As filed with the Securities and Exchange Commission on March 
26, 1997 
 
Registration No.	33-25087                                           
811-5678 
_______________________________________________________________
____ 
 
U.S.SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C.  20549 
 
FORM N-1A 
 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933	 
	 
 [   ]   Pre-Effective Amendment No.	[ X ]Post-Effective 
Amendment No.20				 
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 
1940, as  
amended  
Amendment No.21[ X ] 
 
SMITH BARNEY PRINCIPAL RETURN FUND 
 (formerly Smith Barney Shearson Brothers Principal Return 
Fund)  
(Exact name of Registrant as Specified in Charter) 
Area Code and Telephone Number: (212)723-9218 
388 Greenwich Street, New York, New York  10013 
(Address of Principal Executive Office)  (Zip Code) 
 
Christina T. Sydor 
Secretary 
 
Smith Barney Principal Return Fund 
388 Greenwich Street 
New York, New York 10013 
(Name and Address of Agent of Service) 
 
copies to: 
 
Burton M. Liebert, Esq. 
Willkie Farr & Gallagher LLP 
One Citicorp Center 
153 East 53rd Street  
New York, NY 10022 
 
Approximate Date of Proposed Public Offering: 
As soon as possible after this Post-Effective Amendment becomes 
effective. 
 
It is proposed that this filing will become effective: 
 
  X 	Immediately upon filing pursuant to Rule 485(b) 
____	on March 26, 1997 pursuant to Rule 485(b) 
       	60 days after filing pursuant to Rule 485(a) 
       	on _______pursuant to Rule 485(a) 
 
The Registrant has previously filed a declaration of indefinite 
registration of its shares pursuant to Rule  
24f-2 under the Investment Company Act of 1940, as amended.  
Registrant's Rule 24f-2 Notice for the  
fiscal year ended  November 30, 1996 was filed on January 27, 
1997 as accession number 000091155-97- 
000040. 
 
 
SMITH BARNEY PRINCIPAL RETURN FUND 
 
CONTENTS OF REGISTRATION STATEMENT 
 
This Registration Statement contains the following pages and 
documents: 
 
Front Cover 
 
Contents Page 
 
Cross-Reference Sheet 
 
Part A - Prospectus 
 
Part B - Statement of Additional Information 
 
Part C - Other Information 
 
Signature Page 
 
Exhibits 
 
 
 
 
SMITH BARNEY PRINCIPAL RETURN FUND 
 
FORM N-IA CROSS REFERENCE SHEET 
PURSUANT TO RULE 495(b) UNDER THE SECURITIES ACT OF 1933, AS 
AMENDED 
 
Part A. 
Item No. and Caption					Prospectus 
Caption 
 
1.  Cover Page						Cover Page 
 
2.  Synopsis						Introduction, 
Series' Expenses 
 
3.  Condensed Financial Information			Financial 
Highlights 
 
4.  General Description of Registrant	             	
	Cover Page, Introduction 		 
								Investment 
Objective and  
	Policies; 							
	Management of the  
Trust 									
	Distributor; Additional  
Information 
 
5.  Management of the Fund				Introduction; 
Management of  
							the Trust; 
Distributor; Additional  
							Information. 
 
6.  Capital Stock and Other Securities		
	Investment Objectives and Policies; 		 
						Dividends, Distributions 
and Taxes;  
							Additional 
Information 
 
7.  Purchase of Securities Being Offered			Purchase 
of Shares; Valuation of  
							Shares; Redemption of 
Shares;  
							Exchange Privilege; 
Minimum Account 		 
						Size; Distributor 
 
8.  Redemption or Repurchase of Shares			Purchase 
of Shares; Redemption of  
							Shares; Exchange 
Privilege 
 
9.  Pending Legal Proceedings				Not Applicable 
 
 
 
 
Part B 
  
Item No. and Caption					Statement of 
Additional Information 		 
						Caption 
 
10.  Cover Page						Cover Page 
 
11.  Table of Contents					Contents 
 
12.  General Information and History		
	Distributor; Organization of the Trust 
			 
13.  Investment Objectives and Policies		
	Investment Objectives and Management 
							Policies 
14.  Management of the Fund				Investment 
Adviser and 				 
						Administrator;Distributor 
 
15.  Control Persons and Principal			
	Organization of the Trust; Investment 	 
							Adviser;Distributor 
 
16.  Investment Advisory and Other Services	
	Investment Adviser and Administrator; 		 
						Distributor and Shareholder 
Servicing 			 
					Agent  
 
17.  Brokerage Allocation 				
	Investment Objectives and  
       							Management 
Policies; Portfolio 			 
						Transactions 
 
18.  Capital Stock and Other Securities		
	Investment Objectives and  
							Management Policies; 
Redemption of  		 
						Shares Taxes;  
										
		 
19.  Purchase, Redemption and  
       Pricing Securities Being Offered			Purchase 
of Shares; Redemption of Shares; 
							of Shares Valuation 
of Shares; Distributor; 	 
							Exchange Privilege 
 
20.  Tax Status						Taxes 
 
21.  Underwriters						Distributor 
 
22.  Calculations of Performance Data		
	Performance Data 
 
23.  Financial Statements					Financial 
Statements 



SMITH BARNEY PRINCIPAL RETURN FUND

388 Greenwich Street
New York, New York 10013
(212) 723-9218
March 27, 1997
PROSPECTUS
This Prospectus describes Smith Barney Principal Return Fund (the 
"Trust") and the following series (each, a "Series" and 
collectively, the "Series").  
  Zeros and Appreciation Series 1998 ("Series 1998") seeks (a) 
to return to each shareholder on August 31, 1998 (the "Series 1998 
Maturity Date") the principal amount of the shareholder's original 
investment (including any sales charge paid) through investment of 
a portion of its assets in zero coupon securities and (b) to the 
extent consistent with that objective, to provide long-term 
appreciation of capital through investment of the balance of its 
assets primarily in equity securities.  There can be no assurance 
that Series 1998's investment objectives will be achieved.
  Zeros Plus Emerging Growth Series 2000 ("Series 2000") seeks 
(a) to return to each shareholder on February 28, 2000 (the 
"Series 2000 Maturity Date") the principal amount of the 
shareholder's original investment (including any sales charge 
paid) through investment of a portion of its assets in zero coupon 
securities and (b) to the extent consistent with that objective, 
to provide long-term appreciation of capital through investment of 
the balance of its assets primarily in equity securities issued by 
"emerging growth companies," which are small- to medium-sized 
companies that are believed by the Series' investment adviser to 
show a prospect of achieving significant profit and gain in a 
relatively short period of time.  There can be no assurance that 
Series 2000's investment objectives will be achieved.  
  Security and Growth Fund seeks (a) to return to each 
shareholder on August 31, 2005 (the "Security and Growth Fund 
Maturity Date") the principal amount of the shareholder's original 
investment (including any sales charge paid) through investment of 
a portion of its assets in zero coupon securities and (b) to the 
extent consistent with that objective, to provide long-term 
appreciation of capital through investment of the balance of its 
assets primarily in equity securities.  There can be no assurance 
that the Fund's investment objectives will be achieved.  
When used herein, the term Maturity Date shall refer to the 
"Series 1998 Maturity Date," the "Series 2000 Maturity Date," and 
the "Security and Growth Fund Maturity Date", as applicable.

FD 01103


SHARES OF SERIES 1998, SERIES 2000 AND THE SECURITY AND 
GROWTH FUND ARE NOT CURRENTLY BEING OFFERED FOR SALE TO NEW 
INVESTORS.  THE NET ASSET VALUE PER SHARE OF EACH SERIES PRIOR TO 
THE MATURITY DATE CAN BE EXPECTED TO FLUCTUATE SUBSTANTIALLY OWING 
TO CHANGES IN PREVAILING INTEREST RATES THAT WILL AFFECT THE 
CURRENT VALUE OF EACH SERIES' HOLDINGS OF ZERO COUPON SECURITIES, 
AS WELL AS CHANGES IN THE VALUE OF EACH SERIES' OTHER HOLDINGS.  
BECAUSE THE SERIES ARE NOT CURRENTLY ENGAGED IN A CONTINUOUS 
OFFERING OF SHARES, THEY ARE NOT BENEFITING FROM AN INFLOW OF NEW 
CAPITAL.  IN ADDITION, EACH SERIES MAY EXPERIENCE REDEMPTIONS AND 
CAPITAL LOSSES PRIOR TO THE MATURITY DATE (OR IN PREPARATION FOR 
EACH SERIES' LIQUIDATION AT THE MATURITY DATE) AND WILL PAY 
DIVIDENDS AND DISTRIBUTIONS IN CASH TO SHAREHOLDERS WHO SO ELECT.  
A DIMINUTION OF ITS ASSETS RESULTING FROM LOSSES, REDEMPTIONS AND 
DIVIDENDS AND DISTRIBUTIONS PAID IN CASH COULD MAKE EACH SERIES' 
INVESTMENT OBJECTIVES UNACHIEVABLE; THUS THE ACCOMPLISHMENT OF 
EACH SERIES' INVESTMENT OBJECTIVES IN RESPECT TO REMAINING 
SHAREHOLDERS THAT REINVEST DIVIDENDS AND DISTRIBUTIONS COULD 
DEPEND IN PART ON THE INVESTMENT DECISIONS OF OTHER SHAREHOLDERS.  
SEE "INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES." 
This Prospectus sets forth concisely information about the 
Trust and each Series, including sales charges, shareholder 
servicing fees and expenses.  Investors are encouraged to read 
this Prospectus carefully and retain it for future reference.
Additional information about the Trust and each Series is 
contained in a Statement of Additional Information dated March 27, 
1997, as amended or supplemented from time to time, which 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 any 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 OFFENCE.



INTRODUCTION
The investment objectives of Series 1998 are (a) to return 
to each shareholder on the Maturity Date the principal amount of 
the shareholder's original investment (including any sales charge 
paid) through investment of a portion of its assets in zero coupon 
securities and (b) to the extent consistent with that objective, 
to provide long-term appreciation of capital through investment of 
the balance of its assets primarily in equity securities.  There 
can be no assurance that Series 1998's investment objectives will 
be achieved.
The investment objectives of Series 2000 are (a) to return 
to each shareholder on the Maturity Date the principal amount of 
the shareholder's original investment (including any sales charge 
paid) through investment of a portion of its assets in zero coupon 
securities and (b) to the extent consistent with that objective, 
to provide long-term appreciation of capital through investment of 
the balance of its assets primarily in equity securities issued by 
"emerging growth companies," which are small- to medium-sized 
companies that are believed by the Series' investment adviser to 
show a prospect of achieving significant profit and gain in a 
relatively short period of time.  There can be no assurance that 
Series 2000's investment objectives will be achieved.  
The investment objectives of the Security and Growth Fund 
are (a) to return to each shareholder on the Maturity Date the 
principal amount of the shareholder's original investment 
(including any sales charge paid) through investment of a portion 
of its assets in zero coupon securities and (b) to the extent 
consistent with that objective, to provide long-term appreciation 
of capital through investment of the balance of its assets 
primarily in equity securities.  There can be no assurance that 
the Fund's investment objectives will be achieved.  
As with most mutual funds, the Series employ various 
organizations to perform necessary functions and to provide 
services to their shareholders.  These organizations are carefully 
selected on behalf of each Series by the Trust's Board of 
Trustees, which regularly reviews the quality and scope of their 
performance.  The names of the organizations and the services that 
they perform on behalf of each Series and its shareholders are 
listed below:

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.
("First Data")
	............................................
 .................

Transfer Agent

More detailed information regarding these organizations and 
the functions they perform is provided in this Prospectus as well 
as in the Statement of Additional Information.



TABLE OF CONTENTS
Introduction	
3

The Series' Expenses	
5

Financial Highlights	
6

Investment Objectives and Management Policies	
10

Management of the Trust	
21

Purchase of Shares	
22

Redemption of Shares	
22

Minimum Account Size	
24

Valuation of Shares	
25

Exchange Privilege	
25

Dividends, Distributions and Taxes	
28

The Series' Performance	
29

Custodian and Transfer Agent	
30

Distributor	
30

Additional Information	
31



THE SERIES' EXPENSES
The following expense table lists the costs and expenses 
that an investor will incur, either directly or indirectly, as a 
shareholder of each Series, based upon the maximum sales charge 
that was incurred at the time of purchase and upon each Series' 
operating expenses for its most recent fiscal year:



Series
1998
Series 
2000
Security and 
Growth Fund

Shareholder Transaction Expenses
Sales charge imposed on purchases
(as a percentage of offering price)	


5.00%


5.00%


4.00%

Annual Fund Operating Expenses
(as a percentage of average net 
assets)
Management fees	


0.50%


0.60%


0.50%

Shareholder Servicing fees	
0.25%
0.25%
0.25%

Other expenses	
0.20%
0.26%
0.24%

Total Fund Operating Expenses	
0.95%
1.11%
0.99%



Management fees paid by the Trust include investment 
advisory fees paid monthly to SBMFM at an annual rate equal to a 
percentage of the value of the relevant Series' average daily net 
assets, as follows: Series 1998 - .30%; Series 2000 - .40%, and 
the Security and Growth Fund - .50%.  Series 1998, Series 2000 and 
the Security and Growth Fund also pay SBMFM an administration fee 
paid monthly at the annual rate of .20% of the value of each 
Series' average daily net assets.  Each Series also pay Smith 
Barney an annual shareholder servicing fee equal to .25% of the 
value of their respective daily net assets.
The nature of the services for which each Series pays 
management fees is described under "Management of the Trust."  
"Other expenses" in the above table include fees for transfer 
agent services, custodial fees, legal and accounting fees, 
printing costs and registration fees.


Example*
The following example demonstrates the projected dollar 
amount of total cumulative expenses that would be incurred over 
various periods with respect to a hypothetical investment in each 
Series. These amounts are based upon (a) payment by an investor of 
the initial sales charge, (b) payment by the Series of operating 
expenses at the levels set forth in the table above and (c) the 
following assumptions: 




1 YEAR

3 YEARS

5 YEARS
MATURITY 
DATE**

A shareholder would pay 
the following expenses on 
a $1,000 investment, 
assuming (1) 5% annual 
return and (2) redemption 
at the end of each time 
period





Series 1998 	
$59 
$79 
$100
$161

Series 2000	
$61 
$84 
$108 
$178

Security and Growth Fund	
$50 
$70 
$ 93 
$156

*	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, a Series' 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.  
**	Ten year amount for the Security and Growth Fund.  

FINANCIAL HIGHLIGHTS
  The following information for the fiscal years ended November 
30,1996 and 1995, has been audited by KPMG Peat Marwick LLP, 
independent auditors, whose reports thereon appear in the Funds' 
annual reports dated November 30,1996 and 1995. The information 
for the fiscal years ended November 30,1991 through November 
30,1994 has been audited by other auditors. The information set 
out below should be read in conjunction with the financial 
statements and related notes that appear in the Fund's Annual 
Report to Shareholders, which is incorporated by reference into 
the Statement of Additional Information.


For a Series 1998 share of beneficial interest outstanding 
throughout each period


1996
	1995
	1994
	1993
	1992
	1991 (1)

Net Asset Value, Beginning 
of Period
$7.91
	$7.75
	$9.38
	$9.02
	$8.40
	$7.60

Income (Loss) From 
Operations:
 	Net investment income
 	Net realized and 
unrealized  gain (loss)

	0.38
	0.45


	0.36
	1.03 

	0.41
	(0.70)

	0.38
	0.48

	0.37
	0.68

	0.39
	0.41

Total Income (Loss) From 
operations 
0.83
	1.39 
	(0.29) 
	0.86 
	1.05 
	0.80

Less Distributions From:
	Net investment income
 	Net realized gains 

	(0.78
) 
	(0.44
)

	(0.40) 
	(0.83) 

	(0.45) 
	(0.89)

	(0.40) 
	(0.10) 

	(0.43)
	--

	--
	--

Total Distributions
	(1.22
) 
	(1.23) 
	(1.34) 
	(0.50) 
	(0.43)


Net Asset Value, End of 
Period  
	$7.52 
	$7.91 
	$7.75 
	$9.38 
	$9.02 
	$8.40

Total Return  
	11.03
% 
	19.93% 
	(3.69)% 
	9.99%
	12.86%
	10.53%++

Net Assets, End of Period 
(000s)
	$93,7
93
	$98,51
3
	$101,38
8 
	$136,57
6 
	$166,0
77 
	$195,956

Ratios to Average Net 
Assets:







	Expenses 
	Net investment income  
	0.95%
	4.67 
	1.05%
	4.59 
	1.01%
	4.47
	0.97%
	4.15 
	1.01%
	4.39 
	1.05%+
	5.04+

Portfolio Turnover Rate 
	12% 
	13% 
	10% 
	17% 
	4% 
	20%

Average Commissions Paid On
Equity Security 
Transactions (2) 

	$0.06

	$0.06

	--

	--

	--

	--

(1) 	For the period from January 25, 1991 (commencement of 
operations) to November 30, 1991.
(2) 	As of September 1995, the SEC instituted new guidelines 
requiring the disclosure of average commissions 	per share.
+ +	Total return is not annualized, as it may not be 
representative of the total return for the year.
+	Annualized.



 For a Series 2000 share of beneficial interest outstanding 
throughout each period: 


1996
1995
1994
1993
1992
1991(1)

Net Asset Value, Beginning 
of Period
$9.28
$8.15 
$9.00 
$8.16 
$7.57 
$7.60

Income (Loss) From 
Operations: 
	Net investment income
	Net realized and unrealized  
gain (loss)

0.30
(0.16)

0.27 
1.48

0.27 
(0.28) 

0.26 
0.96 

0.26
0.43

0.07
(0.10)

Total Income (Loss) From 
operations 
0.14
1.75 
(0.01) 
1.22
0.69
(0.03)

Less Distributions From:
	Net investment income
 	Net realized gains 

(0.57) 
(0.22)

(0.27)
(0.35)  

(0.34) 
(0.50) 

(0.29) 
(0.09)

(0.10)
--

--

Total Distributions
(0.79)
(0.62) 
(0.84)
(0.38) 
(0.10)
--

Net Asset Value, End of 
Period  
$8.63
$9.28 
$8.15 
$9.00 
$8.16
$7.57

Total Return  
1.55%
22.17% 
(0.20)% 
15.72% 
9.15%
(0.39)%
++

Net Assets End of Period 
(000s)
$65,43
2
$76,56
3 
$74,751
$96,865
$125,32
7
$157,42
5

Ratios to Average Net 
Assets:







	Expenses (2)
	Net investment income  
1.11% 
3.15 
1.17% 
3.12 
1.15% 
3.27
1.10% 
3.12
1.15%
3.31
1.18%+
3.56+

Portfolio Turnover Rate 
0%
6%
1 %
0%
0%
2%

Average Commissions Paid On
	Equity Security 
Transactions(3) 

$0.06

$0.06

--

--

--

--

(1) 	For the period from August 30, 1991 (commencement of 
operations) to November 30, 1991.
(2)	For the year ended November 30, 1992, the expense ratio 
excludes interest expense.
	The expense ratio including interest expense was 1.16%
(3) 	As of September 1995, the SEC instituted new guidelines 
requiring the disclosure of average commissions per share.
+ +	Total return is not annualized, as it may not be 
representative of the total return for the year.
+	Annualized.


For a Security and Growth Fund share of beneficial interest 
outstanding throughout the period: 

1996
1995 (1)

Net Asset Value, Beginning of Period
$10.68
$9.60

Income (Loss) From Operations:
 	Net investment income
 	Net realized and unrealized  gain (loss)

0.33
0.82

0.28
0.94

	Total Income (Loss) From Operations 
1.15
1.22

Less Distributions From:
	Net investment income
 	Net realized gains 

(0.62)
(0.99)

--
(0.14)

Total Distributions
(1.61)
(0.14)

Net Asset Value, End of Period  
$10.22
$10.68

Total Return  
11.15%
12.70%++

Net Assets, End of Period (000s)
$244,007
$309,822

Ratios to Average Net Assets:



	Expenses 
	Net investment income  
0.99%
2.88
1.02%+
4.07+

Portfolio Turnover Rate 
43%
26%

Average Commissions Paid On
	Equity Security Transactions 

$0.05

$0.06





(1) For the period from March 30, 1995 (commencement of 
operations) to November 30, 1995
 + + Total return is not annualized, as it may not be 
representative of the total return for the year.
 + Annualized


INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

Set forth below is a description of the investment 
objectives and policies of each Series.  The investment objectives 
of a Series are fundamental and may not be changed without the 
approval of the holders of a majority of the outstanding voting 
securities of that Series, as defined under the Investment Company 
Act of 1940, as amended (the "1940 Act").  There can be no 
assurance that a Series will achieve its investment objectives.  
Additional information about the Series' investment strategies and 
investment policies appears in the Statement of Additional 
Information.  
In General
The investment objectives of each Series is (a) to return to 
each shareholder on the Maturity Date the principal amount of the 
shareholder's original investment (including any sales charge 
paid) through investment of a portion of its assets in zero coupon 
securities (the "Repayment Objective") and (b) to the extent 
consistent with that objective, to provide long-term appreciation 
of capital through investment of the balance of its assets 
primarily in equity securities (in the case of Series 2000, equity 
securities issued by "emerging growth companies").  
Although SBMFM believes that the Series' investment 
strategies should be sufficient to accomplish their investment 
objectives, there can be no assurance that they will be achieved.  
Moreover, although the Trust is structured as an open-end 
investment company and shareholders may redeem their shares at any 
time and may elect to receive dividends and distributions in cash, 
in order to help assure the return of the full amount of an 
original investment, shareholders should plan to hold their shares 
until the Maturity Date and to reinvest all dividends and 
distributions in additional shares.  In addition, while the amount 
sought to be returned on the Maturity Date to shareholders may 
equal or exceed the amount originally invested, the present value 
of that amount may be substantially less.  Shareholders also 
should be aware that the amount returned as taxable on the 
Maturity Date represents accretion of interest on each Series' 
zero coupon securities and will have been taxable as ordinary 
income over the term of the Series.  
Operations of the Series
As of February 28, 1997, zero coupon securities represented 
approximately 61%, 58%, 49%, of Series 1998's, Series 2000's, and 
Security and Growth Fund's, net assets, respectively, with the 
balance of each Series' net assets invested in equity (in the case 
of Series 2000, equity securities of emerging growth companies) 
and other securities as described below.  The Series' zero coupon 
securities will mature within one year before the Maturity Date 
and their aggregate stated principal amount is expected to be 
sufficient to meet the Repayment Objective; the Series will not 
receive any payments with respect to a zero coupon security prior 
to the maturity of that security.  The Series may hold zero coupon 
securities in excess of those required to meet the Repayment 
Objective to the extent SBMFM deems appropriate.  As each Series' 
zero coupon securities mature, the proceeds will be invested in 
direct obligations of the United States government with remaining 
maturities of one year or less and, in any case, maturing on or 
prior to the Maturity Date.  On the Maturity Date, each Series' 
remaining equity investments will be sold and other investments 
will mature, the liabilities of each Series will be discharged or 
provision made therefor, each Series' shares will be mandatory 
redeemed and, within seven days thereafter, the proceeds will be 
distributed to shareholders and each Series' thereafter will be 
terminated.  These arrangements may require the disposition of the 
Series' equity securities at a time when it is otherwise 
disadvantageous to do so and may involve selling securities at a 
substantial loss.  The liquidation and termination of each Series 
is conditioned on the Trust's receipt of an opinion of its counsel 
that all actions have been taken that are necessary to effect 
these transactions in accordance with the then current position of 
the SEC regarding a change in the nature of the business of a 
registered investment company, including (as is required under 
current SEC policy) the approval by the holders of a majority of 
the Trust's outstanding voting securities, as defined in the 1940 
Act.  If shareholder approval is solicited but not obtained, the 
Board of Trustees would consider and, if necessary, propose for 
shareholder approval, such other action as it deems appropriate 
and in the best interests of the Trust and its shareholders.  The 
estimated expenses of liquidation and termination of each Series 
will be accrued rateably over the entire term of the Series and 
will be charged to income.  These expenses are not expected to 
affect materially the ordinary annual operating expenses of the 
Series and, accordingly, should have no effect on the Series' 
ability to meet the Repayment Objective. 
Each Series may satisfy redemption requests and cash 
payments of dividends and distributions by liquidating a portion 
of its holdings of zero coupon securities, as well as other 
investments, provided that the Series would have sufficient zero 
coupon securities remaining to meet the Repayment Objective.  
Thus, each Series' portfolio may be visualized as consisting 
of two portions: one, its zero coupon securities, which are 
expected to increase in value by reason of accretion of interest 
to equal at maturity an amount sufficient to meet the Repayment 
Objective; the other, its equity securities and all other 
investments (in the case of Series 2000, holdings of emerging 
growth securities), which represent a variable portion of the 
Series' assets depending on the performance of those investments, 
the Series' expenses, the level of dividend reinvestment and the 
level of redemptions over time.  In order to facilitate the 
management of the Series' portfolios, shareholders are urged to 
reinvest dividends and distributions in additional shares; these 
amounts will be paid in cash only at the specific election of a 
shareholder.  
Zero Coupon Securities
A zero coupon security is a debt obligation that does not 
entitle the holder to any periodic payments of interest prior to 
maturity and therefore is issued and traded at a discount from its 
face amount.  Zero coupon securities may be created by separating 
the interest and principal components of securities issued or 
guaranteed by the United States government or one of its agencies 
or instrumentalities ("U.S.  government securities") or issued by 
private corporate issuers.  The Series, however, invest only in 
zero coupon securities that are direct obligations of the United 
States Treasury.  The discount from face value at which zero 
coupon securities are purchased varies depending on the time 
remaining until maturity, prevailing interest rates and the 
liquidity of the security.  Because the discount from face value 
is known at the time of investment, investors holding zero coupon 
securities until maturity know the total amount of their 
investment return at the time of investment.  In contrast, a 
portion of the total realized return from conventional interest-
paying obligations comes from the reinvestment of periodic 
interest.  Because the rate to be earned on these reinvestments 
may be higher or lower than the rate quoted on the interest-paying 
obligations at the time of the original purchase, the investor's 
return on reinvestments is uncertain even if the securities are 
held to maturity.  This uncertainty is commonly referred to as 
reinvestment risk.  With zero coupon securities, however, there 
are no cash distributions to reinvest, so investors bear no 
reinvestment risk if they hold the zero coupon securities to 
maturity; holders of zero coupon securities, however, forego the 
possibility of reinvesting at a higher yield than the rate paid on 
the originally issued security.  With both zero coupon and 
interest-paying securities, there is no reinvestment risk on the 
principal amount of the investment.  
Equity Securities (Series 1998 and Security and Growth Fund)
Series 1998 attempts to achieve its investment objective of 
long-term appreciation of capital by investing the portion of 
their assets not invested in zero coupon securities primarily in 
equity securities, as described in the following paragraph, that 
are believed to afford attractive opportunities for investment 
appreciation.  It is expected that Series 1998's equity 
investments will be in domestic companies, generally with market 
capitalizations in excess of $100 million.  Most of Series 1998's 
equity investments will be listed for trading on stock exchanges, 
although Series 1998 may purchase securities traded in the over-
the-counter market.  SBMFM will cause Series 1998 to invest in the 
securities of companies whose earnings they expect to increase, 
companies whose securities prices are lower than they believe 
justified in relation to their underlying assets or earning power 
or companies in which changes that it anticipates would result in 
improved operations or profitability.  Series 1998's equity 
holdings are broadly invested among different industries.  In 
analyzing securities for investment, SBMFM considers many 
different factors, including past growth records, management 
capability, future earnings prospects and technological 
innovation, as well as general market and economic factors that 
can influence the price of securities.  
The Security and Growth Fund attempts to achieve its 
investment objective of long-term capital appreciation by 
investing the portion of its assets not invested in zero coupon 
securities primarily in equity securities that SBMFM believes have 
above-average potential for capital growth.  In selecting 
investments on behalf of the Security and Growth Fund, SBMFM will 
seek to identify companies that are experiencing, or have the 
potential to experience, significant growth in earnings due to any 
number of factors, including benefiting from new products or 
services, technological developments, management changes or other 
external circumstances.  This significant potential for growth is 
often achieved by small- or medium-sized companies, but it may 
also be achieved by large, seasoned companies.  Although SBMFM 
anticipates that the Security and Growth Fund's non-zero coupon 
security portfolio initially would primarily be invested in small- 
to medium-sized companies, it may also be invested in the equity 
securities of larger, established companies that SBMFM determines 
present particular opportunities for capital growth.  
Under normal market conditions, the bulk of Series 1998's 
and the Security and Growth Fund's non-zero coupon security 
portfolios consist of common stocks, but they also may contain 
other equity securities, including preferred stocks and debt 
securities convertible into common stocks. Series 1998 does not 
intend to purchase warrants or rights but may receive these 
securities as part of a unit distributed to holders of a class of 
securities held by Series 1998.  Preferred securities and 
convertible securities will be selected on the basis of their 
equity characteristics, and ratings by statistical rating 
organizations generally will not be a factor in the selection 
process.  
Emerging Growth Securities (Series 2000)
Series 2000 attempts to achieve its investment objective of 
long-term capital appreciation by investing the portion of its 
assets not invested in zero coupon securities primarily in equity 
securities issued by "emerging growth companies" based in the 
United States, which are small - to medium-sized companies that 
are believed by SBMFM to show a prospect of achieving significant 
profit and gains within two to three years after their securities 
are acquired by Series 2000.  Although Series 2000 is not subject 
to a limitation on the market capitalization of the companies in 
which it will invest, the emerging growth companies in which 
Series 2000 will typically invest will have market capitalizations 
of less than $1 billion.  A company's stock market capitalization 
is calculated by multiplying the total number of shares of its 
common stock outstanding by the market price per share of its 
stock.  
In selecting investments on behalf of Series 2000, SBMFM 
will seek to identify emerging growth companies that it believes 
are undervalued in the marketplace or have earnings that may be 
expected to grow faster than the U.S.  economy in general.  These 
companies typically would possess one or more of a variety of 
characteristics, including high quality management, new 
technologies, techniques, products or services or cost-reducing 
measures that give them a leading or dominant position in a major 
product line, a sound financial position and a relatively high 
rate of return on invested capital so that future growth can be 
financed from internal sources.  Series 2000 also may invest in 
companies, typically called "special situation companies," that 
offer the possibility of accelerating earnings growth because of 
management changes, capitalization or asset deployment, 
governmental regulations or other external circumstances.  
Although SBMFM anticipates that Series 2000's non-zero coupon 
security portfolio primarily will be invested in smaller 
companies, it may also be invested to a lesser degree in the 
equity securities of medium or larger, established companies, 
including those involved in special situations, that SBMFM 
determines present particular opportunities for capital growth.  
Series 2000's non-zero coupon security portfolio has been designed 
to provide investors with significant opportunities for long-term 
capital appreciation that SBMFM believes are presented by the 
equity securities of small capitalization companies.  SBMFM 
believes that these securities are undervalued as compared, on a 
relative historical basis, with equity securities of larger 
capitalization companies, and have tended over time to outperform 
securities of larger capitalization companies. 
Additional Investments and Investment Techniques
Although under normal circumstances a Series' non-zero 
coupon security portfolio will consist primarily of common stocks 
of companies based in the United States, each Series may also 
invest in certain other securities as described below.  When SBMFM 
believes that a temporary defensive investment posture is 
warranted, each Series may invest in corporate and government 
bonds and notes and money market instruments, and from time to 
time may invest in repurchase agreements and lend its portfolio 
securities as discussed below.  
Warrants; Convertible Securities.  (Series 2000 and Security 
and Growth Fund) A warrant is a security that gives the holder the 
right, but not the obligation, to subscribe for newly created 
securities of the issuer or a related company at a fixed price 
either at a certain date or during a set period.  A convertible 
security is a security that may be converted either at a stated 
price or rate within a specified period of time into a specified 
number of shares of common stock.  In investing in convertible 
securities, the Series seeks the opportunity, through the 
conversion feature, to participate in the capital appreciation of 
the common stock into which the securities are convertible.  
Foreign Securities.  (Series 2000 and Security and Growth 
Fund) Series 2000 and the Security and Growth Fund may each invest 
up to 10% of its net assets in securities of foreign issuers.  
Investing in foreign securities involves certain risks, including 
those resulting from fluctuations in currency exchange rates, 
revaluation of currencies, future political or economic 
developments and the possible imposition of restrictions or 
prohibitions on the repatriation of foreign currencies or other 
foreign governmental laws or restrictions, reduced availability of 
public information concerning issuers, and, typically, the lack of 
uniform accounting, auditing and financial reporting standards or 
other regulatory practices and requirements comparable to those 
applicable to domestic companies.  Moreover, securities of many 
foreign companies may be less liquid and their prices more 
volatile than those of securities of comparable domestic 
companies.  In addition, with respect to certain foreign 
countries, the possibility exists of expropriation, confiscatory 
taxation and limitations on the use or removal of funds or other 
assets of the Series including the withholding of dividends.  
Lending Securities.  Each Series is authorized to lend 
securities it holds to brokers, dealers and other financial 
organizations.  These loans, if and when made, may not exceed 33-
1/3% of each Series' assets taken at value.  A Series' loans of 
securities will be collateralized by cash, letters of credit or 
U.S.  government securities that are maintained at all times in a 
segregated account with the Trust's custodian in an amount at 
least equal to the current market value of the loaned securities.  
By lending its portfolio securities, a Series will seek to 
generate income by continuing to receive interest on the loaned 
securities, by investing the cash collateral in short-term 
instruments or by obtaining yield in the form of interest paid by 
the borrower when U.S.  government securities are used as 
collateral.  The risks in lending portfolio securities, as with 
other extensions of secured credit, consist of possible delays in 
receiving additional collateral or in the recovery of the 
securities or possible loss of rights in the collateral should the 
borrower fail financially.  Loans will be made to firms deemed by 
SBMFM to be of good standing and will not be made unless, in the 
judgement of SBMFM, the consideration to be earned from such loans 
would justify the risk.  
Money Market Instruments
Each Series may hold at any time up to 10% of the value of 
its assets in cash and money market instruments in order to cover 
the Series' expenses, anticipated redemptions, cash payments of 
dividends and distributions and to meet settlement requirements 
for securities.  In addition, when SBMFM believes that, with 
respect to its equity portfolio, a temporary defensive investment 
posture is warranted, a Series may invest without limitation in 
cash and money market instruments.  To the extent that it holds 
cash or invests in money market instruments, a Series will not 
achieve its investment objective of long-term appreciation of 
capital.  Money market instruments in which the Series may invest 
are: U.S.  government securities; bank obligations (including 
certificates of deposit, time deposits and bankers' acceptances of 
domestic or foreign banks, domestic savings and loan associations 
and other banking institutions having total assets in excess of 
$500 million); commercial paper rated no lower than A-2 by 
Standard & Poor's Corporation or Prime-2 by Moody's Investors 
Service, Inc. 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 a Series' investments in 
bank obligations, including time deposits, exceed 25% of its 
assets.  In addition, a Series will not invest in time deposits 
maturing in more than seven days if, as a result, its holdings of 
those time deposits would exceed 5% of Security and Growth Fund's 
and Series 1998's net assets and 10% of Series 2000's net assets.  
A Series will invest in an obligation of a foreign bank or 
foreign branch of a United States bank only if SBMFM determines 
that the obligation presents minimal credit risks.  Obligations of 
foreign banks or foreign branches of United States banks in which 
a Series will invest may be traded in the United States or outside 
the United States, but will be denominated in U.S.  dollars.  
These obligations entail risks that are different from those of 
investments in obligations of United States banks.  These risks 
include foreign economic and political developments, foreign 
governmental restrictions that may adversely affect payment of 
principal and interest on the obligations, foreign exchange 
controls and foreign withholding or other taxes on income.  
Foreign branches of domestic banks are not necessarily subject to 
the same or similar regulatory requirements that apply to domestic 
banks, such as mandatory reserve requirements, loan limitations 
and accounting, auditing and financial recordkeeping requirements.  
In addition, less information may be publicly available about a 
foreign branch of a domestic bank than about a domestic bank.  
U.S. government securities in which a Series may invest 
include: direct obligations of the United States Treasury, and 
obligations issued or guaranteed by the United States government, 
its agencies and instrumentalities, including instruments that are 
supported by the full faith and credit of the United States; 
instruments that are supported by the right of the issuer to 
borrow from the United States Treasury; and instruments that are 
supported solely by the credit of the instrumentality.  
Repurchase Agreements
Each series may engage in repurchase agreement transactions 
with certain banks which are the issuers of instruments acceptable 
for purchase by the Fund and with certain dealers on the Federal 
Reserve Bank of New York's list of reporting dealers.  Under the 
terms of a typical repurchase agreement, a Series would acquire an 
underlying debt obligation for a relatively short period (usually 
not more than seven days) subject to an obligation of the seller 
to repurchase, and the Series to resell, the obligation at an 
agreed price and time, thereby determining the yield during the 
Series' holding period.  This arrangement results in a fixed rate 
of return that is not subject to market fluctuations during the 
Series' holding period.  The value of the underlying securities 
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 also will review 
on an ongoing basis the creditworthiness of those banks and 
dealers with which the Series may enter into repurchase agreements 
to evaluate the potential risks.  The Series bear a risk of loss 
in the event that the other party to a repurchase agreement 
defaults on its obligations and the Series is delayed or prevented 
from exercising its rights to dispose of the underlying 
securities, including the risk of a possible decline in the value 
of the underlying securities during the period in which the Series 
seeks to assert its rights to them, the risk of incurring expenses 
associated with asserting those rights and the risk of losing all 
or a part of the income from the agreement.  At any one time, 
Series 2000's aggregate holdings of repurchase agreements having a 
duration of more than five business days and securities lacking 
readily available market quotations will not exceed 10% of Series 
2000's total assets.  
Risk Factors and Other Special Considerations
Zero coupon securities of the type held by each Series can 
be sold prior to their due date in the secondary market at their 
then prevailing market value which, depending on prevailing levels 
of interest rates and the time remaining to maturity, may be more 
or less than the securities' "accreted value;" that is, their 
value based solely on the amount due at maturity and accretion of 
interest to date.  The market prices of zero coupon securities are 
generally more volatile than the market prices of securities that 
pay interest periodically and, accordingly, are likely to respond 
to a greater degree to changes in interest rates than do non-zero 
coupon securities having similar maturities and yields.  As a 
result, the net asset value of shares of each Series may fluctuate 
over a greater range than shares of other mutual funds that invest 
in U.S.  government securities having similar maturities and 
yields but that make current distributions of interest.  The 
current net asset value of each Series attributable to zero coupon 
securities and other debt instruments held by each Series 
generally will vary inversely with changes in prevailing interest 
rates.  
As a series of an open-end investment company, each Series 
is required to redeem its shares upon the request of any 
shareholder at the net asset value next determined after receipt 
of the request.  However, because of the price volatility of zero 
coupon securities prior to maturity, a shareholder who redeems 
shares prior to the Maturity Date may realize an amount that is 
greater or less than the purchase price of those shares, including 
any sales charge paid.  Although shares redeemed prior to the 
Maturity Date would no longer be subject to the possible 
achievement of the Repayment Objective, the amount originally 
invested in the shares not redeemed would remain subject to the 
possible achievement of the Repayment Objective, provided 
dividends and distributions with respect to these shares are 
reinvested.  Thus, if each Series is successful in achieving the 
Repayment Objective, the holder of those remaining shares plus 
shares acquired through reinvestment of dividends and 
distributions thereon ("Remaining Shares") would receive at the 
Maturity Date an amount that equals or exceeds the purchase price 
of those shares.  Nonetheless, the amount received on the Maturity 
Date in respect of Remaining Shares, when combined with the amount 
received in respect of shares redeemed prior to the Maturity Date, 
may be more or less than the aggregate purchase price of all 
shares purchased.
Each year the Series will be required to accrue an 
increasing amount of income on their zero coupon securities 
utilizing the effective interest method.  To maintain its tax 
status as a pass-through entity and also to avoid imposition of 
excise taxes, however, each Series will be required to distribute 
dividends equal to substantially all of its net investment income, 
including the accrued income on its zero coupon securities for 
which it receives no payments in cash prior to their maturity.  
Dividends of each Series' net investment income and distributions 
of its short-term capital gains will be taxable to shareholders as 
ordinary income for Federal income tax purposes, whether received 
in cash or reinvested in additional shares.  See "Dividends, 
Distributions and Taxes." However, a shareholder who elects to 
receive dividends and distributions in cash, instead of 
reinvesting these amounts in additional shares of the Series, may 
realize an amount that is less or greater than the entire amount 
originally invested.  ACCORDINGLY, THE SERIES MAY NOT BE 
APPROPRIATE FOR TAXABLE INVESTORS THAT WOULD REQUIRE CASH 
DISTRIBUTIONS FROM THE SERIES IN ORDER TO MEET THEIR CURRENT TAX 
OBLIGATIONS RESULTING FROM THEIR INVESTMENT.
Emerging Growth Securities (Series 2000).  Securities of the 
kinds of companies in which Series 2000 will invest may be subject 
to significant price fluctuation and above-average risk.  In 
addition, companies achieving a high earnings growth rate tend to 
reinvest their earnings rather than distribute them.  As a result, 
Series 2000 is not likely to receive significant dividend income 
on its portfolio of equity securities; an investment in Series 
2000 should, thus, not be considered as a complete investment 
program and may not be appropriate for all investors.  
Smaller and Medium Sized Companies.  (Series 2000 and 
Security and Growth Fund).  Securities of smaller and medium sized 
companies (companies with a capitalization of less than $1 
billion) may be subject to a limited liquidity and more volatility 
which could result in significant fluctuations in the price of 
their shares.  
Covered Option Writing (Security and Growth Fund).  Security 
and Growth Fund may write covered call options with respect to its 
portfolio securities.  Security and Growth Fund realizes a fee 
(referred to as a "premium") for granting the rights evidenced by 
the options.  A call option embodies the right of its purchaser to 
compel the writer of the option to sell to the option holder an 
underlying security at a specified price at any time during the 
option period.  Thus, the purchaser of a call option written by 
the Security and Growth Fund has the right to purchase from the 
Security and Growth Fund the underlying security owned by the 
Security and Growth Fund at the agreed-upon price for a specified 
time period.  
Upon the exercise of a call option written by the Security 
and Growth Fund, the Security and Growth Fund may suffer a loss 
equal to the excess of the security's market value at the time of 
the option exercise over the Security and Growth Fund's cost of 
the security, less the premium received for writing the option.  
The Security and Growth Fund will write only covered options 
with respect to its portfolio securities.  Accordingly, whenever 
the Security and Growth Fund writes a call option on its 
securities, it will continue to own or have the present right to 
acquire the underlying security for as long as it remains 
obligated as the writer of the option.  To support its obligation 
to purchase the underlying security if a call option is exercised, 
the Security and Growth Fund will either (a) deposit with its 
custodian in a segregated account, cash, or equity and debt 
securities of any grade provided such securities have been 
determined by SBMFM to be liquid and unencumbered pursuant to 
guidelines established by the Trustees("eligible segregated 
assets") having a value at least equal to the exercise price of 
the underlying securities or (b)-continue to own an equivalent 
number of puts of the same "series" (that is, puts on the same 
underlying security) with exercise prices greater than those that 
it has written (or, if the exercise prices of the puts that it 
holds are less than the exercise prices of those that it has 
written, it will deposit the difference with its custodian in a 
segregated account).  
The Security and Growth Fund may engage in a closing 
purchase transaction to realize a profit, to prevent an underlying 
security from being called or to unfreeze an underlying security 
(thereby permitting its sale or the writing of a new option on the 
security prior to the outstanding option's expiration).  To effect 
a closing purchase transaction, the Security and Growth Fund would 
purchase, prior to the holder's exercise of an option that the 
Security and Growth Fund has written, an option of the same series 
as that on which the Security and Growth Fund desires to terminate 
its obligation.  The obligation of the Security and Growth Fund 
under an option that it has written would be terminated by a 
closing purchase transaction, but the Security and Growth Fund 
would not be deemed to own an option as a result of the 
transaction.  There can be no assurances that the Security and 
Growth Fund will be able to effect closing purchase transactions 
at a time when it wishes to do so.  To facilitate closing purchase 
transactions, however, the Security and Growth Fund ordinarily 
will write options only if a secondary market for the options 
exists on domestic securities exchanges or in the over-the counter 
market.  
The Security and Growth Fund may also, for hedging purposes, 
purchase put options on securities traded on national securities 
exchanges as well as in the over-the-counter market.  The Security 
and Growth Fund may purchase put options on particular securities 
in order to protect against a decline in the market value of the 
underlying securities below the exercise price less the premium 
paid for the option.  Put options on individual securities are 
intended to protect against declines in market value which occur 
prior to the option's expiration date.  Prior to expiration, most 
options may be sold in a closing sale transaction.  Profit or loss 
from such a sale will depend on whether the amount received is 
more or less than the premium paid for the option plus the related 
transaction cost.  
The Security and Growth Fund may purchase options in the 
over-the-counter market ("OTC options") to the same extent that it 
may engage in transactions in exchange traded options.  OTC 
options differ from exchange traded options in that they are 
negotiated individually and terms of the contract are not 
standardized as in the case of exchange traded options.  Moreover, 
because there is no clearing corporation involved in an OTC 
option, there is a risk of non-performance by the counterparty to 
the option.  However, OTC options are generally much more 
available for securities in a wider range of expiration dates and 
exercise prices than exchange traded options.  It is the current 
position of the staff of the SEC that OTC options (and securities 
underlying the OTC options) are illiquid securities.  Accordingly, 
the Security and Growth Fund will treat OTC options as subject to 
the Security and Growth Fund's limitation on illiquid securities 
until such time as there is a change in the SEC's position.  
Options on Broad Based-Domestic Stock Indexes (Security and Growth 
Fund) The Security and Growth Fund may, for hedging purposes only, 
write call options and purchase put options on broad-based 
domestic stock indexes and enter into closing transactions with 
respect to such options.  Options on stock indexes are similar to 
options on securities except that, rather than having the right to 
take or make delivery of stock at the specified exercise price, an 
option on a stock index gives the holder the right to receive, 
upon exercise of the option, an amount of cash if the closing 
level of the stock index upon which the option is based is "in the 
money", i.e.  the closing level of the index is higher than the 
exercise price of the option.  This amount of cash is equal to the 
difference between the closing level of the index and the exercise 
price of the option, expressed in dollars times a specified 
multiple.  The writer of the option is obligated, in return for 
the premium received, to make delivery of this amount.  Unlike 
stock options, all settlements are in cash, and gain or loss 
depends on price movements in the stock market generally rather 
than price movements in the individual stocks.  
The effectiveness of purchasing and writing puts and calls 
on stock index options depends to a large extent on the ability of 
SBMFM to predict the price movement of the stock index selected.  
Therefore, whether the Security and Growth Fund realizes a gain or 
loss from the purchase of options on an index depends upon 
movements in the level of stock prices in the stock market 
generally.  Additionally, because exercise of index options are 
settled in cash, a call writer such as the Fund cannot determine 
the amount of the settlement obligations in advance and it cannot 
provide in advance for, or cover, its potential settlement 
obligations by acquiring and holding the underlying securities.  
When the Security and Growth Fund has written the call, there is 
also a risk that the market may decline between the time the 
Security and Growth Fund has a call exercised against it, at a 
price which is fixed as of the closing level of the index on the 
date of exercise, and the time the Security and Growth Fund is 
able to exercise the closing transaction with respect to the long 
call position it holds.  
Futures Contracts and Options on Futures Contracts.  
(Security and Growth Fund) A futures contract provides for the 
future sale by one party and the purchase by the other party of a 
certain amount of a specified security at a specified price, date, 
time and place.  The Security and Growth Fund may enter into 
futures contracts to sell securities when SBMFM believes that the 
value of the Security and Growth Fund's securities will decrease.  
An option on a futures contract, as contrasted with the direct 
investment in a futures contract gives the purchaser the right, in 
return for the premium paid, to assume a position in a futures 
contract at a specified exercise price at any time prior to the 
expiration date of the option.  A call option gives the purchaser 
of the option the right to enter into a futures contract to buy 
and obliges the writer to enter into a futures contract to sell 
the underlying securities.  A put option gives a purchaser the 
right to sell and obliges the writer to buy the underlying 
contract.  The Security and Growth Fund may enter into futures 
contracts to purchase securities when SBMFM anticipates purchasing 
the underlying securities and believes that prices will rise 
before the purchases will be made.  When the Security and Growth 
Fund enters into a futures contract to purchase an underlying 
security, an amount of eligible segregated assets, equal to the 
market value of the contract, will be deposited in a segregated 
account with the Security and Growth Fund's custodian to 
collateralize the position, thereby insuring that the use of the 
contract is unleveraged.  The Security and Growth Fund will not 
enter into futures contracts for speculation and will only enter 
into futures contracts that are traded on a U.S.  exchange or 
board of trade.  
Other Considerations.  In order to generate sufficient cash 
to meet distribution requirements and other operational needs and 
to redeem its shares on request, the Series may be required to 
limit reinvestment of capital on the disposition of its non-zero 
coupon securities and may be required to liquidate some or all of 
its non-zero coupon securities over time.  The Series may be 
required to effect these liquidations at a time when it is 
otherwise disadvantageous to do so.  If a Series realizes capital 
losses on dispositions of non-zero coupon securities that are not 
offset by capital gains on the disposition of other such 
securities, the Series may be required to liquidate a 
disproportionate amount of its zero coupon securities or borrow 
money, in an amount not exceeding 33-1/3% of the Series' total 
assets, to satisfy the distribution and redemption requirements 
described above.  The liquidation of zero coupon securities and 
the expenses associated with borrowing money in these 
circumstances could render the Series unable to meet the Repayment 
Objective.  
lnvestment Restrictions
The Trust has adopted certain fundamental investment 
restrictions that may not be changed without approval of a 
majority of the Trust's outstanding voting securities.  Included 
among those fundamental restrictions are the following: 
1.  A Series will not purchase securities (other than U.S.  
government securities) of any issuer if, as a result of the 
purchase, more than 5% of the value of the Series' total assets 
would be invested in the securities of the issuer, except that up 
to 25% of the value of the Series' total assets may be invested 
without regard to this 5% limitation 
2.  A Series will not purchase more than 10% of the voting 
securities of any one issuer, or more than 10% of the securities 
of any class of any one issuer, except that this limitation is not 
applicable to a Series' investments in U.S.  government 
securities, and up to 25% of a Series' assets may be invested 
without regard to these 10% limitations.  
3.  A Series will not borrow money, except that a Series may 
borrow from banks temporarily for 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 33-1/3% of the value of the Series' total assets 
(including the amount borrowed) valued at market less liabilities 
(not including the amount borrowed) at the time the borrowing is 
made.  Whenever borrowings exceed 5% of the value of the total 
assets of the Series, the Series will not make any additional 
investments.  
4.  A Series will not lend money to other persons, except 
through purchasing debt obligations, lending portfolio securities 
and entering into repurchase agreements.  
5.  A Series will invest no more than 25% of the value of 
its total assets in securities of issuers in any one industry, 
except that this restriction does not apply to investments in U.S.  
government securities.  
Certain other investment restrictions adopted by the Series 
are described in the Statement of Additional Information.  
Portfolio Transactions and Turnover
Securities transactions on behalf of the Series will be 
executed by a number of brokers and dealers, including Smith 
Barney and certain of its affiliated brokers, that are selected by 
SBMFM.  The Series may use Smith Barney or a Smith Barney 
affiliated broker in connection with a purchase or sale of 
securities when SBMFM believes that the charge for the transaction 
does not exceed usual and customary levels.  In selecting a 
broker, including Smith Barney, for a transaction, the primary 
consideration is prompt and effective execution of orders at the 
most favorable prices.  Subject to that primary consideration, 
dealers may be selected for research, statistical or other 
services to enable SBMFM to supplement its own research and 
analysis with the views and information of other securities firms.  
The Trust cannot accurately predict any Series' portfolio 
turnover rate, but anticipates that its annual turnover will not 
exceed 50%.  
MANAGEMENT OF THE TRUST
Board of Trustees
Overall responsibility for management and supervision of the 
Trust and the Series rests with the Trust's Board of Trustees.  
The Trustees approve all significant agreements between the Trust 
and the persons or companies that furnish services to the Trust 
and the Series, including agreements with its investment adviser, 
administrator, custodian and transfer agent.  The day-to-day 
operations of the Series are delegated to the Series' investment 
adviser and administrator.  The Statement of Additional 
Information contains general background information regarding each 
of the Trust's Trustees and the executive officers of each Series.  
lnvestment Advisor SBMFM
SBMFM, located at 388 Greenwich Street, New York, New York 
10013, serves as the Fund's investment adviser.  SBMFM (through 
its predecessors) has been in the investment counselling business 
since 1940.  SBMFM renders investment advice to a wide variety of 
individual, institutional and investment company clients and has 
aggregate assets under management as of January 31, 1997, in 
excess of $80 billion. 
Subject to the supervision and direction of the Trust's 
Board of Trustees, SBMFM manages each Series' portfolio in 
accordance with the Series' stated investment objectives and 
policies, makes investment decisions for the Series, places orders 
to purchase and sell securities, and employs professional 
portfolio managers and securities analysts who provide research 
services to the Series.  
Portfolio Management
Harry D.  Cohen, Managing Director of SBMFM, has served as 
Vice President and Investment Officer of Series 1998 since the 
Series' commencement of operations, and manages the day-to-day 
operations of Series 1998 including making all investment 
decisions.  
Richard Freeman, Managing Director of SBMFM, has served as 
Vice President and Investment Officer of Series 2000 since the 
Series' commencement of operations, and manages the day-to-day 
operations of Series 2000, including making all investment 
decisions. 
John G. Goode, President and Chief Executive Officer of 
Davis Skaggs Investment Management, a division of SBMFM, serves as 
Vice President of the Security and Growth Fund and manages its 
day-to-day operations, including making all investment decisions.  
Management's discussion and analysis, and additional 
performance information regarding each Series during the fiscal 
year ended November 30, 1996, are included in the Series' Annual 
Report dated November 30, 1996.  A copy of each Series' 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.

Administrator SBMFM
SBMFM also serves as the administrator to Series 1998 and 
Series 2000 and oversees all aspects of the Series' 
administration.  For administration services rendered to each of 
the these Series, each Series pays SBMFM a fee at the annual rate 
of 0.20% of the value of the Series' average daily net assets.  
PURCHASE OF SHARES
Shares of the Series are not currently being offered for 
sale to new investors, although each Series, upon at least 30 
days' notice to shareholders, may commence a continuous offering 
if the Trustees determine it to be in the best interests of that 
Series and its shareholders.
REDEMPTION OF SHARES
The Trust is required to redeem shares of a Series tendered to it, 
as described below, at a redemption price equal to their net asset 
value per share next determined after receipt of a written request 
in proper form at no charge other than any applicable CDSC.  
Redemption requests received after the close of regular trading on 
the NYSE are priced at the net asset value per share next 
determined.
The Series normally transmit redemption proceeds for credit to the 
shareholder's account at Smith Barney a broker that clears 
securities transactions through Smith Barney on a fully disclosed 
basis (an "Introducing Broker"), or dealer in the selling group at 
no charge within three days after receipt of proper tender except 
on any days on which the NYSE is closed or as permitted under the 
Investment Company Act of 1940, as amended in extraordinary 
circumstances. Generally, 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.
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 a 
custodian may be redeemed through  a investor's Financial 
Consultant, by submitting a written request for redemption to: 
Smith Barney Principal Return Fund
(specify the Series) 
c/o First Data Investor Services Group, Inc. 
P.O.  Box 9134
Boston, Massachusetts 02205-9134 
A written redemption request must (a) state the number or 
dollar amount of shares to be redeemed, (b) identify the Series 
from which the shares are to be redeemed, (c) identify the 
shareholder's account number and (d) 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 Trust's transfer agent 
together with a redemption request.  Any signature appearing on a 
redemption request in excess of $2,000, share certificate or stock 
power 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 a member firm 
of a national securities exchange.  Written 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 or the 
redemption proceeds are to be sent to an address other than the 
address of record.  Unless otherwise directed, redemption proceeds 
will be mailed to an investor's address of record.  The Trust's 
transfer agent may require additional supporting documents for 
redemptions made by corporations, executors, administrators, 
trustees or guardians.  A redemption request will not be deemed to 
be properly received until the Trust's transfer agent receives all 
required documents in proper form.  
Telephone Redemption and Exchange Program
	Shareholders who do not have a Smith Barney brokerage 
account may be eligible to redeem and exchange Series shares by 
telephone.  To determine if a shareholder is entitled to 
participate in this program, he or she should contact First Data 
at 1-800-451-2010.  Once eligibility is confirmed, the shareholder 
must complete and return a Telephone/Wire Authorization Form, 
along with a signature guarantee that will be provided by First 
Data upon request.  
	Redemptions.  Redemption requests of up to $10,000 of the 
Series' shares may be made by eligible shareholders by calling 
First Data at 1-800-451-2010.  Such requests may be made between 
9:00 a.m.  and 5:00 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 Series 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 shares 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 
First Data at 1-800-451-2010 between 9:00 a.m.  and 5:00 p.m.  
(New York City time) on any day on which the NYSE is open.  
Exchange requests received after the close of regular trading on 
the NYSE are processed at the net asset value next determined.
Additional Information regarding Telephone Redemption and 
Exchange Program.  Neither the Trust nor its agents will be liable 
for following instructions communicated by telephone that are 
reasonably believed to be genuine.  The Trust and its agents will 
employ procedures designed to verify the identity of caller and 
legitimacy of instructions (for example, a shareholder's name and 
account number will be required and phone calls may be recorded).  
The Trust 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.  
Although shares of the Series may be redeemed as described 
above, a shareholder who redeems prior to the Maturity Date may 
realize an amount that is less or greater than the entire amount 
of his or her investment.  See "Investment Objectives and 
Management Policies." 
If the Trust's Board of Trustees determines that it would be 
detrimental to the best interests of remaining shareholders to 
make a redemption payment wholly in cash, a Series may pay any 
portion of a redemption in excess of the lesser of $250,000 or 1% 
of the Series' net assets by distribution in kind of securities 
from a Series' portfolio in lieu of cash in conformity with SEC 
rules.  Portfolio securities issued in a redemption in kind will 
be readily marketable, although a shareholder that receives a 
distribution in kind of securities may incur transaction costs in 
the disposition of those securities and could experience a loss on 
the securities between the time of such distribution and such 
disposition.  
MINIMUM ACCOUNT SIZE
The Trust reserves the right to involuntarily liquidate any 
shareholder's account in a Series if aggregate net asset value of 
the shares held in the Series' account is less than $500.  (If a 
shareholder has more than one account in the Trust, each account 
must satisfy the minimum account size.) The Trust, however, will 
not redeem shares based solely on market reductions in net asset 
value.  Before the Trust 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.  



VALUATION OF SHARES
A Series' net asset value per share is determined as of the close 
of regular trading on the NYSE on each day the NYSE is open and is 
computed by dividing the value of the Series' net assets by the 
total number of its shares outstanding. 
Generally, the Series' investments are valued at market 
value or, in the absence of a market value, at fair value as 
determined by or under the direction of the Trust's Board of 
Trustees.  Securities that are primarily traded on non-U.S.  
exchanges are generally valued at the preceding closing values of 
the securities on their respective exchanges, except that when an 
occurrence subsequent to the time that a non-U.S.  security is 
valued is likely to have changed the value, then the fair value of 
those securities will be determined by consideration of other 
factors by or under the direction of the Board of Trustees.  A 
security that is primarily traded on a U.S.  or non-U.S.  stock 
exchange is valued at the last sale price on that exchange or, if 
there were no sales during the day, at the current quoted bid 
price.  In cases in which securities are traded on more than one 
exchange, the securities are valued on the exchange designated by 
or under the authority of the Board of Trustees as the primary 
market.  Unlisted non-U.S.  securities are valued at the mean 
between the last available bid and offer price prior to the time 
of valuation.  U.S.  over-the-counter securities will be valued on 
the basis of the bid price at the close of business on each day.  
Any assets or liabilities initially expressed in terms of non-U.S.  
currencies will be converted into U.S.  dollar values based on a 
formula prescribed by the Trust or, if the information required by 
the formula is unavailable, as determined in good faith by the 
Board of Trustees.  Investments in U.S.  government securities 
(other than short-term securities) are valued at the quoted bid 
price in the over-the-counter market.  Short-Term investments that 
mature in 60 days or less are valued at amortized cost (which 
involves valuing an investment at its cost initially and, 
thereafter, assuming a constant amortization to maturity of any 
discount or premium, regardless of the effect of fluctuating 
interest rates on the market value of the investment) when the 
Board of Trustees determines that amortized cost reflects fair 
value of the investment.  In carrying out the Board's valuation 
policies, SBMFM may consult with an independent pricing service 
retained by the Trust.  Further information regarding the Series' 
valuation policies is contained in the Statement of Additional 
Information. 
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of the Trust may be 
exchanged at the net asset value next determined for Class A 
shares 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 Trust shares are subject to minimum 
investment requirements and 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 

Growth and Income Funds
Concert Social Awareness Fund 
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.-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 Intermediate Maturity New York Municipals Fund 
Smith Barney Managed Municipals Fund Inc. 
Smith Barney Massachusetts Municipals Fund 
Smith Barney Muni Funds-Florida Portfolio 
Smith Barney Muni Funds-Georgia Portfolio 
Smith Barney Muni Funds - Limited Term Portfolio 
Smith Barney Muni Funds-National Portfolio 
Smith Barney Muni Funds-New York Portfolio 
Smith Barney Muni Funds-Pennsylvania Portfolio 
Smith Barney 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 
Smith Barney Concert Series, Inc. 
	Smith Barney Allocation Concert Series, Inc.-Balanced 
Portfolio 
	Smith Barney Allocation Concert Series, Inc.-Conservative 
Portfolio 
	Smith Barney Allocation Concert Series, Inc.-Growth 
Portfolio 
	Smith Barney Allocation Concert Series, Inc.- High Growth 
Portfolio 
	Smith Barney Allocation Concert Series, Inc.-Income 
Portfolio 

Money Market Funds
Smith Barney Money Funds, Inc.-Cash Portfolio 
Smith Barney Money Funds, Inc.-Government Portfolio 
Smith Barney Money Funds, Inc.-Retirement Portfolio 
Smith Barney Muni Funds-California Money Market Portfolio 
Smith Barney Muni Funds-New York Money Market Portfolio 
Smith Barney Municipal Money Market Fund, Inc. 
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, as 
its discretion, decide to limit additional purchases and/or 
exchanges by a shareholder. Upon such a determination, the Fund 
will provide notice in writing or by telephone 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 funds of the Smith Barney Mutual 
Funds ordinarily available, which position the shareholder would 
be expected to maintain for a significant period of time. All 
relevant factors will be considered in determining what 
constitutes an abusive pattern of exchanges.  
Certain shareholders may be able to exchange shares by 
telephone.  See "Redemption of Shares - Telephone Redemption and 
Exchange Program".  Exchanges will be processed at the net asset 
value next determined, plus any applicable sales charge 
differential.  Redemption procedures discussed above 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 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 Trust reserves the right to modify or 
discontinue exchange privileges upon 60 days' prior notice to 
shareholders.  
A SHAREHOLDER WHO EXCHANGES SHARES PRIOR TO THE MATURITY DATE MAY 
REALIZE AN AMOUNT THAT IS LESS OR GREATER THAN THE ENTIRE AMOUNT 
OF HIS OR HER INVESTMENT.  SEE "INVESTMENT OBJECTIVES AND 
MANAGEMENT POLICIES".  MOREOVER, BECAUSE EACH SERIES IS NOT 
ENGAGING IN A CONTINUOUS OFFERING OF SHARES, A SHAREHOLDER WHO 
EXCHANGES HIS OR HER SERIES SHARES WILL NOT BE ABLE TO EFFECT A 
FURTHER EXCHANGE BACK INTO THAT SERIES.
DIVIDENDS DISTRIBUTIONS AND TAXES
Dividends and Distributions
Dividends from net investment income of each Series and 
distributions of net realized capital gains of each Series, if 
any, will be distributed annually after the close of the fiscal 
year in which they are earned.  Dividends and distributions will 
be reinvested automatically for each shareholder's account at net 
asset value in additional shares of a Series, unless the 
shareholder instructs the Series to pay all dividends and 
distributions in cash and to credit the amounts to his or her 
Smith Barney brokerage account.  
A SHAREHOLDER WHO ELECTS TO RECEIVE DIVIDENDS AND DISTRIBUTIONS IN 
CASH MAY REALIZE AN AMOUNT THAT IS GREATER OR LESS THAN THE ENTIRE 
AMOUNT OF HIS OR HER INVESTMENT.  


Taxes
Each Series of the Trust has qualified and intends to 
continue to qualify each year as a "regulated investment company" 
under Subchapter M of the Internal Revenue Code of 1986 as amended 
for Federal income tax purposes.  The requirements for 
qualification may cause a Series to restrict the extent of its 
short-term trading.  If a Series so qualifies, it will not be 
subject to Federal income tax on its net investment income and net 
realized capital gains that it distributes to shareholders, so 
long as it meets certain distribution requirements.  See 
"Investment Objectives and Management Policies." In addition, each 
Series is subject to a non-deductible excise tax of 4% of the 
amount by which the Series fails to distribute specified 
percentages of its investment income and capital gains.  The 
Series intends to pay dividends and distributions more frequently 
than stated above in order to avoid application of the excise tax, 
if the additional distributions are otherwise determined to be in 
the best interests of the Series' shareholders.  Dividends 
declared by a Series in October, November or December of any 
calendar year and payable to shareholders of record on a specified 
date in such a month are deemed to have been received by each 
shareholder on December 31 of such calendar year and to have been 
paid by a Series not later than such December 31, provided that 
such dividend is actually paid by the Series during January of the 
following year.  
Dividends of each Series' net investment income and 
distributions of its short-term capital gains will be taxable to 
shareholders as ordinary income for Federal income tax purposes, 
whether received in cash or reinvested in additional shares.  
Distributions of long-term capital gains will be taxable to 
shareholders as such, whether received in cash or reinvested, and 
regardless of how long a shareholder has held shares of the 
Series.  In general, only dividends that represent the dividends 
received from U.S.  corporations may, subject to certain 
limitations, qualify for the Federal dividends-received deduction 
for corporate shareholders.  
Statements as to the tax status of each shareholder's 
dividends and distributions will be mailed annually.  These 
statements will set out the amount of each Series' dividends 
eligible for the dividends-received deduction for corporate 
shareholders.  Furthermore, shareholders will receive, as 
appropriate, various written notices after the close of the 
Series' taxable year regarding the tax status of certain dividends 
and distributions that were paid (or that are treated as having 
been paid) by the Series to its shareholders during the preceding 
taxable year, including the amount of dividends that represent 
interest derived from U.S.  government securities.  
Shareholders should consult their own tax advisors as to 
the state and local tax consequences of investing in a Series and 
should be aware that some jurisdictions may not treat income 
derived from a Series' holdings of U.S.  government securities as 
exempt from state and local income taxes.

THE SERIES' PERFORMANCE
From time to time, the Trust may advertise each Series' 
"average annual total return" over various periods of time.  Such 
total return figures show the average percentage change in value 
of an investment in a Series from the beginning date of the 
measuring period to the end of the measuring period.  These 
figures reflect changes in the price of the Series' shares and 
assume that any income dividends and/or capital gains 
distributions made by a Series during the period were reinvested 
in shares of the Series.  Figures will be given for the recent 
one-, and five-year periods, or for the life of the Series to the 
extent that it has not been in existence for any such periods, and 
may be given for other periods as well, such as on a year-by-year 
basis.  When considering average annual total return figures for 
periods longer than one year, it is important to note that the 
Series' average annual total return for any one year in the period 
might have been greater or less than the average for the entire 
period.  A Series also may use "aggregate" total return figures 
for various periods, representing the cumulative change in value 
of an investment in a Series for the specific period (again 
reflecting changes in the Series' share prices and assuming 
reinvestment of dividends and distributions).  Aggregate total 
return may be calculated either with or without the effect of the 
maximum 5.00% sales charge and may be shown by means of schedules, 
charts or graphs, and may indicate subtotals of the various 
components of total return (i.e., change in value of initial 
investment, income dividends and capital gains distributions).  
In reports or other communications to shareholders or in 
advertising material, the Trust may compare the Series' 
performance with the Standard & Poor's Daily Price Index of 500 
Common Stocks, the Russell 2000 Index, the Dow Jones Industrial 
Average, the Value-Line Composite Geometric Index or with that of 
other mutual funds as listed in the rankings prepared by Lipper 
Analytical Services, Inc., with studies prepared by independent 
organizations such as Ibbotson Associates or Wilshire Associates 
Incorporated, or similar independent services which monitor the 
performance of mutual funds or other industry or financial 
publications such as Barron's, Business Week, Forbes, Fortune, 
Institutional Investor, Investors Daily, Kiplinger's Personal 
Finance, Money, Morningstar Mutual Fund Values, The New York 
Times, The Wall Street Journal, or USA Today.  Any given 
performance comparison should not be considered as representative 
of the Series' performance for any future period.  The Statement 
of Additional Information contains a description of the methods 
used to determine total return.  Shareholders may make inquiries 
regarding the Series, including total return figures, to their 
Smith Barney Financial Consultant.  
CUSTODIAN AND TRANSFER AGENT
PNC Bank is located at 17th and Chestnut Streets, 
Philadelphia.  PA 19103, and serves as custodian of the Trust's 
investments.  
First Data serves as the Trust's transfer agent and is 
located at Exchange Place, Boston, Massachusetts, 02109.

DISTRIBUTOR
Distributor and Shareholder Servicing Agent Smith Barney
Smith Barney, which serves as the Trust's distributor and 
shareholder servicing agent for each Series, is located at 388 
Greenwich Street, New York, New York 10013.  Smith Barney 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 & Casualty Insurance Services.  Pursuant 
to a Shareholder Services Plan (the "Plan") adopted with respect 
to the Series' by vote of a majority of the Trust's Board of 
Trustees, including a majority of the Trustees who are not 
"interested persons" of the Trust as defined in the 1940 Act and 
who have no direct or indirect financial interest in the operation 
of the Plan or any agreement relating to it, as well as by the 
Series' sole shareholder prior to the Series' initial public 
offering, Smith Barney, as shareholder servicing agent, is paid an 
annual fee by the respective Series.  The annual fee will be 
calculated at the annual rate of .25 % of the value of the average 
daily net assets of the respective Series and is used by Smith 
Barney to cover payments to Smith Barney Financial Consultants and 
other persons who provide support services to shareholders of the 
Series, including, but not limited to, office space and equipment, 
telephone facilities, responding to routine inquiries regarding 
the Series and its operations, processing shareholder 
transactions, forwarding and collecting proxy materials, dividend 
payment elections and providing any other shareholder services not 
otherwise provided by the Trust's transfer agent.  The Board of 
Trustees evaluates the appropriateness of the Plan and its payment 
terms on a continuing basis and in doing so considers all relevant 
factors, including the nature, extent and quality of services 
generally provided to shareholders.  
ADDITIONAL INFORMATION
The Trust was organized on October 18, 1988 under the laws 
of the Commonwealth of Massachusetts and is an entity commonly 
known as a "Massachusetts business trust." The Trust offers shares 
of beneficial interest of each Series having a $.001 per share par 
value.  When matters are submitted for shareholder vote, 
shareholders of each Series will have one vote for each full share 
owned and a proportionate, fractional vote for any fractional 
share held.  Generally shares of the Trust vote by individual 
Series on all matters except (a) matters affecting only the 
interests of one or more of the Series, in which case only shares 
of the affected Series would be entitled to vote or (b) when the 
1940 Act requires that shares of the Series be voted in the 
aggregate.  There normally will be no annual 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.  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 meeting called for that purpose.  A 
meeting will be called for the purpose of voting on the removal of 
a Trustee at the written request of holders of 10% of the Trust's 
outstanding shares and the Trust will assist shareholders in 
calling such a meeting as required by the 1940 Act.

The Trust sends its shareholders a semi-annual report and an 
audited annual report, each of which includes a listing of the 
investment securities held by the Series at the end of the period 
covered.  In an effort to reduce each Series' printing and mailing 
costs, each Series 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, each Series also plans to consolidate the mailing of its 
Prospectus so that a shareholder having multiple accounts will 
receive a single Prospectus annually.  Any shareholder who does 
not want this consolidation to apply to his or her account should 
contact his or her Financial Consultant or the Trust's transfer 
agent.  Shareholders may make inquiries regarding the Trust to any 
Smith Barney Financial Consultant.  
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE 
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS 
AND IN THE TRUST'S OFFICIAL SALES LITERATURE IN CONNECTION WITH 
THE OFFERING OF THE TRUST'S SHARES, AND, IF GIVEN OR MADE, SUCH 
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS 
HAVING BEEN AUTHORIZED BY THE TRUST.  THIS PROSPECTUS DOES NOT 
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO 
WHOM, THE OFFER MAY NOT LAWFULLY BE MADE.  

g:\funds\prtf\1997\secdocs\prosp97.doc	29


SMITH BARNEY PRINCIPAL RETURN FUND
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Statement of Additional Information	March 27, 1997
This Statement of Additional Information supplements the 
information contained in the current Prospectus dated March 29, 
1997, as amended or supplemented from time to time, of the Zeros 
and Appreciation Series 1998 ("Series 1998"), Zeros Plus Emerging 
Growth Series 2000 ("Series 2000"), and the Security and Growth 
Fund (collectively the "Series"), of Smith Barney Principal Return 
Fund (the "Trust"), and should be read in conjunction with that 
Prospectus.  The Prospectus may be obtained from any Smith Barney 
Financial Consultant or by writing or calling the Trust 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 the Prospectus in its entirety. 
CONTENTS
For ease of reference, the same section headings are used in 
both the Prospectus and the Statement of Additional Information, 
except where noted below. 



Management of the Trust
2

Investment Objectives and Management Policies
6

Redemption of Shares
14

Valuation of Shares
14

Exchange Privilege
14

Determination of Performance
15

(See in the Prospectus "The Series' Performance")


Taxes
16

(See in the Prospectus "Dividends, Distributions and Taxes")


Distributor
18

Custodian and Transfer Agent (See in the Prospectus "Additional 
Information")
19

Organization of the Trust
19

Financial Statements
20

MANAGEMENT OF THE TRUST
The executive officers of the Trust are employees of certain 
of the organizations that provide services to the Series.  These 
organizations are as follows: 
Name
Service

Smith Barney Inc.("Smith Barney ")
Distributor

Smith Barney Mutual Funds Management Inc.
Investment Adviser and

("SBMFM")
Administrator

PNC Bank National Association


("PNC")
Custodian

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

These organizations and the functions that they perform for 
the Series are discussed in the Prospectus and in this Statement 
of Additional Information.
Trustees and Executive Officers of the Trust
The names of the Trustees and executive officers of the 
Trust, together with information as to their principal business 
occupations for the past five years, are set forth below.  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.
Trustees
Paul R. Ades, Trustee (Age 56).  Partner in the law firm of 
Murov & Ades.  His address is 272 South Wellwood Avenue, P.O. 
Box 504, Lindenhurst, New York 11757.
Herbert Barg, Trustee (Age 73).  Private investor.  His address 
is 273 Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004. 
Alger B. Chapman (Age 65).  Chairman and Chief Executive Officer 
of the Chicago Board of Options Exchange. 
Dwight B. Crane (Age 59).  Professor, Graduate School of 
Business Administration, Harvard University; Business 
Consultant.  His address is Harvard Business School, Soldiers 
Field, Morgan Hall #371, Boston, Massachusetts 02163 
Frank Hubbard, Trustee (Age 61).  Vice President, of S & S 
Industries; Former Corporate Vice President, Materials 
Management and Marketing Services of Huls American, Inc. 
Allan R. Johnson, Trustee Emeritus (Age 80).  Retired; Former 
Chairman, Retail Division of BATUS, Inc., and Chairman and Chief 
Executive Officer of Saks Fifth Avenue, Inc.  His address is 2 
Sutton Place South, New York, New York 10022 
* Heath B. McLendon, Chairman of the Board and Investment 
Officer (Age 63).  Managing Director of Smith Barney, Chairman 
of Smith Barney Strategy Advisers Inc.; prior to July 1993, 
Senior Executive Vice President of Shearson Lehman Brothers Inc. 
("Shearson Lehman Brothers"), Vice Chairman of Shearson Asset 
Management,  His address is 388 Greenwich Street, New York, New 
York 10013 
Jerome Miller, Trustee (Age 59).  Retired, Former President, 
Asset Management Group of Shearson Lehman Brothers.  His address 
is 27 Hemlock Road, Manhassett, New York 11030. 
Ken Miller, Trustee (Age 55).  President of Young Stuff Apparel 
Group, Inc.  His address is 1407 Broadway, 6th Floor, New York, 
New York 10018. 
John F. White, Trustee (Age 79).  President Emeritus of The 
Cooper Union for the Advancement of Science and Art, Special 
Assistant to the President of the Aspen Institute.  His address 
is 97 Sunset Drive, Apt 402, Sarasota, Florida 34236 
Jessica M. Bibliowicz, President (Age 37).  Executive Vice 
President of Smith Barney; prior to 1994, Director of Sales and 
Marketing for Prudential Mutual Funds, prior to 1990, First Vice 
President of Asset Management Division of Shearson Lehman 
Brothers.  Ms. Bibliowicz also serves as President of 39 other 
mutual funds of the Smith Barney Mutual Funds.  Her address is 
388 Greenwich Street, New York, New York 10013. 
Harry D. Cohen, Vice President and Investment Officer (Age 56).  
President and Director of Smith Barney Investment Advisors, a 
division of SBMFM; Executive Vice President of Smith Barney, 
prior to July 1993, President of Asset Management Division of 
Shearson Lehman Brothers.  Mr. Cohen also serves as Vice 
President and Investment Officer of 5 other mutual funds of the 
Smith Barney Mutual Funds.  His address is 388 Greenwich Street, 
New York, New York 10013 
Richard A. Freeman, Vice President and Investment Officer (Age 
43).  Managing Director of Smith Barney Investment Advisors, a 
division of SBMFM; prior to July 1993, First Executive Vice 
President of Shearson Asset Management; prior to July 1993, 
Executive Vice President of Shearson Asset Management.  Mr. 
Freeman also serves as Vice President and Investment Officer of 
one other mutual fund of the Smith Barney Mutual Funds.  His 
address is 388 Greenwich Street, New York, New York 10013. 
John G. Goode, President and Chief Executive Officer of Davis 
Skaggs Investment Management, a division of the SBMFM, serves as 
Vice President of the Security and Growth Fund and manages its 
day-to-day operations, including making all investment 
decisions.  Mr. Goode also serves as Vice President and 
Investment Officer of two other mutual fund of the Smith Barney 
Mutual Funds.  His address is 1 Sansome St., Suite 3850 San 
Francisco, California 94104. 
Lewis E. Daidone, Senior Vice President and Treasurer (Age 39).  
Managing Director of Smith Barney, Director and Senior Vice 
President of SBMFM.  Mr. Daidone also serves as Senior Vice 
President and Treasurer of 41 other mutual funds of the Smith 
Barney Mutual Funds.  His address is 388 Greenwich Street, New 
York, New York 10013. 
Christina T. Sydor, Secretary (Age 46).  Managing Director of 
Smith Barney; General Counsel and Secretary of SBMFM.  Ms. Sydor 
also serves as Secretary of 41 other mutual funds of the Smith 
Barney Mutual Funds.  Her address is 388 Greenwich Street, New 
York, New York 10013.
Each Trustee also serves as a trustee, general partner 
and/or director of other mutual funds for which Smith Barney 
serves as distributor.  As of February 28, 1997, Trustees and 
officers of the Series, as a group, owned less than 1% of the 
outstanding shares of beneficial interest of each Series. 
No director, officer or employee of Smith Barney or any of 
its affiliates will receive any compensation from the Trust for 
serving as an officer or Trustee.  The Trust pays each Trustee who 
is not a director, officer or employee of Smith Barney or any of 
its affiliates a fee of $4,000 per annum plus $500 per meeting 
attended and reimburses them for travel and out-of-pocket 
expenses.  For the fiscal year ended November 30, 1996, such fees 
and expenses for the Trust totaled $28,362.19
For the calendar year ended December 31, 1996, the Trustees 
of the Trust were paid the following compensation: 

Trustee
Aggregate Compensation 
from the Fund
Aggregate Compensation from 
the Smith Barney Mutual 
Funds

Paul R. Ades (7)
3,363.91
52,475

Herbert Barg (20)
3,363.91
105,175

Alger B. Chapman (9)
3,363.91
76,775

Dwight B. Crane (26)
3,363.91
140,375

Frank G. Hubbard (7)
3,363.91
52,475

Allan R. Johnson 
(7)***
1,450.91
33,125

Heath B. McLendon (41)
- - -
- - -

Jerome Miller (2)
3,363.91
13,000

Ken Miller (7)*
3,363.91
49,475

John F. White (7)**
3,363.91
52,375

*	 	For 1996, $812.50 and $12,125.00 of 
compensation from the Fund and the 	Smith 
Barney Mutual Funds, respectively, was 
deferred.
**	For 1996, $2,988.91 and $48,375.00 of compensation from the 
Fund and the 
	Smith Barney Mutual Funds, respectively, was deferred.
***	Mr Johnson retired on January 1,1996. He is Trustee 
Emeritus.
Investment Adviser and Administrator - SBMFM
SBMFM serves as the Series' investment adviser under the 
terms of a written agreement for each Series (the "Advisory 
Agreements").  SBMFM is a wholly owned subsidiary of Smith Barney 
Holdings Inc. ("Holdings"), which is in turn a wholly owned 
subsidiary of Travelers Group Inc. ("Travelers").  The Advisory 
Agreements for all Series were last approved by the Board of 
Trustees, including a majority of the Trustees who are not 
"interested persons" of the Trust or Smith Barney on July 25, 
l996.  Certain of the services provided to, and fees paid by, the 
Series under the Advisory and Administration Agreements are 
described in the Prospectus under "Management of the Trust." SBMFM 
pays the salaries of all officers and employees who are employed 
by both it and the Trust and maintains office facilities for the 
Trust.  SBMFM bears all expenses in connection with the 
performance of its services under the Advisory Agreements.
As compensation for investment advisory services rendered, 
Series 1998, Series 2000 and the Security and Growth Fund pay 
SBMFM a fee computed daily and paid monthly at the annual rates of 
0.30%, 0.40% and 0.50%, respectively, of the value of their 
average daily net assets.
SBMFM also serves as the administrator of Series 1998, and 
Series 2000 pursuant to a written agreement for each Series (the 
"Administration Agreements").  The Administration Agreements were 
most recently approved for each Series by the Board of Trustees, 
including a majority of the Trustees who are not "interested 
persons" of the Series or Smith Barney, on July 25, 1996.  The 
services provided by SBMFM under the Administration Agreements are 
described in the Prospectus under "Management of the Trust." SBMFM 
pays the salaries of all officers and employees who are employed 
by both it and the Trust, maintains office facilities for the 
Trust and bears all expenses in connection with the performance of 
its services. 
As compensation for administrative services rendered to 
Series 1998 and Series 2000 SBMFM receives a fee computed daily 
and paid monthly at the annual rate of 0.20% of the value of each 
Series' average daily net assets.
For the fiscal years ended November 30, 1996, 1995 and 1994, 
the Series paid investment advisory and/or administration fees to 
SBMFM as follows:



Series 1998*
Fiscal Year Ended

Series 2000**
Fiscal Year Ended
Security and 
Growth Fund***
Fiscal Year Ended


   1996
   1995
   1994
   1996
   1995
  1994
 1996                
1995

Advisory 
Fee
$284,12
6
$298,00
9
$350,77
3
$278,88
0
$300,015
$333,2
20
1,363,022        
$1,074,991

Admin. 
Fees
$189,41
7
$198,67
3
$233,84
8
$139,44
0
$150,007
$166,6
10                              
      N/A                   
N/A










*	Series 1998 commenced operations on January 25, 1991.
**	Series 2000 commenced operations on August 30, 1991.
***	Security and Growth commenced operations on March 30, 1995.
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; SEC fees and state Blue Sky 
qualification fees; charges of custodians; transfer and dividend 
disbursing agent's fees; certain insurance premiums; outside 
auditing and legal expenses; costs of maintenance of corporate 
existence; investor services (including allocated telephone and 
personnel expenses); and costs of preparation and printing of 
prospectuses for regulatory purposes and for distribution to 
existing shareholders; cost 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 a Series (including fees payable pursuant to the 
Advisory Agreements, but excluding interest, taxes, brokerage and 
extraordinary expenses) exceed the expense limitation of any state 
having jurisdiction over the Series, SBMFM will reduce its fees 
from the Series by the proportion of the excess expense equal to 
the proportion that their respective fees bear to the aggregate of 
fees paid by the Series for investment advice and administration, 
to the extent required by state law.  A fee reduction, if any, 
will be estimated and reconciled on a monthly basis.  No such fee 
reductions were required for the 1996, 1995 and 1994 fiscal years.



Counsel and Auditors
Willkie Farr & Gallagher serves as counsel to the Trust.  
Stroock & Stroock & Lavan serves as counsel to the Trustees who 
are not "interested persons" of the Trust. 
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 
10154, has been selected as the Fund's independent auditor to 
examine and report on the Fund's financial statements and 
highlights for the fiscal year ending November 30, 1997. 
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectus discusses the investment objectives of each 
Series and the policies to be employed to achieve those 
objectives.  Set forth below is supplemental information 
concerning certain of the securities and other instruments in 
which the Series may invest, the investment policies and portfolio 
strategies that the Series may utilize and certain risks involved 
with those investments, policies and strategies. 
Zero Coupon Securities
There are currently two basic types of zero coupon 
securities, those created by separating the interest and principal 
components of a previously issued interest-paying security and 
those originally issued in the form of a face value only security 
paying no interest.  Zero coupon securities of the United States 
government and certain of its agencies and instrumentalities and 
of private corporate issuers are currently available, although the 
Series will purchase only those that represent direct obligations 
of the United States government. 
Zero coupon securities of the United States government that 
are currently available are called Separate Trading of Registered 
Interest and Principal of Securities ("STRIPS") or Coupon Under 
Book-Entry Safekeeping ("CUBES").  STRIPS and CUBES are issued 
under programs introduced by the United States Treasury and are 
direct obligations of the United States government.  The United 
States government does not issue zero coupon securities directly.  
The STRIPS program, which is ongoing, is designed to facilitate 
the secondary market stripping of selected treasury notes and 
bonds into individual interest and principal components.  Under 
the program, the United States Treasury continues to sell its 
notes and bonds through its customary auction process.  However, a 
purchaser of those notes and bonds who has access to a book-entry 
account at a Federal Reserve Bank (the "Federal Reserve") may 
separate the specified treasury notes and bonds into individual 
interest and principal components.  The selected treasury 
securities may thereafter be maintained in the book-entry system 
operated by the Federal Reserve in a manner that permits the 
separate trading and ownership of the interest and principal 
payments.  The Federal Reserve does not charge a fee for this 
service, however, the book-entry transfer of interest or principal 
components is subject to the same fee schedule generally 
applicable to the transfer of treasury securities. 
Under the program, in order for a book-entry treasury 
security to be separated into its component parts, the face amount 
of the security must be an amount which, based on the stated 
interest rate of the security, will produce a semi-annual interest 
payment of $1,000 or a multiple of $1,000.  Once a book-entry 
security has been separated, each interest and principal component 
may be maintained and transferred in multiples of $1,000 
regardless of the face value initially required for separation of 
the resulting amount required for each interest payment. 
CUBES, like STRIPS, are direct obligations of the United 
States government.  CUBES are coupons that have previously been 
physically stripped from treasury notes and bonds, but which were 
deposited with the Federal Reserve and are now carried and 
transferable in book-entry form only.  Only stripped treasury 
coupons maturing on or after January 15, 1988, that were stripped 
prior to January 5, 1987, were eligible for conversion to book-
entry form under the CUBES program.  Investment banks may also 
strip treasury securities and sell them under proprietary names.  
These securities may not be as liquid as STRIPS and CUBES and the 
Series have no present intention of investing, in these 
instruments. 
STRIPS and CUBES are purchased at a discount from $1,000.  
Absent a default by the United States government, a purchaser will 
receive face value for each of the STRIPS and CUBES provided that 
the STRIPS and CUBES are held to their due date.  While STRIPS and 
CUBES can be purchased on any business day, they all currently 
come due on February 15, May 15, August 15 or November 15 in any 
given year. 
Money Market Instruments
As noted in the Prospectus, each Series may hold at any time 
up to 10% of the value of its assets in cash and money market 
instruments.  In addition, when SBMFM believes that opportunities 
for capital appreciation do not appear attractive, each Series 
may, notwithstanding its investment objective, take a temporary 
defensive posture with respect to its equity securities and invest 
without limitation in cash and money market instruments.  Among 
the money market instruments in which the Series may invest are 
obligations of the United States government and its agencies and 
instrumentalities ("U.S. government securities"); certain bank 
obligations, commercial paper, and repurchase agreements involving 
U.S. government securities. 
U.S. government securities.  U.S. government securities 
include debt obligations of varying maturities issued or 
guaranteed by the United States government or its agencies or 
instrumentalities.  Direct obligations of the United States 
Treasury include a variety of securities that differ in their 
interest rates, maturities and dates of issuance. 
U.S government securities include not only direct 
obligations of the United States Treasury, but also securities 
issued or guaranteed by the Federal Housing Administration, 
Federal Financing Bank, 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 National 
Mortgage Association, Maritime Administration, Tennessee Valley 
Authority, Resolution Trust Corporation, District of Columbia 
Armory Board, Student Loan Marketing Association and various 
institutions that previously were or currently are part of the 
Farm Credit System (which has been undergoing a reorganization 
since 1987).  Because the United States government is not 
obligated by law to provide support to an instrumentality that it 
sponsors, the Series will invest in obligations issued by such an 
instrumentality only if SBMFM determines that the credit risk with 
respect to the instrumentality does not make its securities 
unsuitable for investment by the Series. 
Repurchase Agreements.  Each Series may enter into 
repurchase agreements with certain banks which are the issuers of 
instruments acceptable for purchase by the Fund and with certain 
dealers on the Federal Reserve Bank of New York's list of 
reporting dealers.  A repurchase agreement is a contract under 
which the buyer of a security simultaneously commits to resell the 
security to the seller at an agreed upon price on an agreed upon 
date.  Under each repurchase agreement, the selling institution 
will be required to maintain the value of the securities subject 
to the repurchase agreement at not less than their repurchase 
price.  Repurchase agreements could involve certain risks in the 
event of default or insolvency of the seller, including possible 
delays or restrictions on a Series' ability to dispose of the 
underlying securities, the risk of a possible decline in the value 
of the underlying securities during the period in which a Series 
seeks to assert its rights to them, the risk of incurring expenses 
associated with asserting these rights and the risk of losing all 
or part of the income from the agreement.  In evaluating these 
potential risks, SBMFM, acting under the supervision of the Board 
of Trustees, and on an ongoing basis, monitors (a) the value of 
the collateral underlying each repurchase agreement to ensure that 
the value is at least equal to the total amount of the purchase 
obligation, including interest, and (b) the creditworthiness of 
the banks and dealers with which the Series enters into repurchase 
agreements. 
Warrants (Series 2000 and Security and Growth Fund)
Because a warrant does not carry with it the right to 
dividends or voting rights with respect to securities that the 
warrant holder is entitled to purchase, and because it does not 
represent any rights to the assets of the issuer, a warrant may be 
considered more speculative than certain other types of 
investments.  In addition, the value of a warrant does not 
necessarily change with the value of the underlying securities and 
a warrant ceases to have value if it is not exercised by its 
expiration date. 
Convertible Securities
Convertible securities are fixed-income securities that may 
be converted at either a stated price or stated rate into 
underlying shares of common stock.  Convertible securities have 
general characteristics similar to both fixed-income and equity 
securities.  Although to a lesser extent than with fixed-income 
securities generally, the market value of convertible securities 
tends to decline as interest rates increase and, conversely, tends 
to increase as interest rates decline.  In addition, because of 
the conversion feature, the market value of convertible securities 
tends to vary with fluctuations in the market value of the 
underlying common stocks and, therefore, also will react to 
variations in the general market for equity securities.  A unique 
feature of convertible securities is that as the market price of 
the underlying common stock declines, convertible securities tend 
to trade increasingly on a yield basis, and so may not experience 
market value declines to the same extent as the underlying common 
stock.  When the market price of the underlying common stock 
increases, the prices of the convertible securities tend to rise 
as a reflection of the value of the underlying common stock.  
While no securities investments are without risk, investments in 
convertible securities generally entail less risk than investments 
in common stock of the same issuer. 
As fixed-income securities, convertible securities are 
investments that provide for a stable stream of income with 
generally higher yields than common stocks.  Of course, like all 
fixed-income securities, there can be no assurance of current 
income because the issuers of the convertible securities may 
default on their obligations.  Convertible securities, however, 
generally offer lower interest or dividend yields than non-
convertible securities of similar quality because of the potential 
for capital appreciation.  A convertible security, in addition to 
providing fixed income, offers the potential for capital 
appreciation through the conversion feature, which enables the 
holder to benefit from increases in the market price of the 
underlying common stock.  There can be no assurance of capital 
appreciation, however, because securities prices fluctuate. 
Convertible securities generally are subordinated to other 
similar but non-convertible securities of the same issuer, 
although convertible bonds, as corporate debt obligations, enjoy 
seniority in right of payment to all equity securities, and 
convertible preferred stock is senior to common stock of the same 
issuer.  Because of the subordination feature, however, 
convertible securities typically have lower ratings than similar 
non-convertible securities. 
Preferred Stock
Preferred stocks, like debt obligations, are generally 
fixed-income securities.  Shareholders of preferred stock normally 
have the right to receive dividends at a fixed rate when and as 
declared by the issuer's board of directors, but do not 
participate in other amounts available for distribution by the 
issuing corporation.  Dividends on the preferred stock may be 
cumulative, and all cumulative dividends usually must be paid 
prior to common shareholders receiving any dividends.  Preferred 
stock dividends must be paid before common stock dividends and, 
for that reason, preferred stocks generally entail less risk than 
common stocks.  Upon liquidation, preferred stocks are entitled to 
a specified liquidation preference, which is generally the same as 
the par or stated value, and are senior in right of payment to 
common stock.  Preferred stocks are, however, equity securities in 
the sense that they do not represent a liability of the issuer 
and, therefore, do not offer as great a degree of protection of 
capital or assurance of continued income as investments in 
corporate debt securities.  In addition, preferred stocks are 
subordinated in right of payment to all debt obligations and 
creditors of the issuer, and convertible preferred stocks may be 
subordinated to other preferred stock of the same issuer. 
Lending Portfolio Securities
Although the Series are authorized to lend their securities 
to brokers, dealers and other financial organizations, they will 
not lend securities to their distributor, Smith Barney, or its 
affiliates unless the Series apply for and receive specific 
authority to do so from the SEC.  These loans, if and when made, 
may not exceed 33-1/3% of a Series' assets taken at value.  The 
Series' loans of securities will be collateralized by cash, 
letters of credit or U.S government securities that will be 
maintained at all times in an amount at least equal to the current 
market value of the loaned securities.  From time to time, a 
Series may pay a part of the interest earned from the investment 
of collateral received for securities loaned to: (a) the borrower 
and/or (b) a third party that is unaffiliated with that Series and 
that is acting as a "finder " 
By lending its securities, a Series can increase its income 
by continuing to receive interest on the loaned securities as well 
as by either investing the cash collateral in short-term 
instruments or obtaining yield in the form of interest paid by the 
borrower when U.S. government securities are used as collateral. 
Requirements of the SEC, which may be subject to future 
modifications, currently provide that the following conditions 
must be met whenever a Series' portfolio securities are loaned: 
(a) the Series must receive at least 100% cash collateral or 
equivalent securities from the borrower; (b) the borrower must 
increase such collateral whenever the market value of the 
securities rises above the level of such collateral; (c) the 
Series must be able to terminate the loan at any time; (d) the 
Series must receive reasonable interest on the loan, as well as an 
amount equal to any dividends, interest or other distributions on 
the loaned securities and any increase in market value; (e) the 
Series may pay only reasonable custodian fees in connection with 
the loan; and (f) voting rights on the loaned securities may pass 
to the borrower, however, if a material event adversely affecting 
the investment in the loaned securities occurs, the Board of 
Trustees must terminate the loan and regain the Series' right to 
vote the securities.
Investment Restrictions
The investment restrictions recited in the Prospectus and 
those numbered 1 through 8 below have been adopted by the Trust as 
fundamental policies.  Under the 1940 Act, a fundamental policy 
may not be changed without the vote of a majority of the 
outstanding voting securities of the Series, as defined in the 
1940 Act.  "Majority" means the lesser of (a) 67% or more of the 
shares present at a meeting, if the holders of more than 50% of 
the outstanding shares of the Series are present or represented by 
proxy, or (b) more than 50% of the outstanding shares.  Investment 
restrictions 9 through 19 may be changed by vote of a majority of 
the Board of Trustees at any time. 
Under the investment restrictions adopted by the Series: 
1. A Series will not purchase securities (other than U. S. 
government securities) of any issuer if, as a result of the 
purchase, more than 5% of the value of a Series' total assets 
would be invested in the securities of that issuer, except that up 
to 25% of the value of a Series' total assets may be invested 
without regard to this 5% limitation. 
2. A Series will not purchase more than 10% of the voting 
securities of any one issuer, or more than 10% of the securities 
of any class of any one issuer, except that this limitation is not 
applicable to a Series' investments in U. S. government 
securities, and up to 25% of a Series' assets may be invested 
without regard to these 10% limitations. 
3. A Series will not borrow money, except that a Series may 
borrow from banks temporarily for 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 33-1/3% of the value of a Series' total assets 
(including the amount borrowed) at the time the borrowing is made.  
Whenever borrowings exceed 5% of the value of the total assets of 
a Series, a Series will not make any additional investments. 
4. A Series will not lend money to other persons, except 
through purchasing debt obligations, lending portfolio securities 
and entering into repurchase agreements. 
5. A Series will invest no more than 25% of the value of its 
total assets in securities of issuers in any one industry, except 
that this restriction does not apply to investments in U. S. 
government securities. 
6. A Series will not underwrite the securities of other 
issuers, except insofar as a Series may be deemed to be an 
underwriter under the Securities Act of 1933, as amended (the 
"1933 Act"), in disposing of its portfolio securities. 
7. A Series will not purchase or sell real estate, interests 
in real estate limited partnerships or interests in real estate, 
except that a Series may purchase and sell securities that are 
secured by real estate and may purchase securities issued by 
companies that invest or deal in real estate. 
8. A Series will not purchase or sell commodities or 
commodities futures contracts.
9. A Series will not sell securities short. 
10. A Series will not purchase securities on margin, except 
that a Series may obtain any short-term credits necessary for the 
clearance of purchases and sales of securities. 
11. A Series will not pledge, hypothecate, mortgage or 
encumber in any other way more than 10% of its assets. 
12. A Series will not invest in oil, gas, mineral leases or 
other mineral exploration or development programs, except that a 
Series may invest in the securities of companies that invest in or 
sponsor those programs. 
13. A Series will not invest in securities of other 
investment companies registered or required to be registered under 
the 1940 Act, except as the securities may be acquired as part of 
a merger, consolidation, reorganization, acquisition of assets or 
an offer of exchange.  This restriction does not apply to 
investments in closed-end, publicly traded investment companies.  
14. A Series will not write or sell put options, call 
options, straddles or combinations of those options, except that 
the Security and Growth Fund may, for hedging purposes only, (i) 
write call options and purchase put options on broad-based 
domestic stock indexes and enter into closing transactions with 
respect to such options; and (ii) write or purchase options on 
futures contracts.  
15. A Series will not purchase any security, except U.S. 
government securities, if as a result of the purchase, the Series 
would then have more than 5% of its total assets invested in 
securities of companies (including predecessor companies) that 
have been in continuous operation for fewer than three years.  
(For purposes of this limitation, issuers include predecessors, 
sponsors, controlling persons, general partners, guarantors and 
originators of underlying assets which may have less than three 
years of continuous operation or relevant business experience.) 
16. A Series will not make investments for the purpose of 
exercising control or management of any other issuer. 
17. A Series will not purchase or retain securities of any 
company, 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 0.5% of the outstanding securities of 
the company and together they own beneficially more than 5% of the 
securities. 
18. A Series will not invest in warrants, if as a result, 
more than 2% of the value of a Series' net assets would be 
invested in warrants that are not listed on a recognized United 
States stock exchange, or more than 5% of a Series' net assets 
would be invested in warrants regardless of whether they are 
listed on such an exchange. 
19. A Series will not invest in time deposits maturing in 
more than seven days, enter into repurchase agreements having a 
duration of more than seven days, or purchase instruments lacking 
readily available market quotations ("illiquid instruments"), if 
as a result of the purchase a Series' aggregate holdings of 
illiquid instruments exceed 10% of a Series' net assets. 
The Trust may make commitments more restrictive than the 
restrictions listed above so as to permit the sale of its shares 
in certain states.  Should the Trust determine that any commitment 
is no longer in the best interests of the Trust and its 
shareholders, the Trust will revoke the commitment by terminating 
the sale of shares in the relevant state.  The percentage 
limitations set forth above apply at the time of purchase of 
securities. 
Portfolio Turnover
The Series intend not to seek profits through short-term 
trading of their securities.  Nevertheless, a Series will not 
consider portfolio turnover rate a limiting factor in making 
investment decisions.  The Series cannot accurately predict their 
portfolio turnover rate, but anticipate that their annual turnover 
rates will not exceed 50%.  The turnover rates would be 100% if 
all of a Series' securities that are included in the computation 
of turnover were replaced once during a period of one year.  The 
Series' turnover rate is calculated by dividing the lesser of 
purchases or sales of portfolio securities for the year by the 
monthly average value of portfolio securities.  Securities with 
remaining maturities of one year or less on the date of 
acquisition are excluded from the calculation.  For the fiscal 
years ended November 30,1996 and 1995, the Series' portfolio 
turnover rates were as follows:

1996
1995

Series 1998
12%
13%

Series 2000
0%
6%

Security and Growth Fund
43%
26%





Portfolio Transactions
Decisions to buy and sell securities for the Series are made 
by SBMFM, subject to the overall review of the Trust's Board of 
Trustees.  Although investment decisions for a Series are made 
independently from those of the other accounts managed by SBMFM, 
investments of the type made by a Series also may be made by those 
accounts.  When a Series 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 Series or the size of the position obtained or 
disposed of by the Series. 
Transactions on United States stock exchanges involve the 
payment of negotiated brokerage commissions.  On exchanges on 
which commissions are negotiated, the cost of transactions may 
vary among different brokers.  No stated commission is generally 
applicable to securities traded in over-the-counter markets, but 
the prices of those securities include undisclosed commissions or 
mark-ups.  Over-the-counter purchases and sales are transacted 
directly with principal market makers except in those cases in 
which better prices and executions may be obtained elsewhere.  The 
cost of securities purchased from underwriters includes an 
underwriting commission or concession, and the prices at which 
securities are purchased from and sold to dealers include a 
dealer's mark-up or mark-down.  U.S. government securities are 
generally purchased from underwriters or dealers, although certain 
newly issued U.S government securities may be purchased directly 
from the United States Treasury or from the issuing agency or 
instrumentality.  The following table sets forth certain 
information regarding the Series' payment of brokerage 
commissions: 

Fiscal Year 
Ended 
November 30
Series
1998
Series
2000
Security and 
Growth Fund

Total Brokerage 
Commissions
1994
$45,657
$0
N/A


1995
$37,974
$5,760
$475,496


1996
$39,223
$8,690
$303,127

Commissions Paid to 
Smith Barney and/or

1994

$2,370

$2,130

N/A

Smith Barney Shearson
1995
$420
$0
$0


1996
$0
$0
$3,000

% of Total Brokerage 
Commissions paid to 
Smith Barney

1995
1996

1.1%
0%

0%
0%

0%
0.99%

% of Total Transactions 
involving Commissions 
paid to Smith Barney

1995

0%

1.00%

0%


1996
0%
0%
0.99%

SBMFM seeks the best overall terms available in selecting 
brokers or dealers to execute transactions on behalf of the 
Series.  In assessing the best overall terms available for any 
transaction, SBMFM will consider factors it deems relevant, 
including the breadth of the market in the security, the price of 
the security, the financial condition and execution capability of 
the broker or dealer and the reasonableness of the commission, if 
any, for the specific transaction and on a continuing basis.  In 
addition, SBMFM is authorized in selecting brokers or dealers to 
execute a particular transaction and in evaluating the best 
overall terms available to consider the brokerage and research 
services (as those terms are defined in Section 28(e) of the 
Securities Exchange Act of 1934) provided to the Series and/or 
other accounts over which SBMFM or its affiliates exercise 
investment discretion.  The fees under the Series' Advisory 
Agreements are not reduced by reason of SBMFM receiving brokerage 
and research services.  The Trust's Board of Trustees will 
periodically review the commissions paid by the Series to 
determine if the commissions paid over representative periods of 
time were reasonable in relation to the benefits inuring to the 
Series. 
In accordance with Section 17(e) of the 1940 Act and Rule 
17e-1 under the 1940 Act, the Trust's Board of Trustees has 
determined that transactions for the Series may be executed 
through Smith Barney and other affiliated broker-dealers if, in 
the judgment of SBMFM, the use of an affiliated broker-dealer is 
likely to result in price and execution at least as favorable as 
those of other qualified broker-dealers and if, in the 
transaction, the affiliated broker-dealer charges the Series a 
rate consistent with that charged to comparable unaffiliated 
customers in similar transactions.  In addition, under the rules 
recently adopted by the SEC, Smith Barney may directly execute 
such transactions for the Series on the floor of any national 
securities exchange, provided: (a) the Board of Trustees has 
expressly authorized Smith Barney to effect such transactions; and 
(b) Smith Barney annually advises the Series of the aggregate 
compensation it earned on such transactions. 
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of 
payment postponed (a) for any period during which the New York 
Stock Exchange, Inc. (the "NYSE") is closed (other than for 
customary weekend and holiday closings), (b) when trading in 
markets the Series normally utilizes is restricted, or an 
emergency as determined by the SEC exists, so that disposal of the 
Series' investments or determination of its net asset value is not 
reasonably practicable or (c) for such other periods as the SEC by 
order may permit for protection of the Series' shareholders.
VALUATION OF SHARES
The Series' net asset value is calculated on each day, 
Monday through Friday, except on 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.  On those days, securities held by the Series 
may nevertheless be actively traded, and the value of the Series' 
shares could be significantly affected. 
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any fund of the Smith 
Barney Mutual Funds may exchange all or part of their shares for 
shares of the same class of other funds of the Smith Barney Mutual 
Funds to the extent such shares are offered for sale in the 
shareholder's state of residence, on the basis of relative net 
asset value per share at the time of exchange. 
A shareholder who has redeemed shares of any of the Series, 
through the exchange privilege or otherwise, will not be able to 
purchase new shares of any Series'. 
The exchange privilege enables shareholders to acquire 
shares of the same Class in a fund with different investment 
objectives when they believe that a shift between funds is an 
appropriate investment decision.  This privilege is available to 
shareholders resident in any state in which the fund shares being 
acquired may be legally sold.  Prior to any exchange, the investor 
should obtain and review a copy of the then current prospectus of 
each fund into which an exchange is being made.  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 the proceeds are 
immediately invested, at a price as described above, in shares of 
the fund being acquired with such shares being subject to any 
applicable contingent deferred sales charge.  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. 


DETERMINATION OF PERFORMANCE
From time to time, the Trust may quote a Series' performance 
in terms of its total return in reports or other communications to 
shareholders.  The Series' performance will vary from time to time 
depending upon market conditions, the composition of its portfolio 
and its operating expenses.
Average Total Return
The Series' "average annual total return" figures are 
computed according to a formula prescribed by the SEC.  The 
formula can be expressed as follows: 
P(1 + T)n = ERV
Where:
P =	a hypothetical initial payment of $1,000
T =	average annual total return
n =	number of years
ERV =	Ending Redeemable Value of a hypothetical $1,000 
investment made at the beginning of a 1-, 5- or 10-
year period at the end of the 1-, 5- or 10-year 
period (or fractional portion thereof), assuming 
reinvestment of all dividends and distributions
The Series' average annual total returns were as follows for 
the periods indicated:



Name of Series

One Year
Period Ended
11/30/96

Five Year
Period Ended
11/30/96
Per Annum for 
Period
from Commencement 
of
Operations through
11/30/96

Series 1998 (1)
5.43%
8.63%
9.18%

Series 2000 (2)
(3.54)%
8.24%
7.74 %

Security & 
Growth Fund (3)
6.66%
N/A
11.43%


(1) Series 1998 commenced operations on January 25, 1991.
(2) Series 2000 commenced operations on August 30, 1991.
(3) Security and Growth Fund commenced operations on March 
30, 1995.
These total return figures assume that the maximum sales 
charge has been included in the investment at the time of 
purchase.
Aggregate Total Return
The Series' aggregate total return figures shown below 
represent the cumulative change in the value of an investment in a 
Series 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 Series' aggregate total returns were as follows for the 
periods indicated: 




Name of 
Series



One Year 
Period 
Ended 
11/30/96*


Five Year 
Period 
Ended 
11/30/96*
Period 
From 
Commenceme
nt of 
Operations 
through 
11/30/96*


One Year 
Period 
Ended 
11/30/96*
*


Five Year 
Period 
Ended 
11/30/96*
*
Period 
From 
Commencem
ent of 
Operation
s through 
11/30/96*
*

Series 
1998 (1)
11.03%
59.20%
75.95%
5.43%
51.27%
67.16%









Series 
2000 (2)
1.55%
56.40%
55.78%
(3.54)%
48.55%
48.00%

Security 
& Growth 
Fund (3)

11.55%

N/A

25.26%

6.66%

N/A

20.25%









*	Figures do not include the effect of the maximum sales charge.
**	Figures include the effect of the maximum sales charge.
(1)	Series 1998 commenced operations on January 25, 1991.
(2)	Series 2000 commenced operations on August 30, 1991.
(3)	Security & Growth Fund commenced operations on March 30, 
1995.
A Series' performance will vary from time to time depending 
upon market conditions, the composition of its portfolio and its 
operating expenses.  Consequently, any given performance quotation 
should not be considered representative of the Series' performance 
for any specified period in the future.  In addition, because 
performance will fluctuate, it may not provide a basis for 
comparing an investment in the Series with certain bank deposits 
or other investments that pay a fixed yield for a stated period of 
time.  Investors comparing the Series' performance with that of 
other mutual funds should give consideration to the quality and 
maturity of the respective investment companies' portfolio 
securities. 
TAXES
The following is a summary of certain Federal income tax 
considerations that may affect the Trust and its shareholders.  
The summary is not intended as a substitute for individual tax 
planning, and investors are urged to consult their own tax 
advisors as to the Federal, state and local income tax 
consequences of an investment in a Series. 
Tax Status of the Trust and its Shareholders
Each of the Series has qualified and intends to continue to 
qualify each year as a regulated investment company under the 
Internal Revenue Code of 1986, as amended (the "Code").  To 
qualify as a regulated investment company, the Series must meet 
certain requirements set forth in the Code.  Each Series is 
required to earn at least 90% of its gross income from (a) 
interest, (b) dividends, (c) payments with respect to securities 
loans, (d) gains from the sale or other disposition of stock or 
securities and (e) other income derived with respect to the 
Series' business of investing in stock or securities.  Each Series 
also must earn less than 30% of its gross income from the sale or 
other disposition of stock or securities held for less than three 
months.
Dividends of net investment income and distributions of net 
realized short-term capital gains will be taxable to shareholders 
as ordinary income for Federal income tax purposes, whether 
received in cash or reinvested in additional shares of the Series.  
Distributions of long-term capital gains will be taxable to 
shareholders as long-term gain, whether paid in cash or reinvested 
in additional shares, and regardless of the length of time that 
the shareholder has held his or her shares of the Series.
Dividends of investment income (but not distributions of 
capital gain) from the Series generally will qualify for the 
Federal dividends-received deduction for corporate shareholders to 
the extent that the dividends do not exceed the aggregate amount 
of dividends received by the Series from domestic corporations.  
If securities held by the Series are considered to be ''debt-
financed'' (generally, acquired with borrowed funds) or are held 
by the Series for less than 46 days (91 days in the case of 
certain preferred stock), the portion of the dividends paid by the 
Series that corresponds to the dividends paid with respect to the 
debt-financed securities or securities that have not been held for 
the requisite period will not be eligible for the corporate 
dividends-received deduction.
Foreign countries may impose withholding and other taxes on 
dividends and interest paid to a Series with respect to 
investments in foreign securities.  Certain foreign countries, 
however, have entered into tax conventions with the United States 
to reduce or eliminate such taxes.
If a Series is the holder of record of any stock on the 
record date for any dividends payable with respect to the stock, 
the dividends are included in the Series' gross income not as of 
the date received but as of the later of (a) the date on which the 
stock became ex-dividend with respect to the dividends (that is 
the date on which a buyer of the stock would not be entitled to 
receive the declared, but unpaid, dividends) or (b) the date on 
which the Series acquired the stock.
Capital Gains.  In general, a shareholder who redeems or 
exchanges his or her Series shares will recognize long-term 
capital gain or loss if the shares have been held for more than 
one year, and will recognize short-term capital gain or loss if 
the shares have been held for one year or less.  If a shareholder 
receives a distribution taxable as long-term capital gain with 
respect to shares of a Series and redeems or exchanges the shares 
before he or she has held them for more than six months, however, 
any loss on the redemption or exchange that is less than or equal 
to the amount of the distribution will be treated as a long-term 
capital loss. 
Backup Withholding.  If a shareholder fails to furnish a 
correct taxpayer identification number, fails to report fully 
dividend or interest income, or fails to certify that he 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) dividends and distributions and (b) the proceeds of 
any redemptions of a Series' shares.  An individual's taxpayer 
identification number is his or her social security number.  The 
backup withholding tax is not an additional tax and may be 
credited against a shareholder's regular Federal income tax 
liability. 
Taxation of the Series' Investments
Zero Coupon Securities.  The Series will invest in zero 
coupon securities having an original issue discount (that is, the 
discount represented by the excess of the stated redemption price 
at maturity over the issue price).  Each year, the Series will be 
required to accrue as income a portion of this original issue 
discount even though the Series will receive no cash payment of 
interest with respect to these securities.  In addition, if the 
Series acquires a security at a discount that resulted from 
fluctuations in prevailing interest rates ("market discount"), the 
Series may elect to include in income each year a portion of this 
market discount.
The Series will be required to distribute substantially all 
of its income (including accrued original issue and market 
discount) in order to qualify for "pass-through" Federal income 
tax treatment and also in order to avoid the imposition of the 4% 
excise tax described in the Prospectus.  Therefore, a Series may 
be required in some years to distribute an amount greater than the 
total cash income the Series actually receives.  In order to make 
the required distribution in such a year, a Series may be required 
to borrow or to liquidate securities.  The amount of actual cash 
that a Series would have to distribute, and thus the degree to 
which securities would need to be liquidated, would depend upon 
the number of shareholders who chose not to have their dividends 
reinvested.  Capital losses resulting from the liquidation of 
securities can only be used to offset capital gains and cannot be 
used to reduce the Series' ordinary income.  These capital losses 
may be carried forward for eight years. 
Capital Gains Distributions.  Gain or loss on the sale of a 
security by a Series will generally be long-term capital gain or 
loss if the Series has held the security for more than one year.  
Gain or loss on the sale of a security held for one year or less 
will generally be short-term capital gain or loss.  Generally, if 
a Series acquires a debt security at a discount, any gain on the 
sale or redemption of the security will be taxable as ordinary 
income to the extent that the gain reflects accrued market 
discount.

DISTRIBUTOR AND SHAREHOLDER SERVICING AGENT -
SMITH BARNEY
Smith Barney serves as the Series' distributor pursuant to a 
written agreement (the "Distribution Agreement") with the Trust.  
To compensate Smith Barney for the services it provides as 
Shareholder Servicing Agent and for the expenses it bears, the 
Trust has adopted a Shareholder Services Plan (the "Plan").  Under 
the Plan, the Trust pays Smith Barney, with respect to Series 1998 
and Series 2000, a fee, accrued daily and paid monthly, calculated 
at the annual rate of .25% of the value of the respective Series' 
average daily net assets.  Under its terms, the Plan continues 
from year to year, provided that its continuance is approved 
annually by vote of the Trust's 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 (the "Independent Trustees").  The Plan may 
not be amended to increase materially the amount to be spent for 
the services provided by Smith Barney without shareholder 
approval, and all material amendments of the Plan must be approved 
by the Trustees in the manner described above.  The Plan may be 
terminated at any time, without penalty, by vote of a majority of 
the Independent Trustees or by a vote of a majority of the 
outstanding voting securities (as defined in the 1940 Act) of the 
relevant Series on not more than 30 days' written notice to any 
other party to the Plan.  Pursuant to the Plan, Smith Barney will 
provide the Board of Trustees periodic reports of amounts expended 
under the Plan and the purpose for which such expenditures were 
made.  For the fiscal year ended November 30, 1996, Smith Barney 
was paid $236,771, $174,300 and $681,511 in shareholder servicing 
fees for Series 1998, Series 2000 and the Security and Growth Fund 
respectively.  
CUSTODIAN AND TRANSFER AGENT
PNC Bank, is located at 17th and Chestnut Streets, 
Philadelphia, PA 19103, and serves as the custodian of Trust.  The 
assets of the Trust are held under bank custodianship in 
compliance with the 1940 Act.
First Data is located at Exchange Place, Boston, 
Massachusetts 02109, and serves as the Trust's transfer agent.  
Under the transfer agency agreement, First Data maintains the 
shareholder account records for the Trust, handles certain 
communications between shareholders and the Trust, distributes 
dividends and distributions payable by the Trust and produces 
statements with respect to account activity for the Trust and its 
shareholders.  For these services, First Data receives a monthly 
fee computed on the basis of the number of shareholder accounts 
First Data maintains for the Trust during the month and is 
reimbursed for out-of-pocket expenses. 
ORGANIZATION OF THE TRUST
The Trust is organized as an unincorporated business trust 
under the laws of the Commonwealth of Massachusetts pursuant to a 
Master Trust Agreement dated October 18, 1988, as amended (the 
"Trust Agreement").  On November 18, 1988, August 27, 1990, July 
30, 1993 and October 14, 1994, the Trust changed its name from SLH 
Secured Capital Fund to SLH Principal Return Fund, Shearson Lehman 
Brothers Principal Return Fund, Smith Barney Shearson Principal 
Return Fund and Smith Barney Principal Return Fund, respectively.  
Under the Trust Agreement, the Trustees have authority to issue an 
unlimited number of shares of beneficial interest with a par value 
of $.001 per share. 
Massachusetts law provides that shareholders could, under 
certain circumstances, be held personally liable for the 
obligations of the Trust.  The Trust has been structured, and will 
be operated in such a way, so as to ensure as much as possible, 
that shareholders will not be liable for obligations of the 
Series.  The Trust Agreement disclaims shareholder liability for 
acts or obligations of the Trust, and requires that notice of the 
disclaimer be given in each agreement, obligation or instrument 
entered into or executed by the Trust or a Trustee.  The Trust 
Agreement also provides for indemnification from the Trust's 
property for all losses and expenses of any shareholder held 
personally liable for the obligations of the Trust.  Thus, the 
risk of a shareholder's incurring financial loss on account of 
shareholder liability is limited to circumstances in which the 
Trust would be unable to meet its obligations, a possibility that 
the Trust's management believes is remote.  Upon payment of any 
liability incurred by the Trust, the shareholder paying the 
liability will be entitled to reimbursement from the general 
assets of the Trust.  The Trustees intend to conduct the 
operations of the Trust and each of its series in such a way so as 
to avoid, as far as possible, ultimate liability of the 
shareholders for liabilities of the Trust. 
FINANCIAL STATEMENTS
The Trust's Annual Reports for the fiscal year ended 
November 30, 1996 accompany this Statement of Additional 
Information and are incorporated herein by reference in its 
entirety. 


g:\funds\prtf\1997\secdocs\1997sai.doc	20




PART C 
 
Item 24.	Financial Statements and Exhibits 
 
(a)	Financial Statements: 
 
   	Included in Part A:	 
 
		Financial Highlights 
 
	Included in Part B: 
 
	The Registrant's Annual Reports for the fiscal year ended 
November 30, 1996 and the reports of  
Independent Auditors are incorporated by reference to the 
Definitive 30b2-1 filed on February 7, 1997 as  
accession  number 91155-97-076. 
 
b)	Exhibits 
 
Exhibit No.	Description of Exhibit 
 
All references are to the Registrant's registration Statement 
on Form N-1A  
as filed with  the Securities Exchange Commission (the "SEC").  
(File Nos.  
33-25087 and 811-5678). 
 
1	Registrant's Master Trust Agreement and Amendments to the 
Master  
Trust Agreement dated October 18, 1988, November 18, 1988, 
August 24, 1990,  
October 5, 1990, February 26, 1991, May 1, 1991, and July 30, 
1993, is  
incorporated by reference to the Registrant's Registration 
Statement filed  
with the SEC on January 28, 1994 ("Post-Effective Amendment No. 
13"). 
 
(b)	Amendment to Master Trust Agreement with respect to 
Security and  
Growth Fund is incorporated by reference to the Registrant's 
Registration  
Statement filed with the SEC on March 23, 1995 ("Post-Effective 
Amendment  
No. 16").  
 
2	By-Laws are incorporated by reference to Registrant's 
Registration  
Statement filed with the SEC on October 19, 1988 (the 
"Registration  
Statement"). 
 
3	Not Applicable. 
 
4	Not Applicable. 
 
5 	Investment Advisory Agreement between the Registrant and 
Smith Barney  
Shearson Asset Management ("Asset Management") relating to 
Series 1996,  
Series 1998 and Series 2000 are incorporated by reference to 
Post-Effective  
Amendment No. 13.  
 
 (b)	Investment Advisory Agreement and Administration 
Agreement between  
the Registrant and Smith Barney Mutual Funds Management Inc. 
relating to  
Security and Growth Fund is incorporated by reference to Post-
Effective  
Amendment No. 16.    
 
6	Distribution Agreement between the Registrant and Smith 
Barney  
Shearson Inc. ("Smith Barney Shearson") is incorporated by 
reference to  
Post-Effective Amendment No. 13.  
 
7	Not Applicable. 
 
8	Form of Custodian Agreement is attached hereto. 
 
9 (a) 
    
    Administration Agreements dated April 21, 1994 
between the Registrant and Smith Barney  
Advisers, Inc. relating to Series 2000 is incorporated by 
reference to Post-Effective Amendment  
No.16.     
 
   (b)	Transfer Agency Agreement between the Registrant 
and  First Data Investor Services Group  
formerly known as The Shareholder Services Group, Inc. dated 
August 2, 1993 is incorporated by  
reference to Post-Effective Amendment No. 13. 
 
   (c)	Shareholder Services Plan between the Registrant 
and Smith Barney  
Shearson relating to Series 1998 is incorporated by reference 
to Post- 
Effective Amendment No. 13. 
 
  (d)	Shareholder Services Plan between the Registrant and 
Smith Barney  
Shearson relating to Series 2000 is incorporated by reference 
to Post- 
Effective Amendment No. 13.  
 
 (e)	Shareholder Services Plan between the Registrant and 
Smith Barney  
relating to Security & Growth Fund is incorporated by reference 
to Post- 
Effective Amendment No. 16 
 
10	Not Applicable 
 
11	Not Applicable. 
 
12	Not Applicable. 
 
13(a)	Purchase Agreement relating to Series 1998 Incorporated 
by reference  
to Post-Effective Amendment No. 9. 
 
    (b)	Form of Purchase Agreement relating to Series 2000 
is incorporated by  
reference to Post-Effective Amendment No. 8. 
 
    (c)	Form of Purchase Agreement relating to Security and 
Growth  
Fund is incorporated by reference to Post-Effective Amendment 
No. 16.  
 
14	Not Applicable. 
 
15	Not Applicable. 
 
16	Performance Data is incorporated by reference to Post-
Effective  
Amendment No. 2 filed with the SEC on April 2, 1990. 
 
17	Financial Data Schedule filed herewith. 
 
Item 25.	Persons Controlled by or under Common Control with 
Registrant 
 
	None 
		 
 
	Item 26.	Number of Holders of Securities 
 
		(1)						(2) 
    
		Number of Record Holders by Class 
Title of Class			  as of February 28, 1997 
 
 
 
 
(i)  Security and Growth Fund				22,870.00 
 
(ii)  Zeros and Appreciation 
	Series 1998					9,068.00 
 
(iii)  Zeros Plus Emerging  
	Equities Series 2000				  6,684.00 
 
     
Item 27.	Indemnification 
 
	The response to this item is incorporated by reference to  
Registrant's Pre-Effective Amendment No. 1. 
 
Item 28(a).	Business and Other Connections of Investment  
Adviser 
 
Investment Adviser - - Smith Barney Mutual Funds Management, 
Inc. 
Smith Barney Mutual Funds Management, Inc. ("SBMFM"), formerly  
known as Smith, Barney Advisers, Inc.,) 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 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 July 30, 1993 (the 
"Closing"),  
Shearson Asset Management, a member of the Asset Management 
Group  
of Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers"),  
served as the Registrant's investment adviser.  On the Closing,  
Travelers and Smith Barney Inc. (formerly known as Smith Barney  
Shearson Inc.) acquired the domestic retail brokerage and asset  
management business of Shearson Lehman Brothers which included 
the  
business of the Registrant's prior investment adviser.  
Shearson  
Lehman Brothers was a wholly owned subsidiary of Shearson 
Lehman  
Brothers Holdings Inc. ("Shearson Holdings").  All of the 
issued  
and outstanding common stock of Shearson Holdings (representing 
92%  
of the voting stock) was held by American Express Company.   
Information as to any past business vocation or employment of a  
substantial nature engaged in by officers and directors of 
Shearson  
Asset Management can be located in Schedules A and D of FORM 
ADV  
filed by Shearson Lehman Brothers on behalf of Shearson Asset  
Management prior to July 30, 1993.  (SEC FILE NO. 801-3701) 
 
Item 29.	Principal Underwriters 
 
Smith  Barney Inc. ("Smith Barney") also acts as principal 
underwriter for Smith Barney Money Funds,  
Inc.; Smith Barney Muni Funds; Smith Barney Funds, Inc., Smith 
Barney Variable Account Funds; Smith  
Barney  Intermediate Municipal Fund, Inc., Smith Barney 
Municipal Fund, Inc., High Income Opportunity  
Fund Inc., Smith Barney/Travelers Series Fund Inc., Smith 
Barney World Funds, Inc., Greenwich Street  
California Municipal Fund Inc., The Inefficient Fund, Inc., 
Smith Barney Adjustable Rate Government  
Income Fund, Smith Barney Equity Funds, Smith Barney Income 
Funds, Smith Barney Massachusetts  
Municipals Fund, Zenix Income Fund  Inc., Smith Barney Arizona 
Municipals Fund Inc., Smith Barney  
Principal Return Fund, Municipal High Income Fund Inc., The 
Trust for TRAK Investments, Smith  
Barney Series Fund, Smith Barney Income Trust, Smith  Barney 
Oregon Municipals Fund Inc., Smith  
Barney Municipal Money Market Fund, Inc., Smith Barney 
Aggressive Growth Fund Inc., Smith Barney  
Appreciation Fund Inc., Smith Barney California Municipals Fund  
Inc., Smith Barney Fundamental Value  
Fund Inc., Smith Barney Managed Governments Fund Inc., Smith 
Barney Managed Municipals Fund Inc.,  
Smith Barney New York Municipals Fund Inc., Smith Barney New 
Jersey  Municipals Fund Inc., Smith  
Barney Precious Metals and Minerals Fund Inc., Smith Barney 
Investment Funds Inc., Smith Barney FMA  
 Trust, The Italy Fund Inc., Smith Barney Telecommunications 
Trust, Managed Municipals Portfolio  
Inc., Managed Municipals Portfolio II Inc., Smith Barney 
Florida Municipal Fund, Managed  High Income  
Portfolio Inc. On June  1,  1994, Smith Barney changed its name 
from  Smith Barney Shearson  Inc.  to its  
current name. 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 Accountants and Record 
 
(1)	 Smith Barney Principal Return Fund 
	388 Greenwich Street 
	New York, New York  10013 
 
(2)	Smith Barney Mutual Funds Management Inc. 
	388 Greenwich Street 
	New York, New York 10013 
 
 
(3)	PNC Bank, National Association 
	17th and Chestnut Streets 
	Philadelphia, PA 19103 
	 
(4)	First Data Investor Services Group, Inc. 
	One Exchange Place 
	Boston, Massachusetts  02109 
 
Item 31.	Management Services 
 
	Not Applicable. 
 
Item 32.	Undertakings 
 
	(a)  Registrant undertakes to call a meeting of the 
shareholders for the purpose of voting upon the  
question  of removal of trustee or trustees when requested in 
writing to do so by the holders of at  
least 10% of Registrant's outstanding Shares and, in connection 
worth such 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. 
 
    
SIGNATURES 
 
	Pursuant to the requirements of the Securities Act of 
1933, and the  
Investment Company Act of 1940, the Registrant, SMITH BARNEY 
PRINCIPAL  
RETURN FUND, certifies that it meets all of the requirements 
for  
effectiveness of this Registration Statement pursuant to Rule 
485(b) under  
the Securities Act of 1933, has duly caused this Amendment to 
the  
Registration Statement to be signed on its behalf by the 
undersigned,  
thereunto duly authorized, all in the City of New York, State 
of New York  
on the 1st day of April, 1996. 
 
			SMITH BARNEY PRINCIPAL RETURN FUND  
 
			By:/s/ Heath B. McLendon *                          
			Heath B. McLendon, Chief Executive Officer 
 
	We, the undersigned, hereby severally constitute and 
appoint Heath B.  
McLendon, Christina T. Sydor and Lee D. Augsburger and each of 
them singly,  
our true and lawful attorneys, with full power to them and each 
of them to  
sign for us, and in our hands and in the capacities indicated 
below, any  
and all Amendments to this Registration Statement and to file 
the same,  
with all exhibits thereto, and other documents therewith, with 
the  
Securities and Exchange Commission, granting unto said 
attorneys, and each  
of them, acting alone, full authority and power to do and 
perform each and  
every act and thing requisite or necessary to be done in the 
premises, as  
fully to all intents and purposes as he might or could do in 
person, hereby  
ratifying and confirming all that said attorneys or any of them 
may  
lawfully do or cause to be done by virtue thereof. 
 
	WITNESS our hands on the date set forth below. 
 
	Pursuant to the requirements of the Securities Act of 
1933, as  
amended, this Amendment to the Registration Statement has been 
signed below  
by the following persons in the capacities and on the dates 
indicated. 
 
Signature				Title				Date 
 
 
/s/ Heath B. McLendon*		Chairman of the Board		
	 
Heath B. McLendon		(Chief Executive Officer)		
	03/26/97 
 
/s/ Lewis E. Daidone           	Senior Vice President 
andTreasurer  
				(Chief Financial and Accounting 
Officer)	03/29/96 
Lewis E. Daidone 
 
/s/ Paul R. Ades*           		Trustee			
		03/26/97 
Paul R. Ades 
 
Herbert Barg*	             		Trustee		
			03/26/97 
Herbert Barg 
 
/s/ Alger B. Chapman*	    	Trustee				
	03/26/97 
Alger B. Chapman 
 
/s/ Dwight B. Crane*	              Trustee			
		03/26/97 
Dwight B. Crane 
 
/s/ Frank Hubbard*		Trustee				
	03/26/97 
Frank Hubbard 
 
				Trustee				
	03/26/97 
Jerome Miller 
 
/s/ Ken Miller*			Trustee				
	03/26/97 
Ken Miller 
 
/s/ John F. White*		Trustee				              
03/26/97 
John F. White 
 
*Signed by Heath B. McLendon, their 
  duly authorized attorney-in-fact, pursuant  
   to power of attorney dated December 23, 1994 
 
   /s/ Heath B. McLendon 
   Heath B. McLendon 
 
     
 
funds prtn pea18