interest 
and repay principal, although they are somewhat more 
susceptible to the adverse effects of changes in 
circumstances and economic conditions than bonds in higher-
rated categories.

BBB - Bonds rated BBB are regarded as having an adequate 
capacity to pay interest and repay principal. Whereas they 
normally exhibit adequate protection parameters, adverse 
economic conditions or changing circumstances are more 
likely to lead to weakened capacity to pay interest and 
repay principal for bonds in this category than for bonds in 
the higher-rated categories.

BB - An obligation rated BB is less vulnerable to 
nonpayment than other speculative issues.  However, it faces 
major ongoing uncertainties or exposure to adverse business, 
financial, or economic conditions which could lead to the 
obligor's inadequate capacity to meet its financial 
commitment on the obligation.

B - An obligation rated B is more vulnerable to 
nonpayment than obligations rated BB, but the obligor 
currently has the capacity to meet its financial commitment 
on the obligation. Adverse business, financial, or economic 
conditions will likely impair the obligor's capacity or 
willingness to meet its financial commitment on the 
obligation.

CCC - An obligation rated CCC is currently vulnerable to 
nonpayment, and is dependent upon favorable business, 
financial, and economic conditions for the obligor to meet 
its financial commitment on the obligation. In the event of 
adverse business, financial, or economic conditions, the 
obligor is not likely to have the capacity to meet its 
financial commitment on the obligation.

CC - An obligation rated CC is currently highly 
vulnerable to nonpayment.

C - The C rating may be used to cover a situation where a 
bankruptcy petition has been filed or similar action has 
been taken, but payments on this obligation are being 
continued.

D - An obligation rated D is in payment default. The D 
rating category is used when payments on an obligation are 
not made on the date due even if the applicable grace period 
has not expired, unless Standard & Poor's believes that such 
payments will be made during such grace period. The 'D' 
rating also will be used upon the filing of a bankruptcy 
petition or the taking of a similar action if payments on an 
obligation are jeopardized.

Plus(+) or minus(-) - The ratings from AA to CCC may be 
modified by the addition of a plus or minus sign to show 
relative standing within the major rating categories.

P - The letter P following a rating indicates the rating 
is provisional. A provisional rating assumes the successful 
completion of the project being financed by the issuance of 
the bonds being rated and indicates that payment of debt 
service requirements is largely or entirely dependent upon 
the successful and timely completion of the project. This 
rating, however, while addressing credit quality subsequent 
to completion, makes no comment on the likelihood of, or the 
risk of default upon failure of, such completion.  
Accordingly, the investor should exercise his own judgment 
with respect to such likelihood and risk.

L - The letter L indicates that the rating pertains to 
the principal amount of those bonds to the extent that the 
underlying deposit collateral is federally insured, and 
interest is adequately collateralized. In the case of 
certificates of deposit, the letter L indicates that the 
deposit, combined with other deposits being held in the same 
right and capacity, will be honored for principal and pre-
default interest up to federal insurance limits within 30 
days after closing of the insured institution or, in the 
event that the deposit is assumed by a successor insured 
institution, upon maturity.

Conditional rating(s), indicated by "Con" are given to 
bonds for which the continuance of the security rating is 
contingent upon S&P's receipt of an executed copy of the 
escrow agreement or closing documentation confirming 
investments and cash flows and/or the security rating is 
conditional upon the issuance of insurance by the respective 
insurance company.

NR - Not rated.

S&P Ratings for Municipal Notes

Municipal notes with maturities of three years or less 
are usually given note ratings (designated SP-1, -2 or -3) 
by S&P to distinguish more clearly the credit quality of 
notes as compared to bonds. Notes rated SP-1 have a strong 
capacity to pay principal and interest. An issue determined 
to possess a very strong capacity to pay debt service is 
given a plus(+) designation. Notes rated SP-2 have a 
satisfactory capacity to pay principal and interest, with 
some vulnerability to adverse financial and economic changes 
over the term of the notes. Notes rated SP-3 have 
speculative capacity to pay principal and interest. 

Commercial Paper Ratings

A-1 - This designation indicates that the degree of 
safety regarding timely payment is strong. Those issues 
determined to possess extremely strong safety 
characteristics are denoted with a plus sign (+) 
designation.

A-2 - Capacity for timely payment on issues with this 
designation is satisfactory. However, the relative degree of 
safety is not as high as for issues designated A-1.

A-3 - Issues carrying this designation have an adequate 
capacity for timely payment. They are, however, more 
vulnerable to the adverse effects of changes in 
circumstances than obligations carrying the higher 
designations.

B - Issues rated B are regarded as having only 
speculative capacity for timely payment.

C - This rating is assigned to short-term debt 
obligations with a doubtful capacity for payment.

D - Debt rated D is in payment default. The D rating 
category is used when interest payments or principal 
payments are not made on the due date, even if the 
applicable grace period has not expired, unless S&P's 
believes such payments will be made during such grace 
period.


Moody's Ratings for Municipal Bonds

Aaa - Bonds which are Aaa are judged to be of the best 
quality. They carry the smallest degree of investment risk 
and are generally referred to as "gilt edge.'' Interest 
payments are protected by a large or by an exceptionally 
stable margin and principal is secure. While the various 
protective elements are likely to change, such changes as 
can be visualized are most unlikely to impair the 
fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high 
quality by all standards. Together with the Aaa group they 
comprise what are generally known as high-grade bonds. They 
are rated lower than the best bonds because margins of 
protection may not be as large as in Aaa securities or 
fluctuation of protective elements may be of greater 
amplitude or there may be other elements present which make 
the long-term risks appear somewhat larger than in Aaa 
securities.

A - Bonds which are rated A possess many favorable 
investment attributes and are to be considered as upper 
medium-grade obligations. Factors giving security to 
principal and interest are considered adequate, but elements 
may be present which suggest a susceptibility to impairment 
sometime in the future.

Baa - Bonds which are rated Baa are considered as medium-
grade obligations, i.e., they are neither highly protected 
nor poorly secured. Interest payments and principal security 
appear adequate for the present but certain protective 
elements may be lacking or may be characteristically 
unreliable over any great length of time. Such bonds lack 
outstanding investment characteristics and in fact have 
speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have 
speculative elements; their future cannot be considered as 
well assured. Often the protection of interest and principal 
payments may be very moderate and therefore not well 
safeguarded during both good and bad times over the future. 
Uncertainty of position characterizes bonds in this class.

B - Bonds which are rated B generally lack 
characteristics of the desirable investment. Assurance of 
interest and principal payments or of maintenance of other 
terms of the contract over any long period of time may be 
small.

Caa - Bonds that are rated Caa are of poor standing. 
These issues may be in default or present elements of danger 
may exist with respect to principal or interest.

Ca - Bonds that are rated Ca represent obligations that 
are speculative in a high degree. These issues are often in 
default or have other marked short-comings.

C - Bonds that are rated C are the lowest rated class of 
bonds, and issues so rated can be regarded as having 
extremely poor prospects of ever attaining any real 
investment standing.

Rating symbols may include numerical modifiers "1," "2", 
or "3".  The numerical modifier "1" indicates that the 
security ranks at the high end, "2" in the mid-range, and 
"3" nearer the low end of the generic category. These 
modifiers of rating symbols "Aa", "A" and "Baa" are to give 
investors a more precise indication of relative debt quality 
in each of the historically defined categories.

Moody's Ratings for Municipal Notes

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

Description of Moody's Prime-1 Commercial Paper Rating

The rating Prime-1 is the highest commercial paper rating 
assigned by Moody's. Among the factors considered by Moody's 
in assigning ratings are the following: (a) evaluation of 
the management of the issuer; (b) economic evaluation of the 
issuer's industry or industries and an appraisal of 
speculative-type risks which may be inherent in certain 
areas; (c) evaluation of the issuer's products in relation 
to competition and customer acceptance; (d) liquidity; (e) 
amount and quality of long-term debt; (f) trend of earnings 
over a period of ten years; (g) financial strength of a 
parent company and the relationships which exist with the 
issuer; and (h) recognition by the management of obligations 
which may be present or may arise as a result of public 
interest questions and preparations to meet such 
obligations. 
    



	Smith Barney
	New Jersey
	Municipals
	Fund Inc.

Statement of

Additional Information
   

July 29, 1998 
    

Smith Barney
New Jersey Municipals Fund Inc.
388 Greenwich Street
New York, NY  10013


SMITH BARNEY
A Member of Travelers Group

	A-1

SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.

PART C

Item 24. Financial Statements and Exhibits

(a)	Financial Statements:

		Included in Part A:

		Financial Highlights

		Included in Part B:

   
	The Registrant's Annual Report for the fiscal year ended 
March 31, 1998 and the Report of Independent Accountants dated 
May 15, 1998 are incorporated by reference to the Definitive 30b2-1 
filed on June 9, 1998 as Accession #0000091155-98-000374.
    
	Included in Part C:

	Consent of Independent Accountants is filed herein.

(b)	Exhibits

Exhibit No.	Description of Exhibits

All references are to the Registrant's Registration Statement on Form 
N-1A as filed with the Securities and Exchange 
Commission on December 1, 1987 File No. 33-18779 and 
811-5486 (the "Registration Statement").

(1)(a)	Registrant's Articles of Incorporation dated November 12, 
1987, Articles of Amendment dated December 15, 1988 to 
Articles of Incorporation, Articles of Revival dated 
March 31, 1992 to Articles of Incorporation, Articles 
Supplementary dated November 5, 1992 to Articles of 
Incorporation, and Articles of Amendment dated July 
30, 1993, to Articles of Incorporation are 
incorporated by reference to Post-Effective Amendment 
No. 12 to the Registration Statement filed on August 
1, 1994 ("Post-Effective Amendment No. 12").

(b)	Form of Articles of Amendment dated October 14, 1994 to the 
Articles of Incorporation are incorporated by 
reference to Post-Effective Amendment No. 13 to the 
Registration Statement filed on November 7, 1994 
("Post-Effective Amendment No. 13").

(c)	Form of Articles Supplementary and Form of Articles of 
Amendment dated November 7, 1994 to the Articles of 
Incorporation are incorporated by reference to Post-
Effective Amendment No. 13.

   
(d) Amendment to Registrant's Articles of Incorporation dated
June 1, 1998 filed herein. 
    

(2)	Registrant's By-Laws dated November 23, 1987 are incorporated 
by reference to the Registration Statement.

(3)	Not Applicable.

(4)	Registrant's form of stock certificate is incorporated by 
reference to Post-Effective Amendment No. 9 to the 
Registration Statement filed on October 23, 1992 
("Post-Effective Amendment No. 9").

(5)(a)	Investment Advisory Agreement dated July 30, 1993 between the 
Registrant and Greenwich Street Advisors is 
incorporated by reference to Post-Effective Amendment 
No. 12.

(b)	Form of Transfer of Investment Advisory Agreement dated as of 
November 7, 1994, among  Registrant, Mutual Management 
Corp. and Smith Barney Mutual Fund Management Inc. is 
incorporated by reference to Post-Effective Amendment 
No. 14 to the Registration Statement filed on June 2, 
1995 ("Post-Effective Amendment No. 14").

(6)	Form of Distribution Agreement dated July 30, 1993 between the 
Registrant and Smith Barney Shearson Inc. is 
incorporated by reference to Post-Effective Amendment 
No. 12.

(7)	Not Applicable.

(8)	Custody Agreement dated June 12, 1995 between the Registrant 
and PNC Bank, National Association is incorporated by 
reference to Post-Effective Ammendment No. 16.

(9)(a)	Transfer Agency Agreement dated August 2, 1993 between the 
Registrant and The Shareholder Services Group, Inc. is 
incorporated by reference to  Post-Effective Amendment 
No. 12.

(b)	Form of Administration Agreement dated April 20, 1994 between 
the Registrant and Smith, Barney Advisers, Inc. 
("SBA") is incorporated by reference to Post-
Effective Amendment No. 13.

(10)	Opinion of Counsel as to Legality of Securities being Offered 
is incorporated by reference to Post-Effective 
Amendment No. 14.

(11)
   
	Consent of KPMG Peat Marwick LLP is filed herein
    

(12)	Not Applicable.

(13)	Not Applicable.

(14)	Not Applicable.

(15)	Amended and Restated Services and Distribution Plan pursuant 
to Rule 12b-1 dated as of November 7, 1994 is 
incorporated by reference to Post-Effective Amendment 
No. 13.

(16)	Performance Data is incorporated by reference to Post-
Effective Amendment No. 3 to the Registration 
Statement filed on May 27, 1989.

(17)	A Financial Data Schedule is filed herein.

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

Item 25.	Persons Controlled by or under Common Control with 
Registrant

		None

Item 26.	Number of Holders of Securities

(1)					(2)
				Number of Record Holders
Title of Class		by Class as of    July 14, 
1998    

Common stock, par			Class A	   3,134    
value $.001 per share		Class B 	   1,925    
					Class L	      174    
					Class Y	          0    

Item 27.	Indemnification

	Response to this item is incorporated by reference to Post-
Effective Amendment No. 9.

Item 28		Business and Other Connections of Investment Adviser

   Investment Adviser - - Mutual Management Corp. ("MMC") formerly 
known as Smith Barney Mutual Funds Management Inc.
    

   
MMC, through its predecessors, has been in the investment 
counseling business since 1934 and was incorporated 
in December 1968 under the laws of the State of 
Delaware. MMC is a wholly owned subsidiary of Salomon 
Smith Barney Holdings Inc. (formerly known as Smith 
Barney Holdings Inc.), which in turn is a wholly 
owned subsidiary of Travelers Group Inc. (formerly 
known as Primerica Corporation) ("Travelers").  MMC 
is registered as an investment adviser under the 
Investment Advisers Act of 1940 (the "Advisers Act").
    

   
The list required by this Item 28 of the officer and 
directors of MMC together with information as to any 
other business, profession, vocation or employment of 
a substantial nature engaged in by such officer and 
directors during the past two fiscal years, is 
incorporated by reference to Schedules A and D of FORM 
ADV filed by MMC pursuant to the Advisers Act (SEC 
File No. 801-8314).
    
Item 29.	Principal Underwriters
   
Smith Barney Inc. ("Smith Barney") currently acts as a 
distributor for
Concert Investment Series;
Consulting Group Capital Markets Funds;
Global Horizons Investment Series (Cayman Islands);
Greenwich Street California Municipal Fund
Inc.;
Greenwich Street Municipal Fund Inc.;
Greenwich Street Series Fund;
High Income Opportunity Fund Inc.;
The Italy Fund Inc.;
Managed High Income Portfolio Inc.;
Managed Municipals Portfolio II Inc.;
Managed Municipals Portfolio Inc.;
Municipal High Income Fund Inc.;
Puerto Rico Daily Liquidity Fund Inc.;
Smith Barney Adjustable Rate Government Income Fund;
Smith Barney Aggressive Growth Fund Inc.;
Smith Barney Appreciation Fund Inc.;
Smith Barney Arizona Municipals Fund Inc.;
Smith Barney California Municipals Fund Inc.;
Smith Barney Concert Allocation Series Inc.;
Smith Barney Equity Funds;
Smith Barney Fundamental Value Fund Inc.;
Smith Barney Funds, Inc.;
Smith Barney Income Funds;
Smith Barney Institutional Cash Management Fund, Inc.;
Smith Barney Intermediate Municipal Fund, Inc.;
Smith Barney Investment Funds Inc.;
Smith Barney Investment Trust;
Smith Barney Managed Governments Fund Inc.;
Smith Barney Managed Municipals Fund Inc.;
Smith Barney Massachusetts Municipals Fund;
Smith Barney Money Funds, Inc.;
Smith Barney Muni Funds;
Smith Barney Municipal Fund, Inc.;
Smith Barney Municipal
Money Market Fund, Inc.;
Smith Barney Natural Resources Fund Inc.;
Smith Barney New Jersey Municipals Fund Inc.;
Smith Barney Oregon Municipals Fund Inc.;
Smith Barney Principal Return Fund;
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust;
Smith Barney Variable Account Funds;
Smith Barney World Funds, Inc.;
Smith Barney Worldwide Special Fund N.V. (Netherlands Antilles); 
Travelers Series Fund Inc.;
The USA High Yield Fund N.V.;
Worldwide Securities Limited (Bermuda);
Zenix Income Fund Inc.
and various series of unit investment trusts.
    
Smith Barney is a wholly owned subsidiary of Holdings. The 
information required by this Item 29 with respect to each director, 
officer and partner of Smith Barney is incorporated by reference to 
Schedule A of FORM BD filed by Smith Barney pursuant to the 
Securities Exchange Act of 1934 (SEC File No. 812-8510).


	Item 30.	Location of Accounts and Records

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

		   
	(2)	Mutual Management Corp.
		388 Greenwich Street
		New York, New York 10013
		    

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

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

Item 31.	Management Services

		None

   
Item 32.	Undertakings

(a) Not applicable. 

(b)	Not applicable.

(c)	Registrant undertakes to furnish each person to 
whom a prospectus is delivered with a copy of
Registrant's latest report to shareholders, upon 
request and without charge. 
    

Rule 485(b) Certification

		The Registrant hereby certifies that it meets all of 
the requirements for effectiveness pursuant to Rule 
485(b) under the Securities Act of 1933, as amended.

SIGNATURES


	Pursuant to the requirements of the Securities Act of 1933 
and the Investment Company Act of 1940, as amended, the Registrant 
has duly caused this Amendment to its Registration Statement to be 
signed on its behalf by the undersigned, thereunto duly authorized, 
in the City of New York and State of New York, on the     29th day 
of July, 1998.    

SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.



By:	/s/ Heath B. McLendon
	Health B. McLendon
	Chairman of the Board
	President and Chief Executive Officer

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


Signature:                Title:              Date:
/s/ Heath B. McLendon     Chairman of
                          the Board        July 29, 1998    
Heath B. McLendon
                          President and
                          Chief Executive Officer

/s/ Lewis E. Daidone      Senior Vice
                          President
                          and              July 29, 1998    
Lewis E. Daidone          Treasurer
                          (Chief Financial
                          And Accounting Officer)


/s/ Herbert Barg          Director       July 29, 1998    
Herbert Barg

/s/ Alfred J. Bianchetti  Director       July 29, 1998    
Alfred J. Bianchetti

/s/ Martin Brody          Director       July 29, 1998    
Martin Brody

/s/ Dwight B. Crane       Director       July 29, 1998    
Dwight B. Crane

/s/ Burt N. Dorsett       Director       July 29, 1998    
Burt N. Dorsett

/s/ Elliot S. Jaffe       Director       July 29, 1998    
Elliot S. Jaffe

/s/ Stephen E. Kaufman    Director       July 29, 1998    
Stephen E. Kaufman

/s/ Joseph J. McCann      Director       July 29, 1998    
Joseph J. McCann

/s/ Cornelius C. Rose    Director        July 29, 1998    
Cornelius C. Rose, Jr.

EXHIBIT INDEX


Exhibit No.	Exhibit

(1)(g)	Amendment to Articles of Incorporation

(11)(a)	Consent of KPMG Peat Markwick LLP

(17)	Financial Data Schedule

(18)	Rule 18f-3(d) Multiple Class Plan

			cover page