Registration Nos.: 33-43446  
811-6444  
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.       11                                        
X  
  
REGISTRATION STATEMENT UNDER  
THE INVESTMENT COMPANY ACT OF 1940                                X  
  
	Amendment No.        11                

SMITH BARNEY INVESTMENT TRUST  
                                                                       .  
(Exact name of Registrant as specified in Charter)  
  
388 Greenwich Street, New York, New York  10013  
(Address of Principal Executive Offices) (Zip Code)  
  
Christina T. Sydor  
Secretary  
  
Smith Barney Investment Trust  
388 Greenwich Street  
New York, New York  10013  
(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 becomes effective:  
			     
			       immediately upon filing pursuant to Rule 485(b)  
			__X__  on March 26, 1996 pursuant to Rule 485(b)  
			____ days after filing pursuant to Rule 485(a)(2)  
			____ on _______ pursuant to Rule 485(a)  
			      
Registrant previously registered an indefinite number of its shares pursuant   
to Rule 24f-2 of the Investment Company Act of 1940.    
 The Registrant's Rule   
24f-2 Notice for the fiscal year ended November 30, 1995 was filed on January   
30, 1996 as Accession No. 0000880366-96-000001.<R/>  
  
  
<TABLE>  
<CAPTION>  

    
    CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933(1)  
  
  
  
  
  
<S>  
  
  
  
  
Title of   
Securities  
Being   
Registered  
<C>  
  
Proposed   
Maximum  
Offering  
Amount Being  
Registered   
(1)  
<C>  
  
Proposed  
Maximum  
Aggregate  
Price per  
Unit (2)  
<C>  
  
Proposed  
Maximum  
Aggregate  
Offering  
Price (3)  
<C>  
  
  
  
Registration  
Fee  
  
  
  
  
Shares of   
beneficial  
Interest par   
value  
$0.001 per   
share  
of Smith   
Barney  
Intermediate   
Maturity New   
York  
Municipals   
Fund  
  
  
  
  
  
1,743,745  
  
  
  
  
  
$8.52  
  
  
  
  
  
$290,000  
  
  
  
  
  
$100  
  
  
  
(1) 	The shares being registered as set forth in this table are in addition   
to the indefinite number of shares of beneficial interest which the   
Registrant has registered under the Securities Act of 1933, as amended (the   
"1933 Act"), pursuant to Rule 24f-2 under the Investment company Act of   
1940, as amended (the "1940 Act").  The Registrant's Rule 24f-2 Notice for   
the fiscal year ended November 30, 1995 was filed on January 30, 1996 as   
Accession No. 0000880366-96-000001.  
  
(2)	Based on Smith Barney Intermediate Maturity New York Municipals Fund's   
closing price of $8.52 on March 21, 1996, pursuant to Rule 457(d) under the   
1933 Act and Rule 24e-2(a) under the 1940 Act.  
  
(3)	In response to Rule 24e-2(b) under the 1940 Act: (1) the calculation of   
the maximum aggregate offering price is made pursuant to Rule 24e-2;  (2)   
2,443,262 shares of beneficial interest of Smith Barney Intermediate   
Maturity New York Municipals Fund were redeemed by the Fund during the   
fiscal year ended November 30, 1995;  (3) 733,554 of such shares are being   
used for reductions pursuant to Rule 24f-2 during the current fiscal year;   
and (4) 1,709,706 shares are being used for reduction in this amendment   
pursuant to Rule 24e-2(a).  
      
  
  
     
CONTENTS OF REGISTRATION STATEMENT  
  
Front Cover  
  
Contents Page  
  
Cross Reference Sheet  
  
  
Part A:	Prospectus dated March 22, 1996 for Smith Barney Intermediate   
Maturity California Municipals Fund  
  
Prospectus dated March 22, 1996 for Smith Barney Intermediate   
Maturity New York Municipals Fund  
  
(A prospectus dated November 13, 1995 for Smith Barney S&P 500   
Advantage Fund was filed on November 13, 1995 (Accession No.   
0000091155-95-000415).  That Fund has not yet commenced operations   
and therefore is not included in this filing.)  
  
Part B:	Statement of Additional Information dated March 22, 1996 for Smith   
Barney Investment Trust  
  
Part C:	Other Information  
  
      
  
  
  
SMITH BARNEY INVESTMENT TRUST  
  
FORM N-1A  
  
CROSS-REFERENCE SHEET  
PURSUANT TO RULE 495(b)  
  
  
Part A Item No.  
  
Prospectus Caption  
  
1.  Cover Page  
  
Cover Page  
  
2.  Synopsis  
  
Prospectus Summary  
  
3.  Financial Highlights  
  
Financial Highlights  
  
4.  General Description of   
Registrant  
  
Cover Page; Prospectus Summary;   
Investment  
Objective and Management Policies;   
Additional Information  
  
  
5.  Management of the Fund  
  
Management of the Trust and the   
Fund; Distributor; Additional   
Information; Annual Report  
  
  
6.  Capital Stock and Other   
Securities  
  
Investment Objective and   
Management Policies; Dividends,   
Distributions and Taxes;   
Additional Information  
  
  
7.  Purchase of Securities Being   
Offered  
  
Purchase of Shares; Valuation of   
Shares; Exchange Privilege;   
Redemption of Shares; Minimum   
Account Size; Distributor;   
Additional Information  
  
  
8.  Redemption or Repurchase  
  
Purchase of Shares; Redemption of   
Shares; Exchange Privilege  
  
  
9.  Pending Legal Proceedings  
  
Not applicable  
  
  
  
Part B Item No.  
Statement of Additional   
Information Caption  
  
  
10.  Cover Page  
  
Cover Page  
  
11.  Table of Contents  
  
Table of Contents  
  
12.  General Information and   
History  
  
Distributor; Additional   
Information  
  
13.  Investment Objective and   
Policies  
  
Investment Objectives and   
Management Policies  
  
  
14.  Management of the Fund  
  
Management of the Trust and the   
Funds; Distributor  
  
  
15.  Control Persons and Principal   
Holders of   
       Securities  
  
Management of the Trust and the   
Funds  
  
16.  Investment Advisory and Other   
Services  
  
Management of the Trust and the   
Funds; Distributor  
  
  
17.  Brokerage Allocation and Other   
Services  
  
Investment Objectives and   
Management Policies; Distributor  
  
  
18.  Capital Stock and Other   
Securities  
  
Investment Objectives and   
Management Policies; Purchase of   
Shares; Redemption of Shares;   
Taxes  
  
  
19.  Purchase, Redemption and   
Pricing of  
       Securities Being Offered  
  
Purchase of Shares; Redemption of   
Shares; Valuation of Shares;   
Distributor; Exchange Privilege  
  
  
20.  Tax Status  
  
Taxes  
  
21.  Underwriters  
  
Distributor  
  
22.  Calculation of Performance   
Data  
  
Performance Data  
  
23.  Financial Statements  
  
Financial Statements  
  
  
  
  
SMITH BARNEY INVESTMENT TRUST  
  
  
PART A  
PROSPECTUS  
  
                                                              SMITH BARNEY  
  
  
                                                              Intermediate  
  
                                                                  Maturity  
  
                                                                California  
  
                                                                Municipals  
  
                                                                      Fund  
  
  
     
                                                            March 22, 1996  
      
  
                                                   Prospectus begins on page  
one  
  
  
  
[Logo] Smith Barney Mutual Funds  
       Investing for your future  
       Every day.  
  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
     
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Prospectus                                                      March 22, 1996  
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--  
      
  
     388 Greenwich Street  
     New York, New York 10013  
     (212) 723-9218  
  
     
     Smith Barney Intermediate Maturity California Municipals Fund (the  
"Fund")  
is a non-diversified intermediate-term municipal bond fund that seeks to  
provide  
California investors with as high a level of current income exempt from  
Federal  
income taxes and California State personal income taxes as is consistent with  
the preservation of principal. The Fund invests primarily in investment grade  
obligations issued by the State of California and its political subdivisions,  
agencies and public authorities. The Fund is one of a number of funds, each  
having distinct investment objectives and policies making up the Smith Barney  
Investment Trust (the "Trust"). The Trust is an open-end management investment  
company commonly referred to as a mutual fund.  
  
     This Prospectus sets forth concisely certain information about the Fund,  
including sales charges and service and distribution fees and expenses, that  
prospective investors will find helpful in making an investment decision.  
Investors are encouraged to read this Prospectus carefully and retain it for  
future reference. Shares of the other funds offered by the Trust are described  
in separate prospectuses which may be obtained by calling or writing the Trust  
at the telephone number or address set forth above or by contacting a Smith  
Barney Financial Consultant.  
  
     Additional information about the Fund and the Trust is contained in a  
Statement of Additional Information dated March 22, 1996, as amended or  
supplemented from time to time, that is available upon request and without  
charge by calling or writing the Trust at the telephone number or address set  
forth above or by contacting a Smith Barney Financial Consultant. The  
Statement  
of Additional Information 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  
  
Smith Barney Mutual Funds Management Inc.  
Investment Adviser and Administrator  
  
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES  
AND  
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE  
SECURITIES  
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON  
THE  
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE  
CONTRARY IS A  
CRIMINAL OFFENSE.  
  
                                                                                
1  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
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Table of Contents  
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--  
  
Prospectus Summary                                                              
3  
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Financial Highlights                                                           
10  
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Investment Objective and Management Policies                                   
13  
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Valuation of Shares                                                            
26  
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--  
Dividends,Distributions and Taxes                                              
27  
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--  
Purchase of Shares                                                             
29  
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--  
Exchange Privilege                                                             
36  
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--  
Redemption of Shares                                                           
39  
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Minimum Account Size                                                           
42  
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Performance                                                                    
42  
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Management of the Trust and the Fund                                           
43  
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Distributor                                                                    
45  
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--  
Additional Information                                                         
46  
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--  
  
  
  
=========================================================================== 
=====  
  
     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 or  
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 an offer or solicitation in such jurisdiction.  
  
=========================================================================== 
=====  
  
2  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
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--  
Prospectus Summary  
------------------------------------------------------------------------------ 
--  
  
The following summary is qualified in its entirety by the detailed information  
appearing elsewhere in this Prospectus and in the Statement of Additional  
Information. Cross references in this summary are to headings in the  
Prospectus.  
See "Table of Contents."  
  
     
     INVESTMENT OBJECTIVE The Fund seeks to provide California investors with  
as  
high a level of current income exempt from Federal income taxes and California  
State personal income taxes as is consistent with the preservation of  
principal.  
The Fund invests primarily in investment grade obligations issued by the State  
of California and its political subdivisions, agencies and public authorities.  
The weighted average maturity of the Fund's portfolio securities will normally  
not be less than three nor more than 10 years. The maximum remaining maturity  
of  
the securities in which the Fund will normally invest will be no greater than  
20  
years. See "Investment Objective and Management Policies."  
  
  
ALTERNATIVE PURCHASE ARRANGEMENTS  The Fund offers three 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 two Classes of shares: Class A shares and Class C shares, which differ  
principally in terms of sales charges and rates of expenses to which they are  
subject. A third Class of shares, Class Y shares, is offered only to investors  
meeting an initial investment minimum of $5,000,000. 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 2.00% 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  
waived for certain purchases. Purchases of Class A shares which, when combined  
with current holdings of Class A shares offered with a sales charge equal or  
exceed $500,000 in the aggregate, 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 -- No Initial Sales Charge."  
      
  
     Class C Shares. Class C shares are sold at net asset value with no  
initial  
sales charge. They are subject to an annual service fee of 0.15% and an annual  
distribution fee of 0.20% of the average daily net assets of the Class, and  
investors pay a CDSC of 1.00% if they redeem Class C shares within 12 months  
of  
purchase. The CDSC may be waived for certain redemptions. The Class C shares'  
distribution fee may cause that Class to have higher expenses and pay lower  
dividends than  
  
                                                                                
3  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
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--  
Prospectus Summary (continued)  
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--  
  
Class A shares.  Purchases of the Fund shares, which when combined with  
current  
holdings of Class C 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 $5,000,000. Class Y shares are sold at net asset  
value with no initial sales charge or CDSC. They 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 holding period 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 to purchase shares without an initial  
sales  
charge and the shares are subject to lower ongoing expenses over the term of  
the  
investment. As an alternative, Class C 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, investors should consider the effect of the CDSC period  
in  
the context of their own investment time frame.  
  
     Investors investing a minimum of $5,000,000 must purchase Class Y shares,  
which are not subject to an initial sales charge, CDSC or service or  
distribution fees. The maximum purchase amount for Class A shares is  
$4,999,999  
and Class C shares is $499,999. There is no maximum purchase amount for Class  
Y  
shares.  
      
  
     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 would be immediately invested in the Fund. In addition, Class A share  
purchases, which when combined with current holdings of Class A shares offered  
with a sales charge equal or exceed $500,000 in the aggregate, 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 aggregate  
investment may be met by adding the purchase to the net asset value of all  
Class  
A shares offered with  
  
4  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
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--  
Prospectus Summary (continued)  
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--  
  
a sales charge held in funds sponsored by Smith Barney Inc. ("Smith Barney")  
listed under "Exchange Privilege." See "Purchase of Shares." Because the  
ongoing  
expenses of Class A shares may be lower than those for Class C shares,  
purchasers eligible to purchase Class A shares at net asset value should  
consider doing so.  
  
     Smith Barney Financial Consultants may receive different compensation for  
selling each Class of shares. Investors should understand that the purpose of  
the CDSC on the Class C shares is the same as that of the initial sales charge  
on the Class A shares.  
  
     See "Purchase of Shares" and "Management of the Trust and 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 among 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 and Class C 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 $5,000,000.  
Subsequent investments of at least $50 may be made for all Classes. The  
minimum  
initial investment requirement for Class A and Class C shares and the  
subsequent  
investment requirement for all Classes through the Systematic Investment Plan  
described below is $50. 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."  
  
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 in an amount of at least $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."  
  
                                                                                
5  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
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Prospectus Summary (continued)  
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--  
  
MANAGEMENT OF THE TRUST AND THE FUND  Smith Barney Mutual Funds Management  
Inc.  
("SBMFM") serves as the Fund's investment adviser and administrator. SBMFM is  
a  
wholly owned subsidiary of 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, Consumer Finance  
Services, Life Insurance Services and Property & Casualty Insurance Services.  
See "Management of the Trust and 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, plus any applicable sales charge differential. 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 also is available  
from a Smith Barney Financial Consultant. See "Valuation of Shares."  
  
DIVIDENDS AND DISTRIBUTIONS  Dividends from net investment income are paid on  
the last Friday of each calendar month to shareholders of record as of three  
business days prior. Distributions of net realized capital gains, if any, are  
paid annually. See "Dividends, Distributions and Taxes."  
  
REINVESTMENT OF DIVIDENDS  Dividends and distributions paid on shares of any  
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 reinvestments will not be subject to any sales charge or  
CDSC. See "Dividends, Distributions and Taxes."  
  
     
RISK FACTORS AND SPECIAL CONSIDERATIONS  No assurance can be given that the  
Fund  
will achieve its investment objective. Shares of the Fund, unlike certain bank  
deposit accounts, are not guaranteed or insured by any Federal or state  
authority. Changes in interest rates generally will result in increases or  
decreases in the market value of the obligations held by the Fund. The yield  
of  
the Fund may not be as high as those of other funds that invest in lower  
quality  
and/or longer term securities. The Fund is not a tax-exempt money market fund  
and therefore its investment portfolio can be expected to experience greater  
volatility than that of a tax-exempt money market fund. The net asset value of  
the Fund will be subject to greater fluctuation to the extent that the Fund  
invests in zero coupon securities. The Fund's net asset value per share will  
      
  
6  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
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--  
Prospectus Summary (continued)  
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--  
  
fluctuate depending on a combination of factors such as current market  
interest  
rates and the creditworthiness of the issuers in whose securities the Fund  
invests. The Fund will not invest in obligations that are rated lower than Baa  
by Moody's Investors Service, Inc. ("Moody's"), BBB by Standard & Poor's  
Corporation ("S&P") or BBB by Fitch Investors Service, L.P. ("Fitch"), at the  
time of purchase. The ratings of Moody's, S&P and Fitch represent their  
opinions  
as to the quality of the obligations that they undertake to rate; the ratings  
are relative and subjective and are not absolute standards of quality.  
  
     
     The Fund may invest up to 20% of its total assets in unrated securities  
that SBMFM determines to be of comparable quality to the securities rated  
investment grade in which the Fund may invest. Dealers may not maintain daily  
markets in unrated securities and retail secondary markets for many of them  
may  
not exist; lack of markets may affect the Fund's ability to sell these  
securities when SBMFM deems it appropriate. The Fund has the right to invest  
without limitation in state and local obligations that are "private activity  
bonds," the income from which may be taxable as a specific preference item for  
purposes of the Federal alternative minimum tax. Thus, the Fund may not be a  
suitable investment for investors who are subject to the alternative minimum  
tax.  
  
     Certain of the instruments held by the Fund, and certain of the  
investment  
techniques that the Fund may employ, might expose the Fund to certain risks.  
The  
instruments exposing the Fund to risks are municipal leases, zero coupon  
securities, custodial receipts, municipal obligation components, floating and  
variable rate demand notes and bonds, and participation interests. Entering  
into  
securities transactions on a when-issued or delayed-delivery basis are  
investment techniques involving risks to the Fund. See "Investment Objective  
and  
Management Policies -- Investment Techniques -- Risk Factors and Special  
Considerations" and "Dividends, Distributions and Taxes."  
      
  
     Investment in the Fund which is classified as a non-diversified fund, may  
present a greater risk than an investment in a diversified fund. See  
"Investment  
Objective and Management Policies -- Risk Factors and Special Considerations."  
Investment in the Fund involves risks and special considerations applicable to  
the State of California. See "Investment Objective and Management Policies --  
Risk Factors and Special Considerations."  
  
                                                                                
7  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
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Prospectus Summary (continued)  
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--         
  
     
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 upon 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 C   Class Y  
=========================================================================== 
=====  
Shareholder Transaction Expenses  
   Maximum sales charge imposed on purchases  
     (as a percentage of offering price)          2.00%     None      None  
   Maximum CDSC  
     (as a percentage of original cost or  
     redemption proceeds, whichever is lower)     None*     1.00%     None  
=========================================================================== 
=====  
     
Annual Fund Operating Expenses***  
   (as a percentage of average net assets)  
   Management fees (after fee waivers)            0.14%     0.14%     0.14%  
   12b-1 fees**                                   0.15      0.35      0.00  
   Other expenses                                 0.46      0.49      0.44  
      
=========================================================================== 
=====  
TOTAL FUND OPERATING EXPENSES  
   (after waivers)                                0.75%     0.98%     0.58%  
=========================================================================== 
=====  
  
  
  *  Purchases of Class A shares, which when combined with current holdings of  
     Class A shares offered with a sales charge, equal or exceed $500,000 in  
the  
     aggregate, will be made at net asset value with no sales charge, but may  
be  
     subject to a CDSC of 1.00% on redemptions made within 12 months.  
  
 **  Class C shares are subject to an ongoing distribution fee and, as a  
result,  
     long-term shareholders of Class C shares may pay more than the economic  
     equivalent of the maximum front-end sales charge permitted by the  
National  
     Association of Securities Dealers, Inc.  
  
     
***  During the fiscal year ended November 30, 1995, the Fund's investment  
     adviser and administrator voluntarily waived portions of its fees in the  
     aggregate amount equal to 0.41% of the value of the Fund's average daily  
     net assets thereby decreasing the amount paid in respect of management  
fees  
     to 0.14% of the value of the Fund's average daily net assets. This had  
the  
     effect of lowering the Fund's overall expenses and increasing the returns  
     available to investors. If SBMFM had elected not to waive fees and  
     reimburse expenses, the Fund's total operating expenses for Class A,  
Class  
     C and Class Y shares for the fiscal year ended November 30, 1995 would  
have  
     been 1.16%, 1.39% and 0.99%, respectively, of the value of the Fund's  
     average daily net assets. As of November 17, 1995, the Fund's investment  
     advisory fee was decreased from 0.35% to 0.30% of the average daily net  
     assets of the Fund.  
      
  
     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  
actually may pay lower or no charges, depending on the amount purchased and  
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 C shares an annual 12b-1 fee of 0.35% of the value of average  
  
8  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Prospectus Summary (continued)  
------------------------------------------------------------------------------ 
--  
  
daily net assets of that Class, consisting of a 0.20% distribution fee and a  
0.15% service fee. The nature of the services for which the Fund pays  
management  
fees is described under "Management of the Trust and the Fund." "Other  
expenses"  
in the above table includes fees for shareholder services not provided by  
Smith  
Barney, custodial fees, legal and accounting fees, printing costs and  
registration fees, the costs of regulatory compliance, the costs associated  
with  
maintaining the Trust's legal existence and the costs involved in  
communicating  
with shareholders of the Fund.  
  
         
  
     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 above. See "Purchase of Shares," "Redemption  
of Shares" and "Management of the Trust and the Fund."  
  
     
                                     1 year     3 years     5 years     10  
years  
=========================================================================== 
=====  
An investor would pay the following  
expenses on  $1,000 investment,  
assuming(1) 5.00% annual return  
and(2) redemption at the end of  
each time period:  
  
   Class A                              $28       $43         $61         $111  
   Class C                               20        31          54          120  
   Class Y                                6        19          32           73  
An investor would pay the following  
expenses on the same investment,  
assuming the same annual return  
and no redemption:  
   Class A                              $28       $43         $61         $111  
   Class C                               10        31          54          120  
   Class Y                                6        19          32           73  
=========================================================================== 
=====  
      
  
     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>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Financial Highlights  
------------------------------------------------------------------------------ 
-  
  
The following information for the fiscal year ended November 30, 1995 has been  
audited by KPMG Peat Marwick LLP, independent auditors, whose report thereon  
appears in the Fund's Annual Report dated November 30, 1995. The following  
information for the period ended November 30, 1992 and for the fiscal years  
ended November 30, 1993 and November 30, 1994 has been audited by Coopers &  
Lybrand L.L.P., independent auditors. This information 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  
Statement  
of Additional Information.  
  
     
  
For a Class A share of beneficial interest outstanding throughout each year:  
  
                                       1995       1994       1993        
1992(1)  
=========================================================================== 
=====  
Net Asset Value, Beginning of Year    $7.80      $8.50      $8.04       $7.90  
------------------------------------------------------------------------------ 
--  
Income (Loss) From Operations:  
  Net investment income(2)             0.40       0.39       0.39        0.35  
  Net realized and unrealized  
   gain (loss)                         0.73      (0.69)      0.46        0.14  
------------------------------------------------------------------------------ 
--  
Total Income/(loss) From Operations    1.13      (0.30)      0.85        0.49  
------------------------------------------------------------------------------ 
--  
Less Distributions From:  
  Net investment income               (0.40)     (0.39)     (0.39)      (0.35)  
  Net realized gains                    --       (0.01)       --          --  
------------------------------------------------------------------------------ 
--  
Total Distributions                   (0.40)     (0.40)     (0.39)      (0.35)  
------------------------------------------------------------------------------ 
--  
Net Asset Value, End of Year          $8.53      $7.80      $8.50       $8.04  
------------------------------------------------------------------------------ 
--  
Total Return                          14.85%     (3.65)%    10.70%        
6.33%++  
------------------------------------------------------------------------------ 
--  
Net Assets, end of year (in 000s)   $26,211    $25,359    $32,514     $10,667  
------------------------------------------------------------------------------ 
--  
Ratios to Average Net Assets:            
  Expenses(2)                          0.75%      0.75%      0.72%        
0.65%+  
  Net investment income                4.89       4.73       4.45        4.81+  
------------------------------------------------------------------------------ 
--  
Portfolio Turnover Rate                   8%        39%        16%          
46%+  
=========================================================================== 
=====  
      
  
(1)  For the period from December 31, 1991 (inception date) to November 30,  
     1992.  
  
     
(2)  The investment adviser has waived all or part of its fees for the three  
     years ended November 30, 1995 and the period ended November 30, 1992. If  
     such fees were not waived, the per share decreases in net investment  
income  
     and expense ratios would be as follows:  
  
                  Per Share Decreases                     Expense Ratios  
               In Net Investment Income                Without Fee Waivers  
            -------------------------------    ------------------------------- 
--  
            1995     1994     1993     1992      1995    1994     1993    1992  
            ----     ----     ----     ----      ----    ----     ----    ----  
  
Class A    $0.03    $0.04    $0.07    $0.11     $1.16%   1.24%    1.49%    
2.18%+  
  
++   Total return is not annualized, as it may not be representative of the  
     total return for the year.  
  
 +   Annualized  
      
  
10  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Financial Highlights (continued)  
------------------------------------------------------------------------------ 
--  
  
     
For a Class C share of beneficial interest outstanding throughout each year:  
      
  
     
                                                            1995       1994(1)  
=========================================================================== 
=====  
Net Asset Value, Beginning of Year                         $7.80       $7.76  
------------------------------------------------------------------------------ 
--  
Income from investment operations:  
  Net investment income(2)                                  0.38        0.01  
  Net realized and unrealized  
    gain (loss)                                             0.72        0.05**  
------------------------------------------------------------------------------ 
--  
Total Income from Operations                                1.10        0.06  
------------------------------------------------------------------------------ 
--  
Less Distributions From:  
  Net investment income                                    (0.38)      (0.02)  
  Net realized gain                                          --          --  
------------------------------------------------------------------------------ 
--  
Total Distributions                                        (0.38)      (0.02)  
------------------------------------------------------------------------------ 
--  
Net Asset Value, End of Year                               $8.52       $7.80  
------------------------------------------------------------------------------ 
--  
Total Return                                               14.36%        
0.72%++  
------------------------------------------------------------------------------ 
--  
Net Assets, End of Year (in 000s)                         $2,254         $45  
------------------------------------------------------------------------------ 
--  
Ratios to Average Net Assets(2)                               
  Expenses(2)                                               0.98%       0.95%+  
  Net investment income                                     4.54        4.53+  
------------------------------------------------------------------------------ 
--  
Portfolio turnover rate                                        8%         39%  
=========================================================================== 
=====  
  
(1)  For the period from November 8, 1994 (inception date) to November 30,  
1994.  
  
(2)  The investment adviser has waived a part of its fees for the year ended  
     November 30, 1995, and the period ended November 30, 1994. If such fees  
     were not waived, the per share decreases in net investment income and  
     expense ratios would be as follows:  
  
               Per Share Decrease                         Expense Ratio  
              In Net Investment Income                   Without Fee Waivers  
             -------------------------                ------------------------ 
-  
              1995               1994                  1995               1994  
              ----               ----                  ----               ----  
Class C      $0.03              $0.00*                 1.39%               
1.44%+  
             -----              -----                  ----               ----    
      
  
+    Annualized  
  
++   Total return is not annualized, as it may not be representative of the  
     total return for the year.  
  
*    Amount represents less than $0.01 per share.  
  
**   The amount in this caption for each share outstanding throughout the  
period  
     may not acord with the chanage in aggregate gains and losses in the  
     portfollio securities for the period because of the timing of purchases  
and  
     withdrawals of shares in relation to the fluctuating market values of the  
     portfolio.   
  
                                                                               
11  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Financial Highlights (continued)  
------------------------------------------------------------------------------ 
--  
  
     
For a Class Y share of beneficial interest outstanding throughout each year:  
      
  
                                                                         
1995(1)  
     
=========================================================================== 
=====  
Net Asset Value, Beginning of Year                                     $8.39  
------------------------------------------------------------------------------ 
--  
Income From Operations:  
  Net investment income(2)                                              0.09  
  Net realized and unrealized gain                                      0.15  
------------------------------------------------------------------------------ 
--  
Total income From Operations                                            0.24  
------------------------------------------------------------------------------ 
--  
Less Distributions From:  
  Net investment income                                                (0.09)  
  Net realized gain                                                      --  
------------------------------------------------------------------------------ 
--  
Total Distributions                                                    (0.09)  
------------------------------------------------------------------------------ 
--  
Net Asset Value, End of Year (in 000s)                                 $8.54  
------------------------------------------------------------------------------ 
--  
Total Return                                                             
2.92%++  
------------------------------------------------------------------------------ 
--  
Net Assets, end of year (in 000s)                                       $261  
------------------------------------------------------------------------------ 
--  
Ratios to Average Net Assets:  
  Expenses(2)                                                           0.58%+  
  Net investment income                                                  4.74+  
------------------------------------------------------------------------------ 
--  
Portfolio Turnover Rate                                                    8%  
=========================================================================== 
=====  
  
(1)  For the period from September 8, 1995 (inception date) to November 30,  
     1995.  
  
(2)  The investment adviser has waived a part of its fees for the period  
     ended November 30, 1995. If such fees were not waived, the per share  
     decrease in net investment income and expense ratios would be as  
     follows:  
  
                Per Share Decrease                          Expense Ratio  
              In Net Investment Income                   Without Fee Waivers  
             -------------------------                  ---------------------  
                       1995                                      1995  
                       ----                                      -----  
Class Y               $0.03                                      0.99%+  
  
+   Annualized  
  
++  Total return is not annualized, as it may not be representative of the  
total  
    return for the year.  
      
  
  
12  
<PAGE>  
  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies  
------------------------------------------------------------------------------ 
--  
  
     
     Set out below is a description of the investment objective and principal  
investment policies of the Fund. No assurance can be given that the Fund will  
be  
able to achieve its investment objective, which may be changed only with the  
approval of a majority (as defined in the Investment Company Act of 1940, as  
amended (the "1940 Act")) of the Fund's outstanding shares.  
  
     The Fund's investment objective is to provide California investors with  
as  
high a level of current income exempt from Federal income taxes and California  
State personal income taxes as is consistent with the preservation of  
principal.  
Under normal market conditions, the Fund attempts to invest 100% of its assets  
in a portfolio of investment grade debt obligations issued by or on behalf of  
the State of California and other states, territories and possessions of the  
United States, the District of Columbia and their respective authorities,  
agencies, instrumentalities and political subdivisions ("Municipal  
Obligations"). For purposes of this Prospectus, debt obligations issued by the  
State of California and its political subdivisions, agencies and public  
authorities (together with certain other governmental issuers such as the  
Commonwealth of Puerto Rico), the interest from which debt obligations is, in  
the opinion of bond counsel to the issuer, excluded from gross income for  
Federal income tax purposes and exempt from California State personal income  
tax, are defined as "California Exempt Obligations." The Fund will operate  
subject to a fundamental investment policy providing that, under normal market  
conditions, the Fund will invest at least 80% of its net assets in California  
Exempt Obligations rated investment grade.  
      
  
     The Fund is classified as a non-diversified fund 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, however, so as to qualify as a "regulated  
investment company" for purposes of the Internal Revenue Code of 1986, as  
amended (the "Code"), which will relieve the Fund of any liability for Federal  
income tax and California State franchise tax to the extent that its earnings  
are distributed to shareholders. To qualify as a regulated investment company,  
the Fund will, among other things, 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 will invest at least 80% of its total assets in California  
Exempt  
Obligations rated investment grade, that is, rated no lower than Baa, MIG 3 or  
  
  
                                                                               
13  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
Prime-1 by Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by Fitch. Up to 20%  
of  
the Fund's total assets may be invested in unrated securities that are deemed  
by  
SBMFM to be of a quality comparable to investment grade. The Fund will not  
invest in California Exempt Obligations that are rated lower than investment  
grade at the time of purchase. Although California Exempt Obligations rated  
Baa  
by Moody's, BBB by S&P or BBB by Fitch are considered to be investment grade,  
they may be viewed as being subject to greater risks than other investment  
grade  
securities. California Exempt Obligations rated Baa by Moody's, for example,  
are  
considered medium grade obligations that lack outstanding investment  
characteristics and have speculative characteristics as well. California  
Exempt  
Obligations rated BBB by S&P are regarded as having an adequate capacity to  
pay  
principal and interest. California Exempt Obligations rated BBB by Fitch are  
deemed to be subject to a higher likelihood that their rating will fall below  
investment grade than higher rated bonds.  
  
     The ratings of Moody's, S&P and Fitch represent their opinions as to the  
quality of the California Exempt Obligations that they undertake to rate; the  
ratings are relative and subjective and are not absolute standards of quality.  
SBMFM's judgment as to credit quality of a California Exempt Obligation, thus,  
may differ from that suggested by the ratings published by a rating service. A  
description of Moody's, S&P and Fitch ratings relevant to the Fund's  
investments  
is included as an Appendix to the Statement of Additional Information. The  
policies of the Fund described above as to ratings of portfolio investments  
will  
apply only at the time of the purchase of a security, and the Fund will not be  
required to dispose of a security in the event Moody's, S&P or Fitch  
downgrades  
its assessment of the credit characteristics of the security's issuer.  
  
     California Exempt Obligations are classified as general obligation bonds,  
revenue bonds and notes. General obligation bonds are secured by the issuer's  
pledge of its full faith, credit and taxing power for the payment of principal  
and interest. Revenue bonds are payable from the revenue derived from a  
particular facility or class of facilities or, in some cases, from the  
proceeds  
of a special excise or other specific revenue source, but not from the general  
taxing power. Notes are short-term obligations of issuing municipalities or  
agencies and are sold in anticipation of a bond sale, collection of taxes or  
receipt of other revenues. California Exempt Obligations bear fixed, floating  
and variable rates of interest, and variations exist in the security of  
California Exempt Obligations, both within a particular classification and  
between classifications.  
  
     The yields on, and values of, California Exempt Obligations are dependent  
on a variety of factors, including general economic and monetary conditions,  
  
  
14  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
conditions in the California Exempt Obligation markets, size of a particular  
offering, maturity of the obligation and rating of the issue. Consequently,  
California Exempt Obligations with the same maturity, coupon and rating may  
have  
different yields or values, whereas obligations of the same maturity and  
coupon  
with different ratings may have the same yield or value. See "Risk Factors and  
Special Considerations -- California Exempt Obligations." Issuers of  
California  
Exempt Obligations may be subject to the provisions of bankruptcy, insolvency  
and other laws, such as the Federal Bankruptcy Reform Act of 1978, affecting  
the  
rights and remedies of creditors. In addition, the obligations of those  
issuers  
may become subject to laws enacted in the future by Congress, state  
legislatures  
or referenda extending the time for payment of principal and/or interest, or  
imposing other constraints upon enforcement of the obligations or upon the  
ability of municipalities to levy taxes. The possibility also exists that, as  
a  
result of litigation or other conditions, the power or ability of any issuer  
to  
pay, when due, the principal of, and interest on, its obligations may be  
materially affected.  
  
     MATURITY OF OBLIGATIONS HELD BY THE FUND  
  
     SBMFM believes that the Fund may offer an attractive investment  
opportunity  
for investors seeking a higher effective tax yield than a tax-exempt money  
market fund or a tax-exempt short-term bond fund and less fluctuation in net  
asset value than a longer term tax-exempt bond fund. The Fund will normally  
invest in intermediate maturity securities; the weighted average maturity of  
the  
Fund will normally be not less than three nor more than 10 years. The maximum  
remaining maturity of the securities in which the Fund will normally invest  
will  
be no greater than 20 years.  
  
     PRIVATE ACTIVITY BONDS  
  
     The Fund may invest without limit in California Exempt Obligations that  
are  
"private activity bonds," as defined in the Code, which are in most cases  
revenue bonds. Private activity bonds generally do not carry the pledge of the  
credit of the issuing municipality, but are guaranteed by the corporate entity  
on whose behalf they are issued. Interest income on certain types of private  
activity bonds issued after August 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 these bonds. Dividends  
derived  
from interest income on California Exempt Obligations are a "current earnings"  
adjustment item for purposes of the Federal corporate alternative minimum tax.  
See "Dividends, Distributions and Taxes." Private activity bonds held by the  
  
  
                                                                               
15  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
Fund will be included in the term California Exempt Obligations for purposes  
of  
determining compliance with the Fund's policy of investing at least 80% of its  
total assets in California Exempt Obligations.  
  
     RELATED INSTRUMENTS  
  
     The Fund may invest without limit in California Exempt Obligations that  
are  
repayable out of revenues generated from economically related projects or  
facilities or debt obligations whose issuers are located in the same state.  
Sizable investments in these obligations could involve an increased risk to  
the  
Fund should any of the related projects or facilities experience financial  
difficulties.  
  
     OTHER MISCELLANEOUS POLICIES  
  
     The Fund may invest up to 10% of its net assets in illiquid securities,  
which term includes securities subject to contractual or other restrictions on  
resale and other instruments that lack readily available markets. In addition,  
up to 5% of the value of the Fund's assets may be invested in securities of  
entities that have been in continuous operation for fewer than three years.  
  
     TYPES OF CALIFORNIA EXEMPT OBLIGATIONS HELD BY THE FUND  
  
     Municipal Leases. The Fund may invest without limit in "municipal  
leases."  
Municipal leases may take the form of a lease or an installment purchase  
contract issued by state and local government authorities to obtain funds to  
acquire a wide variety of equipment and facilities such as fire and sanitation  
vehicles, computer equipment and other capital assets. Interest payments on  
qualifying municipal leases are exempt from Federal income taxes and state  
income taxes within the state of issuance. 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. In addition to the  
"non-appropriation" risk, these securities represent a relatively new type of  
financing that has not yet developed the depth of marketability associated  
with  
more conventional bonds. Although "non-appropriation" lease obligations are  
often secured by the underlying property, disposition of the property in the  
event of foreclosure might prove difficult. The Fund may invest in municipal  
  
  
16  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
leases without non-appropriation clauses only when the municipality is  
required  
to continue the lease under all circumstances except bankruptcy. 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, SBMFM  
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 other than those covered by the lease  
obligation.  
  
     Municipal leases that the Fund may acquire will be both rated and  
unrated.  
Rated leases include those rated investment grade at the time of investment or  
those issued by issuers whose senior debt is rated investment grade at the  
time  
of investment. The Fund may acquire unrated issues that SBMFM deems to be  
comparable in quality to rated issues in which the Fund is authorized to  
invest.  
A determination that an unrated lease obligation is comparable in quality to a  
rated lease obligation will be subject to the oversight and approval by the  
Trust's Board of Trustees.  
  
     Municipal leases held by the Fund will be considered illiquid securities  
unless the Trust's Board of Trustees determines on an ongoing basis that the  
leases are readily marketable. An unrated municipal lease with a  
non-appropriation risk that is backed by an irrevocable bank letter of credit  
or  
an insurance policy issued by a bank or insurer deemed by SBMFM to be of high  
quality and minimal credit risk, will not be deemed to be illiquid solely  
because the underlying municipal lease is unrated, if SBMFM determines that  
the  
lease is readily marketable because it is backed by the letter of credit or  
insurance policy.  
  
     Zero Coupon Securities. The Fund may invest up to 10% of its assets in  
zero  
coupon California Exempt Obligations. Zero coupon California Exempt  
Obligations  
are generally divided into two categories: pure zero obligations, which are  
those that pay no interest for their entire life and zero/fixed obligations,  
which pay no interest for some initial period and thereafter pay interest  
currently. In the case of a pure zero obligation, the failure to pay interest  
currently may result from the obligation's having no stated interest rate, in  
which case the obligation pays only principal at maturity and is issued at a  
discount from its stated principal amount. A pure zero obligation may, in the  
  
  
                                                                               
17  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
alternative, provide for a stated interest rate, but provide that no interest  
is  
payable until maturity, in which case accrued, unpaid interest on the  
obligation  
may be capitalized as incremental principal. The value to the investor of a  
zero  
coupon California Exempt Obligation consists of the economic accretion either  
of  
the difference between the purchase price and the nominal principal amount (if  
no interest is stated to accrue) or of accrued, unpaid interest during the  
California Exempt Obligation's life or payment deferral period.  
  
     Custodial Receipts. The Fund may acquire custodial receipts or  
certificates  
underwritten by securities dealers or banks that evidence ownership of future  
interest payments, principal payments, or both, on certain California Exempt  
Obligations. The underwriter of these certificates or receipts typically  
purchases California Exempt Obligations and deposits the obligations in an  
irrevocable trust or custodial account with a custodian bank, which then  
issues  
receipts or certificates that evidence ownership of the periodic unmatured  
coupon payments and the final principal payment on the obligations. Custodial  
receipts evidencing specific coupon or principal payments have the same  
general  
attributes as zero coupon California Exempt Obligations described above.  
Although under the terms of a custodial receipt, the Fund would be typically  
authorized to assert its rights directly against the issuer of the underlying  
obligation, the Fund could be required to assert through the custodian bank  
those rights as may exist against the underlying issuer. Thus, in the event  
the  
underlying issuer fails to pay principal and/or interest when due, the Fund  
may  
be subject to delays, expenses and risks that are greater than those that  
would  
have been involved if the Fund had purchased a direct obligation of the  
issuer.  
In addition, in the event that the trust or custodial account in which the  
underlying security has been deposited is determined to be an association  
taxable as a corporation, instead of a non-taxable entity, the yield on the  
underlying security would be reduced in recognition of any taxes paid.  
  
     California Exempt Obligation Components. The Fund may invest in  
California  
Exempt Obligations, the interest rate on which has been divided by the issuer  
into two different and variable components, which together result in a fixed  
interest rate. Typically, the first of the components (the "Auction  
Component")  
pays an interest rate that is reset periodically through an auction process,  
whereas the second of the components (the "Residual Component") pays a  
residual  
interest rate based on the difference between the total interest paid by the  
issuer on the California Exempt Obligation and the auction rate paid on the  
Auction Component. The Fund may purchase both Auction and Residual Components.  
  
     Because the interest rate paid to holders of Residual Components is  
generally determined by subtracting the interest rate paid to the holders of  
  
  
  
18  
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Investment Objective and Management Policies (continued)  
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--  
  
Auction Components from a fixed amount, the interest rate paid to Residual  
Component holders will decrease as the Auction Component's rate increases and  
increase as the Auction Component's rate decreases. Moreover, the magnitude of  
the increases and decreases in market value of Residual Components may be  
larger  
than comparable changes in the market value of an equal principal amount of a  
fixed rate California Exempt Obligation having similar credit quality,  
redemption provisions and maturity.  
  
     Floating and Variable Rate Instruments. The Fund may purchase floating  
and  
variable rate demand notes and bonds, which are California Exempt Obligations  
normally having a stated maturity in excess of one year, but which permit  
their  
holder to demand payment of principal at any time, or at specified intervals.  
The maturity of a floating or variable rate demand note or bond will not be  
deemed shortened by virtue of a demand feature for purposes of calculating the  
Fund's net asset value or determining its weighted average maturity.  
  
     
     The issuer of floating and variable rate demand obligations normally has  
a  
corresponding right, after a given period, to prepay at its discretion the  
outstanding principal amount of the obligations plus accrued interest upon a  
specified number of days' notice to the holders of these obligations. The  
interest rate on a floating rate demand obligation is based on a known lending  
rate, such as a bank's prime rate, and is adjusted automatically each time  
that  
rate is adjusted. The interest rate on a variable rate demand obligation is  
adjusted automatically at specified intervals. Frequently, floating and  
variable  
rate obligations are secured by letters of credit or other credit support  
arrangements provided by banks. Use of letters of credit or other credit  
support  
arrangements will not adversely affect the tax-exempt status of these  
obligations. Because they are direct lending arrangements between the lender  
and  
borrower, floating and variable rate obligations will generally not be traded.  
In addition, no secondary market generally exists for these obligations,  
although their holders may demand their payment at face value. For these  
reasons, when floating and variable rate obligations held by the Fund are not  
secured by letters of credit or other credit support arrangements, the Fund's  
right to demand payment is dependent on the ability of the borrower to pay  
principal and interest on demand. SBMFM, on behalf of the Fund, will consider  
on  
an ongoing basis the creditworthiness of the issuers of floating and variable  
rate demand obligations held by the Fund.  
      
  
     Participation Interests. The Fund may purchase from financial  
institutions  
tax-exempt participation interests in California Exempt Obligations. A  
participation interest gives the Fund an undivided interest in the California  
Exempt Obligation in the proportion that the Fund's participation interest  
bears  
  
  
                                                                               
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Intermediate Maturity California Municipals Fund  
  
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--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
to the total amount of the California Exempt Obligation. These instruments may  
have floating or variable rates of interest. If the participation interest is  
unrated, it will be backed by an irrevocable letter of credit or guarantee of  
a  
bank that the Trust's Board of Trustees has determined meets certain quality  
standards, or the payment obligation otherwise will be collateralized by  
obligations of the United States government or its agencies and  
instrumentalities ("U.S. government securities"). The Fund will have the  
right,  
with respect to certain participation interests, to demand payment, on a  
specified number of days' notice, for all or any part of the Fund's interest  
in  
the California Exempt Obligation, plus accrued interest. The Fund intends to  
exercise its right with respect to these instruments to demand payment only  
upon  
a default under the terms of the California Exempt Obligation or to maintain  
or  
improve the quality of its investment portfolio.  
  
     TAXABLE INVESTMENTS  
  
     Under normal conditions, the Fund may hold up to 20% of its total assets  
in  
cash or money market instruments, including taxable money market instruments  
(collectively, "Taxable Investments"). In addition, when SBMFM believes that  
market conditions warrant, the Fund may take a temporary defensive posture and  
invest without limitation in short-term California Exempt Obligations and  
Taxable Investments. To the extent the Fund holds Taxable Investments and,  
under  
certain market conditions, certain floating and variable rate demand  
obligations  
or Auction Components, the Fund may not achieve its investment objective.  
  
     Money market instruments in which the Fund may invest include: U.S.  
government securities; tax-exempt notes of municipal issuers rated, at the  
time  
of purchase, no lower than MIG 1 by Moody's, SP-1 by S&P or F-1 by Fitch or,  
if  
not rated, by issuers having outstanding, unsecured debt then rated within the  
three highest rating categories; bank obligations (including certificates of  
deposit, time deposits and bankers' acceptances of domestic banks, domestic  
savings and loan associations and similar institutions); commercial paper  
rated  
no lower than P-1 by Moody's, A-1 by S&P or F-1 by Fitch or the equivalent  
from  
another major rating service or, if unrated, of an issuer having an  
outstanding,  
unsecured debt issue then rated within the three highest rating categories;  
and  
repurchase agreements. At no time will the Fund's investments in bank  
obligations, including time deposits, exceed 25% of the value of its assets.  
  
     U.S. government securities in which the Fund may invest include direct  
obligations of the United States and obligations issued by U.S. government  
agencies and instrumentalities. Included among direct obligations of the  
United  
States are Treasury Bills, Treasury Notes and Treasury Bonds, which differ  
  
  
20  
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Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
principally in terms of their maturities. Included among the securities issued  
by U.S. government agencies and instrumentalities are: securities that are  
supported by the full faith and credit of the United States (such as  
Government  
National Mortgage Association certificates); securities that are supported by  
the right of the issuer to borrow from the United States Treasury (such as  
securities of Federal Home Loan Banks); and securities that are supported by  
the  
credit of the instrumentality (such as Federal National Mortgage Association  
and  
Federal Home Loan Mortgage Corporation bonds).  
  
     INVESTMENT TECHNIQUES  
  
     The Fund may employ, among others, the investment techniques described  
below, which may give rise to taxable income: When-Issued and Delayed-Delivery  
Securities. The Fund may purchase securities on a when-issued basis, or may  
purchase or sell securities for delayed delivery. In when-issued or  
delayed-delivery transactions, delivery of the securities occurs beyond normal  
settlement periods, but no payment or delivery will be made by the Fund prior  
to  
the actual delivery or payment by the other party to the transaction. The Fund  
will not accrue income with respect to a when-issued or delayed-delivery  
security prior to its stated delivery date. The Fund will establish with PNC  
Bank, National Association ("PNC"), the Trust's custodian, a segregated  
account  
consisting of cash or U.S. government securities in an amount equal to the  
amount of the when-issued and delayed-delivery purchase commitments. Placing  
securities rather than cash in a segregated account may have a leveraging  
effect  
on the Fund's net assets.  
  
     
     Stand-by Commitments. The Fund may acquire "stand-by commitments" with  
respect to California Exempt Obligations held in its portfolio. Under a stand- 
by  
commitment, a broker, dealer or bank is obligated to repurchase at the Fund's  
option specified securities at a specified price and, in this way, stand-by  
commitments are comparable to put options. Each exercise of a stand-by  
commitment, therefore, is subject to the ability of the seller to make payment  
on demand. The Fund will acquire stand-by commitments solely to facilitate  
portfolio liquidity and does not intend to exercise the rights afforded by the  
commitments for trading purposes. The Fund anticipates that stand-by  
commitments  
will be available from brokers, dealers and banks without the payment of any  
direct or indirect consideration. The Fund may pay for stand-by commitments if  
payment is deemed necessary, thus increasing to a degree the cost of the  
underlying California Exempt Obligation and similarly decreasing the  
security's  
yield to investors.  
      
  
  
  
                                                                               
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Intermediate Maturity California Municipals Fund  
  
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--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
     INVESTMENT RESTRICTIONS  
  
     The Trust has adopted certain fundamental investment restrictions with  
respect to the Fund that may not be changed without approval of a majority (as  
defined in the 1940 Act) of the Fund's outstanding voting securities. Included  
among those fundamental restrictions are the following:  
  
     1.   The Fund will not purchase securities other than Municipal and  
          California Exempt Obligations and Taxable Investments as those terms  
          are defined in this Prospectus or the Statement of Additional  
          Information.  
  
     2.   The Fund will not borrow money, except that the Fund may borrow from  
          banks for temporary or emergency (not leveraging) purposes,  
including  
          the meeting of redemption requests and cash payments of dividends  
and  
          distributions that might otherwise require the untimely disposition  
of  
          securities, in an amount not to exceed 10% of the value of the  
Fund's  
          total assets (including the amount borrowed) valued at market less  
          liabilities (not including the amount borrowed) at the time the  
          borrowing is made. Whenever the Fund's borrowings exceed 5% of the  
          value of its total assets, the Fund will not make any additional  
          investments.  
  
     3.   The Fund will not lend money to other persons, except through  
          purchasing Municipal and California Exempt Obligations or Taxable  
          Investments and entering into repurchase agreements in a manner  
          consistent with the Fund's investment objective.  
  
     4.   The Fund will not invest more than 25% of the value of its total  
          assets in securities of issuers in any one industry, except that  
this  
          limitation is not applicable to a Fund's investments in U.S.  
          government securities.  
  
     5.   The Fund will not pledge, hypothecate, mortgage or otherwise  
encumber  
          its assets, except to secure permitted borrowings.  
  
     Certain other investment restrictions adopted by the Fund are described  
in  
the Statement of Additional Information.  
  
     RISK FACTORS AND SPECIAL CONSIDERATIONS  
  
     Investment in the Fund involves risk factors and special considerations,  
such as those described below:  
  
     California Exempt Obligations. Even though California Exempt Obligations  
are interest-bearing investments that promise a stable stream of income, their  
prices are inversely affected by changes in interest rates and, therefore, are  
subject to the risk of market price fluctuations. The values of California  
Exempt Obligations with longer remaining maturities typically fluctuate more  
than those of similarly rated California Exempt Obligations with shorter  
  
  
22  
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Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
remaining maturities such as the Fund intends to hold. The values of  
fixed-income securities also may be affected by changes in the credit rating  
or  
financial condition of the issuing entities.  
  
     Opinions relating to the validity of Municipal Obligations and to the  
exemption of interest on them from Federal income taxes (and, with respect to  
California Exempt Obligations, to the exemption of interest on them from  
California state personal income taxes) are rendered by bond counsel to the  
respective issuers at the time of issuance. Neither the Fund nor SBMFM will  
review the proceedings relating to the issuance of California Exempt  
Obligations  
or the basis for opinions of counsel.  
  
     Potential Legislation. In past years, the United States government has  
enacted various laws that have restricted or diminished the income tax  
exemption  
on various types of Municipal Obligations and may enact other similar laws in  
the future. If any such laws are enacted that would reduce the availability of  
California Exempt Obligations for investment by the Fund so as to affect the  
Fund's shareholders adversely, the Trust will reevaluate the Fund's investment  
objective and policies and might submit possible changes in the Fund's  
structure  
to shareholders for their consideration. If legislation were enacted that  
would  
treat a type of California Exempt Obligation as taxable for Federal income tax  
purposes, the Fund would treat the security as a permissible Taxable  
Investment  
within the applicable limits set forth in this Prospectus.  
  
     Unrated Securities. The Fund may invest in unrated securities that SBMFM  
determines to be of comparable quality to the rated securities in which the  
Fund  
may invest. Dealers may not maintain daily markets in unrated securities and  
retail secondary markets for many of such securities may not exist. As a  
result,  
the Fund's ability to sell these securities when SBMFM deems it appropriate  
may  
be diminished.  
  
     Municipal Leases. Municipal leases in which the Fund may invest have  
special risks not normally associated with Municipal Obligations. These  
obligations frequently contain non-appropriation clauses that provide that the  
governmental issuer of the obligation need not make future payments under the  
lease or contract unless money is appropriated for that purpose by a  
legislative  
body annually or on another periodic basis. Municipal leases have additional  
risks because they represent a type of financing that has not yet developed  
the  
depth of marketability generally associated with other Municipal Obligations.  
Moreover, although a municipal lease will be secured by financed equipment or  
facilities, the disposition of the equipment or facilities in the event of  
foreclosure might prove difficult. In addition, in certain instances the  
tax-exempt status of the municipal lease will not be subject to the legal  
  
                                                                               
23  
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Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
opinion of a nationally recognized bond counsel, although in all cases the  
Fund  
will require that a municipal lease purchased by the Fund be covered by a  
legal  
opinion to the effect that, as of each effective date of the municipal lease,  
the lease is the valid and binding obligation of the government issuer.  
  
     
     Municipal leases are also subject to the risk of non-payment. The ability  
of issuers of municipal leases to make timely lease payments may be adversely  
impacted in general economic downturns and as relative governmental cost  
burdens  
are allocated and reallocated among Federal, state and local governmental  
units.  
Such non-payment would result in a reduction of income to the Fund, and could  
result in a reduction in the value of the municipal lease experiencing  
non-payment and a decrease in the net asset value of the Fund. Issuers of  
municipal securities might seek protection under the bankruptcy laws. In the  
event of bankruptcy of such an issuer, the Fund could experience delays and  
limitations with respect to the collection of principal and interest on such  
municipal leases and the Fund may not, in all circumstances, be able to  
collect  
all principal and interest to which it is entitled. To enforce its rights in  
the  
event of a default in the lease payments, the Fund may take possession of and  
manage the assets securing the issuer's obligations on such securities, which  
may increase the Fund's operating expenses and adversely affect the net asset  
value of the Fund. Any income derived from the Fund's ownership or operation  
of  
such assets may not be tax-exempt. In addition, the Fund's intention to  
qualify  
as a "regulated investment company" under the Code may limit the extent to  
which  
the Fund may exercise its rights by taking possession of such assets, because  
as  
a regulated investment company the Fund is subject to certain limitations on  
its  
investments and on the nature of its income.  
      
  
     Non-Publicly Traded Securities. As suggested above, the Fund may, from  
time  
to time, invest a portion of its assets in non-publicly traded California  
Exempt  
Obligations. Non-publicly traded securities may be less liquid than publicly  
traded securities. Although non-publicly traded securities may be resold in  
privately negotiated transactions, the prices realized from these sales could  
be  
less than those originally paid by the Fund.  
  
     When-Issued and Delayed-Delivery Transactions. Securities purchased on a  
when-issued or delayed-delivery basis may expose the Fund to risk because the  
securities may experience fluctuations in value prior to their delivery.  
Purchasing securities on a when-issued or delayed-delivery basis can involve  
the  
additional risk that the yield available in the market when the delivery takes  
place may be higher than that obtained in the transaction itself.  
  
24  
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Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
     Non-Diversified Classification. Investment in the Fund, which is  
classified  
as a non-diversified fund under the 1940 Act, may present greater risks to  
investors than an investment in a diversified fund. The investment return on a  
non-diversified fund typically is dependent upon the performance of a smaller  
number of securities relative to the number of securities held in a  
diversified  
fund. The Fund's assumption of large positions in the obligations of a small  
number of issuers will affect the value of its portfolio to a greater extent  
than that of a diversified fund in the event of changes in the financial  
condition, or in the market's assessment, of the issuers.  
  
     Special Considerations. In seeking to achieve its objective, the Fund may  
invest without limit in Municipal Obligations which are private activity  
bonds.  
Moreover, although the Fund does not currently intend to do so on a regular  
basis, it may invest more than 20% of its assets in Municipal Obligations  
which  
are repayable out of revenue streams generated from economically related  
projects or facilities, if such investment is deemed necessary or appropriate  
by  
SBMFM. To the extent the Fund's assets are concentrated in Municipal  
Obligations  
payable from revenues on economically related projects and facilities, the  
Fund  
will be subject to the particular risks presented by such projects to a  
greater  
extent than it would be if the Fund's assets were not so concentrated.  
  
     
     The payment of principal and interest on most securities purchased by the  
Fund will depend on the ability of the issuers to meet their obligations. The  
Fund's portfolio will be affected by general changes in interest rates, which  
will result in increases or decreases in the value of the obligations held by  
the Fund. The market value of the obligations in the Fund's portfolio can be  
expected to vary inversely to changes in prevailing interest rates. On July  
15,  
1994, Moody's and S&P, citing the State's deteriorating financial position,  
lowered California's general obligation bond rating from Aa to A1 and from AA  
to  
A+, respectively.  
      
  
     Investors should be aware that certain California constitutional  
amendments, legislative measures, executive orders, administrative regulations  
and voter initiatives could result in certain adverse consequences affecting  
California Exempt Obligations. For instance, certain provisions of the  
California Constitution and statutes that limit the taxing and spending  
authority of California governmental entities may impair the ability of the  
issuers of some California Exempt Obligations to maintain debt service on  
their  
obligations. Other measures affecting the taxing or spending authority of  
California or its political sub-divisions may be approved or enacted in the  
future. Some of the significant financial considerations relating to the  
Fund's  
investments in California Exempt Obligations are summarized in the Statement  
of  
Additional Information.  
  
                                                                               
25  
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Intermediate Maturity California Municipals Fund  
  
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--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
     PORTFOLIO TRANSACTIONS AND TURNOVER  
  
     
     The Fund's portfolio securities ordinarily are purchased from and sold to  
parties acting as either principal or agent. Newly issued securities  
ordinarily  
are purchased directly from the issuer or from an underwriter; other purchases  
and sales usually are placed with those dealers from which it appears that the  
best price or execution will be obtained. Usually no brokerage commissions, as  
such, are paid by the Fund for purchases and sales undertaken through  
principal  
transactions, although the price paid usually includes an undisclosed  
compensation to the dealer acting as agent.  
      
  
     The Fund cannot accurately predict its portfolio turnover rate, but  
anticipates that the annual turnover will not exceed 100%. An annual turnover  
rate of 100% would occur if all of the securities held by the Fund are  
replaced once during a period of one year. SBMFM will not consider turnover  
rate  
a limiting factor in making investment decisions consistent with the  
investment  
objective and policies of the Fund.  
  
------------------------------------------------------------------------------ 
--  
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.  
  
     Generally, the Fund's investments are valued at market value or, in the  
absence of a market value with respect to any securities, at fair value as  
determined by or under the direction of the Trust's Board of Trustees.  
Short-term investments that mature in 60 days or less are valued at amortized  
cost. Amortized cost involves valuing an investment at its cost initially and,  
thereafter, assuming a constant amortization to maturity of any discount or  
premium, regardless of the impact of fluctuating interest rates on the market  
value of the instrument. Further information regarding the Fund's valuation  
policies is contained in the Statement of Additional Information.  
  
  
  
26  
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Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Dividends, Distributions and Taxes  
------------------------------------------------------------------------------ 
--  
  
     DIVIDENDS AND DISTRIBUTIONS  
  
     
     The Fund declares dividends from its net investment income (that is,  
income  
other than net realized capital gains) monthly; dividends ordinarily will be  
paid on the last Friday of each calendar month to shareholders of record as of  
three business days prior. The Fund's net realized capital gains, if any, are  
declared and distributed annually, normally at the end of the calendar year in  
which earned or at the beginning of the subsequent year.  
      
  
     If a shareholder does not otherwise instruct, dividends or capital gain  
distributions will be reinvested automatically in additional shares of the  
same  
Class at net asset value, subject to no sales charge or CDSC. In order to  
avoid  
the application of a 4% nondeductible excise tax on certain undistributed  
amounts of ordinary income and capital gains, the Fund may make a distribution  
shortly before December 31 of each year of any undistributed ordinary income  
or  
capital gains and expects to pay any other distributions as are necessary to  
avoid the application of this tax.  
  
     The per share dividends on Class C shares of the Fund may be lower than  
the  
per share dividends on Class A and Class Y shares principally as a result of  
the  
distribution fee applicable with respect to Class C shares. The per share  
dividends on Class A shares of the Fund may be lower than the per share  
dividends on Class Y shares principally as a result of the service fee  
applicable to Class A shares. Distributions of capital gains, if any, will be  
in  
the same amount for Class A, Class C and Class Y shares.  
  
     TAXES  
  
     The Fund has qualified and intends to continue to qualify each year as a  
regulated investment company under the Code. Dividends paid from the Fund's  
net  
investment income (other than dividends derived from interest earned on  
qualifying tax-exempt obligations as described below) and distributions of the  
Fund's net realized short-term capital gains are taxable to shareholders as  
ordinary income, regardless of how long shareholders in the Fund have held  
their  
shares and whether the dividends or distributions are received in cash or  
reinvested in additional shares of the Fund. Distributions of the Fund's net  
realized long-term capital gains will be taxable to shareholders as long-term  
capital gains, regardless of how long shareholders have held their shares of  
the  
Fund and whether the distributions are received in cash or are reinvested in  
additional Fund shares. In addition, as a general rule, a shareholder's gain  
or  
loss on a sale or redemption of shares of the Fund will be a long-term capital  
gain or loss if the shareholder has held the shares for more than one year and  
  
  
                                                                               
27  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Dividends, Distributions and Taxes (continued)  
------------------------------------------------------------------------------ 
--  
  
will be a short-term capital gain or loss if the shareholder has held the  
shares  
for one year or less.  
  
     Dividends paid by the Fund that are derived from interest earned on  
qualifying tax-exempt obligations are expected to be "exempt-interest"  
dividends  
that shareholders may exclude from their gross incomes for Federal income tax  
purposes if the Fund satisfies certain asset percentage requirements. Any  
exempt- interest dividends of the Fund derived from interest on California  
Exempt Obligations, the interest on which is a specific tax preference item  
for  
Federal income tax purposes, will be a specific tax preference item for  
purposes  
of the Federal individual and corporate alternative minimum taxes. In  
addition,  
all exempt-interest dividends will be a component of the "current earnings"  
adjustment item for purposes of the Federal corporate alternative minimum  
income  
tax and corporate shareholders may incur a larger Federal environmental tax  
liability through the receipt of Fund dividends and distributions from the  
Fund.  
Dividends of the Fund derived from interest on California Exempt Obligations  
will be exempt from California State personal income (but not corporate  
franchise or income) taxes.  
  
     Statements as to the tax status of the dividends and distributions  
received  
by shareholders of the Fund are mailed annually. These statements set forth  
the  
dollar amount of income excluded from Federal income taxes and the dollar  
amount, if any, subject to Federal income taxes. Statements from the Fund will  
also show the dollar amount of income excluded or exempted from California  
State  
personal income taxes and the dollar amount, if any, subject to these taxes.  
These statements will also designate the amount of exempt-interest dividends  
that are a specific preference item for purposes of the Federal individual and  
corporate alternative minimum taxes.  
  
     Shareholders of the Fund should consult their tax advisors with specific  
reference to their own tax situations.  
  
     TAX-EXEMPT INCOME VS. TAXABLE INCOME  
  
     The table below shows California taxpayers who are individuals how to  
translate Federal and California State tax savings from investments such as  
the  
Fund into an equivalent return from a taxable investment. To the extent that  
the  
equivalent taxable yields illustrated in this table are based on an effective  
tax rate which combines the Federal and California marginal income tax rates,  
the table is not applicable to individuals who do not pay California State  
personal income taxes. The yields used below are for illustration only and are  
  
  
28  
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Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Dividends, Distributions and Taxes (continued)  
------------------------------------------------------------------------------ 
--  
  
not intended to represent current or future yields for the Fund, which may be  
higher or lower than those shown.  
  

</TABLE>
<TABLE>  
<CAPTION>  
  
                                                                       
     
                                                                                                   
A California Tax-Exempt  
                                                                     1996                           
Income Fund Yield   
             Taxable Income*           California     Federal      Combined  
      Single               Joint          Rate***      Rate         Rate**           
2.00%      3.00%      4.00%     5.00%       
6.00%  
=========================================================================== 
=========================================================  
<S>                        <C>            <C>          <C>           <C>             
<C>        <C>        <C>       <C>        
<C>  
$       0-24,000           0-40,100       6.00%        15.00%        20.10%          
2.50%      3.75%      5.01%      
6.26%      7.51%  
   24,001-58,150      40,101-96,900       9.30         28.00         34.70           
3.06       4.59       6.13      7.66        
9.19  
  58,151-121,300     96,901-147,700       9.30         31.00         37.42           
3.20       4.79       6.39      7.99        
9.59  
 121,301-263,750    147,701-263,750      10.00         36.00         42.40           
3.47       5.21       6.94       
8.68      10.42  
    over 263,751       over 263,751      10.00         39.60         45.64           
3.68       5.52       7.36      9.20       
11.04  
=========================================================================== 
=========================================================  
  
<CAPTION>  
                                                             
California Tax-Exempt  
                                                                     1996   
Income Fund Yield of:  
             Taxable Income*           California    Federal       Combined  
      Single               Joint          Rate***      Rate          Rate** 

 7.00%         8.00%         9.00%         
10.00%  
=========================================================================== 
=========================================================  
<S>                        <C>            <C>          <C>           <C> <C>  
         <C>           <C>            
<C>  
$       0-24,000           0-40,100       6.00%        15.00%        20.10%  
        
8.76%        10.01%        11.26%         
12.52%  
   24,001-58,150      40,101-96,900       9.30         28.00         34.70 
         
10.72         12.25         13.78          
15.31  
  58,151-121,300     96,901-147,700       9.30         31.00         37.42 
         
11.19         12.78         14.38          
15.98  
 121,301-263,750    147,701-263,750      10.00         36.00         42.40 
        
12.15         13.89         15.63          
17.36  
    over 263,751       over 263,751      10.00         39.60         45.64  
        
12.88         14.72         16.56          
18.40  
=========================================================================== 
=========================================================  
</TABLE>  
      
  
  
  *  This amount represents taxable income as defined in the Code. It is  
assumed  
     that taxable income as defined in the Code is the same as under the  
     California personal income tax law; however, California taxable income  
may  
     differ due to differences in exemptions, itemized deductions, and other  
     items.  
  
     
**   For Federal tax purposes, these combined rates reflect the applicable  
     marginal rates and rate brackets for 1996, including indexing the rate  
     bracket for inflation. These rates include the effect of deducting state  
     and city taxes on your Federal return.  
      
  
***  These rates represent the highest California personal income tax rates  
     within the applicable Federal income tax brackets for 1996. Where there  
is  
     a difference between the California personal income tax rates for single  
     and married filing joint, an average rate was used.  
  
     The Federal tax rates and California tax rates shown are those in effect  
for 1996 and are subject to change. The calculations reflected in the table  
assume that no income will be subject to the Federal alternative minimum  
taxes.  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares  
------------------------------------------------------------------------------ 
--  
  
     GENERAL  
  
     
     The Fund currently offers three Classes of shares. Class A shares are  
sold  
to investors with an initial sales charge and Class C shares are sold without  
an  
initial sales charge but are subject to a CDSC payable upon certain  
redemptions.  
Class Y shares are sold without an initial sales charge or a CDSC and are  
available only to investors investing a minimum of $5,000,000 (except, for  
purchases of Class Y shares by Smith Barney Concert Series, Inc. for which  
there  
      
  
                                                                               
29  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
is no minimum purchase amount). 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 C or Class Y shares. No maintenance  
fee will be charged by the Fund in connection with a brokerage account through  
which an investor purchases or holds shares.  
  
     
     Investors in Class A and Class C shares may open an account by making an  
initial investment of at least $1,000 for each account in the Fund. Investors  
in  
Class Y shares may open an account by making an initial investment of  
$5,000,000. Subsequent investments of at least $50 may be made for all  
Classes.  
For participants in the Fund's Systematic Investment Plan, the minimum initial  
investment requirement for Class A and Class C shares and the subsequent  
investment requirement for all Classes is $50. There are no minimum investment  
requirements in Class A shares for employees of Travelers and its  
subsidiaries,  
including Smith Barney, Trustees of the Trust and their spouses and children  
and  
unitholders who invest distributions from a UIT sponsored by Smith Barney. 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 Fund's  
transfer agent, First Data Investor Services Group,Inc.(the "Transfer Agent").  
Share certificates are issued only upon a shareholder's written request to the  
Transfer Agent.  
      
  
     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. 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  
received by the Fund or Smith Barney prior to Smith Barney's close of business  
(the "trade date"). 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 (the "settlement date"). In all other  
cases, payment must be made with the purchase order.  
  
  
  
30  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     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 $50 or more 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 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:  
  
<TABLE>  
<CAPTION>  
  
                                                                                      
Dealers  
                             Sales Charge as            Sales Charge as            
Reallowance as  
Amount of Investment       % of Offering Price       % of Amount Invested        
% of Offering Price  
=========================================================================== 
==========================  
<S>                               <C>                         <C>                       
<C>  
Less than $500,000                2.00%                       2.04%                     
1.80%  
$500,000 and over                   *                           *                         
*  
=========================================================================== 
==========================  
</TABLE>  
  
*    Purchases of Class A shares which, when combined with current holdings of  
     Class A shares offered with a sales charge, equal or exceed $500,000 in  
the  
     aggregate, 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 C  
     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 $500,000 investment may be met by aggregating the purchases of Class  
A  
shares of the Fund made at one time by "any person," which includes an  
individual, his or her spouse and children, or a trustee or other fiduciary of  
a  
single trust estate or single fiduciary account. It may also be met by  
aggregating the purchase with the net asset value of all Class A shares  
offered  
with a sales charge held in funds sponsored by Smith Barney listed under  
"Exchange Privilege."  
  
  
                                                                               
31  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     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 of Class A shares to Trustees  
or Directors of any of the Smith Barney Mutual Funds, and employees of  
Travelers  
and its subsidiaries and to the immediate families of such persons (including  
the surviving spouse of a deceased Trustee or employee, and retired Trustees  
or  
employees), pension, profit-sharing or other benefit plan for such persons  
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, or to employees of members of  
the National Association of Securities Dealers, Inc.; (b) offers of Class A  
shares to any other investment company in connection with 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) shareholders who have redeemed Class A shares  
in  
the Fund (or Class A shares of another fund of the Smith Barney Mutual Funds  
that are offered with a sales charge equal to or greater than the maximum  
sales  
charge of the Fund) and who wish to reinvest their redemption proceeds in the  
Fund, provided the reinvestment is made within 60 calendar days of the  
redemption; (e) accounts managed by registered investment advisory  
subsidiaries  
of Travelers; and (f) investments of distributions from a UIT sponsored by  
Smith  
Barney. In order to obtain such discounts, the investor 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 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 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 to  
permit  
verification that the purchase qualifies for purchase at net asset value. The  
right of accumulation is subject to modification or discontinuance at any time  
with respect to all shares purchased thereafter.  
  
32  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     GROUP PURCHASES  
  
     Upon completion of certain automated systems, purchases 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, if any, 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 the Smith Barney Mutual Funds offered  
with  
a sales charge to, and share holdings of, all members of the group. To be  
eligible for such purchase at net asset value, all purchases must be pursuant  
to  
an employer- 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 also may offer  
net  
asset value purchases 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 at the 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 purchase at net asset value, the purchaser must provide sufficient  
information at the time of purchase to permit verification that the purchase  
qualifies for purchase at net asset value. Approval of group purchases at net  
asset value is subject to the discretion of Smith Barney.  
  
     LETTER OF INTENT  
  
     
     Class A Shares. A Letter of Intent for amounts of $50,000 or more  
provides  
an opportunity for an investor to purchase shares at net asset value by  
aggregating the 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 Investment" as referred to in the preceding sales charge table  
      
  
  
                                                                               
33  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     
includes purchases of all Class A shares of the Fund and other Smith Barney  
Mutual Funds offered with a sales charge over a 13 month period based on the  
total amount of intended purchases plus the value of all Class A shares  
previously purchased and still owned. An alternative is to compute the 13  
month  
period starting up to 90 days before the date of execution of a Letter of  
Intent. Each investment made during the period receives the 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. 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. Such investors  
must make an initial minimum purchase of $1,000,000 in Class Y shares of the  
Fund and agree to purchase a total of $5,000,000 of Class Y shares of the Fund  
within six months from the date of the Letter. If a total investment of  
$5,000,000 is not made within the six-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%. The Fund expects that such  
transfer will not be subject to Federal income taxes. Please contact a Smith  
Barney Financial Consultant or the Transfer Agent for further information.  
      
  
     DEFERRED SALES CHARGE ALTERNATIVE  
  
     
     "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 C shares;  
and  
(b) Class A shares which, when combined with Class A shares offered with a  
sales  
charge currently held by an investor, equal or exceed $500,000 in the  
aggregate.  
  
     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;  
or  
(c) shares redeemed more than 12 months after their purchase. CDSC Shares are  
subject to a 1.00% CDSC if redeemed within 12 months of purchase.  
      
  
  
  
34  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     In determining the applicability of any CDSC, it will be assumed that a  
redemption is made first of shares representing capital appreciation, next of  
shares representing the reinvestment of dividends and capital gain  
distributions, and finally of other shares held by the shareholder for the  
longest period of time. The length of time that CDSC Shares acquired through  
an  
exchange have been held will be calculated from the date that the shares  
exchanged therefor 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 C shares at  
$10 per share for a cost of $1,000. Subsequently, the investor acquired 5  
additional shares through dividend reinvestment. During the tenth 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 1.00% (the applicable rate for Class C shares) for a  
total  
deferred sales charge of $2.40.  
  
     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 in connection with 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 funds  
of the 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.  
      
  
  
                                                                               
35  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     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  
for  
shares of the same Class in the following funds of the Smith Barney Mutual  
Funds, to the extent shares are offered for sale in the shareholder's state of  
residence. Exchanges of Class A and Class C shares are subject to minimum  
investment requirements and all shares are subject to the other requirements  
of  
the fund into which exchanges are made and a sales charge differential may  
apply.  
  
FUND NAME  
------------------------------------------------------------------------------ 
--  
  
Growth Funds  
  
     Smith Barney Aggressive Growth Fund Inc.  
     Smith Barney Appreciation Fund Inc.  
     Smith Barney Fundamental Value Fund Inc.  
     Smith Barney Growth Opportunity Fund  
     Smith Barney Managed Growth Fund  
     Smith Barney Natural Resources Fund Inc.  
     Smith Barney Special Equities Fund  
     Smith Barney Telecommunications Growth Fund  
  
Growth and Income Funds  
  
     Smith Barney Convertible Fund  
     Smith Barney Funds, Inc. -- Equity Income Portfolio  
     Smith Barney Growth and Income Fund  
     Smith Barney Premium Total Return Fund  
     Smith Barney Strategic Investors Fund  
     Smith Barney Utilities Fund  
  
  
  
36  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Exchange Privilege (continued)  
------------------------------------------------------------------------------ 
--  
  
Taxable-Fixed Income Funds  
  
    *Smith Barney Adjustable Rate Government Income Fund  
     Smith Barney Diversified Strategic Income Fund  
     Smith Barney Funds, Inc. -- Income Return Account Portfolio  
    *Smith Barney Funds, Inc. -- Short-Term U.S. Treasury Securities Portfolio  
     Smith Barney Funds, Inc. -- U.S. Government Securities Portfolio  
     Smith Barney Government Securities Fund  
     Smith Barney High Income Fund  
     Smith Barney Investment Grade Bond Fund  
     Smith Barney Managed Governments Fund Inc.  
  
Tax-Exempt Funds  
  
     Smith Barney Arizona Municipals Fund Inc.  
     Smith Barney California Municipals Fund Inc.  
     Smith Barney Intermediate Maturity New York Municipals Fund  
     Smith Barney Managed Municipals Fund Inc.  
     Smith Barney Massachusetts Municipals Fund  
     Smith Barney Muni Funds -- Florida Limited Term Portfolio  
     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-- Ohio Portfolio  
     Smith Barney Muni Funds-- Pennsylvania Portfolio  
     Smith Barney New Jersey Municipals Fund Inc.  
     Smith Barney Oregon Municipals Fund  
     Smith Barney Tax-Exempt Income Fund  
  
International Funds  
  
     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  
  
                                                                               
37  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Exchange Privilege (continued)  
------------------------------------------------------------------------------ 
--  
  
     
Smith Barney Concert Series Inc.  
  
     Smith Barney Concert Series Inc. -- High Growth Portfolio  
     Smith Barney Concert Series Inc. -- Growth Portfolio  
     Smith Barney Concert Series Inc. -- Balanced Portfolio  
     Smith Barney Concert Series Inc. -- Conservative Portfolio  
     Smith Barney Concert 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 C and Class Y shares of the  
     Fund.  
 **  Available for exchange with Class C shares of the Fund.  
***  Available for exchange with Class A shares of the Fund.  
  
  
     Class A Exchanges. Class A shares of the Smith Barney Mutual Funds sold  
without a sales charge or with a maximum sales charge of less than the maximum  
charged by other Smith Barney Mutual Funds will be subject to the appropriate  
"sales charge differential" upon the exchange of such shares for Class A  
shares  
of a fund sold with a higher sales charge. The "sales charge differential" is  
limited to a percentage rate no greater than the excess of the sales charge  
rate  
applicable to purchases of shares of the mutual fund being acquired in the  
exchange over the sales charge rate(s) actually paid on the mutual fund shares  
relinquished in the exchange and on any predecessor of those shares. For  
purposes of the exchange privilege, shares obtained through automatic  
reinvestment of dividends and capital gain distributions are treated as having  
paid the same sales charges applicable to the shares on which the dividends or  
distributions were paid; however, if no sales charge was imposed upon the  
initial purchase of the shares, any shares obtained through automatic  
reinvestment will be subject to a sales charge differential upon exchange.  
Class  
A shares held in the Fund prior to November 7, 1994, will be deemed to have  
paid  
a maximum sales charge of 2.00% for exchange purposes.  
  
     Class C Exchanges. Upon an exchange, the new Class C shares will be  
deemed  
to have been purchased on the same date as the Class C shares of the Fund that  
have been exchanged.  
  
  
38  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Exchange Privilege (continued)  
------------------------------------------------------------------------------ 
--  
  
     Class Y Exchanges. Class Y shareholders of the Fund who wish to exchange  
all or a portion of their Class Y shares for Class Y shares 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. SBMFM 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 the  
shareholder. Upon such a determination, the Fund will provide notice in  
writing  
or by telephone 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 in 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 expect 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, plus any applicable sales  
charge differential. 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 the 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.  
  
  
  
  
                                                                               
39  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Redemption of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     
     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. The redemption  
proceeds  
will be remitted on or before the third day following receipt of proper  
tender,  
except on any day 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.  
      
  
     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 Intermediate Maturity California Municipals Fund  
     Class A, C or Y (please specify)  
     c/o First Data Investor Services Group, Inc.  
     P.O. Box 9134  
     Boston, Massachusetts 02205-9134  
  
     
     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 required in connection with a redemption request in excess of  
$2,000 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 $2,000 or less do not require a signature  
guarantee unless more than one such redemption request is made in a 10-day  
period. The Transfer Agent may require additional supporting documents for  
redemptions made by corporations, executors, administrators, trustees or  
      
  
40  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Redemption of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
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  
  
     Certain shareholders 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 request may be made between 9:00 a.m.  
and  
4:00 p.m. (New York City time) on any day the NYSE is open. Redemptions of  
shares (i) by retirement plans or (ii) 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.  
(New York City time) on any day on which the NYSE is open.  
  
  
  
                                                                               
41  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Redemption of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     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 may elect to  
receive periodic cash payments of at least $50 monthly or quarterly.  
Retirement  
plan accounts are eligible for automatic cash withdrawal plans only where the  
shareholder is eligible to receive qualified distributions and has an account  
value of at least $5,000. 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 value of a shareholder's shares subject to the CDSC.)  
For  
further information regarding the automatic cash withdrawal plan, shareholders  
should contact a Smith Barney Financial Consultant.  
      
  
------------------------------------------------------------------------------ 
--  
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  
this 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 automatic redemption.  
  
  
  
42  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
     
------------------------------------------------------------------------------ 
--  
Performance   
------------------------------------------------------------------------------ 
--  
      
  
     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 C  
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  
specific 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 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 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  
its 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 Trust and the Fund  
------------------------------------------------------------------------------ 
--  
  
     BOARD OF TRUSTEES  
  
     
     Overall responsibility for management and supervision of the Trust and  
the  
Fund rests with the Trust's Board of Trustees. The Trustees approve all  
significant agreements between the Trust and the persons and companies that  
furnish services to the Fund, including agreements with the Fund's investment  
adviser and administrator, distributor, custodian and transfer agent. The  
day-to-day operations of the Fund have been delegated to the Fund's investment  
      
  
  
                                                                               
43  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Management of the Trust and the Fund (continued)  
------------------------------------------------------------------------------ 
--  
  
adviser and administrator. The Statement of Additional Information contains  
background information regarding each Trustee of the Trust and the executive  
officers of the Fund.  
  
     INVESTMENT ADVISOR AND ADMINISTRATOR -- SBMFM  
  
     
     SBMFM, located at 388 Greenwich Street, New York, New York 10013, serves  
as  
the Fund's investment adviser pursuant to a transfer of the investment  
advisory  
agreement, most recently approved by the Trust's Board of Trustees on July 19,  
1995. SBMFM (through predecessor entities) has been in the investment  
counseling  
business since 1934 and is a registered investment adviser. SBMFM renders  
investment advice to investment companies that had aggregate assets under  
management as of February 28, 1996 in excess of $75.85 billion.  
  
     Subject to the supervision and direction of the Trust's Board of  
Trustees,  
SBMFM manages the Fund's portfolio in accordance with the Fund's stated  
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 advisory services rendered to the Fund, the Fund pays SBMFM a fee  
at  
the annual rate of 0.30% of the value of the Fund's average daily net assets.  
Prior to November 17, 1995, the Fund paid SBMFM an investment advisory fee at  
the annual rate of 0.35% of the value of the Fund's average daily net assets.  
For the fiscal year ended November 30, 1995, the Fund paid investment advisory  
fees to SBMFM in an amount equal to 0.09% of the Fund's average daily net  
assets. During the same period, the Fund's investment adviser waived  
investment  
advisory fees in an amount equal to 0.26% of the value of the Fund's average  
daily net assets.  
  
     SBMFM also serves as the Fund's administrator and oversees all aspects of  
the Fund's administration. For administration services rendered to the Fund,  
the  
Fund pays SBMFM a fee at the annual rate of 0.20% of the value of the Fund's  
average daily net assets. For the fiscal year ended November 30, 1995, the  
Fund  
paid an administration fee of 0.05% of the value of its average daily net  
assets  
and the administrator voluntarily waived administration fees in an amount  
equal  
to 0.15% of the value of the Fund's average daily net assets.  
      
  
     Prior to July 10, 1995, The Boston Company Advisors, Inc. ("Boston  
Advisors") served as the Fund's sub-administrator. Under a sub-administration  
agreement dated July 20, 1994, Boston Advisors was paid a portion of the  
administration fee paid by the Fund to SBMFM at a rate agreed upon from time  
to  
time between Boston Advisors and SBMFM.  
  
  
  
44  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Management of the Trust and the Fund (continued)  
------------------------------------------------------------------------------ 
--  
  
     PORTFOLIO MANAGEMENT  
  
     
     Joseph P. Deane, an Investment Officer of SBMFM, has served as Vice  
President and Investment Officer of the Fund since it commenced operations on  
December 31, 1991, 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 November 30, 1995,  
is included in the Annual Report dated November 30, 1995. A copy of the Annual  
Report may be obtained upon request without charge from a Smith Barney  
Financial  
Consultant or by writing or calling the Fund at the address or phone number  
listed on page one of this Prospectus.  
  
------------------------------------------------------------------------------ 
--  
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 and Class C 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 C shares at the annual rate of 0.20%  
of  
the average daily net assets attributable to that Class. The fees are used by  
Smith Barney to pay its Financial Consultants for servicing shareholder  
accounts  
and, in the case of Class C 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 C 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.  
  
                                                                               
45  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Distributor (continued)  
------------------------------------------------------------------------------ 
--  
  
     
     Payments under the Plan with respect to Class C shares are not tied  
exclusively to the shareholder distribution and service expenses actually  
incurred by Smith Barney, and the payments may exceed expenses actually  
incurred  
by Smith Barney. The Trust's Board of Trustees will evaluate the  
appropriateness  
of the Plan and its payment terms with respect to the Fund on a continuing  
basis  
and in doing so will consider all relevant factors, including expenses borne  
by  
Smith Barney and amounts it receives under the Plan.  
      
  
------------------------------------------------------------------------------ 
--  
Additional Information  
------------------------------------------------------------------------------ 
--  
  
     
     The Trust was organized on October 17, 1991 under the laws of the  
Commonwealth of Massachusetts and is a business entity commonly known as a  
"Massachusetts business trust."  
      
  
     Each Class of the Fund 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 for each Class; (c) the  
distribution  
and/or service fees borne by each Class pursuant to the Plan; (d) the expenses  
allocable exclusively to each Class; (e) voting rights on matters exclusively  
affecting a single Class; and (f) the exchange privilege of each Class. The  
Trust's Board of Trustees does not anticipate that there will be any conflicts  
among the interests of the holders of the different Classes. The Trustees, on  
an  
ongoing basis, will consider whether any such conflict exists and, if so, take  
appropriate action.  
  
     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, in which case only shares of the affected Class  
would be entitled to vote.  
  
     The Fund does not hold annual shareholder meetings. There normally will  
be  
no meetings of shareholders for the purpose of electing Trustees unless and  
until such time as less than a majority of the Trustees holding office have  
been  
elected by shareholders, at which time the Trustees then in office will call a  
shareholders' meeting for the election of Trustees.  
  
     Shareholders of record of not less than two-thirds of the outstanding  
shares of the Trust may remove a Trustee through a declaration in writing or  
by  
vote cast in person or by proxy at a meeting called for that purpose. The  
Trustees will call a meeting for any purpose upon written request of  
shareholders holding at least 10% of the Trust's outstanding shares and the  
  
  
  
46  
<PAGE>  
  
Smith Barney  
Intermediate Maturity California Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Additional Information (continued)  
------------------------------------------------------------------------------ 
--  
  
Trust will assist shareholders in calling such a meeting as required by the  
1940  
Act.  
  
     PNC, located at 17th and Chestnut Streets, Philadelphia, Pennsylvania,  
serves as custodian of the Fund's investments.  
  
     The Transfer Agent is located at Exchange Place, Boston, Massachusetts  
02109.  
  
     The Fund sends shareholders a semi-annual report and an audited annual  
report, each of which includes a listing of investment securities held by the  
Fund. 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.  
In addition, the Fund also plans to consolidate the mailing of its Prospectus  
so  
that a shareholder having multiple accounts will receive a single Prospectus  
annually. Shareholders who do not want this consolidation to apply to their  
accounts should contact their Smith Barney Financial Consultant or the  
Transfer  
Agent.  
  
  
                                                                               
47  
<PAGE>  
  
                                                                    SMITH  
BARNEY  
                                                                    ---------- 
--  
  
                                               A Member of TravelersGroup  
[LOGO]  
  
  
  
  
                                                                    Smith  
Barney  
  
                                                           Intermediate  
Maturity  
  
                                                           California  
Municipals  
  
                                                                             
Fund  
  
  
                                                            388 Greenwich  
Street  
                                                        New York, New York  
10013  
  
  
  
     
                                                                     FD0220  
3/96  
      
  
  
PROSPECTUS  
                                                                    SMITH  
BARNEY  
  
  
                                                                     
Intermediate  
  
                                                                         
Maturity  
  
                                                                        New  
York  
  
                                                                       
Municipals  
  
                                                                             
Fund  
  
  
     
                                                                  March 22,  
1996  
      
  
  
                                                   Prospectus begins on page  
one  
  
  
  
[Logo] Smith Barney Mutual Funds  
       Investing for your future.  
       Every day.  
  
                                         
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Fund  
  
     
------------------------------------------------------------------------------ 
--  
Prospectus                                                        March 22,  
1996  
------------------------------------------------------------------------------ 
--  
      
  
     388 Greenwich Street  
     New York, New York 10013  
     (212) 723-9218  
  
  
     
     Smith Barney Intermediate Maturity New York Municipals Fund (the "Fund")  
seeks to provide New York investors with as high a level of current income  
exempt from Federal income taxes and New York State and New York City personal  
income tax as is consistent with preservation of principal. The Fund invests  
primarily in investment grade obligations issued by the State of New York and  
its political subdivisions, agencies and public authorities. The Fund is one  
of  
a number of funds, each having distinct investment objectives and policies  
making up the Smith Barney Investment Trust (the "Trust"). The Trust is an  
open-end management investment company commonly referred to as a mutual fund.  
  
     This Prospectus sets forth concisely certain information about the Fund,  
including sales charges and service and distribution fees and expenses, that  
prospective investors will find helpful in making an investment decision.  
Investors are encouraged to read this Prospectus carefully and retain it for  
future reference. Shares of the other funds offered by the Trust are described  
in separate prospectuses which may be obtained by calling or writing the Trust  
at  
the telephone number or address set forth above or by contacting a Smith  
Barney  
Financial Consultant.  
  
     Additional information about the Fund and the Trust is contained in a  
Statement of Additional Information dated March 22, 1996, as amended or  
supplemented from time to time, that is available upon request and without  
charge by calling or writing the Trust at the telephone number or address set  
forth above or by contacting a Smith Barney Financial Consultant. The  
Statement  
of Additional Information 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  
  
Smith Barney Mutual Funds Management Inc.  
Investment Adviser and Administrator  
  
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES  
AND  
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE  
SECURITIES  
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON  
THE  
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE  
CONTRARY IS A  
CRIMINAL OFFENSE.  
  
                                                                                
1  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Table of Contents  
------------------------------------------------------------------------------ 
--  
  
Prospectus Summary                                                              
3  
------------------------------------------------------------------------------ 
--  
Financial Highlights                                                           
10  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies                                   
14  
------------------------------------------------------------------------------ 
--  
Valuation of Shares                                                            
27  
------------------------------------------------------------------------------ 
--  
Dividends, Distributions and Taxes                                             
28  
------------------------------------------------------------------------------ 
--  
Purchase of Shares                                                             
31  
------------------------------------------------------------------------------ 
--  
Exchange Privilege                                                             
37  
------------------------------------------------------------------------------ 
--  
Redemption of Shares                                                           
40  
------------------------------------------------------------------------------ 
--  
Minimum Account Size                                                           
43  
------------------------------------------------------------------------------ 
--  
Performance                                                                    
44  
------------------------------------------------------------------------------ 
--  
Management of the Trust and the Fund                                           
44  
------------------------------------------------------------------------------ 
--  
Distributor                                                                    
46  
------------------------------------------------------------------------------ 
--  
Additional Information                                                         
47  
------------------------------------------------------------------------------ 
--  
  
=========================================================================== 
=====  
  
     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 or  
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 an offer or solicitation in such jurisdiction.  
  
=========================================================================== 
=====  
  
  
2  
<PAGE>  
  
Smith Barney   
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Prospectus Summary  
------------------------------------------------------------------------------ 
--  
  
The following summary is qualified in its entirety by detailed information  
appearing elsewhere in this Prospectus and in the Statement of Additional  
Information. Cross references in this summary are to headings in the  
Prospectus.  
See "Table of Contents."  
  
     
INVESTMENT OBJECTIVE. The Fund is a non-diversified intermediate-term  
municipal  
bond fund that seeks to provide New York investors with as high a level of  
current income exempt from Federal income taxes and New York State and New  
York  
City personal income tax as is consistent with the preservation of principal.  
The Fund invests primarily in investment-grade obligations issued by the State  
of New York and its political subdivisions, agencies and public authorities.  
The  
weighted average maturity of the Fund's portfolio securities will normally not  
be less than three nor more than 10 years. The maximum remaining maturity of  
the  
securities in which the Fund will normally invest will be no greater than 20  
years. See "Investment Objective and Management Policies."  
      
  
ALTERNATIVE PURCHASE ARRANGEMENTS.  The Fund offers three 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 two Classes of shares: Class A shares and Class C shares, which differ  
principally in terms of sales charges and rates of expenses to which they are  
subject. A third Class of shares, Class Y shares, is offered only to investors  
meeting an initial investment minimum of $5,000,000. 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 2.00% 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 waived  
for certain purchases. Purchases of Class A shares, which when combined with  
current holdings of Class A shares offered with a sales charge equal or exceed  
$500,000 in the aggregate, 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  
-- No Initial Sales Charge."  
  
     Class C Shares. Class C shares are sold at net asset value with no  
initial  
sales charge. They are subject to an annual service fee of 0.15% and an annual  
distribution fee of 0.20% of the average daily net assets of the Class, and  
investors pay a CDSC of 1.00% if they redeem Class C shares within 12 months  
of  
purchase. The CDSC may be waived for certain redemptions. The Class C shares'  
distribution fee may cause that Class to have higher expenses and pay  
  
                                                                                
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Smith Barney   
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Prospectus Summary (continued)  
------------------------------------------------------------------------------ 
--  
  
lower dividends than Class A shares. Purchases of the Fund shares, which  
when combined with current holdings of Class C 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 $5,000,000. Class Y shares are sold at net asset  
value with no initial sales charge or CDSC. They 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 length 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 to purchase shares without an initial sales charge  
and  
the shares are subject to lower ongoing expenses over the term of the  
investment. As an alternative, Class C 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, investors should consider the effect of the CDSC period  
in  
the context of their own investment time frame.  
  
     Investors investing a minimum of $5,000,000 must purchase Class Y shares,  
which are not subject to an initial sales charge, CDSC or service or  
distribution fees. The maximum purchase amount for Class A shares is  
$4,999,999  
and Class C shares is $499,999. There is no maximum purchase amount for Class  
Y  
shares.  
  
     No Initial Sales Charge.  The initial sales charge on Class A shares may  
be  
waived for certain eligible purchasers, and the entire purchase price would be  
immediately invested in the Fund. In addition, Class A share purchases, which  
when combined with current holdings of Class A shares offered with a sales  
charge equal or exceed $500,000 in the aggregate, 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 aggregate  
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  
  
4  
<PAGE>  
  
Smith Barney   
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Prospectus Summary (continued)  
------------------------------------------------------------------------------ 
--  
  
Barney") listed under "Exchange Privilege." See "Purchase of Shares." Because  
the ongoing expenses of Class A shares may be lower than those for Class C  
shares, purchasers eligible to purchase Class A shares at net asset value  
should  
consider doing so.  
  
     Smith Barney Financial Consultants may receive different compensation for  
selling each Class of shares. Investors should understand that the purpose of  
the CDSC on the Class C shares is the same as that of the initial sales charge  
on the Class A shares.  
  
     See "Purchase of Shares" and "Management of the Trust and 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 and Class C 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 $5,000,000.  
Subsequent investments of at least $50 may be made for all Classes. The  
minimum  
initial investment requirement for Class A and Class C shares and the  
subsequent  
investment requirement for all Classes through the Systematic Investment Plan  
described below is $50. 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."  
  
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 in an amount of at least  
$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 TRUST AND THE FUND.  Smith Barney Mutual Funds Management  
Inc.  
("SBMFM") serves as the Fund's investment adviser and administrator. SBMFM is  
a  
wholly owned subsidiary of 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,  
      
  
                                                                                
5  
<PAGE>  
  
Smith Barney   
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Prospectus Summary (continued)  
------------------------------------------------------------------------------ 
--  
  
     
principally in four business segments: Investment Services, Consumer Finance  
Services, Life Insurance Services and Property & Casualty Insurance Services.  
See "Management of the Trust and 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, plus any applicable sales charge differential. 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 also is available  
from a Smith Barney Financial Consultant. See "Valuation of Shares."  
  
     
DIVIDENDS AND DISTRIBUTIONS.  Dividends from net investment income are paid on  
the last Friday of each calendar month to shareholders of record as of three  
business days prior. Distributions of net realized capital gains, if any, are  
paid annually. See "Dividends, Distributions and Taxes."  
      
  
REINVESTMENT OF DIVIDENDS.  Dividends and distributions paid on shares of any  
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 reinvestments will not be subject to any sales charge or  
CDSC. See "Dividends, Distributions and Taxes."  
  
     
RISK FACTORS AND SPECIAL CONSIDERATIONS.  No assurance can be given that the   
Fund will achieve its investment objective. Shares of the Fund, unlike certain  
bank deposit accounts, are not guaranteed or insured by any Federal or state  
authority. Changes in interest rates generally will result in increases or  
decreases in the market value of the obligations held by the Fund. The yield  
of  
the Fund may not be as high as those of other funds that invest in lower  
quality  
and/or longer term securities. The Fund is not a tax-exempt money market fund  
and therefore its investment portfolio can be expected to experience greater  
volatility than that of a tax-exempt money market fund. The net asset value of  
the Fund will be subject to greater fluctuation to the extent that the Fund  
invests in zero coupon securities. The Fund's net asset value per share will  
fluctuate depending on a combination of factors such as current market  
interest  
rates and the creditworthiness of the issuers in whose securities the Fund  
invests. The Fund will not invest in obligations that are rated lower than Baa  
by Moody's Investors Service, Inc. ("Moody's"), BBB by Standard & Poor's  
Corporation ("S&P") or BBB by Fitch Investors Service, Inc. ("Fitch"), at the  
time of purchase. The ratings of Moody's, S&P and Fitch represent their  
opinions  
as to the quality of the obligations that they undertake to rate; the ratings  
are relative and subjective and are not absolute standards of quality.  
      
  
6  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Prospectus Summary (continued)  
------------------------------------------------------------------------------ 
--  
  
     The Fund may invest up to 20% of its total assets in unrated securities  
that SBMFM determines to be of comparable quality to the securities rated  
investment grade in which the Fund may invest. Dealers may not maintain daily  
markets in unrated securities and retail secondary markets for many of them  
may  
not exist; lack of markets may affect the Fund's ability to sell these  
securities when SBMFM deems it appropriate. The Fund has the right to invest  
without limitation in state and local obligations that are "private activity  
bonds," the income from which may be taxable as a specific preference item for  
purposes of the Federal alternative minimum tax. Thus, the Fund may not be a  
suitable investment for investors who are subject to the alternative minimum  
tax.  
  
     Certain of the instruments held by the Fund, and certain of the  
investment  
techniques that the Fund may employ, might expose the Fund to certain risks.  
The  
instruments presenting the Fund with risks are municipal leases, zero coupon  
securities, custodial receipts, municipal obligation components, floating and  
variable rate demand notes and bonds, and participation interests. Entering  
into  
securities transactions on a when-issued or delayed-delivery basis are  
investment techniques involving risks to the Fund. See "Investment Objective  
and  
Management Policies -- Investment Techniques -- Risk Factors and Special  
Considerations" and "Dividends, Distributions and Taxes."  
  
     Investment in the Fund, which is classified as a non-diversified fund,  
may  
present a greater risk than an investment in a diversified fund. See  
"Investment  
Objective and Management Policies -- Risk Factors and Special Considerations."  
Investment in the Fund involves risks and special considerations applicable to  
the State of New York. See "Investment Objective and Management Policies --  
Risk  
Factors and Special Considerations."  
  
                                                                                
7  
<PAGE>  
  
Smith Barney   
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Prospectus Summary (continued)  
------------------------------------------------------------------------------ 
--  
  
THE FUND'S EXPENSE  The following expense table lists the costs and expenses  
an  
investor will incur either directly or indirectly as a shareholder of the  
Fund,  
based upon 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 C     Class Y  
=========================================================================== 
=====  
Shareholder Transaction Expenses  
     Maximum sales charge imposed on purchases  
      (as a percentage of offering price)       2.00%       None        None  
     Maximum CDSC (as a percentage of original  
      cost or redemption proceeds,   
      whichever is lower)                       None*       1.00%       None  
=========================================================================== 
=====  
      
Annual Fund Operating Expenses***  
    (as a percentage of average net assets)  
    Management fees (net of fee waivers)        0.23%       0.23%       0.23%  
    12b-1 fees**                                0.15        0.35         0.0%  
    Other expenses+                             0.27        0.28        0.27%  
      
=========================================================================== 
=====  
TOTAL OPERATING EXPENSES  
    (after waivers)                             0.65%       0.86%       0.50%  
=========================================================================== 
=====  
*    Purchases of Class A shares which, when combined with current holdings of  
     Class A shares offered with a sales charge, equal or exceed $500,000 in  
the  
     aggregate, will be made at net asset value with no sales charge, but may  
be  
     subject to a CDSC of 1.00% on redemptions made within 12 months.  
  
**   Class C shares are subject to an ongoing distribution fee and, as a  
result,  
     long-term shareholders of Class C shares may pay more than the economic  
     equivalent of the maximum front-end sales charge permitted by the  
National  
     Association of Securities Dealers, Inc.  
  
     
***  During the fiscal year ended November 30, 1995, the Fund's investment  
     adviser and administrator voluntarily waived portions of its fees in the  
     aggregate amount equal to 0.32% of the value of the Fund's average daily  
     net assets thereby decreasing the amount paid by the Fund in respect of  
     management fees to 0.23% of the value of the Fund's average daily net  
     assets. This had the effect of lowering the Fund's overall expenses and  
     increasing the returns available to investors. If SBMFM had not elected  
     to waive fees and reimburse expenses, the Fund's total operating expenses  
     for Class A shares and Class C shares for the fiscal year ended November  
30,  
     1995, would have been 0.97% and 1.19%, respectively, of the value of the  
     Fund's average daily net assets. As of November 17, 1995, the Fund's  
     investment advisory fee was reduced from 0.35% to 0.30% of the average  
     daily net assets of the Fund.  
  
  +  For Class Y shares, "Other expenses" have been estimated based on  
expenses  
     incurred by Class A shares because prior to November 30, 1995 no Class Y  
     shares were sold.  
      
  
     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  
actually may pay lower or no charges, depending on the amount purchased and  
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 C shares an annual 12b-1 fee of 0.35% of the value of average  
  
  
8  
<PAGE>  
  
Smith Barney   
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Prospectus Summary (continued)  
------------------------------------------------------------------------------ 
--  
  
daily net assets of that Class, consisting of a 0.20% distribution fee and a  
0.15% service fee. The nature of the services for which the Fund pays  
management  
fees is described under "Management of the Trust and the Fund." "Other  
expenses"  
in the above table includes fees for shareholder services not provided by  
Smith  
Barney, custodial fees, legal and accounting fees, printing costs and  
registration fees, the costs of regulatory compliance, the costs associated  
with  
maintaining the Trust's legal existence and the costs involved in  
communicating  
with shareholders of the Fund.  
         
  
     
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 above. See "Purchase of Shares," "Redemption  
of Shares" and "Management of the Trust and the Fund."  
      
  
                                        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                               $27        $40        $55        $99  
   Class C                                19         27         48        106  
   Class Y                                 5         16         28         63  
  
An investor would pay the following expenses  
on the same investment, assuming the same  
annual return and no redemption:  
  
   Class A                               $27        $40        $55       $99   
   Class C                                 9         27         48       106   
   Class Y                                 5         16         28        63  
=========================================================================== 
=====  
  
     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>  
  
Smith Barney  
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Financial Highlights  
------------------------------------------------------------------------------ 
--  
  
     The following information for the fiscal year ended November 30, 1995 has  
been audited by KPMG Peat Marwick LLP, independent auditors, whose report  
thereon appears in the Fund's Annual Report dated November 30, 1995. The  
following information for the period ended November 30, 1992 and for the  
fiscal  
years ended November 30, 1993 and November 30, 1994 has been audited by  
Coopers  
& Lybrand L.L.P., independent auditors. This information 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  
Statement  
of Additional Information.  
  
     
For a Class A share of beneficial interest outstanding throughout each year:  
   
                              1995           1994          1993        1992(1)  
      
=========================================================================== 
=====  
Net Asset Value, Beginning   
 of Period                    $7.80          $8.54         $8.18        $7.90  
------------------------------------------------------------------------------ 
--  
Income From Operations  
  Net investment income(2)     0.41           0.40          0.40         0.38  
  Net realized and unrealized  
   gain (loss)                 0.68          (0.72)         0.38         0.28  
------------------------------------------------------------------------------ 
--  
Total Income (Loss) From     
  Operations                   1.09          (0.32)         0.78         0.66  
------------------------------------------------------------------------------ 
--  
Less Distributions From:  
  Net investment income       (0.41)         (0.40)        (0.40)       (0.38)  
  Net realized gains             --          (0.02)        (0.02)         --  
------------------------------------------------------------------------------ 
--  
Total Distributions            (0.41)        (0.42)        (0.42)       (0.38)  
------------------------------------------------------------------------------ 
--  
Net Asset Value, End of Year   $8.48         $7.80         $8.54        $8.18  
------------------------------------------------------------------------------ 
--  
     
Total Return                   14.31%        (3.97)%        9.76%         
8.59%++  
      
------------------------------------------------------------------------------ 
--  
Net Assets, End of   
   Year (in 000s)            $52,568       $62,090        $67,230     $24,543  
------------------------------------------------------------------------------ 
--  
Ratio to Average Net Assets:  
   Expenses(2)                  0.65%         0.65%         0.65%         
0.65%+  
      
   Net investment income        5.01          4.77          4.59         4.95+  
      
------------------------------------------------------------------------------ 
--  
  
Portfolio Turnover Rate(3)        --            68%            22%         68%  
=========================================================================== 
=====  
  
(1)  For the period from December 31, 1991 (inception date) to November 30,  
     1992.  
  
     
(2)  The investment adviser has waived all or part of its fees for the three  
     years ended November 30, 1995 and the period ended November 30, 1992. If  
     such fees were not waived, the per share decreases in net investment  
income  
     and the expense ratios would be as follows:  
  
               Per Share Decrease                      Expense Ratio  
            In Net Investment Income                Without Fee Waivers  
         -------------------------------    ---------------------------------  
          1995    1994      1993    1992    1995    1994     1993     1992  
          ----    ----      ----    ----    ----    ----     ----     ----  
  
         $0.03    $0.03    $0.04    $0.06   $0.97%   0.98%    1.10%    1.45%+  
  
(3)  Portfolio turnover rate was 0% because there were no purchases of   
     securities with maturities in excess of twelve months.  
  
+    Annualized  
  
++   Total return is not annualized, as it may not be representative of the   
     total return for the year.  
      
  
  
10  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Financial Highlights (continued)  
------------------------------------------------------------------------------ 
--  
  
     
For a Class C share of beneficial interest outstanding throughout the year:  
  
  
                                                                      1995(1)  
      
=========================================================================== 
=====  
Net Asset Value, Beginning of Year                                    $7.87  
------------------------------------------------------------------------------ 
--  
Income From Operations  
  Net investment income(2)                                             0.38  
  Net realized and unrealized gain                                     0.61  
------------------------------------------------------------------------------ 
--  
Total Income From Operations                                           0.99  
------------------------------------------------------------------------------ 
--  
Less Distributions From:  
   Net investment income                                              (0.38)  
   Net realized gains                                                   --  
------------------------------------------------------------------------------ 
--  
Total Distributions                                                   (0.38)  
------------------------------------------------------------------------------ 
--  
Net Asset Value, End of Year                                          $8.48  
------------------------------------------------------------------------------ 
--  
Total Return                        .                                 13.01%++  
------------------------------------------------------------------------------ 
--  
Net Assets, End of Year (in 000s)                                      $393  
------------------------------------------------------------------------------ 
--  
Ratio to Average Net Assets:  
   Expenses(2)                                                         0.86%+  
   Ratio of Net Investment Income                                      4.74+  
------------------------------------------------------------------------------ 
--  
Portfolio Turnover Rate(3)                                               --  
=========================================================================== 
=====  
  
(1)  For the period from December 5, 1994 (inception date) to November 30,  
1995.  
  
     
(2)  The investment adviser has waived a part of its fees for the period  
     ended November 30, 1995. If such fees were not waived, the per share  
     decreases in net investment income and the expense ratios would be as  
     follows:  
      
  
                            Per Share Decrease              Expense Ratio  
                          in Net Investment Income       Without Fee Waivers    
                          ------------------------       -------------------  
                                    1995                         1995  
                                    ----                         ----  
                            $0.03                         1.19%+  
  
     
(3)  Portfolio turnover rate was 0% because there were no purchases of   
     securities with maturities in excess of twelve months.  
  
 +   Annualized.  
  
++   Total return is not annualized, as it may not be representative of the   
     total for the year.  
  
     As of November 30, 1995, the Fund had not sold any Class Y shares, and  
accordingly, no comparable financial information is available at this time for  
that class.  
      
  
                                                                               
11  
<PAGE>  
  
  
Smith Barney  
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies  
------------------------------------------------------------------------------ 
--  
  
     
     Set out below is a description of the investment objective and principal  
investment policies of the Fund. No assurance can be given that the Fund will  
be  
able to achieve its investment objective, which may be changed only with the  
approval of a majority (as defined by the Investment Company Act of 1940, as  
amended (the "1940 Act")) of the Fund's outstanding shares.  
  
     The Fund's investment objective is to provide New York investors with as  
high a level of current income exempt from Federal income taxes and New York  
State and New York City personal income taxes as is consistent with  
preservation  
of principal. Under normal market conditions, the Fund attempts to invest 100%  
in a portfolio of investment grade debt obligations issued by or on behalf of  
the State of New York and other states, territories and possessions of the  
United States, the District of Columbia and their respective authorities,  
agencies, instrumentalities and political subdivisions ("Municipal  
Obligations"). For purposes of this Prospectus, debt obligations issued by the  
State of New York and its political subdivisions, agencies and public  
authorities (together with certain other governmental issuers such as the  
Commonwealth of Puerto Rico), the interest from which debt obligations is, in  
the opinion of bond counsel to the issuer, excluded from gross income for  
Federal income tax purposes and exempt from New York State personal income tax  
are defined as " New York Exempt Obligations." The Fund will operate subject  
to  
a fundamental investment policy providing that, under normal market  
conditions,  
the Fund will invest at least 80% of its net assets in New York Exempt  
Obligations.  
      
  
     The Fund will invest at least 80% of its total assets in New York Exempt  
Obligations rated investment grade, that is, rated no lower than Baa, MIG 3 or  
Prime-1 by Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by Fitch. Up to 20%  
of  
the Fund's total assets may be invested in unrated securities that are deemed  
by  
SBMFM to be of a quality comparable to investment grade. The Fund will not  
invest in New York Exempt Obligations that are rated lower than Baa by  
Moody's,  
BBB by S&P or BBB by Fitch, at the time of purchase.  
  
     The Fund is classified as a non-diversified fund under the 1940 Act, as  
amended, 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, however, so as to qualify  
as  
a "regulated investment company" for purposes of the Internal Revenue Code of  
1986, as amended (the "Code"), which will relieve the Fund of any liability  
for  
Federal income tax and New York State franchise tax to the extent that its  
earnings are distributed to shareholders. To qualify as a regulated investment  
company, the Fund will, among other things, limit its investments so that, at  
the close of each quarter of the taxable year (a) not more than 25% of the  
  
12  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Fund  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
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 ratings of Moody's, S&P and Fitch represent their opinions as to the  
quality of the New York Exempt Obligations that they undertake to rate; the  
ratings are relative and subjective and are not absolute standards of quality.  
SBMFM's judgment as to credit quality of a New York Exempt Obligation, thus,  
may  
differ from that suggested by the ratings published by a rating service. A  
description of Moody's, S&P and Fitch ratings relevant to the Fund's  
investments  
is included as an appendix to the Statement of Additional Information. The  
policies of the Fund described above as to ratings of portfolio investments  
will  
apply only at the time of the purchase of a security, and the Fund will not be  
required to dispose of a security in the event Moody's, S&P or Fitch  
downgrades  
its assessment of the credit characteristics of the security's issuer.  
  
     New York Exempt Obligations are classified as general obligation bonds,  
revenue bonds and notes. General obligation bonds are secured by the issuer's  
pledge of its full faith, credit and taxing power for the payment of principal  
and interest. Revenue bonds are payable from the revenue derived from a  
particular facility or class of facilities or, in some cases, from the  
proceeds  
of a special excise or other specific revenue source, but not from the general  
taxing power. Notes are short-term obligations of issuing municipalities or  
agencies and are sold in anticipation of a bond sale, collection of taxes or  
receipt of other revenues. New York Exempt Obligations bear fixed, floating  
and  
variable rates of interest, and variations exist in the security of New York  
Exempt Obligations, both within a particular classification and between  
classifications.  
  
     The yields on, and values of, New York Exempt Obligations are dependent  
on  
a variety of factors, including general economic and monetary conditions,  
conditions in the New York Exempt Obligation markets, size of a particular  
offering, maturity of the obligation and rating of the issue. Consequently,  
New  
York Exempt Obligations with the same maturity, coupon and rating may have  
different yields or values, whereas obligations of the same maturity and  
coupon  
with different ratings may have the same yield or value. See "Risk Factors and  
Special Considerations -- New York Exempt Obligations."  
  
     Issuers of New York Exempt Obligations may be subject to the provisions  
of  
bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Reform  
Act  
of 1978, affecting the rights and remedies of creditors. In addition, the  
  
                                                                               
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obligations of those issuers may become subject to laws enacted in the future  
by  
Congress, state legislatures or referenda extending the time for payment of  
principal and/or interest, or imposing other constraints upon enforcement of  
the  
obligations or upon the ability of municipalities to levy taxes. The  
possibility  
also exists that, as a result of litigation or other conditions, the power or  
ability of any issuer to pay, when due, the principal of, and interest on, its  
obligations may be materially affected.  
  
     MATURITY OF OBLIGATIONS HELD BY THE FUND  
  
     SBMFM believes that the Fund may offer an attractive investment  
opportunity  
for investors seeking a higher effective tax yield than a tax-exempt money  
market fund or a tax-exempt short-term bond fund and less fluctuation in net  
asset value than a longer term tax-exempt bond fund. The Fund will normally  
invest in intermediate maturity securities; the weighted average maturity of  
the  
Fund will normally be not less than three nor more than 10 years. The maximum  
remaining maturity of the securities in which the Fund will normally invest  
will  
be no greater than 20 years.  
  
     PRIVATE ACTIVITY BONDS  
  
     The Fund may invest without limit in New York Exempt Obligations that are  
"private activity bonds," as defined in the Code, which are in most cases  
revenue bonds. Private activity bonds generally do not carry the pledge of the  
credit of the issuing municipality, but are guaranteed by the corporate entity  
on whose behalf they are issued. Interest income on certain types of private  
activity bonds issued after August 7, 1986 to finance nongovernmental  
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 these bonds. Dividends derived from  
interest income on New York Exempt Obligations are a "current earnings"  
adjustment item for purposes of the Federal corporate alternative minimum tax.  
See "Dividends, Distributions and Taxes." Private activity bonds held by the  
Fund will be included in the term New York Exempt Obligations for purposes of  
determining compliance with the Fund's policy of investing at least 80% of its  
total assets in New York Exempt Obligations.  
  
     RELATED INSTRUMENTS  
  
     The Fund may invest without limit in New York Exempt Obligations that are  
repayable out of revenues generated from economically related projects or  
facilities or debt obligations whose issuers are located in the same state.  
Sizable investments in these obligations could involve an increased risk to  
the  
  
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Fund should any of the related projects or facilities experience financial  
difficulties.  
  
     OTHER MISCELLANEOUS POLICIES  
  
     The Fund may invest up to an aggregate amount equal to 10% of its net  
assets in illiquid securities, which term includes securities subject to  
contractual or other restrictions on resale and other instruments that lack  
readily available markets. In addition, up to 5% of the value of the Fund's  
assets may be invested in securities of entities that have been in continuous  
operation for fewer than three years.  
  
     TYPES OF NEW YORK EXEMPT OBLIGATIONS HELD BY THE FUND  
  
     Municipal Leases. The Fund may invest without limit in "municipal  
leases."  
Municipal leases may take the form of a lease or an installment purchase  
contract issued by state and local government authorities to obtain funds to  
acquire a wide variety of equipment and facilities such as fire and sanitation  
vehicles, computer equipment and other capital assets. Interest payments on  
qualifying municipal leases are exempt from Federal income taxes and state  
income taxes within the state of issuance. 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. In addition to the  
"non-appropriation" risk, these securities represent a relatively new type of  
financing that has not yet developed the depth of marketability associated  
with  
more conventional bonds. Although "non-appropriation" lease obligations are  
often secured by the underlying property, disposition of the property in the  
event of foreclosure might prove difficult. The Fund may invest in municipal  
leases without non-appropriation clauses only when the municipality is  
required  
to continue the lease under all circumstances except bankruptcy. 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, SBMFM  
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  
  
                                                                               
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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 other than those covered by the lease  
obligation.  
  
     Municipal leases that the Fund may acquire will be both rated and  
unrated.  
Rated leases include those rated investment grade at the time of investment or  
those issued by issuers whose senior debt is rated investment grade at the  
time  
of investment. The Fund may acquire unrated issues that SBMFM deems to be  
comparable in quality to rated issues in which the Fund is authorized to  
invest.  
A determination that an unrated lease obligation is comparable in quality to a  
rated lease obligation will be subject to oversight and approval by the  
Trust's  
Board of Trustees.  
  
     Municipal leases held by the Fund will be considered illiquid securities  
unless the Trust's Board of Trustees determines on an ongoing basis that the  
leases are readily marketable. An unrated municipal lease with a  
non-appropriation risk that is backed by an irrevocable bank letter of credit  
or  
an insurance policy issued by a bank or insurer deemed by SBMFM to be of high  
quality and minimal credit risk, will not be deemed to be illiquid solely  
because the underlying municipal lease is unrated, if SBMFM determines that  
the  
lease is readily marketable because it is backed by the letter of credit or  
insurance policy.  
  
     
     Zero Coupon Securities. The Fund may invest up to 10% of its assets in  
zero  
coupon New York Exempt Obligations. Zero coupon New York Exempt Obligations  
are  
generally divided into two categories: pure zero obligations, which pay no  
interest for their entire life and zero/fixed obligations, which pay no  
interest  
for some initial period and thereafter pay interest currently. In the case of  
a  
pure zero obligation, the failure to pay interest currently may result from  
the  
obligation's having no stated interest rate, in which case the obligation pays  
only principal at maturity and is issued at a discount from its stated  
principal  
amount. A pure zero obligation may, in the alternative, provide for a stated  
interest rate, but provide that no interest is payable until maturity, in  
which  
case accrued, unpaid interest on the obligation may be capitalized as  
incremental principal. The value to the investor of a zero coupon New York  
Exempt Obligation consists of the economic accretion either of the difference  
between the purchase price and the nominal principal amount (if no interest is  
stated to accrue) or of accrued, unpaid interest during the New York Exempt  
Obligation's life or payment deferral period.  
      
  
     Custodial Receipts. The Fund may acquire custodial receipts or  
certificates  
underwritten by securities dealers or banks that evidence ownership of future  
  
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interest payments, principal payments, or both, on certain New York Exempt  
Obligations. The underwriter of these certificates or receipts typically  
purchases New York Exempt Obligations and deposits the obligations in an  
irrevocable trust or custodial account with a custodian bank, which then  
issues  
receipts or certificates that evidence ownership of the periodic unmatured  
coupon payments and the final principal payment on the obligations. Custodial  
receipts evidencing specific coupon or principal payments have the same  
general  
attributes as zero coupon New York Exempt Obligations described above.  
Although  
under the terms of a custodial receipt, the Fund would be typically authorized  
to assert its rights directly against the issuer of the underlying obligation,  
the Fund could be required to assert through the custodian bank those rights  
as  
may exist against the underlying issuer. Thus, in the event the underlying  
issuer fails to pay principal and/or interest when due, the Fund may be  
subject  
to delays, expenses and risks that are greater than those that would have been  
involved if the Fund had purchased a direct obligation of the issuer. In  
addition, in the event that the trust or custodial account in which the  
underlying security has been deposited is determined to be an association  
taxable as a corporation, instead of a non-taxable entity, the yield on the  
underlying security would be reduced in recognition of any taxes paid.  
  
     New York Exempt Obligation Components. The Fund may invest in New York  
Exempt Obligations, the interest rate on which has been divided by the issuer  
into two different and variable components, which together result in a fixed  
interest rate. Typically, the first of the components (the "Auction  
Component")  
pays an interest rate that is reset periodically through an auction process,  
whereas the second of the components (the "Residual Component") pays a  
residual  
interest rate based on the difference between the total interest paid by the  
issuer on the New York Exempt Obligation and the auction rate paid on the  
Auction Component. The Fund may purchase both Auction and Residual Components.  
  
     Because the interest rate paid to holders of Residual Components is  
generally determined by subtracting the interest rate paid to the holders of  
Auction Components from a fixed amount, the interest rate paid to Residual  
Component holders will decrease as the Auction Component's rate increases and  
increase as the Auction Component's rate decreases. Moreover, the magnitude of  
the increases and decreases in market value of Residual Components may be  
larger  
than comparable changes in the market value of an equal principal amount of a  
fixed rate New York Exempt Obligation having similar credit quality,  
redemption  
provisions and maturity.  
  
     Floating and Variable Rate Instruments. The Fund may purchase floating  
and  
variable rate demand notes and bonds, which are New York Exempt Obligations  
  
                                                                               
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normally having a stated maturity in excess of one year, but which permit  
their  
holder to demand payment of principal at any time, or at specified intervals.  
  
The maturity of a floating or variable rate demand note or bond will not be  
deemed shortened by virtue of a demand feature for purposes of calculating the  
Fund's net asset value or determining its weighted average maturity.  
  
     The issuer of floating and variable rate demand obligations normally has  
a  
corresponding right, after a given period, to prepay at its discretion the  
outstanding principal amount of the obligations plus accrued interest upon a  
specified number of days' notice to the holders of these obligations. The  
interest rate on a floating rate demand obligation is based on a known lending  
rate, such as a bank's prime rate, and is adjusted automatically each time  
that  
rate is adjusted. The interest rate on a variable rate demand obligation is  
adjusted automatically at specified intervals. Frequently, floating and  
variable  
rate obligations are secured by letters of credit or other credit support  
arrangements provided by banks. Use of letters of credit or other credit  
support  
arrangements will not adversely affect the tax-exempt status of these  
obligations. Because they are direct lending arrangements between the lender  
and  
borrower, floating and variable rate obligations will generally not be traded.  
In addition, no secondary market generally exists for these obligations,  
although their holders may demand their payment at face value. For these  
reasons, when floating and variable rate obligations held by the Fund are not  
secured by letters of credit or other credit support arrangements, the Fund's  
right to demand payment is dependent on the ability of the borrower to pay  
principal and interest on demand. SBMFM, on behalf of the Fund, will consider  
the creditworthiness of the issuers of floating and variable rate demand  
obligations in the Fund on an ongoing basis.  
  
     Participation Interests. The Fund may purchase from financial  
institutions  
tax-exempt participation interests in New York Exempt Obligations. A  
participation interest gives the Fund an undivided interest in the New York  
Exempt Obligation in the proportion that the Fund's participation interest  
bears  
to the total amount of the New York Exempt Obligation. These instruments may  
have floating or variable rates of interest. If the participation interest is  
unrated, it will be backed by an irrevocable letter of credit or guarantee of  
a  
bank that the Trust's Board of Trustees has determined meets certain quality  
standards or the payment obligation otherwise will be collateralized by  
obligations of the United States government or its agencies and  
instrumentalities ("U.S. government securities"). The Fund will have the  
right,  
with respect to certain participation interests, to demand payment, on a  
specified number of days' notice, for all or any part of the Fund's interest  
in  
the New York Exempt Obligation, plus accrued interest. The Fund intends to  
  
  
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exercise its right with respect to these instruments to demand payment only  
upon  
a default under the terms of the New York Exempt Obligation or to maintain or  
improve the quality of its investment portfolio.  
  
     TAXABLE INVESTMENTS  
  
     Under normal conditions, the Fund may hold up to 20% of its total assets  
in  
cash or money market instruments, including taxable money market instruments  
(collectively, "Taxable Investments"). In addition, when SBMFM believes that  
market conditions warrant, the Fund may take a temporary defensive posture and  
invest without limitation in short-term New York Exempt Obligations and  
Taxable  
Investments. To the extent the Fund holds Taxable Investments and, under  
certain  
market conditions, certain floating and variable rate demand obligations or  
Auction Components, the Fund may not achieve its investment objective.  
  
     Money market instruments in which the Fund may invest include: U.S.  
government securities; tax-exempt notes of municipal issuers rated, at the  
time  
of purchase, no lower than MIG 1 by Moody's, SP-1 by S&P or F-1 by Fitch or,  
if  
not rated, by issuers having outstanding, unsecured debt then rated within the  
three highest rating categories; bank obligations (including certificates of  
deposit, time deposits and bankers' acceptances of domestic banks, domestic  
savings and loan associations and similar institutions); commercial paper  
rated  
no lower than P-1 by Moody's, A-1 by S&P or F-1 by Fitch or the equivalent  
from  
another major rating service or, if unrated, of an issuer having an  
outstanding,  
unsecured debt issue then rated within the three highest rating categories;  
and  
repurchase agreements. At no time will the Fund's investments in bank  
obligations, including time deposits, exceed 25% of the value of its assets.  
  
     U.S. government securities in which the Fund may invest include direct  
obligations of the United States and obligations issued by U.S. government  
agencies and instrumentalities. Included among direct obligations of the  
United  
States are Treasury Bills, Treasury Notes and Treasury Bonds, which differ  
principally in terms of their maturities. Included among the securities issued  
by U.S. government agencies and instrumentalities are: securities that are  
supported by the full faith and credit of the United States (such as  
Government  
National Mortgage Association certificates); securities that are supported by  
the right of the issuer to borrow from the United States Treasury (such as  
securities of Federal Home Loan Banks); and securities that are supported by  
the  
credit of the instrumentality (such as Federal National Mortgage Association  
and  
Federal Home Loan Mortgage Corporation bonds).  
  
  
                                                                               
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     INVESTMENT TECHNIQUES  
  
     The Fund may employ, among others, the investment techniques described  
below, which may give rise to taxable income:  
  
     When-Issued and Delayed-Delivery Securities. The Fund may purchase  
securities on a when-issued basis, or may purchase or sell securities for  
delayed delivery. In when-issued or delayed-delivery transactions, delivery of  
the securities occurs beyond normal settlement periods, but no payment or  
delivery will be made by the Fund prior to the actual delivery or payment by  
the  
other party to the transaction. The Fund will not accrue income with respect  
to  
a when-issued or delayed-delivery security prior to its stated delivery date.  
The Fund will establish with PNC Bank, National Association ("PNC"), the  
Trust's  
custodian, a segregated account consisting of cash or U.S. government  
securities  
in an amount equal to the amount of the when-issued and delayed-delivery  
purchase commitments. Placing securities rather than cash in a segregated  
account may have a leveraging effect on the Fund's net assets.  
  
     
     Stand-by Commitments. The Fund may acquire "stand-by commitments" with  
respect to New York Exempt Obligations held in its portfolio. Under a stand-by  
commitment, a broker, dealer or bank is obligated to repurchase at the Fund's  
option specified securities at a specified price and, in this way, stand-by  
commitments are comparable to put options. Each exercise of a stand-by  
commitment, therefore, is subject to the ability of the seller to make payment  
on demand. The Fund will acquire stand-by commitments solely to facilitate  
portfolio liquidity and does not intend to exercise the rights afforded by the  
commitments for trading purposes. The Fund anticipates that stand-by  
commitments  
will be available from brokers, dealers and banks without the payment of any  
direct or indirect consideration. The Fund may pay for stand-by commitments if  
payment is deemed necessary, thus increasing to a degree the cost of the  
underlying New York Exempt Obligation and similarly decreasing the security's  
yield to investors.  
      
  
     INVESTMENT RESTRICTIONS  
  
     The Trust has adopted certain fundamental investment restrictions with  
respect to the Fund that may not be changed without approval of a majority of  
the Fund's outstanding voting securities as defined in the 1940 Act. Included  
among those fundamental restrictions are the following:  
  
     1.   The Fund will not purchase securities other than Municipal and New  
          York Exempt Obligations and Taxable Investments as those terms are  
          defined in this Prospectus or the Statement of Additional  
Information.  
  
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     2.   The Fund will not borrow money, except that the Fund may borrow from  
          banks for temporary or emergency (not leveraging) purposes,  
including  
          the meeting of redemption requests and cash payments of dividends  
and  
          distributions that might otherwise require the untimely disposition  
of  
          securities, in an amount not to exceed 10% of the value of the  
Fund's  
          total assets (including the amount borrowed) valued at market less  
          liabilities (not including the amount borrowed) at the time the  
          borrowing is made. Whenever the Fund's borrowings exceed 5% of the  
          value of its total assets, the Fund will not make any additional  
          investments.  
  
     3.   The Fund will not lend money to other persons, except through  
          purchasing Municipal and New York Exempt Obligations or Taxable  
          Investments and entering into repurchase agreements in a manner  
          consistent with the Fund's investment objective.  
  
     4.   The Fund will not invest more than 25% of the value of its total  
          assets in securities of issuers in any one industry, except that  
this  
          limitation is not applicable to a Fund's investments in U.S.  
          government securities.  
  
     5.   The Fund will not pledge, hypothecate, mortgage or otherwise  
encumber  
          its assets, except to secure permitted borrowings.  
  
     Certain other investment restrictions adopted by the Fund are described  
in  
the Statement of Additional Information.  
  
     RISK FACTORS AND SPECIAL CONSIDERATIONS  
  
     Investment in the Fund involves risk factors and special considerations,  
such as those described below:  
  
     New York Exempt Obligations. Even though New York Exempt Obligations are  
interest-bearing investments that promise a stable stream of income, their  
prices are inversely affected by changes in interest rates and, therefore, are  
subject to the risk of market price fluctuations. The values of New York  
Exempt  
Obligations with longer remaining maturities typically fluctuate more than  
those  
of similarly rated New York Exempt Obligations with shorter remaining  
maturities  
such as the Fund intends to hold. The values of fixed-income securities also  
may  
be affected by changes in the credit rating or financial condition of the  
issuing entities.  
  
     Opinions relating to the validity of Municipal Obligations and to the  
exemption of interest on them from Federal income taxes (and, with respect to  
New York Exempt Obligations, to the exemption of interest on them from New  
York  
state personal income taxes) are rendered by bond counsel to the respective  
  
                                                                               
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issuers at the time of issuance. Neither the Fund nor SBMFM will review the  
proceedings relating to the issuance of New York Exempt Obligations or the  
basis  
for opinions of counsel.  
  
     Potential Legislation. In past years, the United States government has  
enacted various laws that have restricted or diminished the income tax  
exemption  
on various types of Municipal Obligations and may enact other similar laws in  
the future. If any such laws are enacted that would reduce the availability of  
New York Exempt Obligations for investment by the Fund so as to affect the  
Fund's shareholders adversely, the Trust will reevaluate the Fund's investment  
objective and policies and might submit possible changes in the Fund's  
structure  
to shareholders for their consideration. If legislation were enacted that  
would  
treat a type of New York Exempt Obligation as taxable for Federal income tax  
purposes, the Fund would treat the security as a permissible Taxable  
Investment  
within the applicable limits set forth in this Prospectus.  
  
     Unrated Securities. The Fund may invest in unrated securities that SBMFM  
determines to be of comparable quality to the rated securities in which the  
Fund  
may invest. Dealers may not maintain daily markets in unrated securities and  
retail secondary markets for many of them may not exist. As a result, the  
Fund's  
ability to sell these securities when SBMFM deems it appropriate may be  
diminished.  
  
     Municipal Leases. Municipal leases in which the Fund may invest have  
special risks not normally associated with Municipal Obligations. These  
obligations frequently contain non-appropriation clauses that provide that the  
governmental issuer of the obligation need not make future payments under the  
lease or contract unless money is appropriated for that purpose by a  
legislative  
body annually or on another periodic basis. Municipal leases have additional  
risks because they represent a type of financing that has not yet developed  
the  
depth of marketability generally associated with other Municipal Obligations.  
Moreover, although a municipal lease will be secured by financed equipment or  
facilities, the disposition of the equipment or facilities in the event of  
foreclosure might prove difficult. In addition, in certain instances the  
tax-exempt status of the municipal lease will not be subject to the legal  
opinion of a nationally recognized bond counsel, although in all cases the  
Fund  
will require that a municipal lease purchased by the Fund be covered by a  
legal  
opinion to the effect that, as of each effective date of the municipal lease,  
the lease is the valid and binding obligation of the government issuer.  
  
     Municipal leases are also subject to the risk of non-payment. The ability  
of issuers of municipal leases to make timely lease payments may be adversely  
impacted in general economic downturns and as relative governmental cost  
burdens  
  
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are allocated and reallocated among Federal, state and local governmental  
units.  
Such non-payment would result in a reduction of income to the Fund, and could  
result in a reduction in the value of the municipal lease experiencing non-  
payment and a potential decrease in the net asset value of the Fund. Issuers  
of  
municipal securities might seek protection under the bankruptcy laws. In the  
event of bankruptcy of such an issuer, the Fund could experience delays and  
limitations with respect to the collection of principal and interest on such  
municipal leases and the Fund may not, in all circumstances, be able to  
collect  
all principal and interest to which it is entitled. To enforce its rights in  
the  
event of a default in the lease payments, the Fund may take possession of and  
manage the assets securing the issuer's obligations on such securities, which  
may increase the Fund's operating expenses and adversely affect the net asset  
value of the Fund. Any income derived from the Fund's ownership or operation  
of  
such assets may not be tax-exempt. In addition, the Fund's intention to  
qualify  
as a "regulated investment company" under the Code, may limit the extent to  
which the Fund may exercise its rights by taking possession of such assets,  
because as a regulated investment company the Fund is subject to certain  
limitations on its investments and on the nature of its income.  
  
     Non-Publicly Traded Securities. As suggested above, the Fund may, from  
time  
to time, invest a portion of its assets in non-publicly traded New York Exempt  
Obligations. Non-publicly traded securities may be less liquid than publicly  
traded securities. Although non-publicly traded securities may be resold in  
privately negotiated transactions, the prices realized from these sales could  
be  
less than those originally paid by the Fund.  
  
     When-Issued and Delayed-Delivery Transactions. Securities purchased on a  
when-issued or delayed-delivery basis may expose the Fund to risk because the  
securities may experience fluctuations in value prior to their delivery.  
Purchasing securities on a when-issued or delayed-delivery basi is can involve  
the additional risk that the yield available in the market when the delivery  
takes place may be higher than that obtained in the transaction itself.  
  
     Non-Diversified Classification. Investment in the Fund, which is  
classified  
as a non-diversified fund under the 1940 Act, may present greater risks to  
investors than an investment in a diversified fund. The investment return on a  
non-diversified fund typically is dependent upon the performance of a smaller  
number of securities relative to the number of securities held in a  
diversified  
fund. The Fund's assumption of large positions in the obligations of a small  
number of issuers will affect the value of its portfolio to a greater extent  
than that of a diversified fund in the event of changes in the financial  
condition, or in the market's assessment, of the issuers.  
  
                                                                               
23  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
     Special Considerations. In seeking to achieve its objective, the Fund may  
invest without limit in Municipal Obligations which are private activity  
bonds.  
Moreover, although the Fund does not currently intend to do so on a regular  
basis, it may invest more than 20% of its assets in Municipal Obligations  
which  
are repayable out of revenue streams generated from economically related  
projects or facilities, if such investment is deemed necessary or appropriate  
by  
SBMFM. To the extent the Fund's assets are concentrated in Municipal  
Obligations  
payable from revenues on economically related projects and facilities, the  
Fund  
will be subject to the particular risks presented by such projects to a  
greater  
extent than it would be if the Fund's assets were not so concentrated.  
  
     Certain substantial issuers of New York Exempt Obligations (including  
issuers whose obligations may be acquired by the Fund) have experienced  
serious  
financial difficulties in recent years. These difficulties have at times  
jeopardized the credit standing and impaired the borrowing abilities of all  
New  
York issuers and have generally contributed to higher interest costs for their  
borrowing and fewer markets for their outstanding debt obligations. In recent  
years, several different issues of municipal securities of New York State and  
its agencies and instrumentalities and of New York City have been downgraded  
by  
S&P and Moody's. On July 10, 1995, S&P downgraded its rating of New York  
City's  
$23 billion of outstanding general obligation bonds to "BBB+" from "A-",  
citing  
the City's chronic structural budget problems and weak economic outlook. S&P  
stated that New York City's reliance on one-time revenue measures to close  
annual budget gaps, a dependence on unrealized labor savings, overly  
optimistic  
estimates of revenues and state and federal aid and City's continued high debt  
levels also contributed to its decision to lower the ratings. On the other  
hand,  
strong demand for New York Exempt Obligations has more recently had the effect  
of permitting New York Exempt Obligations to be issued with yields relatively  
lower, and after issuance, to trade in the market at prices relatively higher,  
than comparably rated municipal obligations issued by other jurisdictions. A  
recurrence of the financial difficulties previously experienced by certain  
issuers of New York Exempt Obligations could result in defaults or declines in  
the market values of those issuers' existing obligations and, possibly, in the  
obligations of other issuers of New York Exempt Obligations. As of the date of  
this Prospectus, the Fund is not aware that any issuers of New York Exempt  
Obligations are in default with respect to the payment of their municipal  
obligations; any such default could affect adversely the market values and  
marketability of all New York Exempt Obligations and, consequently the net  
asset  
value of the Fund's portfolio.  
  
     Other considerations affecting the Fund's investment in New York Exempt  
Obligations are summarized in the Statement of Additional Information.  
  
24  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Investment Objective and Management Policies (continued)  
------------------------------------------------------------------------------ 
--  
  
     PORTFOLIO TRANSACTIONS AND TURNOVER  
  
     The Fund's portfolio securities ordinarily are purchased from and sold to  
parties acting as either principal or agent. Newly issued securities  
ordinarily  
are purchased directly from the issuer or from an underwriter; other purchases  
and sales usually are placed with those dealers from which it appears that the  
best price or execution will be obtained. Usually no brokerage commissions, as  
such, are paid by the Fund for purchases and sales undertaken through  
principal  
transactions, although the price paid usually includes an undisclosed  
compensation to the dealer acting as agent.  
  
     
     The Fund cannot accurately predict its portfolio turnover rate, but  
anticipates that the annual turnover will not exceed 100%. An annual turnover  
rate of 100% would occur if all of the securities held by the Fund are  
replaced once during a period of one year. SBMFM will not consider turnover  
rate  
a limiting factor in making investment decisions consistent with the  
investment  
objective and policies of the Fund.  
      
  
------------------------------------------------------------------------------ 
--  
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.  
  
     Generally, the Fund's investments are valued at market value or, in the  
absence of a market value with respect to any securities, at fair value as  
determined by or under the direction of the Trust's Board of Trustees.  
Short-term investments that mature in 60 days or less are valued at amortized  
cost. Amortized cost involves valuing an investment at its cost initially and,  
thereafter, assuming a constant amortization to maturity of any discount or  
premium, regardless of the impact of fluctuating interest rates on the market  
value of the instrument. Further information regarding the Fund's valuation  
policies is contained in the Statement of Additional Information.  
  
                                                                               
25  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Dividends, Distributions and Taxes  
------------------------------------------------------------------------------ 
--  
  
     DIVIDENDS AND DISTRIBUTIONS  
  
     
     The Fund declares dividends from its net investment income (that is,  
income  
other than net realized capital gains) monthly; dividends ordinarily will be  
paid on the last Friday of each calendar month to shareholders of record as of  
the three business days prior. The Fund's net realized capital gains, if any,  
are declared and distributed annually, normally at the end of the calendar  
year  
in which earned or at the beginning of the subsequent year.  
      
  
     If a shareholder does not otherwise instruct, dividends or capital gain  
distributions will be reinvested automatically in additional shares of the  
same  
Class at net asset value, subject to no sales charge or CDSC. In order to  
avoid  
the application of a 4% nondeductible excise tax on certain undistributed  
amounts of ordinary income and capital gains, the Fund may make a distribution  
shortly before December 31 of each year of any undistributed ordinary income  
or  
capital gains and expects to pay any other distributions as are necessary to  
avoid the application of this tax.  
  
     The per share dividends on Class C shares of the Fund may be lower than  
the  
per share dividends on Class A and Class Y shares principally as a result of  
the  
distribution fee applicable with respect to Class C shares. The per share  
dividends on Class A shares of the Fund may be lower than the per share  
dividends on Class Y shares principally as a result of the service fee  
applicable to Class A shares. Distributions of capital gains, if any, will be  
in  
the same amount for Class A, Class C and Class Y shares.  
  
     TAXES  
  
     The Fund has qualified and intends to continue to qualify each year as a  
regulated investment company under the Code. Dividends paid from the Fund's  
net  
investment income (other than dividends derived from interest earned on  
qualifying tax-exempt obligations as described below) and distributions of the  
Fund's net realized short-term capital gains are taxable to shareholders as  
ordinary income, regardless of how long shareholders in the Fund have held  
their  
shares and whether the dividends or distributions are received in cash or  
reinvested in additional shares of the Fund. Distributions of the Fund's net  
realized long-term capital gains will be taxable to shareholders as long-term  
capital gains, regardless of how long shareholders have held their shares of  
the  
Fund and whether the distributions are received in cash or are reinvested in  
additional Fund shares. In addition, as a general rule, a shareholder's gain  
or  
loss on a sale or redemption of shares of the Fund will be a long-term capital  
gain or loss if the shareholder has held the shares for more than one year and  
  
  
26  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Dividends, Distributions and Taxes (continued)  
------------------------------------------------------------------------------ 
--  
  
will be a short-term capital gain or loss if the shareholder has held the  
shares  
for one year or less.  
  
     Dividends paid by the Fund that are derived from interest earned on  
qualifying tax-exempt obligations are expected to be "exempt-interest"  
dividends  
that shareholders may exclude from their gross incomes for Federal income tax  
purposes if the Fund satisfies certain asset percentage requirements. Any  
exempt-interest dividends of the Fund derived from interest on New York Exempt  
Obligations, the interest on which is a specific tax preference item for  
Federal  
income tax purposes, will be a specific tax preference item for purposes of  
the  
Federal individual and corporate alternative minimum taxes. In addition, all  
exempt-interest dividends will be a component of the "current earnings"  
adjustment item for purposes of the Federal corporate alternative minimum  
income  
tax and corporate shareholders may incur a larger Federal environmental tax  
liability through the receipt of Fund dividends and distributions from the  
Fund.  
Dividends of the Fund derived from interest on New York Exempt Obligations  
will  
be exempt from New York State personal income (but not corporate franchise or  
income) taxes.  
  
     Statements as to the tax status of the dividends and distributions  
received  
by shareholders of the Fund are mailed annually. These statements set forth  
the  
dollar amount of income excluded from Federal income taxes and the dollar  
amount, if any, subject to Federal income taxes. Statements from the Fund will  
also show the dollar amount of income excluded or exempted from New York State  
personal income taxes and the dollar amount, if any, subject to these taxes.  
These statements will also designate the amount of exempt-interest dividends  
that are a specific preference item for purposes of the Federal individual and  
corporate alternative minimum taxes.   
  
     Shareholders of the Fund should consult their tax advisors with specific  
reference to their own tax situations.  
  
     TAX-EXEMPT INCOME VS. TAXABLE INCOME  
  
     The table below shows New York taxpayers who are individuals how to  
translate Federal and New York State tax savings from investments such as the  
Fund into an equivalent return from a taxable investment. To the extent that  
the  
equivalent taxable yields illustrated in this table are based on an effective  
tax rate which combines the Federal and New York marginal income tax rates,  
the  
table is not applicable to individuals who do not pay New York State personal  
income taxes. The yields used below are for illustration only and are not  
  
  
                                                                               
27  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Dividends, Distributions and Taxes (continued)  
------------------------------------------------------------------------------ 
--  
  
intended to represent current or future yields for the Fund, which may be  
higher  
or lower than those shown.  
  
<TABLE>  
<CAPTION>  
  
                                                             New York  
                                      Combined      1996    State, City                     
New York Tax-Exempt  
                                       State       Federal  and Federal                      
Equivalent Yields  
               Taxable Income         and City    Marginal   Effective  
        Single             Joint       Rates****    Rate       Rate**       
2.00%       3.00%       4.00%      5.00%        
6.00%  
=========================================================================== 
====================================================  
<S>                        <C>          <C>        <C>         <C>         <C>          
<C>         <C>        <C>         <C>    
  
 $       0-24,000          0-40,000     10.43%     15.00%      23.87%       
2.63%       3.94%      5.25%        
6.57%       7.88%  
     
    24,001-58,150     40,101-96,900     10.48      28.00       35.55        
3.10        4.65       6.21        7.76         
9.31  
      
   58,151-121,300    96,901-147,700     10.53      31.00       38.27        
3.24        4.86       6.48        8.10         
9.72  
  121,301-263,750   147,701-263,750     10.53      36.00       42.74        
3.49        5.24       6.99        8.73        
10.48  
     over 263,751      over 263,751     10.53      39.60       45.96        
3.70        5.55       7.40        9.25        
11.10  
=========================================================================== 
====================================================  
</TABLE>  
  
<TABLE>  
<CAPTION>  
                                   
                                                              New York  
                                      Combined      1996     State, City                    
New York Tax-Exempt  
                                       State       Federal   and Federal                     
Equivalent Yields  
               Taxable Income         and City    Marginal    Effective  
        Single            Joint        Rate****     Rate        Rate**         
7.00%         8.00%         9.00%          
10.00%  
      
=========================================================================== 
===================================================  
<S>                        <C>          <C>        <C>          <C>            
<C>           <C>           <C>           <C>     
 $       0-24,000          0-40,000     10.43%     15.00%       23.87%          
9.19%        10.51%        11.82%         
13.13%  
    24,001-58,150     40,100-96,900     10.48      28.00        35.55          
10.86         12.41         13.96          
15.51  
   58,151-121,300    96,901-147,700     10.53      31.00        38.27          
11.34         12.96         14.58          
16.20  
  121,301-263,750   147,701-263,750     10.53      36.00        42.74          
12.22         13.97         15.72          
17.46  
     over 263,751      over 263,751     10.53      39.60        45.96          
12.95         14.80         16.65          
18.50  
=========================================================================== 
===================================================  
</TABLE>  
  
  *  This amount represents taxable income as defined in the Code. It is  
assumed  
     that taxable income as defined in the Code is the same as under the New  
     York State or city personal income tax law, however, New York State or  
city  
     taxable law may differ due to differences in exemptions, itemized  
     deductions, and other items.  
  
 **  For Federal tax purposes, these combined rates reflect the applicable  
     marginal rates and rate brackets for 1996, including indexing the rate  
     brackets for inflation. These rates include the effect of deducting state  
     and city taxes on your Federal return. For New York purposes, these  
     combined rates reflect the expected New York State and New York City tax  
     and surcharge rates for 1996.  
  
***  These represent New York State, City and Federal Tax Equivalent Yields.  
  
     
**** These rates represent the highest New York State and City personal income  
     tax rates within the applicable Federal income tax brackets for 1996.  
      
  
     The Federal tax rates and New York State and New York City tax rates  
shown  
are those in effect for 1996 and are subject to change. The calculations  
reflected in the table assume that no income will be subject to the Federal  
alternative minimum taxes.  
  
28  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares  
------------------------------------------------------------------------------ 
--  
  
     GENERAL  
  
     
     The Fund currently offers three Classes of shares. Class A shares are  
sold  
to investors with an initial sales charge and Class C shares are sold without  
an  
initial sales charge but are subject to a CDSC payable upon certain  
redemptions.  
Class Y shares are sold without an initial sales charge or a CDSC and are  
available only to investors investing a minimum of $5,000,000 (except for  
purchases of Class Y shares by Smith Barney Concert Series Inc. for which  
there  
is no minimum purchase amount). 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 C or Class Y shares. No maintenance  
fee will be charged by the Fund in connection with a brokerage account through  
which an investor purchases or holds shares.  
  
     Investors in Class A and Class C shares may open an account by making an  
initial investment of at least $1,000 for each account in the Fund. Investors  
in  
Class Y shares may open an account by making an initial investment of  
$5,000,000. Subsequent investments of at least $50 may be made for all  
Classes.  
For participants in the Fund's Systematic Investment Plan, the minimum initial  
investment requirement for Class A and Class C shares and the subsequent  
investment requirement for all Classes is $50. There are no minimum investment  
requirements in Class A shares for employees of Travelers and its  
subsidiaries,  
including Smith Barney, Trustees of the Trust and their spouses and children  
and  
unitholders who invest distributions from a UIT sponsored by Smith Barney. 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 Fund's  
transfer agent, First Data Investor Services Group, Inc. ("the "Transfer  
Agent"). Share certificates are issued only upon a shareholder's written  
request  
to the Transfer Agent.  
  
     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. 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  
received by the Fund or Smith Barney prior to Smith Barney's close of business  
  
  
                                                                               
29  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
General  
  
(the "trade date"). 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 (the "settlement 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 $50 or more 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 on a monthly or quarterly  
basis  
to provide 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 as            Sales               Dealers  
                              % of             Charge as           Reallowance  
                             Offering             % of               as % of  
Amount of Investment          Price         Amount Invested      Offering  
Price  
=========================================================================== 
=====  
   Less than $500,000          2.00%              2.04%                1.80%  
   $500,000 and over             *                  *                    *  
=========================================================================== 
=====  
  
*  Purchases of Class A shares, which when combined with current holdings of  
   Class A shares offered with a sales charge equal or exceed $500,000 in the  
   aggregate, 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 C  
   shares is waived. See "Deferred Sales Charge Alternatives" and "Waivers of  
   CDSC."  
  
  
  
30  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
     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 $500,000 investment may be met by aggregating the purchases of Class  
A  
shares of the Fund made at one time by "any person," which includes an  
individual, his or her spouse and children, or a trustee or other fiduciary of  
a  
single trust estate or single fiduciary account. It may also be met by  
aggregating the purchase with the net asset value of all Class A shares  
offered  
with a sales charge held in funds sponsored by Smith Barney listed under  
"Exchange Privilege."  
  
     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 of Class A shares to Trustees  
or Directors of any of the Smith Barney Mutual Funds, and employees of  
Travelers  
and its subsidiaries and to the immediate families of such persons (including  
the surviving spouse of a deceased Trustee or employee, and retired Trustees  
or  
employees), pension, profit-sharing or other benefit plan for such persons  
provided such sales are made upon the assurance of the purchaser that the  
purchase is made for investment purposes and the securities will not be resold  
except through redemption or repurchase, or to employees of members of the  
National Association of Securities Dealers, Inc.; (b) offers of Class A shares  
to any other investment company in connection with 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) 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 equal to or greater than the maximum sales charge of the  
Fund) and who wish to reinvest their redemption proceeds in the Fund, provided  
the reinvestment is made within 60 calendar days of the redemption; (e)  
accounts  
managed by registered investment advisory subsidiaries of Travelers; and (f)  
investments of distributions from a UIT sponsored by Smith Barney. In order to  
obtain such discounts, the investor must provide sufficient information at the  
time of purchase to permit verification that the purchase would qualify for  
the  
elimination of the sales charge.  
      
  
  
                                                                               
31  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
  
     RIGHT OF ACCUMULATION  
  
     Class A shares of the Fund may be purchased by "any person" (as defined  
above) 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 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 to  
permit  
verification that the purchase qualifies for purchase at net asset value. 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, purchases 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, if any, 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 the Smith Barney Mutual Funds offered  
with  
a sales charge to, and share holdings of, all members of the group. To be  
eligible for such purchase at net asset value, all purchases must be pursuant  
to  
an employer- 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 also may offer  
net  
asset value purchases 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 at the 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  
  
  
32  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
Fund in its publications and mailings to members at no cost to Smith Barney.  
In  
order 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 purchase at net asset value. Approval of group purchases at net  
asset value is subject to the discretion of Smith Barney.  
  
     LETTER OF INTENT  
  
     
     Class A Shares. A Letter of Intent for amounts of $50,000 or more  
provides  
an opportunity for an investor to purchase shares at net asset value by  
aggregating the 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 Investment" as referred to in the preceding sales charge table  
includes purchases of all Class A shares of the Fund and other Smith Barney  
Mutual Funds offered with a sales charge over a 13 month period based on the  
total amount of intended purchases plus the value of all Class A shares  
previously purchased and still owned. An alternative is to compute the 13  
month  
period starting up to 90 days before the date of execution of a Letter of  
Intent. Each investment made during the period receives the 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. 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. Such investors  
must make an initial minimum purchase of $1,000,000 in Class Y shares of the  
Fund and agree to purchase a total of $5,000,000 of Class Y shares of the Fund  
within six months from the date of the Letter. If a total investment of  
$5,000,000 is not made with the six-month period, all Class Y shares purchased  
to date will the 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%. The Fund expects  
that  
such transfer will not be subject to Federal income taxes. 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  
  
  
                                                                               
33  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
may be immediately invested in the Fund. A CDSC, however, may be imposed on  
certain redemptions of these shares. "CDSC Shares" are: (a) Class C shares;  
and  
  
(b) Class A shares, which when combined with Class A shares offered with a  
sales  
charge currently held by an investor, equal or exceed $500,000 in the  
aggregate.  
  
     Any applicable CDSC will be assessed on an amount equal to the lesser of  
the cost of the original 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;  
or  
(c) shares redeemed more than 12 months after their purchase. CDSC Shares are  
subject to a 1.00% CDSC if redeemed within 12 months of purchase.  
  
     In determining the applicability of any CDSC, it will be assumed that a  
redemption is made first of shares representing capital appreciation, next of  
shares representing the reinvestment of dividends and capital gain  
distributions  
and finally of other shares held by the shareholder for the longest period of  
time. 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 C shares at  
$10 per share for a cost of $1,000. Subsequently, the investor acquired 5  
additional shares through dividend reinvestment. During the tenth 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 1.00% (the applicable rate for Class C shares) for a  
total  
deferred sales charge of $2.40.  
  
     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  
  
  
34  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Purchase of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
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 in connection with 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 funds  
of the 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  
for  
shares of the same Class in the following funds of the Smith Barney Mutual  
Funds, to the extent shares are offered for sale in the shareholder's state of  
residence. Exchanges of Class A and Class C shares are subject to minimum  
investment requirements and all shares are subject to other requirements of  
the  
fund into which exchanges are made and a sales charge differential may apply.  
  
FUND NAME  
------------------------------------------------------------------------------ 
--  
  
Growth Funds  
       
     Smith Barney Aggressive Growth Fund Inc.  
     Smith Barney Appreciation Fund Inc.  
     Smith Barney Fundamental Value Fund Inc.  
     Smith Barney Growth Opportunity Fund  
     Smith Barney Managed Growth Fund  
     Smith Barney Natural Resources Fund Inc.  
     Smith Barney Special Equities Fund  
     Smith Barney Telecommunications Growth Fund  
  
  
  
                                                                               
35  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Exchange Privilege (continued)  
------------------------------------------------------------------------------ 
--  
  
Growth and Income Funds  
       
     Smith Barney Convertible Fund  
     Smith Barney Funds, Inc. -- Equity Income Portfolio  
     Smith Barney Growth and Income Fund  
     Smith Barney Premium Total Return Fund  
     Smith Barney Strategic Investors Fund  
     Smith Barney Utilities Fund  
  
Taxable Fixed-Income Funds  
  
     
    *Smith Barney Adjustable Rate Government Income Fund  
     Smith Barney Diversified Strategic Income Fund  
     Smith Barney Funds, Inc. -- Income Return Account Portfolio  
    *Smith Barney Funds, Inc. -- Short-Term U.S. Treasury Securities Portfolio  
     Smith Barney Funds, Inc. -- U.S. Government Securities Portfolio  
     Smith Barney Government Securities Fund  
     Smith Barney High Income Fund  
     Smith Barney Investment Grade Bond Fund  
     Smith Barney Managed Governments Fund Inc.  
      
  
Tax-Exempt Funds  
  
     Smith Barney Arizona Municipals Fund Inc.  
     Smith Barney California Municipals Fund Inc.  
     Smith Barney Intermediate Maturity California Municipals Fund  
     Smith Barney Managed Municipals Fund Inc.  
     Smith Barney Massachusetts Municipals Fund  
     Smith Barney Muni Funds -- Flo rida Limited Term Portfolio  
     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-- Ohio Portfolio  
     Smith Barney Muni Funds-- Pennsylvania Portfolio  
     Smith Barney New Jersey Municipals Fund Inc.  
     Smith Barney Oregon Municipals Fund  
     Smith Barney Tax-Exempt Income Fund  
  
36  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Exchange Privilege (continued)  
------------------------------------------------------------------------------ 
--  
  
International Funds  
       
     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  
  
Smith Barney Concert Series Inc.  
  
     Smith Barney Concert Series Inc. -- High Growth Portfolio  
     Smith Barney Concert Series Inc. -- Growth Portfolio  
     Smith Barney Concert Series Inc. -- Balanced Portfolio  
     Smith Barney Concert Series Inc. -- Conservative Portfolio  
     Smith Barney Concert 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 C and Class Y shares of the  
     Fund.  
  
     
 **  Available for exchange with Class C shares of the Fund.  
      
  
***  Available for exchange with Class A shares of the Fund.  
  
     Class A Exchanges. Class A shares of the Smith Barney Mutual Funds sold  
without a sales charge or with a maximum sales charge of less than the maximum  
charged by other Smith Barney Mutual Funds will be subject to the appropriate  
"sales charge differential" upon the exchange of such shares for Class A  
shares  
of a fund sold with a higher sales charge. The "sales charge differential" is  
limited to a percentage rate no greater than the excess of the sales charge  
rate  
applicable to purchases of shares of the mutual fund being acquired in the  
exchange over the sales charge rate(s) actually paid on the mutual fund shares  
relinquished in the exchange and on any predecessor of those shares. For  
purposes of the exchange privilege, shares obtained through automatic  
reinvestment of dividends and capital gain distributions are treated as having  
paid the same sales charges applicable to the shares on which the dividends or  
distributions were paid; however, if no sales charge was imposed upon the  
initial purchase of the shares, any shares obtained through automatic  
  
  
                                                                               
37  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Exchange Privilege (continued)  
------------------------------------------------------------------------------ 
--  
  
reinvestment will be subject to a sales charge differential upon exchange.  
Class  
A shares held in the Fund prior to November 7, 1994, will be deemed to have  
paid  
a maximum sales charge of 2.00% for exchange purposes.  
  
     Class C Exchanges. Upon an exchange, the new Class C shares will be  
deemed  
to have been purchased on the same date as the Class C shares of the Fund that  
have been exchanged.  
  
     Class Y Exchanges. Class Y shareholders of the Fund who wish to exchange  
all or a portion of their Class Y shares for Class Y shares 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. SBMFM 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 the  
shareholder. Upon such a determination, the Fund will provide notice in  
writing  
or by telephone 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 in 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 expect 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, plus any applicable  
sales charge differential. 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.  
      
  
  
38  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
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 the 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. The redemption  
proceeds  
will be remitted on or before the third day following receipt of proper  
tender,  
except on any day 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.  
  
     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 Intermediate Maturity New York Municipals Fund   
     Class A, C or Y (please specify)  
     c/o First Data Investor Services Group, Inc.   
     P.O. Box 9134  
     Boston, Massachusetts 02205-9134  
  
     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 required in connection with a redemption request in excess of  
$2,000 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.  
  
  
                                                                               
39  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Redemption of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
Written redemption requests of $2,000 or less do not require a signature  
guarantee unless more than one such redemption request is made in any 10-day  
period. 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.  
  
     Certain shareholders 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 request may be made between 9:00 a.m.  
and  
4:00 p.m. (New York City time) on any day the NYSE is open. Redemptions of  
shares (i) by retirement plans or (ii) 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  
  
  
40  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Redemption of Shares (continued)  
------------------------------------------------------------------------------ 
--  
  
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.  
(New York City 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 believe for the 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 may elect to  
receive periodic cash payments of at least $50 monthly or quarterly.  
Retirement  
plan accounts are eligible for automatic cash withdrawal plans only where the  
shareholder is eligible to receive qualified distributions and has an account  
value of at least $5,000. 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 value of a shareholder's shares subject to the CDSC.)  
For  
further information regarding the automatic cash withdrawal plan, shareholders  
should contact a Smith Barney Financial Consultant.  
  
------------------------------------------------------------------------------ 
--  
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  
this 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 automatic redemption.  
  
  
  
                                                                               
41  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Performance  
------------------------------------------------------------------------------ 
--  
  
     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 C  
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  
specific 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 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 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  
its 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 Trust and the Fund  
------------------------------------------------------------------------------ 
--  
  
     BOARD OF TRUSTEES  
  
     
     Overall responsibility for management and supervision of the Trust and  
the  
Fund rests with the Trust's Board of Trustees. The Trustees approve all  
significant agreements between the Trust and the persons and companies that  
furnish services to the Fund, including agreements with the Fund's investment  
adviser and administrator, distributor, custodian and transfer agent. The  
      
  
  
42  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Management of the Trust Fund (continued)  
------------------------------------------------------------------------------ 
--  
  
day-to-day operations of the Fund have been delegated to the Fund's investment  
adviser and administrator. The Statement of Additional Information contains  
background information regarding each Trustee of the Trust and the executive  
officers of the Fund.  
  
     INVESTMENT ADVISER AND ADMINISTRATOR -- SBMFM  
  
     
     SBMFM, located at 388 Greenwich Street, New York, New York 10013, serves  
as  
the Fund's investment adviser pursuant to a transfer of the investment  
advisory  
agreement, most recently approved by the Trust's Board of Trustees on July 19,  
1995. SBMFM (through predecessor entities) has been in the investment  
counseling  
business since 1934 and is a registered investment adviser. SBMFM renders  
investment advice to investment companies that had aggregate assets under  
management as of February 28, 1996, in excess of $75.85 billion.  
  
     Subject to the supervision and direction of the Trust's Board of  
Trustees,  
SBMFM manages the Fund's portfolio in accordance with the Fund's stated  
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 advisory services rendered to the Fund, the Fund pays SBMFM a fee  
at  
the annual rate of 0.30% of the value of the Fund's average daily net assets.  
Prior to November 17, 1995, the Fund paid SBMFM an investment advisory fee at  
the annual rate of 0.35% of the value of the Fund's average daily net assets.  
For the fiscal year ended November 30, 1995, the Fund paid an investment  
advisory fee to SBMFM in an amount equal to 0.15% of the Fund's average daily  
net assets. During the same period, the Fund's investment adviser waived  
investment advisory fees in an amount equal to 0.20% of the value of the  
Fund's  
average daily net assets.  
  
  
     SBMFM also serves as the Fund's administrator and oversees all aspects of  
the Fund's administration. For administration services rendered to the Fund,  
the  
Fund pays SBMFM a fee at the annual rate of 0.20% of the value of the Fund's  
average daily net assets. For the fiscal year ended November 30, 1995, the  
Fund  
paid an administration fee to SBMFM in an amount equal to 0.08% of the Fund's  
average daily net assets and the administrator voluntarily waived  
administrative  
fees in an amount equal to 0.12% of the value of the Fund's average daily net  
assets.  
      
  
     Prior to July 10, 1995, The Boston Company Advisors, Inc. ("Boston  
Advisors") served as the Fund's sub-administrator. Under a sub-administration  
agreement dated July 20, 1994, Boston Advisors was paid a portion of the  
administration fee paid by the Fund to SBMFM at a rate agreed upon from time  
to  
time between Boston Advisors and SBMFM.  
  
  
                                                                               
43  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Management of the Trust Fund (continued)  
------------------------------------------------------------------------------ 
--  
  
     
     PORTFOLIO MANAGEMENT  
  
     Lawence T. McDermott, an investment Officer of SBMFM, has served as Vice  
President and Investment Officer of the Fund since it commenced operations on  
December 31, 1991, 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 November 30, 1995,  
is included in the Annual Report dated November 30, 1995. A copy of the Annual  
Report may be obtained upon request without charge from a Smith Barney  
Financial  
Consultant or by writing or calling the Fund at the address or phone number  
listed on page one of this Prospectus.  
      
------------------------------------------------------------------------------ 
--  
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 and Class C 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 C shares at the annual rate of 0.20%  
of  
the average daily net assets attributable to that Class. The fees are used by  
Smith Barney to pay its Financial Consultants for servicing shareholder  
accounts  
and, in the case of Class C 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 C shares, a continuing fee for  
servicing  
shareholder accounts for as long as a shareholder remains a holder of that  
  
  
44  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Distributor (continued)  
------------------------------------------------------------------------------ 
--  
  
Class. Smith Barney Financial Consultants may receive different levels of  
compensation for selling different Classes of shares.  
  
     Payments under the Plan with respect to Class C shares are not tied  
exclusively to the shareholder distribution and service expenses actually  
incurred by Smith Barney, and the payments may exceed expenses actually  
incurred  
by Smith Barney. The Trust's Board of Trustees will evaluate the  
appropriateness  
of the Plan and its payment terms with respect to the Fund on a continuing  
basis  
and in doing so will consider all relevant factors, including expenses borne  
by  
Smith Barney and amounts it receives under the Plan.  
  
------------------------------------------------------------------------------ 
--  
Additional Information  
------------------------------------------------------------------------------ 
--  
  
     The Trust was organized on October 17, 1991 under the laws of the  
Commonwealth of Massachusetts and is a business entity commonly known as a  
"Massachusetts business trust."  
  
     Each Class of the Fund 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 for each Class; (c) the  
distribution  
and/or service fees borne by each Class pursuant to the Plan; (d) the expenses  
allocable exclusively to each Class; (e) voting rights on matters exclusively  
affecting a single Class; and (f) the exchange privilege of each Class. The  
Trust's Board of Trustees does not anticipate that there will be any conflicts  
among the interests of the holders of the different Classes. The Trustees, on  
an  
ongoing basis, will consider whether any such conflict exists and, if so, take  
appropriate action.  
  
     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, in which case only shares of the affected Class  
would be entitled to vote.  
  
     The Fund does not hold annual shareholder meetings. There normally will  
be  
no meetings of shareholders for the purpose of electing Trustees unless and  
until such time as less than a majority of the Trustees holding office have  
been  
elected by shareholders, at which time the Trustees then in office will call a  
shareholders' meeting for the election of Trustees. Shareholders of record of  
no  
less than two-thirds of the outstanding shares of the Trust may remove a  
Trustee  
through a declaration in writing or by vote cast in person or by proxy at a  
  
  
                                                                               
45  
<PAGE>  
  
Smith Barney  
Intermediate Maturity New York Municipals Funds  
  
------------------------------------------------------------------------------ 
--  
Additional Information (continued)  
------------------------------------------------------------------------------ 
--  
  
meeting called for that purpose. The Trustees will call a meeting for any  
purpose upon written request of shareholders holding at least 10% of the  
Trust's  
outstanding shares and the Trust will assist shareholders in calling such a  
meeting as required by the 1940 Act.  
  
     PNC, located at 17th and Chestnut Streets, Philadelphia, Pennsylvania,  
serves as custodian of the Fund's investments.  
  
     
     The Transfer Agent is located at Exchange Place, Boston, Massachusetts  
02109.  
      
  
     The Fund sends shareholders a semi-annual report and an audited annual  
report, each of which includes a listing of investment securities held by the  
Fund. 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.  
In addition, the Fund also plans to consolidate the mailing of its Prospectus  
so  
that a shareholder having multiple accounts will receive a single Prospectus  
annually. Shareholders who do not want this consolidation to apply to their  
accounts should contact their Financial Consultants or the Transfer Agent.  
  
  
  
46  
<PAGE>  
  
  
  
                                                                    SMITH  
BARNEY  
                                                                    ---------- 
--  
  
  
                                              A Member of Travelers Group  
[Logo]  
  
  
                                                                    Smith  
Barney  
  
                                                                     
Intermediate  
  
                                                                         
Maturity  
  
                                                                        New  
York  
  
                                                                 Municipals  
Fund  
  
  
                                                            388 Greenwich  
Street  
                                                        New York, New York  
10013  
  
  
  
     
                                                                FD0220       
3/96  
      
  
  
  
SMITH BARNEY INVESTMENT TRUST  
  
  
PART B  
  
  
  
  
     
Smith Barney  
INVESTMENT TRUST  
388 Greenwich Street  
New York, New York 10013  
(212) 723-9218  
  
Statement Of Additional   
Information  
March 22, 1996  
  
      
This Statement of Additional Information supplements the information   
contained in the current Prospectuses of    Smith Barney Intermediate
 Maturity   
California Municipals Fund (the "California Fund") and Smith Barney   
Intermediate Maturity New York Municipals Fund (the "New York Fund") dated   
March 22, 1996, as amended or supplemented from time to time and should be   
read in conjunction with the Prospectuses. The Prospectuses may be
 obtained by  
contacting a Smith Barney Financial Consultant, or by writing or
 calling Smith   
Barney Investment Trust (the "Trust"), of which each of California Fund and   
New York Fund (individually referred to as a "Fund" and collectively referred   
to as the "Funds") is a series, at the address or telephone number set forth   
above.      This Statement of Additional Information,
 although not in itself a   
prospectus, is incorporated by reference into each Prospectus in its entirety.  
  
     
<TABLE>  
TABLE OF CONTENTS  
For ease of reference, the same section headings used in this Statement of   
Additional Information are identical to those used in each Prospectus except   
as noted in parentheses below:  
<S>	<C>  
Management of the Trust and the   
Funds.........................................................	  1  
Investment Objectives and Management   
Policies............................................		   7  
Purchase of   
Shares........................................................................  
 .................		 34  
Redemption of   
Shares........................................................................  
 .............		 35  
Distributor................................................................  
 .....................................		 36  
Valuation of   
Shares........................................................................  
 ................		 38  
Exchange   
Privilege.....................................................................  
 ....................		 39  
Performance Data (See in the Prospectuses "Performance   
")............................		 39  
Taxes (See in the Prospectuses "Dividend, Distribution and   
Taxes")..........		 44  
Additional   
Information................................................................  
 ....................	 46  
Financial   
Statements.................................................................  
 ......................		 46  
Appendix...................................................................  
 ............................	A-1  
</TABLE>  
      
  
     
<TABLE>  
<CAPTION>  
MANAGEMENT OF THE TRUST AND THE FUNDS  
The executive officers of the Funds are employees of certain of the   
organizations that provide services to the Fund.  These organizations are as   
follows:  
  
  
<S>	<C>  
NAME	SERVICE  
Smith Barney Inc.  
  ("Smith Barney'')........................................................  
	Distributor  
Smith Barney Mutual Funds Management Inc.  
  ("SBMFM'')...............................................................  
	Investment Adviser and   
Administrator  
PNC Bank, National Association ("PNC")....................	Custodian  
First Data Investor Services Group, Inc., formerly  
known as The Shareholder Services Group, Inc.  
(the "Transfer Agent'')..................................................  
	Transfer Agent  
</TABLE>  
      
These organizations and the functions they perform for the Funds are   
discussed in the Prospectuses and in this Statement of Additional Information. 
 
  
  
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST  
  
The names of the Trustees of the Trust and executive officers of the Funds,   
together with information as to their principal business occupations, are set   
forth below. The executive officers of the Funds are employees of   
organizations that provide services to the Funds. Each Trustee who is an   
"interested person" of the Trust, as defined in the Investment Company Act of   
1940, as amended (the "1940 Act"), is indicated by an asterisk.  
     
  
Herbert Barg, Trustee  (Age 72).  Private investor.  His address is 273   
Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.   
  
*Alfred J. Bianchetti, Trustee (Age 73).  Retired; formerly Senior   
Consultant to Dean Witter Reynolds Inc.  His address is 19 Circle End Drive,   
Ramsey, New Jersey 07466.  
  
Martin Brody, Trustee (Age 74). Vice Chairman of the Board of Restaurant   
Associates, Corp.  His address is HMK Associates, Three ADP Boulevard,   
Roseland, New Jersey 07068.  
  
Dwight B. Crane, Trustee (Age 58).  Professor, Graduate School of Business   
Administration, Harvard University; Business Consultant.  His address is   
Graduate School of Business Administration, Harvard University, Boston,   
Massachusetts 02163.  
  
Burt N. Dorsett, Trustee (Age 65).  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 540 Madison Avenue, New York, New York 10021.  
  
Elliot S. Jaffe, Trustee (Age 69).  Chairman of the Board and Chief   
Executive of The Dress Barn, Inc.  His address is 30 Dunnigan Drive, Suffern,   
New York  10901.  
  
Stephen E. Kaufman, Trustee (Age 64).  Attorney. His address is 277 Park   
Avenue, New York, New York 10172.  
  
Joseph J. McCann, Trustee (Age 65).  Financial Consultant.  His address is   
200 Oak Park Place, Pittsburgh, Pennsylvania 15243.  
  
*Heath B. McLendon, Chairman of the Board and Investment Officer (Age 62).    
Managing Director of Smith Barney, Chairman of the Board of Smith Barney   
Strategy Advisers Inc. and President of SBMFM; prior to July 1993, Senior   
Executive Vice President of Shearson Lehman Brothers Inc. ("Shearson Lehman   
Brothers"); Vice Chairman of Asset Management Division of Shearson Lehman   
Brothers; a 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., Trustee (Age 62).  President, Cornelius C. Rose   
Associates, Inc., financial consultants, and Chairman and Director of   
Performance Learning Systems, an education consultant.  His address is P.O.   
Box 355, Fair Oaks, Enfield, New Hampshire 03748.  
  
James J. Crisona, Trustee emeritus (Age 88).  Attorney; formerly Justice of   
the Supreme Court of the State of New York.  His address is 118 East 60th   
Street, New York, New York  10022.  
  
Jessica M. Bibliowicz, President (Age 36).  Executive Vice President of   
Smith Barney; prior to 1994, Director of Sales and Marketing for Prudential   
Mutual Funds; prior to 1990, First Vice President, Asset Management Division   
of Shearson Lehman Brothers.  Ms. Bibliowicz serves as President of 39 Smith   
Barney Mutual Funds.  Her address is 388 Greenwich Street, New York, New York   
10013.  
  
Lewis E. Daidone, Senior Vice President and Treasurer (Age 38).  Managing   
Director of Smith Barney; Director and Senior Vice President of SBMFM.  Mr.   
Daidone serves as Senior Vice President and Treasurer of 41 Smith Barney   
Mutual Funds.  His address is 388 Greenwich Street, New York, New York 10013.  
  
Joseph P. Deane, Vice President and Investment Officer (Age 48).    
Investment Officer of SBMFM; prior to July 1993, Managing Director of Shearson  
 
Lehman Advisors.  Mr. Deane also serves as Investment Officer of 5 other Smith
   
Barney Mutual Funds.  His address is 388
 Greenwich Street, New York, New York    
10013.  
  
Lawrence T. McDermott, Vice President and Investment Officer (Age 47).    
Investment Officer of SBMFM; prior to November 7, 1994, Managing Director of   
Greenwich Street Advisors, a division of SBMFM; prior to July 1993, Managing   
Director of Shearson Lehman Advisors, the predecessor to SBMFM. 
 Mr. McDermott   
also serves as Investment Officer of 10 other Smith Barney Mutual Funds.  His   
address is 388 Greenwich Street, New York, New York 10013.  
  
Christina T. Sydor, Secretary (Age 45).  Managing Director of Smith Barney;   
General Counsel and Secretary of SBMFM.  Ms. Sydor serves as Secretary of 41   
Smith Barney Mutual Funds.
 Her address is 388 Greenwich Street, New York, New
York  10013.  

    
     

    
     
As of March 5, 1996, the Trustees and officers, as a group, owned less than   
1.00% of the outstanding common stock of each Fund.  To the best knowledge of   
the Trustees, as of March 5, 1996, no shareholder or "group" (as that term is   
used in Section 13(d) of the Securities and Exchange Act of 1934) owned   
beneficially or of record more than 5% of the shares of either Fund.  
      
     
No officer, director or employee of Smith Barney or any of its affiliates   
receives any compensation from the Trust for serving as an officer of the   
Funds or Trustee of the Trust.  The Trust pays each Trustee who is not an   
officer, director or employee of Smith Barney or any of its affiliates a fee   
of $4,000 per annum plus $500 per in-person meeting and $100 per telephonic   
meeting.
  Each Trustee emeritus who is not an officer, director or employee of   
Smith Barney or its affiliates receives a fee of $2,000 per annum plus $250   
per in-person meeting and $50 per telephonic meeting.  All Trustees are   
reimbursed for travel and out-of-pocket expenses incurred to attend such   
meetings.  
      
  
  
     
For the fiscal year ended November 30, 1995, the Trustees of the Trust were   
paid the following compensation:  
<TABLE>  
<CAPTION>  
		<S>					<C>			<C>  
	Aggregate Compensation  
	Aggregate Compensation	from all Smith   
Barney   
	Trustee (*)	from the Trust	Mutual Funds***  
	Herbert Barg (18)...............................	$4,900  
	$85,200  
	Alfred J. Bianchetti (13)......................	4,900	40,850  
	Martin Brody (21)..............................	4,600	96,550  
	Dwight B. Crane (24).........................	4,800	122,600  
	Burt N. Dorsett (13)...........................	6,300+  
	51,400+  
	Elliot S. Jaffe (13)..............................	6,300	53,250  
	Stephen E. Kaufman (15)...................	4,900	60,350  
	Joseph J. McCann (13).......................	4,800	40,750  
	Heath B. McLendon (41) ...................	---	---  
	Cornelius C. Rose (13)........................	6,400	54,100  
	James J. Crisona** (12) .....................	1,700	26,700  
  
<FN>  
____________  
*    Number of directorships/trusteeships held with other Smith Barney Mutual   
Funds.  
**  Trustee emeritus.  A Trustee emeritus may attend meetings of the Fund's   
Board of Trustees but has no voting rights at such meetings.  
*** Aggregate compensation for all Smith Barney Mutual Funds is for calendar   
year ended December 31, 1995.  
+     Pursuant to the Funds' deferred compensation plan, Mr. Dorsett has   
elected to defer the payment of some or all of the compensation due to him   
from the Funds.  
</FN>  
</TABLE>  
  
Investment Adviser and Administrator -- SBMFM  
  

    
     
SBMFM serves as investment adviser to each of the Funds pursuant to an   
investment advisory agreement with the Trust which was most recently approved   
by the Board of Trustees, including a majority of Trustees who are not   
"interested persons" of the Trust or SBMFM, on July 19, 1995.  SBMFM is a   
wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings"), which, in   
turn, is a wholly owned subsidiary of Travelers Group Inc. ("Travelers"). The   
Advisory Agreement is dated July 30, 1993 (the "Advisory Agreement"), and was   
first approved by the Trustees, including a majority of those
 Trustees who are   
not "interested persons" of the Trust or Smith Barney, on April 7, 1993. The   
services provided by SBMFM under the Advisory Agreement are described in the   
Prospectuses under "Management of the Trust and the Fund." SBMFM pays the   
salary of any officer and employee who is employed by both it and the Trust.   
SBMFM bears all expenses in connection with the performance of its services.  
  
As compensation for investment advisory services, each Fund pays SBMFM a fee   
computed daily and paid monthly at the annual rate of 0.30% of the Fund's   
average daily net assets.  
      
  
  
     
For the fiscal year ended November 30, 1993, the Funds paid Greenwich   
Street Advisors and its predecessor, Shearson Lehman Advisors investment   
advisory fees, and Greenwich Street Advisors and Shearson Lehman Advisors   
waived fees and reimbursed expenses, as follows:  
<TABLE>  
<CAPTION>  
  
<S>  
<C>  
<C>  
Fees Waived  
  
  
  
and Expenses  
  
Fund  
Fees Paid  
Reimbursed  
  
California Fund  
$0  
$83,727  
  
New York Fund  
28,605  
130,230  
  
  
  
  
  
</TABLE>  
      
     
For the fiscal year ended November 30, 1994, the Funds paid SBMFM, and/or its   
predecessor investment adviser, investment advisory fees, and the investment   
adviser waived fees and reimbursed expenses as follows:  
<TABLE>  
<CAPTION>  
<S>  
<C>  
<C>  
Fees Waived  
  
  
  
and Expenses  
  
Fund  
Fees Paid  
Reimbursed  
  
California Fund  
$12,828  
$98,519  
  
New York Fund  
97,097  
144,592  
  
</TABLE>  
      
     
For the fiscal year ended November 30, 1995, the Funds paid SBMFM investment   
advisory fees, and the investment adviser waived fees and reimbursed expenses   
as follows:  
<TABLE>  
<CAPTION>  
<S>  
<C>  
<C>  
Fees Waived  
  
  
  
and Expenses  
  
Fund  
Fees Paid  
Reimbursed  
  
California Fund  
$22,385  
$ 65,910  
  
New York Fund  
82,898  
115,831  
  
  
  
  
  
</TABLE>  
      
     
SBMFM also serves as administrator to each of the Funds pursuant to a   
written agreement dated April 20, 1994 (the "Administration
 Agreement"), which   
was most recently approved by the Trustees of the Trust, including a majority   
of Trustees who are not "interested persons" of the Trust or SBMFM, on July   
19, 1995.  The services provided by SBMFM under the Administration Agreement   
are described in the Prospectuses under "Management of the Trust and the   
Fund." SBMFM pays the salary of any officer and employee who is employed by   
both it and the Trust and bears all expenses in connection with the   
performance of its services.  
      
     
As compensation for administrative services rendered to each Fund, SBMFM   
receives a fee computed daily and paid monthly at the annual rate of 0.20% of   
the Fund's average daily net assets.  
      
     
Prior to June 26, 1995 and July 10, 1995 for New York Fund and   
California Fund, respectively, The Boston Company Advisors, Inc. ("Boston   
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation,   
served as the Funds' sub-administrator.  
      
  
  
     
For the fiscal year ended November 30, 1993 the Funds paid Boston Advisors   
administration fees, and Boston Advisors waived fees as follows:  
<TABLE>  
<CAPTION>  
  
<S>  
<C>  
<C>  
Fees Waived  
  
  
  
and Expenses  
  
Fund  
Fees Paid  
Reimbursed  
  
California Fund  
$0  
$39,799  
  
New York Fund  
 16,167  
 74,596  
  
  
  
  
  
</TABLE>  
      
     
For the fiscal year ended November 30, 1994, the Funds paid Boston Advisors   
and SBMFM administration fees and Boston Advisors and SBMFM waived fees as   
follows:  
<TABLE>  
<CAPTION>  
<S>  
<C>  
<C>  
Fees Waived  
  
  
   
and Expenses  
  
Fund  
Fees Paid  
Reimbursed  
  
California Fund  
     $7,330  
  $56,297  
  
New York Fund  
     55,483  
  82,625  
  
  
  
  
  
</TABLE>  
      
     
For the fiscal year ended November 30, 1995 the Funds paid SBMFM   
administration fees and SBMFM waived fees as follows:  
<TABLE>  
<CAPTION>  
<S>  
<C>  
<C>  
Fees Waived  
  
  
  
and Expenses  
  
Fund  
Fees Paid  
Reimbursed  
  
California Fund  
$17,121  
$37,626  
  
New York Fund  
47,695  
65,864  
  
  
  
  
  
</TABLE>  
      
  
The Trust bears expenses incurred in its operation, including: taxes,   
interest, brokerage fees and commissions, if any; fees of Trustees
 who are not   
officers, directors, shareholders or employees of Smith Barney or SBMFM;   
   Securities and Exchange Commission ("SEC")     fees and state Blue Sky   
qualification fees; charges of custodians; transfer and dividend disbursing   
agent fees; certain insurance premiums; outside auditing and legal expenses;   
costs of maintaining corporate existence; costs of investor services   
(including allocated telephone and personnel expenses); costs of
 preparing and   
printing prospectuses for regulatory purposes and for
 distribution to existing   
shareholders; costs of shareholders' reports and shareholder meetings; and   
meetings of the officers or Board of Trustees of the Trust.  
  
     
SBMFM has agreed that if in any fiscal year the aggregate expenses of the   
Trust (including fees pursuant to the Advisory Agreement and Administration   
Agreement, but excluding interest, taxes, brokerage fees paid pursuant to the   
Trust's services and distribution plan, and, with the prior
 written consent of   
the necessary state securities commissions, extraordinary expenses)
 exceed the   
expense limitation of any state having jurisdiction over the Trust, SBMFM   
will, to the extent required by state law, reduce its fees by the amount of   
such excess expenses.  Such fee reductions, if any, will be reconciled on a   
monthly basis. The most restrictive state limitation currently applicable to   
the Trust would require SBMFM to reduce its fees in any year that such   
expenses exceed 2.50% of the first $30 million of average daily net assets,   
2.00% of the next $70 million of average daily net assets and 1.50% of the   
remaining average daily net assets. No fee reduction was required for the   
fiscal years ended November 30, 1993, 1994 and 1995.  
      
Counsel and Auditors  
     
Willkie Farr & Gallagher serves as legal counsel to the Trust.  The Trustees   
who are not "interested persons" of the Trust have selected Stroock & Stroock   
& Lavan as their counsel.  
      
  
     
KPMG Peat Marwick LLP, independent auditors, 345 Park Avenue, New York, New   
York 10154, have been selected to serve as auditors of the Trust
 and to render   
an opinion on the Trust's financial statements for the fiscal year ended   
November 30, 1996.  
      
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES  
  
The Prospectuses discuss the investment objective of each Fund and the   
principal policies to be employed to achieve that objective. Supplemental   
information is set out below concerning the types of securities and other   
instruments in which the Funds may invest, the investment policies and   
strategies that the Funds may utilize and certain risks attendant to those   
investments, policies and strategies.  
  
United States Government Securities  
  
Securities issued or guaranteed by the United States government or one of its   
agencies, authorities or instrumentalities ("U.S. government securities") in   
which each of the California Fund and the New York Fund may invest include   
debt obligations of varying maturities issued by the United States
 Treasury or   
issued or guaranteed by an agency or instrumentality of the United States   
government, including the Federal Housing Administration, Export-Import Bank   
of the United States, Small Business Administration, Government National   
Mortgage Association, General Services Administration, Federal Home Loan   
Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit   
Banks, Federal National Mortgage Association, Maritime Administration,   
Tennessee Valley Authority, District of Columbia Armory Board, Student Loan   
Marketing Association, Resolution Trust Corporation and various institutions   
that previously were or currently are part of the Farm Credit System (which   
has been undergoing a reorganization since 1987). Direct obligations of the   
United States Treasury include a variety of securities that differ in their   
interest rates, maturities and dates of issuance. Because the United States   
government is not obligated by law to provide support to an instrumentality   
that it sponsors, neither of the Funds will invest in
 obligations issued by an   
instrumentality of the United States government unless SBMFM determines that   
the instrumentality's credit risk does not make its securities unsuitable for   
investment by the Fund.  
  
Municipal Obligations  
  
Each of the Funds invests principally in debt obligations issued by, or on   
behalf of, states, territories and possessions of the United States and the   
District of Columbia and their political subdivisions, agencies and   
instrumentalities or multistate agencies or authorities, the interest from   
which debt obligations is, in the opinion of bond counsel to the issuer,   
excluded from gross income for Federal income tax purposes ("Municipal   
Obligations").  Municipal Obligations generally are understood
 to include debt   
obligations issued to obtain funds for various public purposes, including the   
construction of a wide range of public facilities, refunding of outstanding   
obligations, payment of general operating expenses and extensions of loans to   
public institutions and facilities. Private activity bonds that are issued by   
or on behalf of public authorities to finance privately operated facilities   
are considered to be Municipal Obligations if the interest paid on them   
qualifies as excluded from gross income (but not necessarily from alternative   
minimum taxable income) for Federal income tax purposes
 in the opinion of bond   
counsel to the issuer. Municipal Obligations may be issued to finance life   
care facilities, which are an alternative form of long-term housing for the   
elderly that offer residents the independence of a
 condominium life-style and,   
if needed, the comprehensive care of nursing home services. Bonds to finance   
these facilities have been issued by various state industrial development   
authorities. Because the bonds are secured only by the revenues of each   
facility and not by state or local government tax payments, they are subject   
to a wide variety of risks, including a drop in occupancy levels, the   
difficulty of maintaining adequate financial reserves to secure estimated   
actuarial liabilities, the possibility of regulatory cost
 restrictions applied   
to health care delivery and competition from alternative health care or   
conventional housing facilities.  
  
Municipal Leases  
  
Municipal leases are Municipal Obligations that may take the form of a lease   
or an installment purchase issued by state and local
 government authorities to   
obtain funds to acquire a wide variety of equipment and facilities such as   
fire and sanitation vehicles, computer equipment and other capital assets.   
These obligations have evolved to make it possible for state and local   
government authorities to acquire property and equipment without meeting   
constitutional and statutory requirements for the issuance of debt. Thus,   
municipal leases have special risks not normally associated with Municipal   
Obligations. These obligations frequently contain "non-appropriation" clauses   
that provide that the governmental issuer of the municipal lease has no   
obligation to make future payments under the lease or contract
 unless money is   
appropriated for such purposes by the legislative body on a yearly or other   
periodic basis. In addition to the non-appropriation risk, municipal leases   
represent a type of financing that has not yet developed the depth of   
marketability associated with Municipal Obligations; moreover, although the   
obligations will be secured by the leased equipment, the disposition of the   
equipment in the event of foreclosure might prove difficult.
 In order to limit   
the risks, the Fund will purchase either (a) municipal leases that are rated   
in the four highest categories by Moody's Investor Services, Inc. ("Moody's")   
or Standard & Poor's Corporation ("S&P") or (b) unrated municipal leases that   
are purchased principally from domestic banks or other responsible third   
parties that have entered into an agreement with the
 Fund providing the seller   
will either remarket or repurchase the municipal leases within a short period   
after demand by the Fund.   
  
From time to time, proposals to restrict or eliminate the Federal income tax   
exemption for interest on Municipal Obligations have been introduced before   
Congress. Similar proposals may be introduced in the future. In addition, the   
Internal Revenue Code of 1986, as amended, (the "Code") currently provides   
that small issue private activity bonds will not be tax-exempt if the bonds   
were issued after December 31, 1986, and the proceeds were used to finance   
projects other than manufacturing facilities.  
  
Special Considerations Relating To California  
Exempt Obligations  
  
     
As indicated in its Prospectus, the California Fund seeks its objective by   
investing principally in a portfolio of Municipal Obligations, the interest   
from which is exempt from California State personal income taxes ("California   
Exempt Obligations").  
      
Some of the significant financial considerations
 relating to the    California   
    Fund's investments in California Exempt Obligations are summarized below.   
This summary information is derived principally from official statements and   
prospectuses relating to securities offerings of the State of California and   
various local agencies in California, available as of the date of this   
Statement of Additional Information and does not purport to be a complete   
description of any of the considerations mentioned herein.     It is also   
based on the disclosure statement filed in the County of Orange bankruptcy   
case.  The accuracy and completeness of the information contained in such   
official statements and disclosure statement has not been independently   
verified.      
  
ECONOMIC FACTORS. The Governor's 1993-1994 Budget, introduced on January 8,   
1993, proposed general fund expenditures of $37.3 billion, with projected   
revenues of $39.9 billion. To balance the budget in the face of declining   
revenues, the Governor proposed a series of revenue shifts from local   
government, reliance on increased federal aid, and reductions in state   
spending.  
  
The Department of Finance of the State of California's May
 Revision of General   
Fund Revenues and Expenditures (the "May Revision"),
 released on May 20, 1993,   
projected the State would have an accumulated deficit of about $2.75 billion   
by June 30, 1993 essentially unchanged from the prior year. The Governor   
proposed to eliminate this deficit over an 18-month period. Unlike previous   
years, the Governor's Budget and May Revision did not calculate a "gap" to be   
closed, but rather set forth revenue and expenditure forecasts and proposals   
designed to produce a balanced budget.  
  
The 1993-94 budget act (the "1993-94 Budget Act") was signed by the Governor   
on June 30, 1993, along with implementing legislation. The Governor vetoed   
about $71 million in spending.   
  
The 1993-94 Budget Act is predicated on general fund revenues and transfers   
estimated at $40.6 billion, $400 million below 1992-93 (and the second   
consecutive year of actual decline). The principal reasons for declining   
revenue are the continued weak economy and the expiration
 (or repeal) of three   
fiscal steps taken in 1991 -- a half cent temporary sales tax, a deferral of   
operating loss carryforwards, and repeal by initiative
 of a sales tax on candy   
and snack foods.  
  
The 1993-94 Budget Act also assumes special fund revenues of
 $11.9 billion, an   
increase of 2.9% over 1992-93.  
  
The 1993-94 Budget Act includes general fund expenditures of $38.5 billion (a   
6.3% reduction from projected 1992-93 expenditures of
 $41.1 billion), in order   
to keep a balanced budget within the available revenues. The 1993-94 Budget   
Act also includes special fund expenditures of $12.1
 billion, a 4.2% increase.   
The 1993-94 Budget Act reflects the following major adjustments:   
  
1. Changes in local government financing to shift about $2.6 billion in   
property taxes from cities, counties, special districts and   
redevelopment agencies to school and community college districts,   
thereby reducing general fund support by an equal amount. About $2.5   
billion would be permanent, reflecting termination of the State's   
"bailout" of local governments following the property tax cuts of   
Proposition 13 in 1978 (See "Constitutional, Legislative and Other   
Factors" below).  
  
The property tax revenue losses for cities and counties are offset in   
part by additional sales tax revenues and mandate relief. The temporary   
0.5% sales tax was extended through December 31, 1993, for allocation to   
counties for public safety programs. The voters approved Proposition 172   
in November 1993 and the 0.5% sales tax was extended permanently for   
public safety purposes.  
  
Legislation also has been enacted to eliminate state mandates in order   
to provide local governments flexibility in making their programs   
responsive to local needs. Legislation provides mandate relief for local   
justice systems which affect county audit requirements, court reporter   
fees, and court consolidation; health and welfare relief involving   
advisory boards, family planning, state audits and realignment   
maintenance efforts; and relief in areas such as county welfare   
department self-evaluations, noise guidelines and recycling   
requirements.  
  
2. The 1993-94 Budget Act projected K-12 Proposition 98 funding on a   
cash basis at the same per-pupil level as 1992-93 by providing schools a   
$609 million loan payable from future years' Proposition 98 funds.  
  
3. The 1993-94 Budget Act assumed receipt of about $692 million of aid   
to the State from the Federal government to offset health and welfare   
costs associated with foreign immigrants living in the State, which   
would reduce a like amount of general fund expenditures. About $411   
million of this amount was one-time funding. Congress ultimately   
appropriated only $450 million.   
  
4. Reductions of $600 million in health and welfare programs, and $400   
million in support for higher education (partly offset by fee increases   
at all three units of higher education) and various miscellaneous cuts   
(totaling approximately $150 million) in State government services in   
many agencies, up to 15%.  
  
5. A 2-year suspension of the renters' tax credit ($390 million   
expenditure reduction in 1993-94).  
  
6. Miscellaneous one-time items, including deferral of payment to the   
Public Employees Retirement Fund ($339 million) and a change in   
accounting for debt service from accrual to cash basis, saving $107   
million.  
  
The 1993-94 Budget Act contains no general fund tax/revenue increases other   
than a two-year suspension of the renters' tax credit. The 1993-94 Budget Act   
suspended the 4% automatic budget reduction "trigger," as was done in 1992-93   
so that cuts could be focused.  
  
Administration reports during the course of the 1993-94 Fiscal Year have   
indicated that while economic recovery appears to have started in the second   
half of the fiscal year, recessionary conditions continued longer than has   
been anticipated when the 1993-94 Budget Act was adopted. Overall, revenues   
for the 1993-94 Fiscal Year were about $800 million lower than original   
projections, and expenditures were about $780 million higher, primarily   
because of higher health and welfare caseloads, lower property taxes which   
require greater State support for K-14 education
 to make up the shortfall, and   
lower than anticipated Federal government payments for immigration-related   
costs. The reports in May and June, 1994, indicated that revenues in the   
second half of the 1993-94 Fiscal Year have been
 very close to the projections   
made in the Governor's Budget of January 10, 1994, which is consistent with a   
slow turnaround in the economy.  
  
The Department of Finance's July 1994 Bulletin, including the final June   
receipts, reported that June revenues were $114 million (2.5%) above   
projection, with final end-of-year results at $377 million (about 1%) above   
the May Revision projections. Part of this result was due to end-of-year   
adjustments and reconciliations. Personal income tax and sales tax continued   
to track projections very well. The largest factor in the higher than   
anticipated revenues was from bank and corporation taxes, which were $140   
million (18.4%) above projection in June. While the higher June receipts are   
reflected in the actual 1993-94 Fiscal Year cash flow results, and help the   
starting cash balance for the 1994-95 Fiscal Year, the Department of Finance   
has not adjusted any of its revenue projections for the 1994-95 or 1995-96   
Fiscal Years.   
  
During the 1993-94 Fiscal Year, the State implemented the deficit   
retirement plan, which was part of the 1993-94 Budget Act, by issuing $1.2   
billion of revenue anticipation warrants in February 1994 maturing December   
21, 1994. This borrowing reduced the cash deficit at the end of the 1993-94   
Fiscal Year. Nevertheless, because of the $1.5 billion variance from the   
original 1993-94 Budget Act assumptions, the General Fund ended the fiscal   
year at June 30, 1994 carrying forward an accumulated deficit
 of approximately   
$2 billion.   
  
Because of the revenue shortfall and the State's reduced internal   
borrowable cash resources, in addition to the $1.2 billion of revenue   
anticipation warrants issued as part of the deficit retirement
 plan, the State   
issued an additional $2.0 billion of revenue anticipation warrants, maturing   
July 26, 1994, which were needed to fund the State's obligations and expenses   
through the end of the 1993-94 Fiscal Year.   
  
On January 17, 1994, a major earthquake measuring an estimated 6.8 on the   
Richter Scale struck Los Angeles. Significant property damage to private and   
public facilities occurred in a four-county area including northern Los   
Angeles County, Ventura County, and parts of Orange and San Bernardino   
Counties, which were declared as State and Federal disaster areas by January   
18. Current estimates of total property damage (private and
 public) are in the   
range of $20 billion but these estimates still are subject to change.   
  
Despite such damage, on the whole, the vast majority of structures in the   
areas, including large manufacturing and commercial buildings and all modern   
high-rise offices, survived the earthquake with minimal or no damage,   
validating the cumulative effect of strict building codes and thorough   
preparation for such an emergency by the State and local agencies.  
  
State-owned facilities, including transportation corridors and facilities   
such as Interstate Highways 5 and 10 and State Highways 14, 118 and 210   
sustained damage. Most of the major highways (Interstate 5 and 10) have now   
been repaired. The campus of California State University at Northridge (very   
near the epicenter) suffered an estimated $350 million damage, resulting in   
temporary closure of the campus. It has reopened using borrowed facilities   
elsewhere in the area and many temporary structures. There was also some   
damage to the University of California at Los Angeles and to an office   
building in Van Nuys (now open after a temporary closure).
 Overall, except for   
the temporary road and bridge closures, and CSU-Northridge, the
 earthquake did   
not and is not expected to significantly affect State government operations.  
  
The State in conjunction with the Federal government is committed to   
providing assistance to local governments, individuals and businesses   
suffering damage as a result of the earthquake, as well as to provide for the   
repair and replacement of State-owned facilities. The Federal government will   
provide substantial earthquake assistance.  
  
The President immediately allocated some available disaster funds, and   
Congress has approved additional funds for a total of at least
 $9.5 billion of   
Federal funds for earthquake relief, including assistance to homeowners and   
small businesses, and costs for repair of damaged public facilities. The   
Governor originally proposed that the State will have to pay about $1.9   
billion for earthquake relief costs, including a 10% match to some of the   
Federal funds, and costs for some programs not covered
 by the Federal aid. The   
Governor proposed to cover $1.05 billion of these costs from a general   
obligation bond issue which was on the June 1994 ballot, but it was not   
approved by the voters. The Governor subsequently announced that the State's   
share for transportation projects would come from existing Department of   
Transportation funds (thereby delaying other, non-earthquake related   
projects), that the State's share for certain other costs (including local   
school building repairs) would come from reallocating
 existing bond funds, and   
that a proposed program for homeowner and small business aid supplemental to   
Federal aid would have to be abandoned. Some other costs
 will be borrowed from   
the Federal government in a manner similar to that used by the State of   
Florida after Hurricane Andrew; pursuant to Senate Bill 2383, repayment will   
have to be addressed in 1995-96 or beyond.   
  
The 1994-95 Fiscal Year will represent the fourth consecutive year the   
Governor and Legislature will be faced with a very difficult budget   
environment to produce a balanced budget. Many program cuts and budgetary   
adjustments have already been made in the last three years. The Governor's   
Budget proposal, as updated in May and June, 1994, recognized that the   
accumulated deficit could not be repaid in one year, and proposed a two-year   
solution. The budget proposal sets forth revenue and
 expenditure forecasts and   
revenue and expenditure proposals which result in operating surpluses for the   
budget for both 1994-95 and 1995-96, and lead to the elimination of the   
accumulated budget deficit, estimated at about $2.0 billion at June 30, 1994,   
by June 30, 1996.  
  
The 1994-95 Budget Act, signed by the Governor on July 8, 1994, projects   
revenues and transfers of $41.9 billion, $2.1 billion higher than revenues in   
1993-94. This reflects the Administration's forecast of an improving economy.   
Also included in this figure is a projected receipt of about
 $360 million from   
the Federal government to reimburse the State's cost of incarcerating   
undocumented immigrants. The State will not know how much the Federal   
government will actually provide until the Federal fiscal year 1995 Budget is   
completed. Completion of the Federal budget is expected by October 1994. The   
Legislature took no action on a proposal in the January Governor's Budget to   
undertake an expansion of the transfer of certain programs to counties, which   
would also have transferred to counties 0.5% of the State's current sales tax.  
  
The Budget Act projects Special Fund revenues of $12.1 billion, a decrease   
of 2.4% from 1993-94 estimated revenues.  
  
The 1994-95 Budget Act projects General Fund expenditures of $40.9 billion,   
an increase of $1.6 billion over 1993-94. The Budget Act
 also projects Special   
Fund expenditures of $13.7 billion, a 5.4% increase over 1993-94 estimated   
expenditures. The principal features of the Budget Act were the following:  
  
1. Receipt of additional Federal aid in 1994-95 of about $400 million   
for costs of refugee assistance and medical care for undocumented   
immigrants, thereby offsetting a similar General Fund cost. The State   
will not know how much of these funds it will receive until the Federal   
fiscal year 1995 Budget is passed.  
  
2. Reductions of approximately $1.1 billion in health and welfare costs.   
A 2.3% reduction in Aid to Families with Dependent Children ("AFCD")   
payments (equal to about $56 million for the entire fiscal year) has   
been  suspended by court order.  
  
3. A General Fund increase of approximately $38 million in support for   
the University of California and $65 million for California State   
University. It is anticipated that student fees for both the U.C. and   
the C.S.U. will increase up to 10%.  
  
4. Proposition 98 funding for K-14 schools is increased by $526 million   
from 1993-94 levels, representing an increase for enrollment growth and   
inflation. Consistent with previous budget agreements, Proposition 98   
funding provides approximately $4,217 per student for K-12 schools,   
equal to the level in the past three years.  
  
5. Legislation enacted with the Budget clarifies laws passed in 1992 and   
1993 which require counties and other local agencies to transfer funds   
to local school districts, thereby reducing State aid. Some counties had   
implemented a method of making such transfers which provided less money   
for schools if there were redevelopment agency projects. The new   
legislation bans this method of transfer. If all counties had   
implemented this method, General Fund aid to K-12 schools would have   
been $300 million higher in each of the 1994-95 and 1995-96 Fiscal   
Years.  
  
6. The 1994-95 Budget Act provides funding for anticipated growth in the   
State's prison inmate population, including provisions for implementing   
recent legislation (the so-called "Three Strikes" law) which requires   
mandatory life prison terms for certain third-time felony offenders.  
  
7. Additional miscellaneous cuts ($500 million) and fund transfers ($255   
million) totaling in the aggregate approximately $755 million.  
  
The 1994-95 Budget Act contains no tax increases. Under legislation enacted   
for the 1993-94 Budget, the renters' tax credit was suspended for two years   
(1993 and 1994). A ballot proposition to permanently restore the renters' tax   
credit after this year failed at the June, 1994 election. The Legislature   
enacted a further one-year suspension of the renters' tax credit, for 1995,   
saving about $390 million in the 1995-96 Fiscal Year.  
  
The 1994-95 Budget assumes that the State will use a cash flow borrowing   
program in 1994-95 which combines one-year notes and two-year warrants, which   
have now been issued. Issuance of warrants allows the State to
 defer repayment   
of approximately $1.0 billion of its accumulated budget deficit into the 1995-  
96 Fiscal Year.  
  
The State's cash flow management plan for the 1994-95 fiscal year
 included the   
issuance of $4.0 billion of revenue anticipation warrants on July 26,
 1994, to   
mature on April 25, 1996, as part of a two-year plan to retire the
 accumulated   
State budget deficit.  
  
Because preparation of cash flow estimates for the 1995-96 Fiscal Year is   
necessarily more imprecise than for the current fiscal year and entails   
greater risks of variance from assumptions, and because the Governor's two-  
year budget plan assumes receipt of a large amount of Federal aid in the 1995-  
96 Fiscal Year for immigration-related costs which is uncertain, the   
Legislature enacted a backup budget adjustment mechanism to mitigate possible   
deviations from projected revenues, expenditures or internal borrowable   
resources which might reduce available cash resources during the two-year   
plan, so as to assure repayment of the warrants.  
  
Pursuant to Section 12467 of the California Government Code, enacted by   
Chapter 135, Statutes of 1994 (the "Budget Adjustment Law"), the State   
Controller was required to make a report by November 15, 1994 on whether the   
projected cash resources for the General Fund as of June 30, 1995 will   
decrease more than $430 million from the amount projected by the State in its   
Official Statement in July, 1994 for the sale of $4,000,000,000 of Revenue   
Anticipation Warrants. On November 15, 1994, the State Controller issued the   
report on the State's cash position required by the Budget
 Adjustment Law. The   
report indicated that the cash position of the General Fund on June 30, 1995   
would be $581 million better than was estimated in the July, 1994 cash flow   
projections and therefore, no budget adjustment procedures will
 be invoked for   
the 1994-95 fiscal year. The Law would only be implemented if the State   
Controller estimated that borrowable resources on June 30, 1995 would be at   
least $430 million lower than projected.  
  
The State Controller's report identified a number of factors which
 have led to   
the improved cash position of the State. Estimated revenues and transfers for   
the 1994-95 fiscal year other than Federal reimbursement for
 immigration costs   
were up about $650 million. The largest portion of this was in
 higher bank and   
corporation tax receipts, but all major tax sources were above original   
projections. However, most of the Federal immigration aid revenues projected   
in connection with the 1994-95 Budget Act and in the July, 1994 cash flows   
will not be received, as indicated above, leaving a net increase in revenues   
of $322 million.  
  
On the expenditure side, the State Controller reported that estimated reduced   
caseload growth in health and welfare programs, reduced school enrollment   
growth, and an accounting adjustment reducing a transfer from
 the General Fund   
to the Special Fund for Economic Uncertainties resulted in overall General   
Fund expenditure reductions (again before adjusting for Federal aid) of $672   
million. However, the July, 1994 cash flows projected that General Fund
 health   
and welfare and education expenditures would be offset by the anticipated   
receipt of $407 million in Federal aid for illegal immigrant costs. The State   
Controller now estimates that none of these funds will be
 received, so the net   
reduction in General Fund expenditures is $265 million.  
  
Finally, the State Controller indicated that a review of balances in special   
funds available for internal borrowing resulted in an estimated reduction of   
such borrowable resources of $6 million. The combination of these factors   
results in the estimated improvement of the General Fund's cash position of   
$581 million. The State Controller's revised cash flow
 projections for 1994-95   
have allocated this improvement to two line items: an increase from
 $0 to $427   
million in the estimated ending cash balance of the General Fund on June 30,   
1995, and an increase in unused borrowable resources of $154 million.  
  
The State Controller's report indicated that there was no anticipated cash   
impact in the 1994-95 fiscal year for recent initiative on "three strikes"   
criminal penalties and illegal immigration which were approved by voters on   
November 8, 1994. At a hearing before a committee of the Legislature on   
November 15, 1994, both the Legislative Analyst and the Department of  
  
Finance concurred in the reasonableness of the State
 Controller's report. (The   
Legislative Analyst had issued a preliminary analysis on November 1, 1994   
which reached a conclusion very close to that of the State Controller.) The   
State Controller's report makes no projections about whether the Law may have   
to be implemented in 1995-96. However, both the State Controller and the   
Legislative Analyst in the November 15 hearing noted that the July, 1994 cash   
flows for the 1995-96 fiscal year place continued reliance on 
large amounts of   
federal assistance for immigration costs, which did not
 materialize this year,   
indicating significant budget pressures for next year. The Department of   
Finance indicated that the budgetary issues identified
 in the hearing would be   
addressed in the Governor's Budget proposal for the 1995-96
 fiscal year, which   
will be released in early January, 1995.  
  
    The Director of Finance is required to include updated cash-flow   
statements for the 1994-95 and 1995-96 Fiscal Years in the
 May revision to the   
1995-96 Fiscal Year budget proposal. By June 1, 1995, the State Controller   
must concur with these updated statements or provide a revised
 estimate of the   
cash condition of the General Fund for the 1994-95 and the 1995-96 Fiscal   
Years. For the 1995-96 Fiscal Year, Chapter 135 prohibits any external   
borrowing as of June 30, 1996, thereby requiring the State to rely solely on   
internal borrowable resources, expenditure reductions or revenue increases to   
eliminate any projected cash flow shortfall.  
  
Commencing on October 15, 1995, the State Controller will,
 in conjunction with   
the Legislative Analyst's Office, review the estimated cash condition of the   
General Fund for the 1995-96 Fiscal Year. The "1996 cash shortfall" shall be   
the amount necessary to bring the balance of unused borrowable resources on   
June 30, 1996 to zero. On or before December 1, 1995, legislation must be   
enacted providing for sufficient General Fund expenditure reductions, revenue   
increases, or both, to offset any such 1996 cash shortfall identified by the   
State Controller. If such legislation is not enacted, within five days   
thereafter the Director of Finance must reduce all General Fund
 appropriations   
for the 1995-96 Fiscal Year, except the Required Appropriations, by the   
percentage equal to the ratio of said 1996 cash shortfall to total remaining   
General Fund appropriations for the 1995-96 Fiscal Year, excluding the   
Required Appropriations.  
  
     
On December 6, 1994, Orange County, California and its Investment Pool (the   
"Pool") filed for bankruptcy under Chapter 9 of the United States Bankruptcy   
Code. Approximately 187 California public entities, substantially
 all of which   
are public agencies within the County, were investors in the Pool.  Since the   
filing, the County has employed various investment advisors to
 restructure the   
investments in the Pool.  That and other actions resulted in the Pool   
sustaining a loss $1.66 billion. The County failed to make certain
 deposits to   
a fund for repayment of $169,000,000 aggregate principal amount of its short   
term indebtedness resulting in a technical default under its note resolution.   
Additionally, the County defaulted in its obligation to accept tenders of its   
$110,200,000 aggregate principal amount of its Taxable Pension Obligation   
Bonds, Series B used to finance County pension obligations. 
Interest at a rate   
set pursuant to the bond documents has been timely paid on such Pension Bonds. 
  
Both S&P and Moody's have suspended or downgraded ratings on various debt   
securities of the County and certain of the investors in the Pool. Such   
suspensions or downgradings could affect both price and liquidity of such   
securities.  
      
     
Orange County has taken a number of steps to resolve its bankruptcy case.  In   
April of 1995, it entered into a Comprehensive Settlement Agreement with   
representatives of investors in the Pool, which resulted in the distribution   
to the investors of, on average, approximately 77% of their Pool investment   
balances.  A proposed sales tax increase to provide funds to make up   
investment losses and assure payment of the County's debt was defeated by a   
vote of 61% to 39% on June 27, 1995.  However, the County issued $278,790,000   
of Recovery Bonds to fund a portion of the investors' losses on June 16, 1995   
and issued $155,000,000 of Teeter Plan Revenue bonds on June 30, 1995 to fund   
advances of delinquent taxes to other taxing jurisdictions within the County   
(the "Teeter Plan") and to repay previously issued Teeter Plan Notes maturing   
on June 30, 1995.  On July 10, 1995, the County completed a consensual   
modification of over 99% of its other maturing short-term debt (consisting of   
$600 million of taxable notes and $200 million of tax-exempt Tax and Revenue   
Anticipation Notes), which now has a new maturity date of June 30, 1996.  In   
September 1995 the California legislature passed legislation that shifts   
revenues from other County entities to the County.  Based on these revenues   
and the agreement of Pool investors to subordinate their remaining
 claims, the   
County has filed a plan of adjustment and a Disclosure Statement with the   
Bankruptcy Court with an objective of emerging from bankruptcy by the end of   
June of 1996. The County is also pursuing litigation against numerous parties   
seeking a recovery of the Pool losses.  
      
CONSTITUTIONAL, LEGISLATIVE AND OTHER FACTORS. Certain California   
constitutional amendments, legislative measures, executive orders,   
administrative regulations and voter initiatives could result in the adverse   
effects described below. The following information constitutes only a brief   
summary, does not purport to be a complete description, and is based on   
information drawn from official statements and prospectuses relating to   
securities offerings of the State of California and various local agencies in   
California available as of the date of this Statement of Additional   
Information.  
  
Certain of the California Municipal Obligations in which the Fund may invest   
may be obligations of issuers which rely in whole or in part on California   
State revenues for payment of these obligations. Property tax revenues and a   
portion of the State's general fund surplus are distributed to counties,   
cities and their various taxing entities and the State assumes certain   
obligations theretofore paid out of local funds. Whether and to what extent a   
portion of the State's general fund will be distributed in the future to   
counties, cities and their various entities, is unclear. In 1988, California   
enacted legislation providing for a water's-edge combined reporting method if   
an election fee was paid and other conditions met. On October 6, 1993,   
California Governor Pete Wilson signed Senate Bill 671 (Alquist) which   
modifies the unitary tax law by deleting the requirements that a taxpayer   
electing to determine its income on a water's-edge basis pay a fee and file a   
domestic disclosure spreadsheet and instead requiring an annual information   
return. Significantly, the Franchise Tax Board can no longer disregard a   
taxpayer's election. The Franchise Tax Board is reported to have estimated   
state revenue losses from the Legislation as growing from $27 million in 1993-  
94 to $616 million in 1999-2000, but others, including    former     Assembly   
Speaker Willie Brown, disagree with that estimate and assert that
 more revenue   
will be generated for California, rather than less, because of an anticipated   
increase in economic activity and additional revenue generated by the   
incentives in the Legislation.  
  
Certain of the California Municipal Obligations may be obligations of issuers   
who rely in whole or in part on ad valorem real property taxes as a source of   
revenue. On June 6, 1978, California voters approved an amendment to the   
California Constitution known as Proposition 13, which added Article XIIIA to   
the California Constitution. The effect of Article XIIIA is to limit ad   
valorem taxes on real property and to restrict the ability of taxing entities   
to increase real property tax revenues. On November 7, 1978,
 California voters   
approved Proposition 8, and on June 3, 1986, California voters approved   
Proposition 46, both of which amended Article XIIIA. Section 1 of Article   
XIIIA limits the maximum ad valorem tax on real property to 1% of full cash   
value (as defined in Section 2), to be collected by the counties and   
apportioned according to law; provided that the 1% limitation does not apply   
to ad valorem taxes or special assessments to pay the interest and redemption   
charges on (a) any indebtedness approved by the voters prior to July 1, 1978,   
or (b) any bonded indebtedness for the acquisition or improvement of real   
property approved on or after July 1, 1978, by two-thirds of the
 votes cast by   
the voters voting on the proposition. Section 2 of Article
 XIIIA defines "full   
cash value" to mean "the County Assessor's valuation of real
 property as shown   
on the 1975/76 tax bill under 'full cash value' or, thereafter, the appraised   
value of real property when purchased, newly constructed, or a change in   
ownership has occurred after the 1975 assessment." The full cash value may be   
adjusted annually to reflect inflation at a rate not to
 exceed 2% per year, or   
reduction in the consumer price index or comparable local data, or reduced in   
the event of declining property value caused by damage, destruction or other   
factors. The California State Board of Equalization has adopted regulations,   
binding on county assessors, interpreting the meaning
 of "change in ownership"   
and "new construction" for purposes of determining full
 cash value of property   
under Article XIIIA.  
  
Legislation enacted by the California Legislature to implement Article XIIIA   
(Statutes of 1978, Chapter 292, as amended) provides that notwithstanding any   
other law, local agencies may not levy any ad valorem property tax except to   
pay debt service on indebtedness approved by the voters
 prior to July 1, 1978,   
and that each county will levy the maximum tax permitted by Article XIIIA of   
$4.00 per $100 assessed valuation (based on the former practice of using 25%,   
instead of 100%, of full cash value as the assessed value for tax purposes).   
The legislation further provided that, for the 1978/79 fiscal year only, the   
tax levied by each county was to be apportioned among all taxing agencies   
within the county in proportion to their average share of taxes levied in   
certain previous years. The apportionment of property taxes for fiscal years   
after 1978/79 has been revised pursuant to Statutes of 1979, Chapter 282,   
which provides relief funds from State moneys beginning
 in fiscal year 1979/80   
and is designed to provide a permanent system for sharing State taxes and   
budget funds with local agencies. Under Chapter 282, cities and counties   
receive more of the remaining property tax revenues collected under   
Proposition 13 instead of direct State aid. School districts receive a   
correspondingly reduced amount of property taxes, but receive compensation   
directly from the State and are given additional relief. Chapter 282 does not   
affect the derivation of the base levy ($4.00 per $100 of assessed valuation)   
and the bonded debt tax rate.  
  
     
On November 6, 1979, an initiative known as "Proposition 4" or the "Gann   
Initiative" was approved by the California voters, which added Article XIIIB   
to the California Constitution. Under Article XIIIB, State and local   
governmental entities have an annual "appropriations limit" and are not   
allowed to spend certain monies called "appropriations subject to limitation"   
in an amount higher than the "appropriations limit." Article XIIIB does not   
affect the appropriation of moneys which are excluded from the definition of   
"appropriations subject to limitation," including debt
 service on indebtedness   
existing or authorized as of January 1, 1979, or bonded indebtedness   
subsequently approved by the voters. In general terms, the "appropriations   
limit" is required to be based on the limit for the prior year adjusted   
annually for certain changes and is tested over consecutive two
 year periods.    
Article XXIIIB also provides that any excess of aggregate proceeds of taxes   
received over such two year period above the combined appropriation
 limits for   
those two years is divided equally between transfers to K-14 districts and   
refunds to taxpayers.  
      
  
At the November 8, 1988 general election, California voters approved an   
initiative known as Proposition 98. This initiative amends Article XIIIB to   
require that (a) the California Legislature establish a prudent state reserve   
fund in an amount as it shall deem reasonable and necessary and (b) revenues   
in excess of amounts permitted to be spent and which would otherwise be   
returned pursuant to Article XIIIB by revision of tax rates or fee schedules,   
be transferred and allocated (up to a maximum of 4%) to the State School Fund   
and be expended solely for purposes of instructional improvement and   
accountability. No such transfer or allocation of funds will be required if   
certain designated state officials determine that annual student expenditures   
and class size meet certain criteria as set forth in Proposition 98.
 Any funds   
allocated to the State School Fund shall cause the appropriation limits   
established in Article XIIIB to be annually increased for any such allocation   
made in the prior year.  
  
Proposition 98 also amends Article XVI to require that the State of
 California   
provide a minimum level of funding for public schools and community colleges.   
Commencing with the 1988-89 fiscal year, state monies to support school   
districts and community college districts shall equal or exceed the lesser of   
(a) an amount equaling the percentage of state general revenue bonds for   
school and community college districts in fiscal year 1986-87, or (b) an   
amount equal to the prior year's state general fund proceeds of taxes   
appropriated under Article XIIIB plus allocated proceeds of local
 taxes, after   
adjustment under Article XIIIB. The initiative permits the enactment of   
legislation, by a two-thirds vote, to suspend the minimum funding requirement   
for one year.  
  
On June 30, 1989, the California Legislature enacted Senate Constitutional   
Amendment 1, a proposed modification of the California Constitution to alter   
the spending limit and the education funding provisions of Proposition 98.   
Senate Constitutional Amendment 1, on the June 5, 1990 ballot as Proposition   
111, was approved by the voters and took effect on July 1, 1990. Among a   
number of important provisions, Proposition 111 recalculates spending limits   
for the State and for local governments, allows greater annual increases in   
the limits, allows the averaging of two years' tax revenues before requiring   
action regarding excess tax revenues, reduces the amount of the funding   
guarantee in recession years for school districts and community college   
districts (but with a floor of 40.9% of State general fund tax revenues),   
removes the provision of Proposition 98 which included excess moneys   
transferred to school districts and community college districts in the base   
calculation for the next year, limits the amount of State tax
 revenue over the   
limit which would be transferred to school districts and community college   
districts, and exempts increased gasoline taxes and truck weight
 fees from the   
State appropriations limit. Additionally, Proposition 111 exempts from the   
State appropriations limit funding for capital outlays.  
  
Article XIIIB, like Article XIIIA, may require further interpretation by both   
the Legislature and the courts to determine its applicability to specific   
situations involving the State and local taxing authorities. Depending upon   
the interpretation, Article XIIIB may limit significantly a governmental   
entity's ability to budget sufficient funds to meet debt service on bonds and   
other obligations.  
  
On November 4, 1986, California voters approved an initiative
 statute known as   
Proposition 62. This initiative (a) requires that any tax for general   
governmental purposes imposed by local governments be approved by resolution   
or ordinance adopted by a two-thirds vote of the governmental entity's   
legislative body and by a majority vote of the electorate of the governmental   
entity, (b) requires that any special tax (defined as taxes levied for other   
than general governmental purposes) imposed by a local governmental entity be   
approved by a two-thirds vote of the voters within that jurisdiction, (c)   
restricts the use of revenues from a special tax to the purposes or for the   
service for which the special tax was imposed, (d) prohibits
 the imposition of   
ad valorem taxes on real property by local governmental entities except as   
permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes   
and sales taxes on the sale of real property by local governments, (f)   
requires that any tax imposed by a local government on or
 after August 1, 1985   
be ratified by a majority vote of the electorate within two years of the   
adoption of the initiative or be terminated by
 November 15, 1988, (g) requires   
that, in the event a local government fails to comply with the provisions of   
this measure, a reduction in the amount of property tax revenue allocated to   
such local government occurs in an amount equal to the revenues received by   
such entity attributable to the tax levied in violation of
 the initiative, and   
(h) permits these provisions to be amended exclusively by the voters of the   
State of California.     A decision of the California Supreme Court upholding   
the validity of Proposition 62 became final in December of 1995.      
  
On November 8, 1988, California voters approved Proposition 87.
 Proposition 87   
amended Article XVI, Section 16, of the California Constitution by
 authorizing   
the California Legislature to prohibit redevelopment agencies from receiving   
any of the property tax revenue raised by increased property tax rates levied   
to repay bonded indebtedness of local governments which is approved by voters   
on or after January 1, 1989. It is not possible to predict whether the   
California Legislature will enact such a prohibition nor is it possible to   
predict the impact of Proposition 87 on redevelopment agencies and their   
ability to make payments on outstanding debt obligations.  
  
Certain California Exempt Obligations in which the Fund may invest may be   
obligations that are payable solely from the revenues of health care   
institutions. Certain provisions under California law may adversely affect   
such revenues and, consequently, payment on those California Exempt   
Obligations.  
  
The Federally sponsored Medicaid program for health care services to eligible   
welfare beneficiaries in California is known as the Medi-Cal program.   
Historically, the Medi-Cal program has provided for a cost-based system of   
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any   
hospital wanting to participate in the Medi-Cal program, provided such   
hospital met applicable requirements for participation. California law now   
provides that the State of California shall selectively contract with   
hospitals to provide acute inpatient services to Medi-Cal patients. Medi-Cal   
contracts currently apply only to acute inpatient services. Generally, such   
selective contracting is made on a flat per diem payment basis for all   
services to Medi-Cal beneficiaries, and generally such payment has not   
increased in relation to inflation, costs or other factors. Other reductions   
or limitations may be imposed on payment for services rendered to Medi-Cal   
beneficiaries in the future.  
  
Under this approach, in most geographical areas of California, only those   
hospitals which enter into a Medi-Cal contract with the State of California   
will be paid for non-emergency acute inpatient services rendered to Medi-Cal   
beneficiaries. The State may also terminate these contracts without notice   
under certain circumstances and is obligated to make
 contractual payments only   
to the extent the California legislature appropriates adequate funding   
therefor.  
  
In February 1987, the Governor of the State of California announced that   
payments to Medi-Cal providers for certain services (not including hospital   
acute inpatient services) would be decreased by 10% through June 1987.   
However, a Federal district court issued a preliminary injunction preventing   
application of any cuts until a trial on the merits can be held. If the   
injunction is deemed to have been granted improperly, the State of California   
would be entitled to recapture the payment differential for the intended   
reduction period. It is not possible to predict at this time whether any   
decreases will ultimately be implemented.  
  
California enacted legislation in 1982 that authorizes private health plans   
and insurers to contract directly with hospitals
 for services to beneficiaries   
on negotiated terms. Some insurers have introduced plans known as "preferred   
provider organizations" ("PPOs"), which offer financial incentives for   
subscribers who use only the hospitals which contract with the plan. Under an   
exclusive provider plan, which includes most health maintenance organizations   
("HMOs"), private payors limit coverage to those
 services provided by selected   
hospitals. Discounts offered to HMOs and PPOs may result in payment to the   
contracting hospital of less than actual cost and the volume of patients   
directed to a hospital under an HMO or PPO contract may vary significantly   
from projections. Often, HMO or PPO contracts are enforceable for a stated   
term, regardless of provider losses or of bankruptcy of the respective HMO or   
PPO. It is expected that failure to execute and maintain such PPO and HMO   
contracts would reduce a hospital's patient base or gross revenues.   
Conversely, participation may maintain or increase the patient base, but may   
result in reduced payment and lower net income to the contracting hospitals.  
  
    Such California Exempt Obligations may also be insured by the State of   
California pursuant to an insurance program implemented by the Office of   
Statewide Health Planning and Development for health facility construction   
loans. If a default occurs on insured
 California Exempt Obligations, the State   
Treasurer will issue debentures payable out of a reserve fund established   
under the insurance program or will pay principal and interest, on an   
unaccelerated basis from unappropriated State funds. At the request of the   
Office of Statewide Health Planning and Development, Arthur D. Little, Inc.   
prepared a study in December 1983 to evaluate the adequacy
 of the reserve fund   
established under the insurance program and, based on certain
 formulations and   
assumptions found the reserve fund substantially underfunded. In September of   
1986, Arthur D. Little, Inc. prepared an update of the study and concluded   
that an additional 10% reserve be established for "multi-level" facilities.   
For the balance of the reserve fund, the update recommended maintaining the   
current reserve calculation method. In March 1990, Arthur D. Little, Inc.   
prepared a further review of the study and recommended that separate reserves   
continue to be established for "multi-level" facilities at a reserve level   
consistent with those that would be required by an insurance company.  
  
Certain California Exempt Obligations in the Fund may be
 obligations which are   
secured in whole or in part by a mortgage or deed of trust on real property.   
California has five principal statutory provisions which limit
 the remedies of   
a creditor secured by a mortgage or deed of trust. Two limit the creditor's   
right to obtain a deficiency judgment, one limitation being based on the   
method of foreclosure and the other on the type of debt secured. Under the   
former, a deficiency judgment is barred when the foreclosure is accomplished   
by means of a nonjudicial trustee's sale. Under the latter, a deficiency   
judgment is barred when the foreclosed mortgage or deed of trust secures   
certain purchase money obligations. Another California
 statute, commonly known   
as the "one form of action" rule, requires creditors secured by real property   
to exhaust their real property security by foreclosure before bringing a   
personal action against the debtor. The fourth statutory provision limits any   
deficiency judgment obtained by a creditor secured by real property following   
a judicial sale of such property to the excess of the outstanding debt over   
the fair value of the property at the time of the sale, thus preventing the   
creditor from obtaining a large deficiency judgment against the debtor as the   
result of low bids at a judicial sale. The fifth statutory
 provision gives the   
debtor the right to redeem the real property from any judicial foreclosure   
sale as to which a deficiency judgment may be ordered against the debtor.  
  
Upon the default of a mortgage or deed of trust with respect to California   
real property, the creditor's nonjudicial foreclosure rights under the power   
of sale contained in the mortgage or deed of trust are subject to the   
constraints imposed by California law upon transfers of title to
 real property   
by private power of sale. During the three-month period beginning with the   
filing of a formal notice of default, the debtor is entitled to reinstate the   
mortgage by making any overdue payments. Under standard loan servicing   
procedures, the filing of the formal notice of default does not occur unless   
at least three full monthly payments have become due and remain unpaid. The   
power of sale is exercised by posting and publishing a notice of sale for at   
least 20 days after expiration of the three-month reinstatement period.   
Therefore, the effective minimum period for foreclosing
 on a mortgage could be   
in excess of seven months after the initial default. Such time delays in   
collections could disrupt the flow of revenues available to an issuer for the   
payment of debt service on the outstanding obligations if such defaults occur   
with respect to a substantial number of mortgages or deeds of trust securing   
an issuer's obligations.  
  
In addition, a court could find that there is sufficient involvement of the   
issuer in the nonjudicial sale of property securing a mortgage for such   
private sale to constitute "state action," and could hold that the private-  
right-of-sale proceedings violate the due process requirements of the Federal   
or State Constitutions, consequently preventing an issuer from using the   
nonjudicial foreclosure remedy described above.  
  
Certain California Exempt Obligations in the Fund may be obligations which   
finance the acquisition of single family home mortgages for low and moderate   
income mortgagors. These obligations may be payable solely from revenues   
derived from the home mortgages, and are subject to California's statutory   
limitations described above applicable to obligations secured by real   
property. Under California antideficiency legislation, there is no personal   
recourse against a mortgagor of a single family residence purchased with the   
loan secured by the mortgage, regardless of whether the creditor chooses   
judicial or nonjudicial foreclosure.  
  
Under California law, mortgage loans secured by single-family owner-occupied   
dwellings may be prepaid at any time. Prepayment charges on such mortgage   
loans may be imposed only with respect to voluntary prepayments made during   
the first five years during the term of the mortgage loan, and cannot in any   
event exceed six months' advance interest on the amount prepaid in excess of   
20% of the original principal amount of the mortgage loan. This limitation   
could affect the flow of revenues available to an issuer for debt service on   
the outstanding debt obligations which financed such home mortgages.  
  
ADDITIONAL CONSIDERATIONS. With respect to Municipal Obligations
 issued by the   
State of California and its political sub-divisions, (i.e., California Exempt   
Obligations) the Fund cannot predict what legislation, if any,
 may be proposed   
in the California State Legislature as regards the California State personal   
income tax status of interest on such obligations, or which proposals, if
 any,   
might be enacted. Such proposals, if enacted, might materially adversely   
affect the availability of California Exempt Obligations for
 investment by the   
Fund and the value of the Fund's portfolio. In such an event, the Trustees   
would reevaluate the Fund's investment objective and policies and consider   
changes in its structure or possible dissolution.  
  
Special Considerations Relating to New York  
Exempt Obligations  
  
STATE ECONOMY.     New York is the third most populous state
 in the nation and   
has a relatively high level of personal wealth.  The State's economy is   
diverse with a comparatively large share of the nation's finance, insurance,   
transportation, communications and services employment, and a very
 small share   
of the nation's farming and mining activity.  The State has a declining   
proportion of its workforce engaged in manufacturing, and an increasing   
proportion engaged in service industries.  New York City (the "City"), which   
is the most populous city in the State and nation and is the center of the   
nation's largest metropolitan area, accounts for a large portion of the   
State's population and personal income.
    
     
  

    
     
The State has historically been one of the wealthiest states in the nation.    
For decades, however, the State has grown more slowly than the nation as a   
whole, gradually eroding its relative economic position.  The recession has   
been more severe in the State, owing to a significant retrenchment in the   
financial services industry, cutbacks in defense spending, and an overbuilt   
real estate market.  There can be no assurance that the State economy
 will not   
experience worse-than-predicted results in the 1995-96 fiscal year, with   
corresponding material and adverse effects on the State's projections of   
receipts and disbursements.  
      
  
     
The unemployment rate in the State dipped below the national rate in the   
second half of 1981 and remained lower until 1991. 
 It stood at 6.9% in 1994.    
The total employment growth rate in the State has been below the national   
average since 1984 and was expected to slow to less than 0.5% in 1995.  State   
per capita personal income remains above the national average.  State per   
capita income for 1994 was estimated at $25,999, which was 19.2% above the   
1994 estimated national average of $21,809. During the past ten years, total   
personal income in the State rose slightly faster than the national average   
only in 1986 through 1989.  
  
STATE BUDGET.  The State Constitution requires the governor (the "Governor")   
to submit to the State legislature (the "Legislature") a balanced executive   
budget which contains a complete plan of expenditures for the ensuing fiscal   
year and all moneys and revenues estimated to be available therefor,   
accompanied by bills containing all proposed appropriations or   
reappropriations and any new or modified revenue measures to be enacted in   
connection with the executive budget.  The entire plan constitutes the   
proposed State financial plan for that fiscal year.  The Governor is required   
to submit to the Legislature quarterly budget updates which include a revised   
cash-basis state financial plan, and an explanation of any changes from the   
previous state financial plan.  
  
The State's budget for the 1995-96 fiscal year was enacted by the Legislature   
on June 7, 1995, more than two months after the start of the fiscal year.    
Prior to adoption of the budget, the Legislature enacted appropriations for   
disbursements considered to be necessary for State operations and other   
purposes, including all necessary appropriations for debt service.  The State   
financial plan for the 1995-96 fiscal year was formulated on
 June 20, 1995 and   
was based upon the State's budget as enacted by the Legislature and signed   
into law by the Governor (the "1995-96 State Financial Plan").   
  
The 1995-96 State Financial Plan was the first to be enacted in the   
administration of the Governor, who assumed office on January 1.  It was the   
first budget in over half a century which proposed and, as enacted, projected   
an absolute year-over-year decline in disbursements in the General Fund, the   
State's principal operating fund.  Spending for
 State operations was projected   
to drop even more sharply, by 4.6%.  Nominal spending from all State spending   
sources (i.e., excluding Federal aid) was proposed to increase by only 2.5%   
from the prior fiscal year, in contrast to the prior decade
 when such spending   
growth averaged more than 6.0% annually.  
  
The 1995-96 State Financial Plan included actions that will have an effect on   
the budget outlook for State fiscal year 1996-97 and beyond.  The Division of   
the Budget estimated that the 1995-96 State Financial Plan contained actions   
that provide nonrecurring resources or savings totaling approximately $900   
million while the State comptroller (the "Comptroller") believed that such   
amount exceeded $1 billion.  In addition to this use of nonrecurring   
resources, the 1995-96 State Financial Plan reflected actions that will   
directly affect the State's 1996-97 fiscal year baseline receipts and   
disbursements.  The three-year plan to reduce State personal
 income taxes will   
decrease State tax receipts by an estimated $1.7 billion in State fiscal year   
1996-97 in addition to the amount of reduction in State fiscal year 1995-96.    
Further significant reductions in the personal income tax are scheduled for   
the 1997-98 State fiscal year.  Other tax reductions enacted in 1994 and 1995   
are estimated to cause an additional reduction in receipts of over $500   
million in 1996-97, as compared to the level of receipts in 1995-96.    
Similarly, many actions taken to reduce disbursements in the State's 1995-96   
fiscal year are expected to provide greater reductions in the State's fiscal   
year 1996-97.  These include actions to reduce the State workforce, reduce   
Medicaid and welfare expenditures and slow community mental hygiene program   
development.  
  
The State issued the first of the three required quarterly
 updates (the "First   
Quarter Update") to the 1995-96 State Financial Plan on July 28, 1995.  The   
First Quarter Update projected continued balance in the State's 1995-96 State   
Financial Plan.  Actual cash receipts and disbursements during the first   
quarter of the fiscal year were impacted by the late adoption of the budget,   
and fell somewhat short of original monthly cashflow estimates.  Receipt   
variances were mainly related to timing issues rather than changes in the   
forecast.  Disbursement variances were also ascribed to timing factors.  
  
On October 2, 1995, the State Comptroller released a report on the State's   
financial condition.  The report identified several risks to
 the 1995-96 State   
Financial Plan and also estimated a potential imbalance in receipts and   
disbursements in the 1996-97 fiscal year of at least $2.7 billion and in the   
1997-98 fiscal year of at least $3.9 billion.  The Governor is required to   
submit a balanced budget to the State Legislature and has indicated that he   
will close any potential imbalance primarily through General Fund expenditure   
reductions and without increases in taxes or deferrals of scheduled tax   
reductions.  
  
The State issued its second quarterly update to the 1995-96 State Financial   
Plan on October 26, 1995.  The Mid-Year Update projected continued balance in   
the 1995-96 State Financial Plan, with estimated receipts
 reduced by a net $71   
million and estimated disbursements reduced by a net $30 million as compared   
to the First Quarter Update.  The resulting General Fund balance decreased   
from $213 million in the First Quarter Update to $172 million in the Mid-Year   
Update, reflecting the use of $41 million from the contingency reserve fund   
for payments of litigation and disallowance expenses.  
  
The Division of the Budget revised the cash-basis
 1995-96 State Financial Plan   
on December 15, 1995, in conjunction with the release of the Executive Budget   
for the 1996-97 fiscal year (the "December Update" and
 together with the First   
Quarter Update and the Mid-Year Update, the "Financial Plan Updates").  These   
projections show continued balance in the State's 1995-96
 Financial Plan, with   
estimated receipts reduced by a net $73 million and estimated disbursements   
reduced by a net $73 million as compared to the Mid-Year Update.  Reductions   
in receipts reflect delays in estimated receipts from the sale of State   
assets, and other revisions based upon operating results through November   
1995.  Disbursement estimates were reduced to reflect lower-than-expected   
spending through November, savings from debt refundings,
 and other items which   
more than offset projected increases in disbursements for school aid and   
tuition assistance.  The resulting General Fund balance of $172 million was   
unchanged from the Mid-Year Update.  
  
The Governor presented his 1996-97 Executive Budget to the Legislature on   
December 15, 1995, one month before the legal deadline.  There can be no   
assurance that the Legislature will enact the Executive Budget into law or   
that the projections set forth in the Executive Budget will not differ   
materially and adversely from actual results.  
  
The Governor's Executive Budget projected balance on a cash basis in the   
General Fund.  It reflected a continuing strategy of substantially reduced   
State spending, including programming restructurings, reductions in social   
welfare spending, and efficiency and productivity initiatives. 
 In his 1996-97   
Executive Budget, the Governor indicated that the 1996-97 General Fund   
financial plan (based on current law governing spending and revenues) would   
have been out of balance by almost $3.9 billion as a result of the underlying   
disparity between receipts and disbursements caused by anticipated spending   
demands, the effect of current and prior-year tax changes, and the use
 of one-  
time revenues to fund recurring spending in the 1995-96
 State Financial Plan.    
The Executive Budget proposes to close this gap primarily through a series of   
spending reductions and cost containment measures.  
  
To make progress toward addressing recurring budgetary
 imbalances, the 1996-97   
Executive Budget proposes significant actions to align recurring receipts and   
disbursements in future fiscal years.  The Governor has proposed closing the   
1996-97 fiscal year imbalance primarily through General Fund expenditure   
reductions and without increases in taxes or deferrals of scheduled tax   
reductions.  However, there can be no assurance that the Legislature will   
enact the Governor's proposals or that the State's actions will be sufficient   
to preserve budgetary balance or to align recurring receipts
 and disbursements   
in future fiscal years.  The 1996-97 Executive Budget includes action that   
will have an effect on the budget outlook for the State fiscal year 1997-98   
and beyond.  The net impact of these and other factors is expected to produce   
a potential imbalance in receipts and disbursements in State
 fiscal year 1997-  
98, which the Governor proposes to close with further spending reductions.    
The Executive Budget contains projections of a potential imbalance in the   
1997-98 fiscal year of $1.4 billion and in the 1998-99 fiscal year of $2.5   
billion, assuming implementation of the 1996-97 Executive Budget   
recommendations.  
  
The 1995-96 State Financial Plan and the Financial Plan Updates were based on   
a number of assumptions and projections.  Because it is not possible to   
predict accurately the occurrence of all factors that may affect the 1995-96   
State Financial Plan or the Financial Plan Updates, actual results could   
differ materially and adversely from projections made at the outset of a   
fiscal year.  There can be no assurance that the State will not face   
substantial potential budget gaps in future years resulting
 from a significant   
disparity between tax revenues projected from a lower recurring receipts base   
and the spending required to maintain State programs at current levels.  To   
address any potential budgetary imbalance, the State may need to take   
significant actions to align recurring receipts and disbursements in future   
fiscal years.  
  
A significant risk to the 1995-96 State Financial Plan projections arise from   
tax legislation under consideration by Congress and the President.    
Congressionally-adopted retroactive changes to federal tax treatment of   
capital gains would flow through automatically to the State personal income   
tax.  Such changes, if ultimately enacted, could produce revenue losses in   
both the 1995-96 fiscal year and the 1996-97 fiscal year.  
  
RECENT FINANCIAL RESULTS.  The General Fund is the principal
 operating fund of   
the State and is used to account for all financial transactions, except those   
required to be accounted for in another fund.  It is the State's largest fund   
and receives almost all State taxes and other resources not dedicated to   
particular purposes.  
  
The State reported a General Fund operating deficit of $1.426 billion for the   
1994-95 fiscal year, as compared to an operating surplus of $914 million for   
the prior fiscal year.  The 1994-95 fiscal year deficit was caused by several   
factors, including the use of $1.026 billion of the 1993-94
 cash-based surplus   
to fund operating expenses in 1994-95 and the adoption of changes in   
accounting methodologies by the State Comptroller.  These factors were offset   
by net proceeds of $315 million in bonds issued by the Local Government   
Assistance Corporation.  The General Fund is projected to be balanced on a   
cash basis for the 1995-96 fiscal year.  
  
Total revenues for 1994-95 were $31.455 billion.  Revenues decreased by $173   
million over the prior fiscal year, a decrease of less
 than one percent. Total   
expenditures for 1994-95 totaled $33.079 billion, an increase of $2.083   
billion, or 6.7 percent over the prior fiscal year.  
  
The State's financial position on a  GAAP (generally accepted accounting   
principles) basis as of March 31, 1995 showed an accumulated deficit in its   
combined governmental funds of $1.666 billion, reflecting liabilities of   
$14.778 billion and assets of $13.112 billion.  
  
DEBT LIMITS AND OUTSTANDING DEBT.  There are a number of methods by which the   
State of New York may incur debt.  Under the State Constitution,
 the State may   
not, with limited exceptions for emergencies, undertake long-term general   
obligation borrowing (i.e., borrowing for more than one year) unless the   
borrowing is authorized in a specific amount for a single work or purpose by   
the Legislature and approved by the voters.  There is no limitation on the   
amount of long-term general obligation debt that may be so authorized and   
subsequently incurred by the State.    
  
The State may undertake short-term borrowings without voter approval (i) in   
anticipation of the receipt of taxes and revenues, by issuing tax and revenue   
anticipation notes, and (ii) in anticipation of the receipt of proceeds from   
the sale of duly authorized but unissued general obligation bonds, by issuing   
bond anticipation notes.  The State may also, pursuant to specific   
constitutional authorization, directly guarantee certain obligations of the   
State of New York's authorities and public benefit corporations   
("Authorities").  Payments of debt service on New York State general   
obligation and New York State-guaranteed bonds and notes are legally   
enforceable obligations of the State of New York.  
  
The State employs additional long-term financing mechanisms, lease-purchase   
and contractual-obligation financings, which involve obligations of public   
authorities or municipalities that are State-supported but are not general   
obligations of the State.  Under these financing arrangements, certain public   
authorities and municipalities have issued obligations to finance the   
construction and rehabilitation of facilities or the acquisition and   
rehabilitation of equipment, and expect to meet their debt service   
requirements through the receipt of rental or other contractual payments made   
by the State.  Although these financing arrangements involve a contractual   
agreement by the State to make payments to a public authority,
 municipality or   
other entity, the State's obligation to make such payments is generally   
expressly made subject to appropriation by the Legislature and the actual   
availability of money to the State for making the payments.  The State has   
also entered into a contractual-obligation financing arrangement with the   
Local Government Assistance Corporation ("LGAC") in an effort to restructure   
the way the State makes certain local aid payments.  
  
In 1990, as part of a State fiscal reform program, legislation was enacted   
creating LGAC, a public benefit corporation empowered to issue long-term   
obligations to fund certain payments to local governments
 traditionally funded   
through New York State's annual seasonal borrowing. 
 The legislation empowered   
LGAC to issue its bonds and notes in an amount not in excess of $4.7 billion   
(exclusive of certain refunding bonds) plus certain other amounts.  Over a   
period of years, the issuance of these long-term obligations, which are to be   
amortized over no more than 30 years, was expected to eliminate the need for   
continued short-term seasonal borrowing.  The legislation also dedicated   
revenues equal to one-quarter of the four cent State sales and use tax to pay   
debt service on these bonds.  The legislation also imposed
 a cap on the annual   
seasonal borrowing of the State at $4.7 billion, less net proceeds of bonds   
issued by LGAC and bonds issued to provide for capitalized interest,
 except in   
cases where the Governor and the legislative leaders have certified the need   
for additional borrowing and provided a schedule for reducing it to the cap.    
If borrowing above the cap is thus permitted in any fiscal year, it is   
required by law to be reduced to the cap by the fourth fiscal year after the   
limit was first exceeded.  As of June 1995, LGAC had issued bonds to provide   
net proceeds of $4.7 billion, completing the program.  The impact of LGAC's   
borrowing is that the State is able to meet its cash flow needs in the first   
quarter of the fiscal year without relying on short-term
 seasonal borrowings.    
The 1995-96 State Financial Plan includes no spring borrowing nor did the   
1994-95 State Financial Plan, which was the first time in 35 years there was   
no short-term seasonal borrowing.   
  
In June 1994, the Legislature passed a proposed constitutional amendment that   
would significantly change the long-term financing practices of the State and   
its public authorities.  The proposed amendment would permit
 the State, within   
a formula-based cap, to issue revenue bonds, which would be debt of the State   
secured solely by a pledge of certain State tax receipts (including those   
allocated to State funds dedicated for transportation purposes), and not by   
the full faith and credit of the State.  In addition, the proposed amendment   
would (i) permit multiple purpose general obligation bond proposals to be   
proposed on the same ballot, (ii) require that State debt be
 incurred only for   
capital projects included in a multi-year capital financing plan, and (iii)   
prohibit, after its effective date, lease-purchase and contractual-obligation   
financing mechanisms for State facilities.  
  
Before the approved constitutional amendment can be presented to the voters   
for their consideration, it must be passed by a separately elected   
legislature.  The amendment must therefore be passed by the newly elected   
Legislature in 1995 prior to presentation to the voters
 in November 1995.  The   
amendment was passed by the Senate in June 1995, and the Assembly is expected   
to pass the amendment shortly.  If approved by the voters,
 the amendment would   
become effective January 1, 1996.  
  
On January 13, 1992, S&P reduced its ratings on the State's general
 obligation   
bonds from A to A- and, in addition, reduced its ratings on the State's moral   
obligation, lease purchase, guaranteed and contractual obligation debt.  S&P   
also continued its negative rating outlook assessment on State general   
obligation debt.  On April 26, 1993, S&P revised the rating
 outlook assessment   
to stable.  On February 14, 1994, S&P raised its outlook to positive and, on   
February 28, 1994, confirmed its A- rating.  On January 6, 1992, Moody's   
reduced its ratings on outstanding limited-liability State lease purchase and   
contractual obligations from A to Baa1.  On February 28, 1994, Moody's   
reconfirmed its A rating on the State's general obligation long-term   
indebtedness.  
  
The State anticipates that its capital programs will be financed, in part, by   
State and public authorities borrowings in 1995-96.  The State expects to   
issue $248 million in general obligation bonds (including $170 million for   
purposes of redeeming outstanding bond anticipation notes) and
 $186 million in   
general obligation commercial paper.  The Legislature has also authorized the   
issuance of up to $33 million in certificates of participation during the   
State's 1995-96 fiscal year for equipment purchases and $14 million for   
capital purposes.  These projections are subject to change if circumstances   
require.  
  
Principal and interest payments on general obligation bonds and interest   
payments on bond anticipation notes and on tax and revenue anticipation notes   
were $793.3 million for the 1994-95 fiscal year, and are estimated to be   
$774.4 million for the 1995-96 fiscal year.  These figures do not include   
interest payable on State General Obligation Refunding Bonds issued in July   
1992 ("Refunding Bonds") to the extent that such interest was paid from an   
escrow fund established with the proceeds of such Refunding Bonds.  Principal   
and interest payments on fixed rate and variable rate bonds issued by LGAC   
were $239.4 million for the 1994-95 fiscal year, and are estimated to be   
$328.2 million for 1995-96.  State lease-purchase rental and contractual   
obligation payments for 1994-95, including State installment
 payments relating   
to certificates of participation, were $1.607 billion and are estimated to be   
$1.641 billion in 1995-96.  
  
New York State has never defaulted on any of its general obligation   
indebtedness or its obligations under lease-purchase or
 contractual-obligation   
financing arrangements and has never been called upon to make any direct   
payments pursuant to its guarantees.  
  
LITIGATION.  Certain litigation pending against New York State
 or its officers   
or employees could have a substantial or long-term adverse effect on New York   
State finances.  Among the more significant of these cases are those that   
involve (1) the validity of agreements and treaties by which various Indian   
tribes transferred title to New York State of certain land in central and   
upstate New York; (2) certain aspects of New York State's Medicaid policies,   
including its rates, regulations and procedures; (3) action against New York   
State and New York City officials alleging inadequate shelter allowances to   
maintain proper housing; (4) challenges to the practice of
 reimbursing certain   
Office of Mental Health patient care expenses from the client's Social   
Security benefits; (5) alleged responsibility of New York State officials to   
assist in remedying racial segregation in the City of Yonkers; (6) challenges   
by commercial insurers, employee welfare benefit plans,
 and health maintenance   
organizations to the imposition of 13%, 11% and 9% surcharges on inpatient   
hospital bills; (7) challenges to certain aspects of petroleum
 business taxes;   
(8) action alleging damages resulting from the failure by the State's   
Department of Environmental Conservation to timely provide certain
 data; (9) a   
challenge to the constitutionality of the treatment of certain moneys held in   
a Supplemental Reserve Fund; and (10) a challenge to the constitutionality of   
a State lottery game.  
  
Several actions challenging the constitutionality of legislation enacted   
during the 1990 legislative session which changed actuarial funding methods   
for determining state and local contributions to state employee retirement   
systems have been decided against the State.  As a result,
 the Comptroller has   
developed a plan to restore the State's retirement systems to prior funding   
levels.  Such funding is expected to exceed prior levels by $30 million in   
fiscal 1994-95, $63 million in fiscal 1995-96, $116 million
 in fiscal 1996-97,   
$193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99.    
Beginning in fiscal 2001-02, State contributions required under the   
Comptroller's plan are projected to be less than that required
 under the prior   
funding method.  As a result of the United States Supreme Court decision in   
the case of State of Delaware v. State of New York, on January 21, 1994, the   
State entered into a settlement agreement with various parties.  Pursuant to   
all agreements executed in connection with the action, the State is required   
to make aggregate payments of $351.4 million, of which $90.3
 million have been   
made.  Annual payments to the various parties will continue through the   
State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in   
any fiscal year subsequent to the State's 1994-95 fiscal year.  
  
The legal proceedings noted above involve State finances, State programs and   
miscellaneous tort, real property and contract claims in which the State is a   
defendant and the monetary damages sought are substantial.  These proceedings   
could affect adversely the financial condition of the State.  Adverse   
developments in these proceedings or the initiation of new proceedings could   
affect the ability of the State to maintain a balanced
 1995-96 State Financial   
Plan.  An adverse decision in any of these proceedings could exceed
 the amount   
of the 1995-96 State Financial Plan reserve for the payment of judgments and,   
therefore, could affect the ability of the State to maintain a balanced 1995-  
96 State Financial Plan.  In its audited financial statements for the fiscal   
year ended March 31, 1995, the State reported its estimated liability for   
awarded and anticipated unfavorable judgments to be $676 million.  
  
Although other litigation is pending against New York State, except as   
described above, no current litigation involves New York State's
 authority, as   
a matter of law, to contract indebtedness, issue its obligations, or pay such   
indebtedness when it matures, or affects New York State's power
 or ability, as   
a matter of law, to impose or collect significant amounts of taxes and   
revenues.  
  
AUTHORITIES.  The fiscal stability of New York State is related, in part, to   
the fiscal stability of its Authorities, which generally have responsibility   
for financing, constructing and operating revenue-producing public benefit   
facilities.  Authorities are not subject to the
 constitutional restrictions on   
the incurrence of debt which apply to the State itself, and may issue bonds   
and notes within the amounts of, and as otherwise restricted by, their   
legislative authorization.  The State's access to the public credit markets   
could be impaired, and the market price of its outstanding debt may be   
materially and adversely affected, if any of the Authorities were to default   
on their respective obligations, particularly with respect to debt that are   
State-supported or State-related.  As of September 30, 1994, the date of the   
latest data available, there were 18 Authorities that had outstanding debt of   
$100 million or more.  The aggregate outstanding debt, including refunding   
bonds, of these 18 Authorities was $70.3 billion.  As of March 31, 1995,   
aggregate public authority debt outstanding as State-supported debt was $27.9   
billion and as State-related debt was $36.1 billion.  
  
Authorities are generally supported by revenues generated by the projects   
financed or operated, such as fares, user fees on bridges, highway tolls and   
rentals for dormitory rooms and housing.  In recent years, however, New York   
State has provided financial assistance through appropriations, in some cases   
of a recurring nature, to certain of the 18 Authorities for operating and   
other expenses and, in fulfillment of its commitments on moral obligation   
indebtedness or otherwise, for debt service.  This operating assistance is   
expected to continue to be required in future years.  In addition, certain   
statutory arrangements provide for State local assistance payments otherwise   
payable to localities to be made under certain circumstances to certain   
Authorities.  The State has no obligation to provide additional assistance to   
localities whose local assistance payments have been paid to
 Authorities under   
these arrangements.  However, in the event that such local
 assistance payments   
are so diverted, the affected localities could seek additional State funds.  
  
NEW YORK CITY AND OTHER LOCALITIES.  The fiscal health of the State of New   
York may also be impacted by the fiscal health of its localities,
 particularly   
the City of New York, which has required and continues to require significant   
financial assistance from New York State.  The City depends on State aid both   
to enable the City to balance its budget and to meet its cash requirements.    
The City has achieved balanced operating results for each of its fiscal years   
since 1981 as reported in accordance with the then-applicable GAAP.  
  
In 1975, New York City suffered a fiscal crisis that impaired the borrowing   
ability of both the City and New York State.  In that year the City lost   
access to public credit markets.  The City was not able to sell short-term   
notes to the public again until 1979.  
  
In 1975, S&P suspended its A rating of City bonds.  This suspension remained   
in effect until March 1981, at which time the City received an investment   
grade rating of BBB from S&P.  On July 2, 1985, S&P revised its
 rating of City   
bonds upward to BBB+ and on November 19, 1987, to A-.  On July 2, 1993, S&P   
reconfirmed its A- rating of City bonds, continued its
 negative rating outlook   
assessment and stated that maintenance of such rating depended
 upon the City's   
making further progress towards reducing budget gaps in the outlying years.    
Moody's ratings of City bonds were revised in November 1981 from B (in effect   
since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May   
1988 to A and again in February 1991 to Baa1.  On July 10, 1995, S&P   
downgraded its rating on the City's $23 billion of outstanding general   
obligation bonds to "BBB+" from "A-", citing to the City's chronic structural   
budget problems and weak economic outlook.  S&P stated that New York City's   
reliance on one-time revenue measures to close annual budget gaps, a   
dependence on unrealized labor savings, overly optimistic estimates of   
revenues and state and federal aid and the City's continued high debt levels   
also contributed to its decision to lower the rating.  
  
New York City is heavily dependent on New York State and federal
 assistance to   
cover insufficiencies in its revenues.  There can be no assurance that in the   
future federal and State assistance will enable the City to make
 up its budget   
deficits.  To help alleviate the City's financial difficulties, the Legisla-  
ture created the Municipal Assistance Corporation ("MAC") in 1975.  MAC is   
authorized to issue bonds and notes payable from certain stock transfer tax   
revenues, from the City's portion of the State sales tax derived in the City   
and, subject to certain prior claims, from State per capita aid otherwise   
payable by the State to the City.  Failure by the State to continue the   
imposition of such taxes, the reduction of the rate of such taxes to rates   
less than those in effect on July 2, 1975, failure by the State to pay such   
aid revenues and the reduction of such aid revenues below a specified level   
are included among the events of default in the resolutions authorizing MAC's   
long-term debt.  The occurrence of an event of default may result in the   
acceleration of the maturity of all or a portion of MAC's debt. 
 MAC bonds and   
notes constitute general obligations of MAC and do not constitute an   
enforceable obligation or debt of either the State or the City.  As of June   
30, 1995, MAC had outstanding an aggregate of approximately $4.882 billion of   
its bonds.  MAC is authorized to issue bonds and notes to refunds its   
outstanding bonds and notes and to fund certain reserves, without limitation   
as to principal amount, and to finance certain capital commitments to certain   
authorities in the event the City fails to provide such financing.  
  
Since 1975, the City's financial condition has been subject to oversight and   
review by the New York State Financial Control Board
 (the "Control Board") and   
since 1978 the City's financial statements have been audited by independent   
accounting firms.  To be eligible for guarantees and assistance, the City is   
required during a "control period" to submit annually for Control Board   
approval, and when a control period is not in effect for
 Control Board review,   
a financial plan for the next four fiscal years covering the City and certain   
agencies showing balanced budgets determined in accordance with GAAP.  New   
York State also established the Office of the State
 Deputy Comptroller for New   
York City ("OSDC") to assist the Control Board in exercising its powers and   
responsibilities.  On June 30, 1986, the City satisfied the statutory   
requirements for termination of the control period.  This means that the   
Control Board's powers of approval are suspended, but the Board continues to   
have oversight responsibilities.  
  
From time to time, the Control Board staff, OSDC, the City comptroller and   
others issue reports and make public statements regarding the
 City's financial   
condition, commenting on, among other matters, the City's financial plans,   
projected revenues and expenditures and actions by the City to eliminate   
projected operating deficits.  Some of these reports and statements have   
warned that the City may have underestimated certain expenditures and   
overestimated certain revenues and have suggested that the City may not have   
adequately provided for future contingencies.  Certain of these reports have   
analyzed the City's future economic and social conditions and have questioned   
whether the City has the capacity to generate sufficient revenues in the   
future to meet the costs of its expenditure increases and to provide
 necessary   
services.  
  
The City submitted to the Control Board on July 21, 1995 a fourth quarter   
modification to the City's financial plan for the 1995 fiscal year (the "1995   
Modification"), which projects a balanced budget in accordance with GAAP for   
the 1995 fiscal year, after taking into account a discretionary transfer of   
$75 million.  On July 11, 1995, the City submitted to the Control Board the   
Financial Plan for the 1996 through 1999 fiscal years (the "1996-1999   
Financial Plan").  
  
The 1996-1999 Financial Plan projected revenues and expenditures for the 1996   
fiscal year balanced in accordance with GAAP.  The projections for the 1996   
fiscal year reflected proposed actions to close a previously projected gap of   
approximately $3.1 billion for the 1996 fiscal year.  The proposed actions in   
the 1996-1999 Financial Plan for the 1996 fiscal year
 included (i) a reduction   
in spending of $400 million, primarily affecting public assistance and   
Medicaid payment to the City; (ii) expenditure reductions in agencies,   
totaling $1.2 billion; (iii) transitional labor savings, totaling $600   
million; and (iv) the phase-in of the increased annual pension funding cost   
due to revisions resulting from an actuarial audit of the City's pension   
systems, which would reduce such costs in the 1996 fiscal year.  
  
The proposed agency spending reductions included the reduction of City   
personnel through attrition, government efficiency initiatives, procurement   
initiatives and labor productivity initiatives.  The substantial agency   
expenditure reductions proposed in the 1996-1999 Financial Plan may be   
difficult to implement, and the 1996-1999 Financial Plan is subject to the   
ability of the City to implement proposed reductions in City personnel and   
other cost reduction initiatives.  In addition, certain initiatives are   
subject to negotiation with the City's municipal unions, and various actions,   
including proposed anticipated State aid totaling $50 million are subject to   
approval by the Governor and the Legislature.  
  
The 1996-1999 Financial Plan also set forth projections for the 1997 through   
1999 fiscal years and outlined a proposed gap-closing program to eliminate   
projected gaps of $888 million, $1.5 billion and $1.4 billion for the 1997,   
1998 and 1999 fiscal years, respectively, after successful implementation of   
the $3.1 billion gap-closing program for the 1996 fiscal year. 
 These actions,   
a substantial number of which were not specified in detail,
 include additional   
agency spending reductions, reduction in entitlements, government procurement   
initiatives, revenue initiatives and the availability of the general reserve.  
  
Contracts with all of the City's municipal unions either expired in the 1995   
fiscal year or will expire in the 1996 fiscal years.  The 1996-1999 Financial   
Plan provided no additional wage increases for City employees after the 1995   
fiscal year.  Each 1% wage increase for all union contracts commencing in the   
1995 or 1996 fiscal year would cost the City an additional $141 million for   
the 1996 fiscal year and $161 million each year thereafter above the amounts   
provided for in the 1996-1999 Financial Plan.  
  
Although the City has balanced its budget since 1981, estimates of the City's   
revenues and expenditures, which are based on numerous assumptions, are   
subject to various uncertainties. If expected federal or State aid is not   
forthcoming, if unforeseen developments in the economy significantly reduce   
revenues derived from economically sensitive taxes or necessitate increased   
expenditures for public assistance, if the City should negotiate wage   
increases for its employees greater than the amounts provided for in the   
City's financial plan or if other uncertainties materialize that reduce   
expected revenues or increase projected expenditures, then,
 to avoid operating   
deficits, the City may be required to implement additional actions, including   
increases in taxes and reductions in essential City services.  The City might   
also seek additional assistance from New York State.  
  
The City requires certain amounts of financing for seasonal and capital   
spending purposes.  The City's current monthly cash flow
 forecast for the 1996   
fiscal year shows a need of $2.4 billion of seasonal financing for the 1996   
fiscal year.  Seasonal financing requirements for the 1995 fiscal year   
increased to $2.2 billion from $1.75 billion and $1.4 billion in the 1994 and   
1993 fiscal years, respectively.  
  
  
Certain localities, in addition to the City, could have financial problems   
leading to requests for additional New York State assistance.  The potential   
impact on the State of such requests by localities was not included in the   
projections of the State's receipts and disbursements in the State's 1995-96   
fiscal year.  
  
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
 resulted in   
the creation of the Financial Control Board for the City of Yonkers (the   
"Yonkers Board") by New York State in 1984. The Yonkers Board is charged with   
oversight of the fiscal affairs of Yonkers.  Future actions taken by the   
Governor or the Legislature to assist Yonkers could result in allocation of   
New York State resources in amounts that cannot yet be determined.  
  
Municipalities and school districts have engaged in substantial
 short-term and   
long-term borrowings.  In 1993, the total indebtedness of all localities in   
New York State other than New York City was approximately $17.7 billion.  A   
small portion (approximately $105 million) of that indebtedness represented   
borrowing to finance budgetary deficits and was issued pursuant to enabling   
New York State legislation.  State law requires the comptroller to review and   
make recommendations concerning the budgets of those local government units   
other than New York City authorized by State law to issue debt to finance   
deficits during the period that such deficit financing is outstanding.    
Fifteen localities had outstanding indebtedness for deficit financing at the   
close of their fiscal year ending in 1993.  
  
From time to time, federal expenditure reductions could reduce, or in some   
cases eliminate, federal funding of some local programs and accordingly might   
impose substantial increased expenditure requirements on affected
 localities.    
If New York State, New York City or any of the Authorities were to suffer   
serious financial difficulties jeopardizing their respective access to the   
public credit markets, the marketability of notes and bonds issued by   
localities within New York State could be adversely affected. 
 Localities also   
face anticipated and potential problems resulting from certain pending   
litigation, judicial decisions and long-range economic trends.  Long-range   
potential problems of declining urban population, increasing expenditures and   
other economic trends could adversely affect localities
 and require increasing   
New York State assistance in the future.  
      
  
Ratings as Investment Criteria  
  
In general, the ratings of Moody's, S&P and Fitch Investors Service,   
   L.P.     ("Fitch") represent the opinions of those agencies as to the   
quality of debt obligations that they rate. These ratings, however, are   
relative and subjective, are not absolute standards of quality and do not   
evaluate the market risk of securities. Ratings will be used with respect to   
the Funds as initial criteria for the selection of portfolio securities; the   
Funds will also rely upon the independent advice of SBMFM to evaluate   
potential investments. Among the factors that will be considered by SBMFM are   
the long-term ability of the issuer to pay principal and interest and general   
economic trends. The Appendix to this Statement of Additional Information   
contains further information concerning the ratings of Moody's, S&P
 and Fitch,   
together with a brief discussion of the significance of those ratings.  
  
    An issue of debt obligations may, subsequent to its purchase by a Fund,   
cease to be rated or its ratings may be reduced below the
 minimum required for   
purchase by the Fund. Neither event will require the sale of the debt   
obligation by a Fund, but SBMFM will consider the event in its determination   
of whether the Fund should continue to hold the obligation. In addition, to   
the extent that ratings change as a result of changes in rating organizations   
or their rating systems or as a result of a corporate restructuring of   
Moody's, S&P or Fitch, SBMFM will attempt to use comparable ratings as   
standards for each Fund's investments.  
  
Miscellaneous Investment Policies  
  
Each Fund may invest up to an aggregate amount equal to 10% of its net   
assets in illiquid securities, which term includes securities subject to   
contractual or other restrictions on resale and other instruments that lack   
readily available markets.    Neither     of the Funds will
 lend its portfolio   
securities.   
  
  
Repurchase Agreements  
  
Each Fund may engage in repurchase agreement transactions with
 banks which are   
the issuers of instruments acceptable for purchase by the Fund and certain   
dealers on the Federal Reserve Bank of New 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, a Fund would acquire an underlying debt
 obligation for a relatively   
short period subject to an obligation of the seller to repurchase, and the   
Fund to resell, the obligation at an agreed-upon price and time, thereby   
determining the yield during the 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. Although   
the amount of a Fund's assets that may be invested in purchase agreements   
terminable in less than seven days is not limited, repurchase agreements   
maturing in more than seven days, together with other securities lacking   
readily available markets held by the Fund, will not exceed 10% of the Fund's   
net assets.   
  
     
The value of the securities underlying a repurchase agreement of a Fund will   
be monitored on an ongoing basis by SBMFM to ensure that
 the value is at least   
equal at all times to the total amount of the repurchase obligation,
 including   
interest. SBMFM will also monitor, on an ongoing basis to evaluate potential   
risks, the creditworthiness of the banks and dealers with which a Fund enters   
into repurchase agreements.  
      
  
  
  
  
  
When-Issued and Delayed-Delivery Transactions  
  
When a Fund engages in when-issued or delayed-delivery securities   
transactions, it will rely on the other party to consummate the trade.
 Failure   
of the seller to do so may result in a Fund's incurring a loss or missing an   
opportunity to obtain a price considered to be advantageous.  
  
Investment Restrictions  
  
     
The investment restrictions numbered 1 through 12 below have been adopted by   
the Trust as fundamental policies of the Funds. Under the 1940 Act, a   
fundamental policy may not be changed with respect to a Fund without the vote   
of a majority of the outstanding voting securities of the Fund. Majority is   
defined in the 1940 Act as the lesser of (a) 67% or more of the
 shares present   
at a Fund meeting, if the holders of more than 50% of the outstanding shares   
of the Fund are present or represented by proxy, or (b) more than 50% of   
outstanding shares. Investment restrictions 13 through 17 may be changed by a   
vote of a majority of the Trust's Board of Trustees at any time.   
      
Under the investment restrictions adopted by the Trust with respect to the   
Funds:  
  
1. No Fund will purchase securities other than Municipal Obligations and   
Taxable Investments as those terms are defined in the Prospectuses or this   
Statement of Additional Information.  
  
2.        No Fund will invest more than 25% of the value of its total assets   
in securities of issuers in any one industry, except that this limitation is   
not applicable to a Fund's investments in U.S. government securities.   
  
3.        No Fund will borrow money, except that a Fund may borrow from banks   
for temporary or emergency (not leveraging) purposes,
 including the meeting of   
redemption requests that might otherwise require the untimely disposition of   
securities, in an amount not to exceed 10% of the value of the Fund's total   
assets (including the amount borrowed) valued at market less liabilities (not   
including the amount borrowed) at the time the borrowing is made. Whenever a   
Fund's borrowings exceed 5% of the value of its total assets, the Fund will   
not make any additional investments.   
  
4.        No Fund will pledge, hypothecate, mortgage or otherwise
 encumber its   
assets, except to secure permitted borrowings.  
  
5.        No Fund will lend money to other persons except through purchasing   
Municipal Obligations or Taxable Investments and entering into repurchase   
agreements, each in a manner consistent with the Fund's investment objective   
and policies.  
  
6.        No Fund will purchase securities on margin, except that a Fund may   
obtain any short-term credits necessary for the clearance of purchases and   
sales of securities.  
  
7.        No Fund will make short sales of securities or maintain a short   
position.  
  
8.        No Fund will purchase or sell real estate or real estate limited   
partnership interests.  
  
9.        No Fund will purchase or sell commodities or commodity contracts.  
  
10.        No Fund will act as an underwriter of securities, except that a   
Fund may acquire securities under circumstances in which, if the securities   
were sold, the Fund could be deemed to be an underwriter for purposes of the   
Securities Act of 1933, as amended.  
  
11.        No Fund will invest in oil, gas or other mineral leases or   
exploration or development programs.  
  
12.        No Fund may write or sell puts, calls, straddles, spreads or   
combinations of those transactions, except as permitted under the Fund's   
investment objective and policies.  
  
13.        No Fund will purchase any security if, as a result (unless the   
security is acquired pursuant to a plan of reorganization or an offer of   
exchange), the Fund would own any securities of an open-end
 investment company   
or more than 3% of the total outstanding voting stock of any closed-end   
investment company, or more than 5% of the value of the Fund's total assets   
would be invested in securities of any one or more closed-end investment   
companies.  
  
14.        No Fund will purchase a security if, as a result, the Fund would   
then have more than 5% of its total assets invested in securities of issuers   
(including predecessors) that have been in continuous
 operation for fewer than   
three years, except that this limitation will be deemed to
 apply to the entity   
supplying the revenues from which the issue is to be paid, in the case of   
private activity bonds purchased.   
  
15.        No Fund may make investments for the purpose of exercising control   
of management.  
  
16.        No Fund will purchase or retain securities of
 any issuer if, to the   
knowledge of the Trust, any of the Trust's officers or Trustees or
 any officer   
or director of SBMFM individually owns more than 1/2 of 1% of the outstanding   
securities of the issuer and together they own beneficially more than 5% of   
the securities.  
  
17.        No Fund will lend its portfolio securities. The Trust may make   
commitments more restrictive than the restrictions listed above to enable the   
sale of shares of any Fund in certain states. Should the Trust determine that   
a commitment is no longer in the best interests of a Fund and its   
shareholders, the Trust will revoke the commitment by terminating the sale of   
shares of the Fund in the state involved. The percentage
 limitations contained   
in the restrictions listed above apply at the time of purchase of securities.  
         
   
Portfolio Transactions  
  
Decisions to buy and sell securities for each Fund are made by SBMFM, subject   
to the overall review of the Trust's Board of Trustees. Although investment   
decisions for each Fund are made independently from those of the other   
accounts managed by SBMFM, investments of the type that a Fund may make also   
may be made by those other accounts. When a Fund and one or more other   
accounts managed by SBMFM 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 SBMFM to be equitable to each. In some   
cases, this procedure may adversely affect the price paid or received by a   
Fund or the size of the position obtained or disposed of by a Fund. The Trust   
has paid no brokerage commissions since its commencement of operations.  
  
Allocation of transactions on behalf of the Funds, including their frequency,   
to various dealers is determined by SBMFM in its best
 judgment and in a manner   
deemed fair and reasonable to the Funds' shareholders. The primary   
considerations of SBMFM in allocating transactions are availability of the   
desired security and the prompt execution of orders in an effective manner at   
the most favorable prices. Subject to these considerations, dealers that   
provide supplemental investment research and statistical or other services to   
SBMFM may receive orders for portfolio transactions by a Fund. Information so   
received is in addition to, and not in lieu of, services required to be   
performed by SBMFM, and the fees of SBMFM are not reduced as a consequence of   
their receipt of the supplemental information. The information may be useful   
to SBMFM in serving both a Fund and other clients, and conversely,   
supplemental information obtained by the placement of business of other   
clients may be useful to SBMFM in carrying out    its     obligations to a   
Fund.  
  
No Fund will purchase U.S. government securities or Municipal Obligations   
during the existence of any underwriting or selling group relating to the   
securities, of which SBMFM is a member, except to the extent permitted by the   
SEC. Under certain circumstances, a Fund may be at a disadvantage because of   
this limitation in comparison with other funds that have similar investment   
objectives but that are not subject to a similar limitation.  
  
Portfolio Turnover  
  
While a 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)   
is generally not expected to exceed 100%, it has in the past exceeded 100%   
with respect to certain funds. The rate of turnover will not be a limiting   
factor, however, when a Fund deems it desirable to sell or purchase   
securities. This policy should not result in higher brokerage
 commissions to a   
Fund, as purchases and sales of portfolio securities are usually effected as   
principal transactions. Securities may be sold in anticipation of a rise in   
interest rates (market decline) or purchased in anticipation of a decline in   
interest rates (market rise) and later sold. In addition, a security may be   
sold and another security of comparable quality purchased at
 approximately the   
same time to take advantage of what the Fund believes to be a temporary   
disparity in the normal yield relationship between the two securities. These   
yield disparities may occur for reasons not directly related to
 the investment   
quality of particular issues or the general movement of interest rates, such   
as changes in the overall demand for, or supply of, various types of tax-  
exempt securities.   
  
  
  
The portfolio turnover rates are as follows:  
     
<TABLE>  
<CAPTION>  
  
  
Year  
Year  
  
  
Ended  
Ended  
  
Fund  
11/30/95  
11/30/94  
  
<S>  
California Fund  
<C>  
8%*  
<C>  
39%  
  
New York Fund  
0%*  
68%  
  
  
  
  
  
<FN>  
__________________  
*  As the above table indicates, the Funds experienced a significantly lower   
level of portfolio turnover in the fiscal year ended November
 30, 1995 than in   
the preceding fiscal year.  During the 1995 fiscal year, the Funds had  lower   
net subscription rates than in the previous year, which, in turn, resulted in   
less monies that needed to be invested for the first time.  In addition,   
interest rates declined during the fiscal year thus increasing the relative   
value of the Funds' then-current holdings.  Lastly, the Funds' holdings   
generally maintained their credit ratings throughout the period, making it   
unnecessary for the Funds to consider selling any specific security.  
</FN>  
</TABLE>  
      
  
PURCHASE OF SHARES  
  
Volume Discounts  
  
The schedules of sales charges described in the Prospectuses    apply     to   
purchases of shares of each Fund made by any "purchaser," which term is   
defined to include the following: (a) an individual; (b) an individual's   
spouse and his or her children purchasing shares for his or her own account;   
(c) a trustee or other fiduciary purchasing shares for a single trust estate   
or single fiduciary account; (d) a pension, profit-sharing or other employee   
benefit plan qualified under Section 401(a) of the Code and qualified
 employee   
benefit plans of employers who are "affiliated persons" of each other within   
the meaning of the 1940 Act; (e) tax-exempt organizations enumerated in   
Section 501(c)(3) or (13) of the Code; or (f) any other organized group of   
persons, provided that the organization has been in existence for
 at least six   
months and was organized for a purpose other than the purchase of investment   
company securities at a discount. Purchasers who wish to combine purchase   
orders to take advantage of volume discounts should contact a Smith Barney   
Financial Consultant.  
  
Combined Right of Accumulation  
  
Reduced sales charges, in accordance with the schedules in the Prospectuses,   
apply to any purchase of shares of a Fund by any "purchaser" (as defined   
above). The reduced sales charge is subject to confirmation of the   
shareholder's holdings through a check of appropriate records. The Trust   
reserves the right to terminate or amend the combined right of
 accumulation at   
any time after written notice to shareholders. For further information   
regarding the right of accumulation, shareholders should contact a Smith   
Barney Financial Consultant.  
  
Determination of Public Offering Price  
  
The Funds offer their shares to the public on a continuous basis. The public   
offering price for a Class A and Class Y share of a Fund is equal to the net   
asset value per share at the time of purchase, plus for Class A shares an   
initial sales charge based on the aggregate amount of the investment. The   
public offering price for a Class C share (and Class A share purchases,   
including applicable rights of accumulation, equaling or exceeding $500,000)   
is equal to the net asset value per share at the time of
purchase and no sales   
charge is  
  
  
imposed at the time of purchase. A contingent deferred sales charge ("CDSC"),   
however, is imposed on certain redemptions of Class C shares, and Class A   
shares when purchased in amounts exceeding $500,000. The method
 of computation   
of the public offering price is shown in each Fund's financial statements,   
incorporated by reference in their entirety into this Statement of Additional   
Information.   
  
  
REDEMPTION OF SHARES  
  
Detailed information on how to redeem shares of the Funds is included in the   
Prospectuses. The right of redemption of shares of each Fund may be suspended   
or the date of payment postponed (a) for any periods during
 which the New York   
Stock Exchange, Inc. (the "NYSE") is closed (other than for customary weekend   
and holiday closings), (b) when trading in the markets the Fund normally   
utilizes is restricted, or an emergency exists, as determined by the SEC, so   
that disposal of the Fund's investments or determination of its net asset   
value is not reasonably practicable or (c) for any other
 periods as the SEC by   
order may permit for the protection of the Fund's shareholders.  
  
Distribution in Kind  
  
If the Board of Trustees of the Trust determines that it would be detrimental   
to the best interests of the remaining shareholders to make a redemption   
payment wholly in cash, a Fund may pay, in accordance with SEC rules, any   
portion of a redemption in excess of the lesser of $250,000 or 1.00% of the   
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 of any Fund who own shares of the Fund with a value of at least   
$10,000 and who wish to receive specific amounts of cash monthly or
 quarterly.   
Withdrawals of at least $50 may be made under the Withdrawal
 Plan by redeeming   
as many shares of the Fund as may be necessary to cover the stipulated   
withdrawal payment. Any applicable CDSC will not be waived on amounts   
withdrawn by shareholders that exceed 1.00% per month of the value of a   
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 that withdrawals exceed dividends, distributions and appreciation   
of a shareholder's investment in a Fund, 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 a Fund.   
Furthermore, as it generally would not be advantageous to a shareholder to   
make additional investments in the Fund at the same time he or she is   
participating in the Withdrawal Plan, purchases by such shareholders in   
amounts of less than $5,000 ordinarily will not be permitted.  
  
Shareholders of a Fund who wish to participate in the Withdrawal Plan and who   
hold their shares of the Fund in certificate form must deposit their share   
certificates with the    Transfer Agent     as agent for Withdrawal Plan   
members. All dividends and distributions on shares in the Withdrawal Plan are   
reinvested automatically at net asset value in additional shares of the Fund   
involved. Effective November 7, 1994, 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 Trust's distributor on a best efforts basis   
pursuant to a written agreement dated July 30, 1993 (the "Distribution   
Agreement"), which was most recently approved by the
 Trust's Board of Trustees   
on    July 19, 1995.       
  
     
For the fiscal years ending November 30, 1993, 1994 and 1995, Smith Barney or   
its predecessor Shearson Lehman Brothers received the following in sales   
charges for the sale of each Fund's Class A shares, and did not reallow any   
portion thereof to dealers:   
<TABLE>  
<CAPTION>  
  
  
Year  
Year  
Year  
  
  
Ended  
Ended  
Ended  
  
Fund  
11/30/95  
11/30/94  
11/30/93  
  
<S>  
California Fund  
<C>  
$22,000  
<C>  
$69,353  
<C>  
$179,329  
  
New York Fund  
32,000  
132,427  
412,346  
  
  
  
  
  
  
</TABLE>  
      
     
  
For the fiscal years ending November 30, 1993, 1994 and 1995, Smith Barney or   
Shearson Lehman Brothers received the following representing CDSC on   
redemption of each Fund's Class A shares:  
<TABLE>  
<CAPTION>  
  
Year  
Year  
Year  
  
  
Ended  
Ended  
Ended  
  
Fund  
11/30/95  
11/30/94  
11/30/93  
  
<S>  
California Fund  
<C>  
$3,800  
<C>  
$18,705  
<C>  
$5,932  
  
New York Fund  
8,000  
22,791  
26,433  
  
  
  
  
  
  
</TABLE>  
      
     
For the fiscal years ending November 30, 1994 and 1995, Smith Barney or   
Shearson Lehman Brothers received the following representing CDSC on   
redemption of each Fund's Class C shares:  
<TABLE>  
<CAPTION>  
  <S>
Year  
Year  
  
  <C>
Ended  
Ended  
  
Fund  
11/30/95  
11/30/94*  
  
California Fund  
$200  
$0  
  
New York Fund  
__  
__  
  
  
  
  
  
<FN>  
__________________  
* The inception dates for Class C shares of California Fund and New York Fund   
are November 8, 1994 and December 5, 1994, respectively.  
</FN>  
</TABLE>  
      
  
When payment is made by the investor before the settlement date, unless   
otherwise requested in writing by the investor, the funds will be held as a   
free credit balance in the 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 the fact that   
they are receiving fees from both such investment companies
 for managing these   
assets, computed on the basis of their average daily net assets. The Trust's   
Board of Trustees has been advised of the benefits to Smith Barney resulting   
from these settlement procedures and will take such benefits into   
consideration when reviewing the Advisory, Administration and Distribution   
Agreements for continuance.  
  
     
For the fiscal year ended November 30, 1995, Smith Barney incurred   
distribution expenses totaling approximately $123,621 consisting of   
approximately $15,735.84 for advertising, $10,468.21 for printing and mailing   
of prospectuses, $32,084.69 for support services, $59,624.98 to Smith Barney   
Financial Consultants, and $312.50 in accruals for interest on the excess of   
Smith Barney expenses incurred in distribution of the Funds' shares over the   
sum of the distribution fees and CDSC received by Smith Barney from the Fund.  
      
Distribution Arrangements  
  
     
To compensate Smith Barney for the services it provides
 and for the expense it   
bears under the Distribution Agreement, the Trust has adopted a services and   
distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act.   
Under the Plan, each 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 Fund's
 Class A and Class C   
shares. In addition, each Fund pays Smith Barney a distribution fee with   
respect to the Class C shares primarily intended to compensate Smith Barney   
for its initial expense of paying its Financial Consultants a commission upon   
sales of those shares. The Class C distribution fee is calculated at the   
annual rate of 0.20% of the value of each Fund's average net assets   
attributable to the shares of the Class.  
  

    
     
The following service and distribution fees were incurred during the periods   
indicated:  
<TABLE>  
<CAPTION>  
SERVICE FEES  
  
California Fund:  
  
  
  
Year  
Ended  
11/30/95  
Year  
Ended  
11/30/94*  
Year  
Ended  
11/30/93  
  

    
     
Class A  
<C>  
$36,511  
<C>  
$47,722  
<C>  
$29,849  
  
Class C*  
1,017  
2  
__  
  
  
  
  
  
  
</TABLE>  
  
New York Fund:  
<TABLE>  
<CAPTION>  
  
  
  
  
Year  
Ended  
11/30/95  
Year  
Ended  
11/30/94  
Year  
Ended  
11/30/93  
  
<S>  
Class A  
<C>  
$84,263  
<C>  
$103,579  
<C>  
$68,072  
  
Class C*  
203  
__  
__  
  
  
  
  
  
  
<FN>  
________________  
* The inception dates for Class C shares of California Fund and New York Fund   
are November 8, 1994 and December 5, 1994,  
   respectively.  
</FN>  
</TABLE>  
  
  
  
DISTRIBUTION FEES  
California Fund:  
<TABLE>  
<CAPTION>  
  
  
  
Year  
Ended  
11/30/95  
Year  
Ended  
11/30/94*  
  
<S>  
Class C  
<C>  
$1,356  
<C>  
$3  
  
</TABLE>  
  
New York Fund:  
<TABLE>  
<CAPTION>  
  
  
  
Year  
Ended  
11/30/95*  
  
  
<S>  
Class C  
<S>  
$271  
  
  
  
<FN>  
_________________  
* The inception dates for Class C shares of California Fund and New York Fund   
are November 8, 1994 and December 5, 1994, respectively.  
</FN>  
</TABLE>  
      
     
For the fiscal years ended November 30, 1993, 1994 and 1995 Smith Barney   
and/or its predecessor, Shearson Lehman Brothers, received $269,091, $291,639   
and $123,621, respectively, in the aggregate  from the Plan.  
      
  
Under its terms, the Plan continues from year to year, provided such   
continuance is approved annually by vote of the Board of
 Trustees, including a   
majority of the Trustees who are not interested persons of the Trust and who   
have no direct or indirect financial interest in the operation of the Plan or   
in the Distribution Agreement (the "Independent Trustees"). The Plan may not   
be amended to increase the amount of the service and
 distribution fees without   
shareholder approval, and all amendments of the Plan also must be approved by   
the Trustees including all of the Independent Trustees
 in the manner described   
above. The Plan may be terminated with respect to a Class at
 any time, without   
penalty, by vote of a majority of the Independent Trustees or,
 with respect to   
any Fund, by vote of a majority of the outstanding voting
 securities of a Fund   
(as defined in the 1940 Act). Pursuant to the Plan,
 Smith Barney will provide   
the Board of Trustees with periodic reports of amounts
 expended under the Plan   
and the purpose for which such expenditures were made.   
  
VALUATION OF SHARES  
  
The net asset value per share of each Fund's Classes is calculated on each   
day, Monday through Friday, except days on which the NYSE is closed. The NYSE   
currently is scheduled to be closed on New Year's Day, Presidents' Day, Good   
Friday, Memorial Day, Independence Day, Labor Day, 
Thanksgiving and Christmas,   
and on the preceding Friday or subsequent Monday when one of these holidays   
falls on a Saturday or Sunday, respectively. Because of the differences in   
distribution fees and Class-specific expenses, the per share net asset value   
of each Class may differ. The following is a description of the procedures   
used by the Trust in valuing its assets.  
  
     
In carrying out valuation policies adopted by the Trust's Board of Trustees,   
SBMFM, as administrator, may consult with an independent pricing service (the   
"Pricing Service") retained by the Trust. Debt securities of domestic issuers   
(other than U.S. government securities and short-term investments), including   
Municipal Obligations, are valued by SBMFM after
 consultation with the Pricing   
Service.  U.S. government securities will be valued at the mean between the   
closing bid and asked prices on each day, or, if market quotations for those   
securities are not readily available, at fair value, as determined in good   
faith by the Trust's Board of Trustees  With respect to other securities held   
by the Fund, when, in the judgment of the Pricing Service, quoted bid prices   
for investments are readily available and are representative of the bid side   
of the market, these investments are valued at the mean
 between the quoted bid   
prices and asked prices. Investments for which no readily obtainable market   
quotations are available, in the judgment of the Pricing Service, are carried   
at fair value as determined by the Pricing Service. The procedures of the   
Pricing Service are reviewed periodically by the officers of the Trust under   
the general supervision and responsibility of the Board of Trustees.  
      
EXCHANGE PRIVILEGE  
     
Except as noted below, shareholders of any of the Smith Barney Mutual Funds   
may exchange all or part of their shares for shares of the
 same Class of other   
Smith Barney Mutual Funds, on the basis of relative net asset value per share   
at the time of exchange as follows:  
      
A.  Class A shares of any fund purchased with a sales charge may be   
exchanged for Class A shares of any of the other funds, and the sales   
charge differential, if any, will be applied. Class A shares of any fund   
may be exchanged without a sales charge for shares of the funds that are   
offered without a sales charge. Class A shares of any fund purchased   
without a sales charge may be exchanged for shares sold with a sales   
charge, and the appropriate sales charge differential will be applied.  
  
B.  Class A shares of any fund acquired by a previous exchange of shares   
purchased with a sales charge may be exchanged for Class A shares of any   
of the other funds, and the sales charge differential, if any, will be   
applied.  
  
Dealers other than Smith Barney must notify    the Transfer Agent     of the   
investor's prior ownership of Class A shares of Smith Barney High Income Fund   
and the account number in order to accomplish an exchange of shares of Smith   
Barney High Income Fund under paragraph B above.  
  
     
The exchange privilege enables shareholders in any
Smith Barney Mutual Fund to   
acquire shares of the same Class in a fund with different investment   
objectives when they believe a shift between funds is an appropriate   
investment decision. This privilege is available to shareholders residing in   
any state in which the fund shares being acquired may legally be sold. Prior   
to any exchange, the shareholder should obtain and review a copy of the   
current prospectus of each fund into which an exchange is being considered.   
Prospectuses may be obtained from a Smith Barney Financial Consultant.   
      
  
Upon receipt of proper instructions and all necessary supporting documents,   
shares submitted for exchange are redeemed at the
 then-current net asset value   
and, subject to any applicable CDSC, the proceeds are
 immediately invested, at   
a price as described above, in shares of the fund
 being acquired. Smith Barney   
reserves the right to reject any exchange request. The exchange privilege may   
be modified or terminated at any time after written notice to shareholders.   
  
PERFORMANCE DATA  
  
From time to time, the Trust may quote a Fund's yield or total return in   
advertisements or in reports and other communications to shareholders. The   
Trust may include comparative performance information in advertising or   
marketing each 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,
 Fortunes, Institutional   
Investor, Investors Daily, Money, Morningstar, Mutual Fund Values, The New   
York Times, USA Today and The Wall Street Journal. To the extent any   
advertisement or sales literature of a Fund describes the expenses or   
performance of any Class it will also disclose such information for the other   
Classes.   
  
Yield and Equivalent Taxable Yield  
  
A Fund's 30-day yield described in the Prospectuses is calculated
 according to   
a formula prescribed by the SEC, expressed as follows:  
  
Yield 	= 2    [(a-b    + 1)6 - 1]  
	         cd  
  
	Where: a =  dividends and interest earned during the period.  
 	b =  expenses accrued for the period (net of   
reimbursement).  
	c =  the average daily number of the maximum offering   
price per shares outstanding during the period that   
were entitled to receive dividends.  
	d =  the maximum offering price per share on the last   
day of the period.  
  
For the purpose of determining the interest earned (variable "a" in the   
formula) on debt obligations that were purchased by a Fund at a discount or   
premium, the formula generally calls for amortization of the discount or   
premium; the amortization schedule will be adjusted monthly to
 reflect changes   
in the market values of the debt obligations.  
  
    A Fund's "equivalent taxable 30-day yield" for a Class is computed by   
dividing that portion of the Class' 30-day yield which is tax-exempt by one   
minus a stated income tax rate and adding the product to that portion, if any   
of the Class' yield that is not tax-exempt.  
  
    The yield on municipal securities is dependent upon a variety of factors,   
including general economic and monetary conditions, conditions of the   
municipal securities market, size of a particular offering, maturity of the   
obligation offered and rating of the issue. Investors should recognize that,   
in periods of declining interest rates, a Fund's yield for each Class of   
shares will tend to be somewhat higher than prevailing market rates, and in   
periods of rising interest rates a Fund's yield for each Class of shares will   
tend to be somewhat lower. In addition, when interest rates are falling, the   
inflow of net new money to a Fund from the continuous sale of its shares will   
likely be invested in portfolio instruments producing lower yields than the   
balance of the Fund's portfolio, thereby reducing the current yield of the   
Fund. In periods of rising interest rates, the opposite can be expected to   
occur.  
  
     
The yields for the 30-day period ended November 30, 1995 for
 California Fund's   
Class A, Class C and Class Y shares were 4.17%, 4.05% and
 4.43%, respectively.    
The yields for the 30-day period ended November 30, 1995 for New York Fund's   
Class A and Class C shares were 4.32% and 4.43%, respectively.  
      
     
The equivalent taxable yields for the 30-day period ended November 30, 1995   
assuming payment of Federal income taxes at the rate of 31.0%; California   
income taxes at the rate of 9.3% for the California
 Fund shareholders; and New   
York State and City income taxes at a rate of 12.0% for the New York Fund   
shareholders would have been as follows: California Fund's Class A, Class C   
and Class Y shares: 6.66%, 6.47% and 7.08%, respectively, and New York Fund's   
Class A and Class C shares: 7.11%, and 7.05%, respectively.  
      
  
Average Annual Total Return  
  
A Fund's "average annual total return," as
 described below,    is     computed   
according to a formula prescribed by the SEC. The formula can be expressed as   
follows:  
  
P(1 + T)n = ERV  
  
Where:     P  	 =  a hypothetical initial payment of $1,000.  
	T  	 =  average annual total return.  
n   	 =  number of years.  
ERV = Ending Redeemable Value of a hypothetical $1,000   
investment made at the beginning of a 1-, 5- or 10-year   
period at the end of a 1-, 5- or 10-year period (or   
fractional portion thereof), assuming reinvestment of all   
dividends and distributions.  
  
The ERV assumes complete redemption of the hypothetical investment at the end   
of the measuring period. A Fund's net investment income
 changes in response to   
fluctuations in interest rates and the expenses of the Fund.   
  
     
The following total return assume that the maximum Class A 2.00% sales charge   
has been deducted from the investment at the time of purchase and have been   
restated to show the change in the maximum sales charge. The Funds' average   
annual total return for Class A shares were as follows:   
  
<TABLE>  
<CAPTION>  
  
ONE YEAR PERIOD  
  
ENDED NOVEMBER 30, 1995  
  
  
  
  
  
  
Total Return  
  
Fund  
(With Fee   
Waivers)   
  
<S>  
California Fund  
<C>  
12.54%  
  
New York Fund  
12.01  
  
  
  
  
			</TABLE>  
			      
     
<TABLE>  
<CAPTION>  
  
PER ANNUM FOR THE PERIOD FROM   
  
COMMENCEMENT OF OPERATIONS   
  
(DECEMBER 31, 1991) THROUGH NOVEMBER 30, 1995  
  
  
  
  
  
  
Total Return  
  
Fund  
(With Fee   
Waivers  
  
<S>  
California Fund  
<C>  
6.99%  
  
New York Fund  
6.63  
  
</TABLE>  
      
   
The Funds' average annual total return for Class C shares were as follows:   
<TABLE>  
<CAPTION>  
ONE YEAR PERIOD  
  
ENDED NOVEMBER 30, 1995  
  
  
  
  
  
  
Total Return  
  
Fund  
(With Fee   
Waivers)   
  
<S>  
California Fund  
<S>  
14.36%  
  
New York Fund*  
13.01  
  
<FN>  
*  For the period from December 5, 1994 (inception date) to November 30, 1995  
</FN>  
</TABLE>  
      
  
     
<TABLE>  
<CAPTION>  
  
PER ANNUM FOR THE PERIOD OF   
  
COMMENCEMENT OF OPERATIONS   
  
(NOVEMBER 8, 1994) THROUGH NOVEMBER 30, 1995  
  
  
  
  
  
  
Total Return  
  
Fund  
(With Fee   
Waivers)   
  
<S>  
California Fund  
<C>  
14.26%  
  
  
  
  
</TABLE>  
      
  
     
The Funds' average annual total return for Class Y shares were as follows:   
<TABLE>  
<CAPTION>  
  
ONE YEAR PERIOD  
  
ENDED NOVEMBER 30, 1995**  
  
  
  
  
  
  
Total Return  
  
Fund  
(With Fee   
Waivers)   
  
<S>  
California Fund*  
<C>  
2.92%  
  
<FN>  
_____________  
*  For the period from September 8, 1995 (inception date) to November 30,   
1995.  
**  As of November 30, 1995, no Class Y shares of New York Fund had been sold.  
</FN>  
</TABLE>  
      
  
Aggregate Total Return  
  
     
A Fund's "aggregate total return," as described below, represents the   
cumulative change in the value of an investment in the Fund 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 ERV assumes complete redemption of the hypothetical investment at the end   
of the measuring period.  
  
The Funds' aggregate total return for Class A shares were as follows:  
<TABLE>  
<CAPTION>  
ONE YEAR PERIOD  
  
ENDED NOVEMBER 30, 1995  
  
  
  
Total Return  
  
Fund  
(With Fee Waivers)   
  
<S>  
California Fund  
<C>  
14.84%  
  
New York Fund  
13.80  
  
</TABLE>  
      
  
<TABLE>  
<CAPTION>  
PER ANNUM FOR THE PERIOD FROM    
  
COMMENCEMENT OF OPERATIONS   
  
(DECEMBER 31, 1991) THROUGH NOVEMBER 30, 1995  
  
  
  
  
Total Return  
  
Fund  
(With Fee Waivers)   
  
<S>  
California Fund  
<C>  
6.98%  
  
New York Fund  
7.12  
  
  
  
  
</TABLE>  
  
  
     
The Funds' aggregate total return for Class C shares were as follows:  
<TABLE>  
<CAPTION>  
ONE YEAR PERIOD  
  
ENDED NOVEMBER 30, 1995  
  
  
  
Total Return  
  
Fund  
(With Fee Waivers)   
  
<S>  
California Fund  
<C>  
14.36%  
  
New York Fund*  
13.01  
  
<FN>  
  
___________________  
*  For the period from December 5, 1994 (inception date) to November 30, 1995  
</FN>  
</TABLE>  
      

     
<TABLE>  
<CAPTION>  
PER ANNUM FOR THE PERIOD FROM    
  
COMMENCEMENT OF OPERATIONS   
  
(NOVEMBER 8, 1994) THROUGH NOVEMBER 30, 1995  
  
  
  
Total Return  
  
Fund  
(With Fee Waivers)   
  
<S>  
California Fund  
<C>  
14.26%  
  
</TABLE>  
      
The Funds' aggregate total return for Class Y shares were as follows:  
<TABLE>  
<CAPTION>  
ONE YEAR PERIOD  
  
ENDED NOVEMBER 30, 1995**  
  
  
  
Total Return  
  
Fund  
(With Fee Waivers)   
  
<S>  
California Fund*  
<C>  
2.92%  
  
  
  
  
<FN>  
________________  
*  For the period from September 8, 1995 (inception date) to November 30,   
1995.  
**  As of November 30, 1995, no Class Y shares of New York Fund had been sold.  
</FN>  
  
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 operating expenses and the expenses exclusively   
attributable to the Class. Consequently, any given performance quotation   
should not be considered representative of the Class' performance for any   
specified period in the future. Because performance will vary, it may not   
provide a basis for comparing an investment in the Class with certain bank   
deposits or other investments that pay a fixed yield for a stated period of   
time. Investors comparing a Class' performance with that of
 other mutual funds   
should give consideration to the quality and maturity of the respective   
investment companies' portfolio securities.   
  
TAXES  
  
The following is a summary of selected Federal income tax considerations that   
may affect the Trust and its shareholders. The summary is not intended as a   
substitute for individual tax advice and investors are urged to consult their   
own tax advisors as to the tax consequences of an investment in the Trust.  
  
As described above and in the Prospectuses, each Fund is designed to provide   
investors with current income which is excluded from gross income for Federal   
income tax purposes, and the California Fund and the New York Fund are   
designed to provide investors with current income exempt from otherwise   
applicable state and/or local personal income taxes. The Trust
 is not intended   
to be a balanced investment program and is not designed for investors seeking   
capital gains or maximum tax-exempt income irrespective of fluctuations in   
principal. Investment in the Trust would not be suitable for tax-exempt   
institutions, qualified retirement plans, H.R. 10 plans and individual   
retirement accounts because those investors would not gain any additional tax   
benefit from the receipt of tax-exempt income.  
  
The Trust has qualified and intends that each Fund continue to qualify each   
year as a "regulated investment company" under the Code. Provided that a Fund   
(a) is a regulated investment company and (b) distributes to its shareholders   
at least 90% of its taxable net investment income (including, for this   
purpose, its net realized short-term capital gains) and 90% of its tax-exempt   
interest income (reduced by certain expenses), the Fund will not be
 liable for   
Federal income taxes to the extent its taxable net investment income and its   
net realized long-term and short-term capital gains, if any, are distributed   
to its shareholders. Any such taxes paid by a Fund would reduce the amount of   
income and gains available for distribution to shareholders.  
  
     
Because the Fund may distribute exempt-interest dividends, interest on   
indebtedness incurred by a shareholder to purchase or carry shares of a Fund   
is not deductible for Federal income tax purposes. In addition, the   
indebtedness is not deductible by a shareholder of the California Fund for   
California State personal income tax purposes, nor by a New York Fund   
shareholder for New York State and New York City personal
 income tax purposes.   
If a shareholder receives exempt-interest dividends with respect to any share   
of a Fund and if the share is held by the shareholder for six months or less,   
then any loss on the sale or exchange of the share may, to the extent of the   
exempt-interest dividends, be disallowed. In addition, the Code may require a   
shareholder that receives exempt-interest dividends to treat as
 taxable income   
a portion of certain otherwise non-taxable social security and railroad   
retirement benefit payments. Furthermore, the portion of any exempt-interest   
dividend paid by a Fund that represents income derived from private activity   
bonds held by the Fund may not retain its tax-exempt status in the hands of a   
shareholder who is a "substantial user" of a facility financed by the bonds,   
or a "related person" of the substantial user. Moreover, as noted in the   
Prospectuses (a) some or all of a Fund's exempt-interest dividends may be a   
specific preference item, or a component of an adjustment item, for purposes   
of the Federal individual and corporate alternative minimum taxes and (b) the   
receipt of a Fund's dividends and distributions may affect a corporate   
shareholder's Federal "environmental" tax liability. In addition, the receipt   
of a Fund's dividends and distributions may affect a foreign corporate   
shareholder's Federal "branch profits" tax liability and the Federal and   
California "excess net passive income" tax liability of a Subchapter S   
corporation. Shareholders should consult their own tax advisors to determine   
whether they are (a) "substantial users" with respect to a facility or   
"related" to those users within the meaning of the Code or (b) subject to a   
Federal alternative minimum tax, the Federal "environmental" tax, the Federal   
"branch profits" tax, or the Federal or California "excess net
 passive income"   
tax. As a general rule, a Fund's gain or loss on a sale or exchange of an   
investment will be a long-term capital gain or loss if the Fund has held the   
investment for more than one year and will be a short-term capital gain or   
loss if it has held the investment for one year or less. Furthermore, as a   
general rule, a shareholder's gain or loss on a sale or redemption of shares   
of a Fund will be a long-term capital gain or loss if the
 shareholder has held   
his or her Fund shares for more than one year and will be
 a short-term capital   
gain or loss if he or she has held the Fund shares for one year or less.   
Shareholders of each Fund will receive, as more fully described in the   
Prospectuses, an annual statement as to the income tax status of his or her   
dividends and distributions for the prior calendar year.
 Each shareholder will   
also receive, if appropriate, various written notices after the close of a   
Fund's prior taxable year as to the Federal income tax status of certain   
dividends or distributions which were received from the
 Fund during the Fund's   
prior taxable year.  
      
  
The dollar amount of dividends paid by a Fund that is excluded from Federal   
income taxation and the dollar amount of dividends paid by a Fund that is   
subject to federal income taxation, if any, will vary for each shareholder   
depending upon the size and duration of each shareholder's investment in a   
Fund.   
  
Investors considering buying shares of a Fund on or just prior to the record   
date for a capital gain distribution should be aware that the amount of the   
forthcoming distribution payment will be a taxable distribution payment. If a   
shareholder fails to furnish a correct taxpayer identification number, fails   
to report fully dividend or interest income or fails to certify
 that he or she   
has provided a correct taxpayer identification number and that he or she is   
not subject to "backup withholding," then the shareholder may be subject to a   
31% "backup withholding" tax with respect to (a) taxable dividends and   
distributions and (b) the proceeds of any redemptions of shares of a Fund. An   
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 taxpayer's regular Federal income tax liability.  
  
The discussion above is only a summary of certain tax
 considerations generally   
affecting a Fund and its shareholders, and is not intended as a
 substitute for   
careful tax planning. Shareholders are urged to consult their tax advisors   
with specific reference to their own tax situations, including
 their state and   
local tax liabilities.  
  
ADDITIONAL INFORMATION  
     
The Trust was organized as an unincorporated business trust on October 17,   
1991 under the name Shearson Lehman Brothers Intermediate-Term Trust. On   
November 20, 1991, July 30, 1993, October 14, 1994 and August 16, 1995, the   
Trust's name was changed to Shearson Lehman Brothers Income Trust, Smith   
Barney Shearson Income Trust, Smith Barney Income Trust and Smith Barney   
Investment Trust, respectively.  
      
  
   First Data Investor Services Group, Inc.     is located at Exchange Place,   
Boston, Massachusetts 02109, and serves as the Trust's transfer agent. Under   
the transfer agency agreement, the Transfer Agent maintains the shareholder   
account records for the Trust, handles certain communications between   
shareholders and the Trust and distributes dividends and
 distributions payable   
by the Trust. For these services, the Transfer Agent receives a monthly fee   
computed on the basis of the number of shareholder accounts it maintains for   
the Trust during the month, and is reimbursed for out-of-pocket expenses.   
  
  
FINANCIAL STATEMENTS  
     
The Funds' Annual Reports for the fiscal year ended November 30, 1995   
accompany this Statement of Additional Information and are
 incorporated herein   
by reference in their entirety.  
      
  
  
  
  
  
APPENDIX  
  
DESCRIPTION OF MOODY'S, S&P AND FITCH RATINGS  
   
Description of Moody's Municipal Bond Ratings:  
  
Aaa  -- Bonds rated Aaa are judged to be of the best quality. They carry the   
smallest degree of investment risk and are generally referred to as "gilt   
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 rated Aa are judged to be of high quality by all standards.   
Together with the Aaa group they comprise what are generally known as high-  
grade bonds. They are rated lower than the best bonds because margins of   
protection may not be as large as in Aaa securities, or fluctuation of   
protective elements may be of greater amplitude, or there may be other   
elements present that make  
the long term risks appear somewhat larger than in Aaa securities.   
  
A -- Bonds 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 rated Baa are considered as medium-grade obligations, that is,   
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.  
  
Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating   
classification below Aaa. The modifier 1 indicates that the security ranks in   
the higher end of its generic rating category; the modifier 2 indicates a mid-  
range ranking; and the modifier 3 indicates that the issue ranks in the lower   
end of its generic rating category.  
   
Description of Moody's Municipal Note Ratings:  
  
Moody's ratings for state and municipal notes and other short-term loans are   
designated Moody's Investment Grade ("MIG") and for variable demand   
obligations are designated Variable Moody's Investment Grade "(VMIG)". This   
distinction 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 Commercial Paper Ratings:   
The rating Prime-1 is the highest commercial paper rating
 assigned by Moody's.   
Issuers rated Prime-1 (or related supporting institutions) are considered to   
have a superior capacity for repayment of short term promissory obligations.   
Issuers rated Prime-2 (or related supporting institutions) are considered to   
have a strong capacity for repayment of short term promissory obligations.   
This will normally be evidenced by many of the characteristics of issuers   
rated Prime-1 but to a lesser degree. Earnings trends and coverage ratios,   
while sound, will be more subject to variation. Capitalization   
characteristics, while still appropriate, may be more affected by external   
conditions. Ample alternative liquidity is maintained.  
  
  
  
Description of S&P Municipal Bond Ratings:  
AAA -- These are the obligations of the highest quality. They have the   
strongest capacity for timely payment of debt service. General Obligation   
Bonds rated AAA -- In a period of economic stress, the issuers will
 suffer the   
smallest declines in income and will be least susceptible to autonomous   
decline. Debt burden is moderate. A strong revenue structure
 appears more than   
adequate to meet future expenditure requirements. Quality of management   
appears superior. Revenue Bonds rated AAA -- Debt service coverage has been,   
and is expected to remain, substantial. Stability of the pledged revenues is   
also exceptionally strong due to the competitive position of the municipal   
enterprise or to the nature of the revenues. Basic security provisions   
(including rate covenant, earnings test for issuance of additional bonds and   
debt service reserve requirements) are rigorous. There is
 evidence of superior   
management.   
  
AA -- The investment characteristics of bonds in this group are only slightly   
less marked than those of the prime quality issues. Bonds rated AA have the   
second strongest capacity for payment of debt service.  
  
A -- Principal and interest payments on bonds in this category are
 regarded as   
safe, although the bonds are somewhat more susceptible to the adverse effects   
of changes in circumstances and economic conditions than bonds in
 higher rated   
categories. This rating describes the third strongest capacity for payment of   
debt service. General Obligation Bonds rated A -- There is some weakness,   
either in the  local economic base, in debt burden, in the balance between   
revenues and expenditures or in quality of management. Under certain adverse   
circumstances, any one such weakness might impair the ability of
 the issuer to   
meet debt obligations at some future date. Revenue Bonds rated A -- Debt   
service coverage is good, but not exceptional. Stability of the pledged   
revenues could show some variations because of increased competition or   
economic influences on revenues. Basic security provisions, while   
satisfactory, are less stringent. Management performance appears adequate.  
  
BBB -- The bonds in this group are regarded as having an adequate capacity to   
pay interest and repay principal. Whereas bonds in this group
 normally exhibit   
adequate protection parameters, adverse economic conditions or changing   
circumstances are more likely to lead to a weakened capacity to pay interest   
and repay principal for debt in this category than in higher
 rated categories.   
Bonds rated BBB have the fourth strongest capacity for payment of debt   
service. S&P's letter ratings may be modified by the addition of a plus or a   
minus sign, which is used to show relative standing within the major rating   
categories, except in the AAA category.  
   
Description of S&P Municipal Note Ratings:  
  
Municipal notes with maturities of three years or less are usually given note   
ratings (designated SP-1, -2 or -3) to distinguish more clearly the credit   
quality of notes as compared to bonds. Notes rated SP-1 have a very strong or   
strong capacity to pay principal and interest. Those issues determined to   
possess overwhelming safety characteristics are given the designation of SP-  
1+. Notes rated SP-2 have a satisfactory capacity to pay principal and   
interest.    
  
Description of S&P Commercial Paper Ratings:  
Commercial paper rated A-1 by S&P indicates that the degree of safety   
regarding timely payment is either overwhelming or very strong. Those issues   
determined to possess overwhelming safety characteristics are denoted A-1+.   
Capacity for timely payment on commercial paper rated A-2 is strong, but the   
relative degree of safety is not as high as for issues designated A-1.    
  
Description of Fitch Municipal Bond Ratings:  
AAA -- Bonds rated AAA are considered to be investment grade and of the   
highest credit quality. The obligor has an exceptionally strong
 ability to pay   
interest and repay principal, which is unlikely to be affected by reasonably   
foreseeable events.    
  
AA -- Bonds rated AA are considered to be investment grade and of very high   
credit quality. The obligor's ability to pay interest and repay principal is   
very strong, although not quite as strong as bonds rated AAA. Because bonds   
rated in the AAA and AA categories are not significantly vulnerable to   
foreseeable future developments, short term debt of these issues is generally   
rated F-1+ by Fitch.  
  
A -- Bonds rated A are considered to be investment grade and of high credit   
quality. The obligor's ability to pay interest and repay principal is   
considered to be strong, but may be more vulnerable to adverse changes in   
economic conditions and circumstances than bonds with higher ratings.   
  
BBB -- Bonds rated BBB are considered to be investment grade and of   
satisfactory credit quality. The obligor's ability to pay interest and repay   
principal is considered to be adequate. Adverse changes in
 economic conditions   
and circumstances, however, are more likely to have adverse impact on these   
bonds, and therefore impair timely payment. The likelihood that
 the ratings of   
these bonds will fall below investment grade is higher than for bonds with   
higher ratings.  Plus and minus signs are used by Fitch with a rating symbol   
to indicate the relative position of a credit within the rating category.
 Plus   
and minus signs, however, are not used in the AAA category.  
  
Description of Fitch Short Term Ratings:  
Fitch's short term ratings apply to debt obligations that are payable on   
demand or have original maturities of generally up to three years, including   
commercial paper, certificates of deposit, medium term notes, and municipal   
and investment notes.  
  
The short term rating places greater emphasis than a long term rating on the   
existence of liquidity necessary to meet the issuer's obligations in a timely   
manner.  
  
 Fitch's short term ratings are as follows:     F-1+ -- Issues assigned this   
rating are regarded as having the strongest degree of assurance for timely   
payment.  
  
F-1 -- Issues assigned this rating reflect an assurance of timely payment
 only   
slightly less in degree than issues rated F-1+.  
  
F-2 -- Issues assigned this rating have a satisfactory degree of
 assurance for   
timely payment but the margin of safety is not as great as for
 issues assigned   
F-1+ and F-1 ratings.  
  
F-3 -- Issues assigned this rating have characteristics suggesting that the   
degree of assurance for timely payment is adequate, however,
 near term adverse   
changes could cause these securities to be rated below investment grade.  
LOC -- The symbol LOC indicates that a Fitch rating is based on a letter of   
credit issued by a commercial bank.  
  
  
  
  
  
  
  
  
50  
  
  
	  
  
  
	A-1  
  
A-2  
  
  
  
SMITH BARNEY     INVESTMENT <R/>TRUST  
  
PART  C  
  
OTHER INFORMATION  
  
Item 24.	Financial Statements and Exhibits  
  
(a)  Financial Statements  
  
	Included in Part A:  
  
      Financial Highlights  
  
	Included in Part B:  
  

    
   		The Funds' Annual Reports for the fiscal year ended November 30,   
1995 and the Reports of Independent Accountants dated January 17, 1996 are   
incorporated by reference to the Rule 30(b)2-1 filings made on February 2,   
1996 as Accession No. 91155-96-000043.       
  
	Included in Part C:  
  
		Consent of Independent Accountants  
  
(b)	Exhibits  
  
	Unless otherwise noted, all references are to the Registrant's   
Registration Statement on Form N-1A (the "Registration Statement") as filed   
with the     Securities and Exchange Commission ("SEC")      on October 21,   
1991 (File Nos. 33-43446 and 811-6444).  
  
	(1)(a) Registrant's Master Trust Agreement dated October 17, 1991 and   
Amendments to the Master Trust Agreement dated November 21, 1991 and July 30,   
1993, respectively, are incorporated by reference to Post-Effective Amendment   
No. 4 to the Registration Statement filed on January 28, 1994
 ("Post-Effective   
Amendment No. 4").  
  
	(b)  Amendments to the Master Trust Agreement dated October 14, 1994 and   
November 7, 1994, respectively, are incorporated by reference to a   
Registration Statement filed on Form N-14 on January 6, 1995 (the "N-14").  
  
	(c)  Amendments to the Master Trust Agreement dated July 20, 1995 and   
August 10, 1995 are incorporated by reference to Post-Effective Amendment No.   
9 to the Registration Statement filed on August 29, 1995 ("Post-Effective   
Amendment No. 9").  
  
	(2)  Registrant's By-Laws are incorporated by reference to the   
Registration Statement.  
  
	(3)  Not Applicable.  
  
	(4)  Registrant's form of stock certificate is incorporated by reference   
to Pre-Effective Amendment No. 1 to the Registration Statement filed on   
December 6, 1991 ("Pre-Effective Amendment No. 1").  
  
	(5)(a)  Investment Advisory Agreement between the Registrant and   
Greenwich Street Advisors dated July 30, 1993 is incorporated by reference to   
Post-Effective Amendment No. 3 to the Registration Statement filed on December   
1, 1993 ("Post-Effective Amendment No. 3").  
  
	(b)  Transfer of Investment Advisory Agreement dated November 7, 1994   
between the Registrant on behalf of Smith Barney Intermediate Maturity   
California Municipals Fund,  Greenwich Street Advisors and
 Smith Barney Mutual   
Funds Management Inc. is incorporated by reference to the N-14.  
  
	(c)  Form of Transfer of Investment Advisory Agreement for Smith Barney   
Limited Maturity Municipals Fund, Smith Barney Intermediate Maturity New York   
Municipals Fund and Smith Barney Limited Maturity Treasury Fund is   
incorporated by reference to Post-Effective Amendment No. 6 to the   
Registration Statement filed on January 27, 1995 ("Post-Effective Amendment   
No. 6").  
  
	(d)  Form of Investment Advisory Agreement between the Registrant on   
behalf of Smith Barney S&P 500 Advantage Fund and Travelers Investment   
Management Company is     incorporated by reference to Post-Effective   
Amendment No. 10 to the Registration Statement filed on November 13, 1995   
("Post-Effective Amendment No. 10").      
  
	(6)(a)  Distribution Agreement between Registrant and Smith Barney   
Shearson Inc. dated July 30, 1993 is incorporated by reference to Post-  
Effective Amendment No. 3.  
  
	(b)  Form of Distribution Agreement between the Registrant on behalf of   
Smith Barney S&P 500 Advantage Fund and PFS Distributors is     incorporated   
by reference to Post-Effective Amendment No. 10.  
  
	(7)  Not Applicable.  
  
	(8)  Form of Custody Agreement with PNC Bank, National Association, is   
incorporated by reference to Post-Effective Amendment No. 9.  
  
	(9)(a)  Administration Agreement between the Registrant on behalf of   
Smith Barney Intermediate Maturity California Municipals Fund and Smith,   
Barney Advisers, Inc. ("SBA") is incorporated by reference to the N-14.  
  
	(b)   Form of Administration Agreement between the Registrant on behalf   
of Smith Barney Limited Maturity Municipals Fund and Smith
 Barney Intermediate   
Maturity New York Municipals Fund and SBA is incorporated by reference to   
Post-Effective Amendment No. 6.  
  
	 (c)  Form of Administration Agreement between the Registrant on behalf   
of Smith Barney S&P 500 Advantage Fund and Smith Barney Mutual Funds   
Management Inc. 
    
    is incorporated by reference to Post-Effective Amendment   
No. 10.       
  
	(d)  Transfer Agency Agreement with The Shareholder Services Group, Inc.   
is incorporated by reference to Post-Effective Amendment No. 3.  
  
	(e)  Form of Sub-Transfer Agency Agreement between the Registrant on   
behalf of Smith Barney S&P 500 Advantage Fund and PFS Shareholder Services is   
    incorporated by reference to Post-Effective Amendment No. 10.      
          
  
	(10)     Opinion of counsel regarding legality of shares being   
registered is incorporated by reference to Pre-Effective Amendment No. 1 to   
the Registration Statement filed on December 6, 1991.      
  
	(11)      Consent of Independent Accountants is filed herewith.       
  
	(12)  Not Applicable.  
  
	(13)  Purchase Agreement between the Registrant and Shearson Lehman   
Brothers Inc. is incorporated by reference to Pre-Effective Amendment No. 1.  
  
	(14)  Not Applicable.  
  
	(15)(a)  Amended Service and Distribution Plan pursuant to Rule 12b-1   
between  the Registrant on behalf of Smith Barney Intermediate Maturity   
California Municipals Fund and Smith Barney Inc. is incorporated by reference   
to the N-14.  
  
	(b) Form of Amended Service and Distribution Plan pursuant to Rule 12b-1   
between the Registrant on behalf of Smith Barney Limited Maturity Municipals   
Fund and Smith Barney Intermediate Maturity New York
 Municipals Fund and Smith   
Barney Inc. is incorporated by reference to Post-Effective Amendment No. 6.  
  
	(c)  Form of Shareholder Services and Distribution Plan pursuant to Rule   
12b-1 between the Registrant on behalf of Smith Barney S&P 500 Advantage Fund   
and Smith Barney Inc.     is incorporated by reference to Post-Effective   
Amendment No. 10.      
  
	(16)  Performance Data is incorporated by reference to Post-Effective   
Amendment No. 2 to the Registration Statement as filed on April 1, 1993.  
  
     
	(17)  A Financial Data Schedule is filed herein.  
      
  
	(18) Plan adopted pursuant to Rule 18f-3(d) of the Investment Company   
Act of 1940, as amended, is     incorporated by reference to Post-Effective   
Amendment No. 10      
  
Item 25.	Persons Controlled by or under Common Control with Registrant  
  
		None  
  
  
  
Item 26.	Number of Holders of Securities  
  
		(1)						(2)  
	Title of Class					  
	Beneficial Interest par value			Number of Record Holders  
	$0.001 per share				as of     February 28, 1996       
  
	          
	Intermediate Maturity California 	  
		Municipals Fund	     691      
	Intermediate Maturity New York	  
		Municipals Fund	    1,398      
	Smith Barney S&P 500  
		Advantage Fund	None  
	             
  
Item 27.	Indemnification  
  
	The response to this item is incorporated by reference to Pre-Effective   
Amendment No. 1.  
  
Item 28(a).	Business and Other Connections of Investment Adviser  
  
Investment Adviser -- Smith Barney Mutual Funds Management Inc. (formerly   
known as Smith, Barney Advisers, Inc. ("SBMFM")).  
     
SBMFM, 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. SBMFM is a wholly owned subsidiary of Smith Barney   
Holdings Inc. (formerly known as Smith Barney Shearson Holdings Inc.), which   
in turn is a wholly owned subsidiary of Travelers Group Inc. (formerly known   
as Primerica Corporation) ("Travelers"). 
 SBMFM 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 officers and directors of SBMFM   
together with information as to any other business, profession, vocation or   
employment of a substantial nature engaged in by such officers and directors   
during the past two fiscal years, is incorporated by reference to Schedules A   
and D of FORM ADV filed by SBMFM pursuant to the Advisers Act (SEC File No.   
801-8314).  
  
     
Prior to the close of business on November 7, 1994, Greenwich Street Advisors   
served as investment adviser. Greenwich Street Advisors, through its   
predecessors, has been in the investment counseling business since 1934 and   
was a division of Mutual Management Corp. ("MMC"). MMC was incorporated in   
1978 and is a wholly owned subsidiary  of Smith Barney Holdings Inc.   
("Holdings"), which in turn is a wholly owned subsidiary of  Travelers. The   
list required by this Item 28 of officers and directors  of MMC and Greenwich   
Street Advisors, together with information as to any other business,   
profession, vocation or employment of a substantial nature engaged in by such   
officers and directors during the past two fiscal years, is incorporated by   
reference to Schedules A and D of Form ADV filed by
 MMC on behalf of Greenwich   
Street Advisors pursuant to the Advisers Act (SEC File No. 801-14437).  
      
  
          
  
Item 29.	Principal Underwriters  
     
Smith Barney Inc. ("Smith Barney") currently acts as distributor for Smith   
Barney Managed Municipals Fund Inc., Smith Barney California Municipals Fund   
Inc., Smith Barney Massachusetts Municipals Fund, Smith Barney Global   
Opportunities Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney   
Appreciation Fund Inc., Smith Barney Principal Return Fund, Smith Barney   
Managed Governments  Fund Inc., Smith Barney Income Funds,
 Smith Barney Equity   
Funds, Smith Barney Investment Funds Inc., Smith Barney
 Natural Resources Fund   
Inc. (formerly, Smith Barney Precious Metals and Minerals Fund Inc.), Smith   
Barney Telecommunications Trust, Smith Barney Arizona Municipals Fund Inc.,   
Smith Barney New Jersey Municipals Fund Inc., Smith Barney Fundamental Value   
Fund Inc., Smith Barney Series Fund, Consulting Group Capital Markets Funds,   
Smith Barney Adjustable Rate Government Income Fund, Smith Barney Oregon   
Municipals Fund, Smith Barney Funds, Inc., Smith Barney Muni Funds, Smith   
Barney World Funds, Inc., Smith Barney Money Funds, Inc., Smith Barney Tax   
Free Money Fund, Inc., Smith Barney Variable
 Accounts Funds, Smith Barney U.S.   
Dollar Reserve Fund (Cayman), Worldwide Special Fund, N.V., Worldwide   
Securities Limited (Bermuda), Smith Barney International Fund (Luxembourg),   
Smith Barney Institutional Cash Management Fund, Inc., Smith Barney Concert   
Series 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 Investment Trust  
		388 Greenwich Street  
		New York, New York  10013  
  
	(2)	Smith Barney Mutual Funds Management Inc.  
		388 Greenwich Street  
		New York, New York  10013  
	(Records relating to its function as investment adviser to certain   
of the Funds and administrator to all of the Funds)  
  
	(3)	Travelers Investment Management Company  
		One Tower Square  
		Hartford, CT  06183-2030  
	(Records relating to its function as investment adviser to Smith   
Barney S&P 500 Advantage Fund)  
  
	(4)	PNC Bank, National Association  
		17th and Chestnut Streets  
		Philadelphia, PA  19103  
		(Records relating to its function as custodian)  
  
	(5)	    First Data Investor     Services Group, Inc.  
		One Exchange Place  
		Boston, Massachusetts 02109  
		(Records relating to its function as Transfer Agent and Dividend   
Paying Agent)  
  
Item 31.	Management Services  
  
		Not Applicable  
  
Item 32.	Undertakings  
  
	(a)  Registrant undertakes to call a meeting of its shareholders of the   
Series for the purpose of voting upon the question of removal of a trustee or   
trustees of Registrant when requested in writing to do so by 
the holders of at   
least 10% of Registrant's outstanding shares.  Registrant undertakes further,   
in connection with the meeting, to comply with the
 provisions of Section 16(c)   
of the Investment Company Act of 1940, as amended, relating to communications   
with the shareholders of certain common-law trusts.  
  
     
	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.   
      
  
SIGNATURES  
  
	Pursuant to the requirements of the Securities Act of 1933, and the   
Investment Company Act of 1940, the Registrant,
 SMITH BARNEY INVESTMENT TRUST,   
has duly caused this registration statement to be signed on its behalf by the   
undersigned, thereto duly authorized in the City of New York, in the State of   
New York on the     22nd day of March, 1996.      
  
								SMITH BARNEY  
								INVESTMENT TRUST  
  
								/s/Heath B. McLendon  
								Heath B. McLendon, Chief  
								Executive Officer  
  
	Pursuant to the requirements of the Securities Act of 1933, this   
registration statement has been signed below by the following persons in the   
capacities and on the date indicated.  
  
  
  
Signature  
Title  
Date  
  
  
/s/Heath B. McLendon  
Heath B. McLendon  
  
Chairman of the Board  
(Chief Executive   
Officer)  
  
   March 22, 1996      
  
  
  
  
  
/s/Lewis E. Daidone  
Lewis E. Daidone  
  
Treasurer  
(Chief Financial and   
Accounting Officer)  
  
   March 22, 1996      
  
  
  
  
  
  
/s/Herbert Barg  
Herbert Barg  
  
   Trustee      
  
   March 22, 1996      
  
  
  
  
  
/s/Alfred J.   
Bianchetti  
Alfred J. Bianchetti  
  
   Trustee      
  
   March 22, 1996      
  
  
  
  
  
/s/Martin Brody  
Martin Brody  
  
   Trustee      
  
   March 22, 1996      
  
  
/s/Dwight B. Crane  
Dwight B. Crane  
  
   Trustee      
  
   March 22, 1996      
  
  
  
  
  
/s/Burt N. Dorsett  
Burt N. Dorsett  
  
   Trustee      
  
   March 22, 1996      
  
  
  
  
  
  
/s/Elliot S. Jaffe  
Elliot S. Jaffe  
  
   Trustee      
  
   March 22, 1996      
  
  
  
  
  
/s/Stephen E. Kaufman  
Stephen E. Kaufman  
  
   Trustee      
  
   March 22, 1996      
  
  
  
  
  
/s/Joseph J. McCann  
Joseph J. McCann  
  
   Trustee      
  
   March 22, 1996      
  
  
  
  
  
/s/Cornelius C. Rose,   
Jr.  
Cornelius C. Rose, Jr.  
  
   Trustee      
  
   March 22, 1996      
  
  
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