As filed with the Securities and Exchange Commission on October 24, 1997
-----------------------------------------------------------------------------
Registration No. 2-74288
		811-3275

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. 46  			
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY 
ACT OF 1940, as amended  Amendment No. 48

SMITH BARNEY INVESTMENT FUNDS INC.
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York  10013
(Address of Principal Executive Offices)  (Zip Code)
Registrant's Telephone Number, including Area Code:
(800)-451-2010

Christina T. Sydor
Secretary

SMITH BARNEY INVESTMENT FUNDS INC.
388 Greenwich Street
New York, New York  10013
(Name and Address of Agent for Service)

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

It is proposed that this filing will become effective:
	immediately upon filing pursuant to Rule 485(b)
     X	on October 27, 1997 pursuant to Rule 485(b)
	75 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 December 
31, 1996 was filed on February 27, 1997 as accession number 0000091155-97-
000104.


SMITH BARNEY INVESTMENT FUNDS INC.

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 INVESTMENT FUNDS INC.

FORM  N-1A CROSS REFERENCE SHEET

PURSUANT TO RULE 485(a) Under the Securities Act of 1933, as amended

Part A
Item No.				Prospectus Caption

1. Cover Page 				Cover Page

2. Synopsis 				Prospectus Summary 

3. Condensed Financial Highlights		Not Applicable

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

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

6. Capital Stock and Other		Investment Objective and 
    Securities				Management Policies; 		
					Dividends, Distributions and 	
					Taxes; Additional Information

7. Purchase of Securities Being Offered	Valuation of Shares; Purchase of 	
					Shares; Exchange Privilege; 	
					Redemption of Shares; 		
					Minimum Account Size; 		
					Distributor; Additional 		
					Information

8  Redemption or 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; Additional 		
					Information

13. Investment Objectives and Policies 	Investment Objectives 		
					Management and Policies

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

15. Control Persons and 			Management of the Company 
     Holders of Securities

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

17. Brokerage Allocation and 		Investment Objective and
     Other Services			Management Policies; Distributor

18. Capital Stock and Other 		Investment Objective and 
      Securities 				Management Policies; Purchase of 	
					Shares; 	Redemption of Shares; 	
					Taxes

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

20. Tax Status				Taxes

21. Underwriters			see Prospectus "Purchase of 
					Shares"

22. Calculations of Performance 	Performance Data

23. Financial Statements			Not Applicable

SMITH BARNEY INVESTMENT FUNDS 
PART B

PROSPECTUS 
 
                                                       
                                                    SMITH BARNEY HANSBERGER     
                                                                          Global
                                                                      Value Fund
                                                              
                                                           OCTOBER 27, 1997     
 
                                                   PROSPECTUS BEGINS ON PAGE ONE
 
 
 
                                
           [LOGO]                               [LOGO]
         HANSBERGER                           SMITH BARNEY 
           GLOBAL                             MUTUAL FUNDS
       INVESTORS, INC.                  INVESTING FOR YOUR FUTURE. 
                                              EVERY DAY.(SM)     

<PAGE>
 
   
PROSPECTUS                                               October 27, 1997     
 
Smith Barney Hansberger Global Value Fund
388 Greenwich Street
New York, New York 10013
(800) 451-2010
 
 The investment objective of Smith Barney Hansberger Global Value Fund (the
"Fund") is long-term capital growth. The Fund seeks to achieve this objective
by investing primarily in equity securities of U.S. and foreign issuers.
 
 The Fund is one of a number of funds, each having distinct investment objec-
tives and policies, making up the Smith Barney Investment Funds Inc. (the "Com-
pany"). The Fund is an open-end, management investment company commonly
referred to as a mutual fund.
   
 The initial subscription period for shares is scheduled to end on December 18,
1997, (the "Subscription Period"). After the expiration of the Subscription
Period or a limited continuous offering period, the Fund will suspend the
offering of shares to the public. A continuous offering of shares is expected
to commence on or about January 19, 1998. See "Purchase of Shares."     
 
 This Prospectus sets forth concisely certain information about the Company and
the Fund, including sales charges, distribution and service fees and expenses,
that prospective investors will find helpful in making an investment decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference.
   
 Additional information about the Fund is contained in a Statement of Addi-
tional Information dated October 27, 1997, as amended or supplemented from time
to time, that is available upon request and without charge by calling or writ-
ing the Fund at the telephone number or address set forth above or by contact-
ing a Smith Barney Financial Consultant. The Statement of Additional Informa-
tion 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 Manager
 
HANSBERGER GLOBAL INVESTORS, INC.
Sub-Investment Adviser
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
 
                                                                               1
<PAGE>
 
TABLE OF CONTENTS
 
 
<TABLE>   
<S>                                           <C>
PROSPECTUS SUMMARY                              3
-------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES   10
-------------------------------------------------
RISK FACTORS                                   18
-------------------------------------------------
VALUATION OF SHARES                            19
-------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES             20
-------------------------------------------------
PURCHASE OF SHARES                             21
-------------------------------------------------
EXCHANGE PRIVILEGE                             32
-------------------------------------------------
REDEMPTION OF SHARES                           35
-------------------------------------------------
MINIMUM ACCOUNT SIZE                           37
-------------------------------------------------
PERFORMANCE                                    37
-------------------------------------------------
MANAGEMENT OF THE FUND                         38
-------------------------------------------------
DISTRIBUTOR                                    39
-------------------------------------------------
ADDITIONAL INFORMATION                         40
</TABLE>    
 
--------------------------------------------------------------------------------
 
  No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Fund
or the distributor. This Prospectus does not constitute an offer by the Fund or
the distributor to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
 
--------------------------------------------------------------------------------
 
2
<PAGE>
 
PROSPECTUS SUMMARY
 
 
 The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the Prospec-
tus. See "Table of Contents."
 
INVESTMENT OBJECTIVE The Fund is an open-end, diversified management invest-
ment company whose investment objective is to seek long term capital growth.
The Fund seeks to achieve this objective by investing primarily in equity
securities of U.S. and foreign issuers. See "Investment Objective and Manage-
ment Policies."
 
ALTERNATIVE PURCHASE ARRANGEMENTS The Fund offers several classes of shares
("Classes") to investors designed to provide them with the flexibility of
selecting an investment best suited to their needs. The general public is
offered three classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of sales charges and rate of
expenses to which they are subject. A fourth Class of shares, Class Y shares,
is offered only to investors meeting an initial investment minimum of
$5,000,000. See "Purchase of Shares" and "Redemption of Shares."
 
 Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.00% and are subject to an annual service fee of 0.25%
of the average daily net assets of the Class. The initial sales charge may be
reduced or waived for certain purchases. Purchases of Class A shares of
$500,000 or more will be made at net asset value with no initial sales charge,
but will be subject to a contingent deferred sales charge ("CDSC") of 1.00% on
redemptions made within 12 months of purchase. See "Prospectus Summary--
Reduced or No Initial Sales Charge."
 
 Class B Shares. Class B shares are offered at net asset value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by 1.00% each year
after the date of purchase to zero. The CDSC may be waived for certain redemp-
tions. Class B shares are subject to an annual service fee of 0.25% and an
annual distribution fee of 0.75% of the average daily net assets of the Class.
The Class B shares' distribution fee may cause that Class to have higher
expenses and pay lower dividends than Class A shares.
 
 Class B Shares Conversion Feature. Class B shares will convert automatically
to Class A shares, based on relative net asset value, eight years after the
date of the original purchase. Upon conversion, these shares will no longer be
subject to an annual distribution fee. In addition, a certain portion of Class
B shares that have been acquired through the reinvestment of dividends and
distributions ("Class B Dividend Shares") will be converted at that time. See
"Purchase of Shares--Deferred Sales Charge Alternatives."
 
 
                                                                              3
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 Class C Shares. Class C shares are sold at net asset value with no initial
sales charge. They are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.75% of the average daily net assets of the Class, and
investors pay a CDSC of 1.00% if they redeem Class C shares within 12 months of
purchase. The CDSC may be waived for certain redemptions. The Class C shares'
distribution fee may cause that Class to have higher expenses and pay lower
dividends than Class A shares. Purchases of Fund shares which, when combined
with current holdings of Class C shares of the Fund, equal or exceed $500,000
in the aggregate, should be made in Class A shares at net asset value with no
sales charge, and will be subject to a CDSC of 1.00% on redemptions made within
12 months of purchase.
 
 Class Y Shares. Class Y shares are available only to investors meeting an ini-
tial investment minimum of $5,000,000. Class Y shares are sold at net asset
value with no initial sales charge or CDSC. They are not subject to any service
or distribution fees.
 
 In deciding which Class of Fund shares to purchase, investors should consider
the following factors, as well as any other relevant facts and circumstances:
 
 Intended Holding Period. The decision as to which Class of shares is more ben-
eficial to an investor depends on the amount and intended holding period of his
or her investment. Shareholders who are planning to establish a program of reg-
ular investment may wish to consider Class A shares; as the investment accumu-
lates, shareholders may qualify for reduced sales charges and the shares are
subject to lower ongoing expenses over the term of the investment. As an
investment alternative, Class B shares and Class C shares are sold without any
initial sales charge so the entire purchase price is immediately invested in
the Fund. Any investment return on these additional invested amounts may par-
tially or wholly offset the higher annual expenses of these Classes. Because
the Fund's future return cannot be predicted, however, there can be no assur-
ance that this would be the case.
 
 Finally investors should consider the effect of the CDSC period and any con-
version rights of the Classes in the context of their own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class
B shares, they do not have a conversion feature and, therefore, are subject to
an ongoing distribution fee. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks.
 
 Investors investing a minimum of $5,000,000 must purchase Class Y shares,
which are not subject to an initial sales charge, CDSC or service or distribu-
tion fee. The maximum purchase amount for Class A shares is $4,999,999, Class B
shares is $249,999 and Class C shares is $499,999. There is no maximum purchase
amount for Class Y shares.
 
 
4
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
   
 Reduced or No Initial Sales Charge. The initial sales charge on Class A shares
may be waived for certain eligible purchasers, and the entire purchase price
will be immediately invested in the Fund. In addition, Class A share purchases
of $500,000 or more will be made at net asset value with no initial sales
charge, but may be subject to a CDSC of 1.00% on redemptions made within 12
months of purchase. The $500,000 investment may be met by adding the purchase
to the net asset value of all Class A shares held in funds sponsored by Smith
Barney Inc. ("SmithBarney") listed under "Exchange Privilege." Class A share
purchases may also be eligible for a reduced initial sales charge. See "Pur-
chase of Shares". Because the ongoing expenses of Class A shares may be lower
than those for Class B and Class C shares, purchasers eligible to purchase
Class A shares at net asset value or at a reduced sales charge should consider
doing so.     
 
 Smith Barney Financial Consultants may receive different compensation for
selling different Classes of shares. Investors should understand that the pur-
pose of the CDSC on the Class B and Class C shares is the same as that of the
initial sales charge on the Class A shares.
 
 See "Purchase of Shares" and "Management of the Fund" for a complete descrip-
tion of the sales charges and service and distribution fees for each Class of
shares and "Valuation of Shares," "Dividends, Distributions and Taxes" and "Ex-
change Privilege" for other differences between the Classes of shares.
   
SMITH BARNEY 401(k) AND EXECCHOICE(TM) PROGRAMS Investors may be eligible to
participate in the Smith Barney 401(k) Program, which is generally designed to
assist plan sponsors in the creation and operation of retirement plans under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
as well as other types of participant directed, tax-qualified employee benefit
plans. Investors may also be eligible to participate in the Smith Barney
ExecChoice(TM) Program. Class A and Class C shares are available without sales
charge as investment alternatives under both of these programs. See "Purchase
of Shares--Smith Barney 401(k) and ExecChoice(TM) Programs."     
 
PURCHASE OF SHARES Shares may be purchased through a brokerage account main-
tained at Smith Barney. Shares may also be purchased through a broker that
clears securities transactions through Smith Barney on a fully disclosed basis
(an "Introducing Broker") or an investment dealer in the selling group. In
addition, certain investors, including qualified retirement plans and certain
institutional investors, may purchase shares directly from the Fund through the
Fund's transfer agent, First Data Investor Services Group, Inc. ("First Data").
See "Purchase of Shares."
   
 The initial subscription period for shares is scheduled to end on December 18,
1997, (the "Subscription Period"). After the expiration of the Subscription
Period or a limited continuous offering period, the Fund will suspend the
offering of shares to the public. A continuous offering of shares is expected
to commence on or about January 19, 1998. See "Purchase of Shares."     
 
                                                                               5
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
INVESTMENT MINIMUMS Investors in Class A, Class B and Class C shares may open
an account by making an initial investment of at least $1,000 for each account,
or $250 for an individual retirement account ("IRA") or a Self-Employed Retire-
ment Plan. Investors in Class Y shares may open an account for an initial
investment of $5,000,000. Subsequent investments of at least $50 may be made
for all Classes. For participants in retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Code, the minimum initial investment
requirement for Class A, Class B and Class C shares and the subsequent invest-
ment requirement for all Classes is $25. The minimum initial investment
requirement for the purchase of Fund shares through the Systematic Investment
Plan is described below. See "Purchase of Shares."
 
SYSTEMATIC INVESTMENT PLAN During the continuous offering period, the Fund
offers shareholders a Systematic Investment Plan under which they may authorize
the automatic placement of a purchase order each month or quarter for Fund
shares. The minimum initial investment requirements for Class A, Class B and
Class C shares and the subsequent investment requirement for all classes for
shareholders purchasing shares through the Systematic Investment Plan on a
monthly basis is $25 and on a quarterly basis is $50. See "Purchase of Shares."
 
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares" and "Re-
demption of Shares."
   
MANAGEMENT OF THE FUND Smith Barney Mutual Funds Management Inc. ("SBMFM")
serves as the Fund's investment manager. SBMFM provides investment advisory and
management services to investment companies affiliated with Smith Barney. SBMFM
is a wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings"). Hold-
ings is a wholly owned subsidiary of Travelers Group Inc. ("Travelers"), a
diversified financial services holding company engaged, through its subsidiar-
ies, principally in four business segments: Investment Services, Consumer
Finance Services, Life Insurance Services and Property & Casualty Insurance
Services.     
 
Hansberger Global Investors, Inc. ("Hansberger") serves as the Fund's sub-
adviser. See "Management of the Fund."
 
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
Class of certain other funds of the Smith Barney Mutual Funds at the respective
net asset values next determined. See "Exchange Privilege."
 
VALUATION OF SHARES Net asset value of the Fund for the prior day generally is
quoted daily in the financial section of most newspapers and is also available
from Smith Barney Financial Consultants. See "Valuation of Shares."
 
6
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income and distribu-
tions of net realized capital gains, if any, are declared and paid annually.
See "Dividends, Distributions and Taxes."
 
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a Class
will be reinvested automatically, unless otherwise specified by an investor, in
additional shares of the same Class at current net asset value. Shares acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution rein-
vestments will become eligible for conversion to Class A shares on a pro-rata
basis. See "Dividends, Distributions and Taxes."
   
RISK FACTORS AND SPECIAL CONSIDERATIONS The Fund invests principally in common
stocks. The prices of common stocks and other securities fluctuate and, there-
fore, the value of an investment in the Fund will vary based upon the Fund's
investment performance. Any income from these investments will be incidental to
the goal of capital appreciation. The Fund will invest in foreign securities
which may result in higher costs than investments in U.S. securities, including
foreign government taxes, which may reduce the investment return of the Fund.
In addition foreign investments may include additional risks associated with
currency exchange rates, less complete financial information about companies,
less market liquidity and political instability. The Fund may use management
techniques and strategies involving options, futures contracts and options on
futures (which are sometimes referred to as "derivatives"), as well as borrow-
ing for leverage purposes. The utilization of these techniques may involve
greater than ordinary investment risks and the likelihood of more volatile
price fluctuation. See "Investment Objective and Management Policies."     
 
                                                                               7
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
THE FUND'S EXPENSES The following expense table lists the costs and expenses
that an investor will incur either directly or indirectly as a shareholder of
the Fund, based on the maximum sales charge or maximum CDSC that may be
incurred at the time of purchase or redemption and the Fund's estimated operat-
ing expenses:
 
<TABLE>
<CAPTION>
  SMITH BARNEY HANSBERGER GLOBAL VALUE FUND    CLASS A CLASS B CLASS C CLASS Y
------------------------------------------------------------------------------
  <S>                                          <C>     <C>     <C>     <C>
  SHAREHOLDER TRANSACTION EXPENSES
    Maximum sales charge imposed on purchases
      (as a percentage of offering price)       5.00%   None    None    None
    Maximum CDSC (as a percentage of original
      cost or redemption proceeds, whichever
      is lower)                                 None*   5.00%   1.00%   None
------------------------------------------------------------------------------
  ANNUAL FUND OPERATING EXPENSES
    (as a percentage of offering price)
    Management Fees                             0.95%   0.95%   0.95%   0.95%
    12b-1 Fees**                                0.25    1.00    1.00    None
    Other Expenses***                           0.40    0.40    0.40    0.40
------------------------------------------------------------------------------
  TOTAL FUND OPERATING EXPENSES                 1.60%   2.35%   2.35%   1.35%
------------------------------------------------------------------------------
</TABLE>
 
   * Purchases of Class A shares of $500,000 or more will be made at net asset
     value with no sales charge, but will be subject to a CDSC of 1.00% on
     redemptions made within 12 months of purchase.
  ** Upon conversion of Class B shares to Class A shares, such shares will no
     longer be subject to a distribution fee. Class C shares do not have a
     conversion feature and, therefore, are subject to an ongoing distribution
     fee. As a result, long-term shareholders of Class C shares may pay more
     than the economic equivalent of the maximum front-end sales charge
     permitted by the National Association of Securities Dealers, Inc.
   
 *** "Other Expenses" have been estimated based on expenses the Fund expects to
     incur during its fiscal year ending April 30, 1998.     
 
 Class A shares of the Fund purchased through the Smith Barney AssetOne Program
will be subject to an annual asset-based fee, payable quarterly, in lieu of the
initial sales charge. The fee will vary to a maximum of 1.50%, depending on the
amount of assets held through the Program. For more information, please call
your Smith Barney Financial Consultant.
 
 
8
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
 The sales charge and CDSC set forth in the above table are the maximum charges
imposed on purchases or redemptions of Fund shares and investors may actually
pay lower or no charges, depending on the amount purchased and, in the case of
Class B, Class C and certain Class A shares, the length of time the shares are
held and whether the shares are held through the Smith Barney 401(k) and
ExecChoice(TM) Programs. See "Purchase of Shares" and "Redemption of Shares."
Smith Barney receives an annual 12b-1 service fee of 0.25% of the value of
average daily net assets of Class A shares. Smith Barney also receives with
respect to Class B shares and Class C shares, an annual 12b-1 fee of 1.00% of
the value of average daily net assets of that Class, consisting of a 0.25%
service fee and a 0.75% distribution fee. "Other Expenses" in the above table
include fees for shareholder services, custodial fees, legal and accounting
fees, printing costs and registration fees.
 
 EXAMPLE
 
  The following example is intended to assist an investor in understanding the
various costs that an investor in the Fund will bear directly or indirectly.
The example assumes payment by the Fund of operating expenses at the levels set
forth in the table above. See "Purchase of Shares," "Redemption of Shares" and
"Management of the Fund."
 
<TABLE>   
<CAPTION>
  SMITH BARNEY HANSBERGER GLOBAL VALUE FUND                     1 YEAR 3 YEARS
------------------------------------------------------------------------------
  <S>                                                           <C>    <C>
  An investor would pay the following expenses on a $1,000
  investment, assuming (1) 5.00% annual return and (2) redemp-
  tion at the end of each time period:
    Class A....................................................   65      98
    Class B....................................................   74     103
    Class C....................................................   34      73
    Class Y....................................................   14      43
  An investor would pay the following expenses on the same
  investment, assuming the same annual return and no redemp-
  tion:
    Class A....................................................   65      98
    Class B....................................................   24      73
    Class C....................................................   24      73
    Class Y....................................................   14      43
------------------------------------------------------------------------------
</TABLE>    
 
 The example also provides a means for the investor to compare expense levels
of funds with different fee structures over varying investment periods. To
facilitate such comparison, all funds are required to utilize a 5.00% annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTA-
TION OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN ABOVE.
 
                                                                               9
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
   
  The Fund's investment objective is to provide long-term capital growth. The
Fund seeks to achieve its objective by investing primarily in equity securi-
ties of U.S. and foreign issuers, which, in the opinion of SBMFM and
Hansberger, are undervalued. Such companies may vary in market capitalization
and industry type. Income will be an incidental consideration.     
 
  In making investment decisions for the Fund, Hansberger relies heavily on a
fundamental analysis of securities with a long-term investment perspective.
Hansberger's valuation methods focus on a company's share price in relation to
earnings, dividends, assets, sales and a variety of other criteria. The Fund
seeks to invest in companies whose securities are trading at the greatest dis-
count to future earnings, cash flow and/or net asset value and Hansberger
utilizes proprietary valuation screens, internal and external research sources
and other fundamental analysis to identify those securities that appear to be
undervalued. Once undervalued securities are identified, Hansberger analyzes
each security, concentrating on a variety of fundamental issues, including
sales growth, cash flow, new product development, management structure and
other economic factors. This fundamental analysis results in a list of securi-
ties meeting a strict value discipline, which are reviewed by Hansberger for
inclusion in the Fund's portfolio.
 
  Hansberger seeks to increase the scope and effectiveness of this fundamental
investment approach by extending the search for value into many countries
around the world. This global search provides Hansberger with more diverse
opportunities and flexibility to shift portfolio investments not only from
company to company and industry to industry, but also country to country, in
search of undervalued securities. Under normal market conditions the Fund will
invest its assets in at least three countries, which may include the United
States.
 
 INVESTMENT POLICIES
   
  Although the Fund generally invests in common stocks, the Fund may also
invest in preferred stocks and certain debt securities, rated or unrated, such
as convertible bonds and bonds selling at a discount, when Hansberger believes
the potential for appreciation will equal or exceed that available from
investments in common stock. The Fund may also invest in warrants or rights to
subscribe to or purchase such securities, and sponsored or unsponsored Ameri-
can Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") and other depository receipts (collective-
ly, "Depositary Receipts"). The Fund may also lend its portfolio securities
and borrow money for investment purposes (i.e., "leverage" its portfolio). In
addition, the Fund may invest in closed-end investment companies holding for-
eign securities, and enter into transactions in options on securities, securi-
ties indices and foreign currencies, forward foreign currency contracts, and
futures contracts and related options. When deemed appropriate by SBMFM or
Hansberger, the Fund may invest cash balances     
 
10
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
   
in repurchase agreements and other money market investments to maintain
liquidity in an amount sufficient to meet expenses or for day-to day operating
purposes. These investment techniques are described below under "Investment
Strategies and Techniques" and "Risk Factors". Whenever, in the judgment of
Hansberger, market or economic conditions warrant, the Fund may adopt a tempo-
rary defensive position and may invest without limit in money market securi-
ties denominated in U.S. dollars or in the currency of any foreign country.
See " Investment Strategies and Techniques--Temporary Investments."     
 
 INVESTMENT STRATEGIES AND TECHNIQUES
 
  The Fund may also engage in the investment techniques and make the types of
investments described and discussed below.
 
  Options Transactions. The Fund may seek to hedge all or a portion of its
investments through options on other securities in which it may invest.
Options which the Fund may purchase or sell will be traded on a recognized
securities or futures exchange or over the counter. Options markets in emerg-
ing countries are currently limited and the nature of the strategies adopted
by Hansberger and the extent to which those strategies are used will depend on
the development of such markets.
   
  The Fund may write (i.e., sell) covered call options. A call gives the pur-
chaser the right to buy the security underlying the option from the Fund at
the stated exercise price, on or before a specified date (the "termination
date") that is usually not more than nine months from the date the option is
issued. A call is "covered" if the Fund (i) owns the securities underlying the
option or securities convertible or exchangeable (without the payment of any
consideration) into the securities underlying the option, (ii) maintains in a
segregated account with The Chase Manhattan Bank ("Chase"), the Fund's custo-
dian, cash or equity and debt securities of any grade provided such securities
have been determined by SBMFM and Hansberger to be liquid and unencumbered
pursuant to guidelines established by the Board of Directors ("eligible segre-
gated assets") with a value sufficient to meet the Fund's obligations under
the call, or (iii) owns an offsetting call option.     
 
  The Fund may also write (i.e., sell) covered put options. The writer of a
put incurs an obligation to buy the security underlying the option from the
put's purchaser at the exercise price at any time on or before the termination
date, at the purchaser's election (certain options the Fund writes will be
exercisable by the purchaser only on a specific date ). Generally, a put is
"covered" if the Fund maintains eligible segregated assets in an amount equal
to the exercise price of the option or if the Fund holds a put on the same
underlying security with a similar or higher exercise price.
 
  The Fund may also purchase put or call options on individual securities or
baskets of securities. When the Fund purchases a call, it acquires the right
to buy the underlying security at the exercise price on or before the termina-
tion date, and
 
                                                                             11
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
when the Fund purchases a put, it acquires the right to sell the underlying
security at the exercise price on or before the termination date.
   
  The primary risks associated with the use of options on securities are (i)
imperfect correlation between the change in market value of the securities the
Fund holds and the prices of options relating to the securities purchased or
sold by the Fund; and (ii) possible lack of a liquid secondary market for an
option. Options not traded on an exchange (OTC options) are generally consid-
ered illiquid and may be difficult to value. Hansberger believes that the Fund
will minimize its risk of being unable to close out an option contract by
transacting in options only if there appears to be a liquid secondary market
for those options.     
   
  Real Estate Investment Trust Securities. The Fund may invest up to 10% of its
assets in Real Estate Investment Trusts ("REITs"). REITs are pooled investment
vehicles that invest primarily in either real estate or real estate related
loans. The value of a REIT is affected by changes in the value of the proper-
ties owned by the REIT or securing mortgage loans held by the REIT. A REIT is
dependent upon cash flow from its investments to repay financing costs and the
ability of the REIT's manager. REITs are also subject to risks generally asso-
ciated with investments in real estate.     
       
       
  Futures Contracts. The Fund may buy and sell financial futures contracts,
stock and bond index futures contracts, foreign currency futures contracts and
options on any of the foregoing for hedging purposes only. A financial futures
contract is an agreement between two parties to buy or sell a specified debt
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
 
  When the Fund enters into a futures contract, it must make an initial depos-
it, known as "initial margin," as a partial guarantee of its performance under
the contract. As the value of the security, index or currency fluctuates,
either party to the contract is required to make additional margin payments,
known as "variation margin," to cover any additional obligation it may have
under the contract. In addition, when the Fund enters into a futures contract,
it will segregate assets or "cover" its position in accordance with the Invest-
ment Company Act of 1940, as amended (the "1940 Act"). With respect to posi-
tions in futures and related options that do not constitute "bona fide hedging"
positions as defined in regulations of the Commodity Futures Trading Commis-
sion, the Fund will not enter into a futures contract or related option con-
tract if, immediately thereafter, the aggregate initial margin deposits relat-
ing to such positions plus premiums paid by it for open futures option posi-
tions, less the amount by which any such options are "in-the-money,"
 
12
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
would exceed 5% of the Fund's total assets. The value of the underlying secu-
rities on which futures contracts will be written at any one time will not
exceed 25% of the total assets of the Fund.
 
  The primary risks associated with the use of futures and options on futures
are (i) imperfect correlation between the change in market value of the secu-
rities held by the Fund and the prices of related futures and options on
futures purchased or sold by the Fund, and (ii) possible lack of a liquid sec-
ondary market for a futures contract (or related option) and the resulting
inability to close a futures position, which could have an adverse impact on
the Fund's ability to hedge. The risk of loss in trading on futures contracts
and related options in some strategies can be substantial, due both to the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. Gains and losses on futures and related options depend on
Hansberger's ability to predict correctly the direction of stock prices,
interest rates, and other economic factors. The risk that the Fund will be
unable to close out a futures position or related options contract will be
minimized by only entering into futures contracts or related options transac-
tions for which there appears to be a liquid secondary market.
   
  Borrowing. The Fund may borrow money from U.S.-regulated banks in an amount
not to exceed 33 1/3% of the Fund's total assets (including the amount borrow-
ed) less all liabilities and indebtedness other than the borrowing. If the
Fund borrows and uses the proceeds to make additional investments, income and
appreciation from each such investments will improve its performance if they
exceed the associated borrowing costs but impair its performance if they are
less than such borrowing costs. This speculative factor is known as "lever-
age."     
   
  Leverage creates an opportunity for increased returns to shareholders of the
Fund but, at the same time, creates special risk considerations. For example,
leverage may exaggerate changes in the net asset value of the Fund's shares
and in the Fund's yield. Although the principal or stated value of such
borrowings will be fixed, the Fund's assets may change in value during the
time the borrowing is outstanding. Leverage will create interest or dividend
expenses for the Fund which can exceed the income from the assets retained. To
the extent the income or other gain derived from securities purchased with
borrowed funds exceeds the interest or dividends the Fund will have to pay in
respect thereof, the Fund's net income or other gain will be greater than if
leverage had not been used. Conversely, if the income or other gain from the
incremental assets is not sufficient to cover the cost of leverage, the net
income or other gain of the Fund will be less than if leverage had not been
used. If the amount of income from the incremental securities is insufficient
to cover the cost of borrowing, securities might have to be liquidated to
obtain required funds. Depending on market or other conditions, such liquida-
tions could be disadvantageous to the Fund.     
 
                                                                             13
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
 
  Depository Receipts. The Fund may purchase sponsored and unsponsored Deposi-
tory Receipts that are or become available, including ADRs, GDRs, EDRs and
other Depository Receipts. Depositary Receipts are typically issued by a
financial institution ("depository") and evidence ownership interests in a
security or a pool of securities ("underlying securities") that have been
deposited with the depository. The depository for ADRs is typically a U.S.
financial institution and the underlying securities are issued by a foreign
issuer. In other Depositary Receipts, the depository may be a foreign or a
U.S. entity, and the underlying securities may have a foreign or a U.S. issu-
er. For purposes of the Fund's investment policies, investments in Depository
Receipts will be deemed to be investments in the underlying securities. Thus,
a Depository Receipt representing ownership of common stock will be treated as
common stock.
 
  Sovereign Debt. The Fund may invest in sovereign debt, which may trade at a
substantial discount from face value. The Fund may hold and trade sovereign
debt of emerging market countries in appropriate circumstances and to partici-
pate in debt conversion programs. Emerging country sovereign debt is generally
lower-quality debt and is considered speculative in nature. The issuer or gov-
ernmental authorities that control Sovereign Debt repayment ("sovereign debt-
ors") may be unable or unwilling to repay principal or interest when due in
accordance with the terms of the debt. A sovereign debtor's willingness or
ability to repay principal and interest due in a timely manner may be affected
by, among other factors, its cash flow, the extent of its foreign reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy towards the International Monetary Fund and the
political constraints to which the sovereign debtor may be subject.
 
  Brady Bonds. The Fund may invest in Brady Bonds as part of its investment in
sovereign debt of countries that have restructured or are in the process of
restructuring their sovereign debt.
   
  Brady Bonds are often viewed as having three or four valuation components:
(i) the collateralized repayment of principal at final maturity; (ii) the col-
lateralized interest payments; (iii) the uncollateralized interest payments;
and (iv) any uncollateralized interest and principal at maturity (these
uncollateralized amounts constitute the " residual risk"). In light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of coun-
tries issuing Brady Bonds, investments in Brady Bonds can viewed as specula-
tive.     
 
  Investment Funds. Some emerging countries have laws and regulations that
preclude direct foreign investment in the securities of companies located
there. However, indirect foreign investment in the securities of companies
listed and traded on
 
14
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
   
the stock exchanges in these countries is permitted by certain emerging coun-
tries through specifically authorized investment funds. The Fund may invest in
these investment funds, as well as other closed-end investment companies up to
10% of its assets as permitted by the 1940 Act.     
   
  Repurchase Agreements. In order to aid in cash management, the Fund may enter
into repurchase agreements with brokers, dealers or banks ("counterparties")
that SBMFM and Hansberger have determined meet the credit guidelines estab-
lished by the Board of Directors. Repurchase agreements will be fully collater-
alized, and may be viewed for purposes of the 1940 Act as a loan of money by
the Fund to the counterparty. The Fund may incur a loss if the counterparty
defaults and the collateral value declines, or if bankruptcy proceedings are
commenced regarding the counterparty and the Fund's realization upon the col-
lateral is delayed or limited.     
 
  Securities Lending. The Fund is authorized to lend up to 33 1/3% of the total
market value of its portfolio securities to brokers, dealers, domestic and for-
eign banks or other financial institutions for the purpose of increasing its
net investment income. Any such loan must be fully secured; however, and there
may be risks of delay in recovery of the securities or even loss of rights in
the collateral should the borrowers of the securities fail financially.
 
  Temporary Investments. The Fund may make money market investments pending
other investments or settlement for liquidity, or in adverse market conditions.
These money market investments include obligations of the U.S. Government and
its agencies and instrumentalities, obligations or foreign sovereignties, other
debt securities, commercial paper including bank obligations, certificates of
deposit (including Eurodollar certificates of deposit) and repurchase agree-
ments.
 
  For temporary defensive purposes, during periods in which SBMFM or Hansberger
believes changes in economic, financial or political conditions make it advis-
able, the Fund may reduce its holdings in equity and other securities and may
invest up to 100% of its assets in certain short-term (less than twelve months
to maturity) and medium-term (not greater than five years to maturity) debt
securities and in cash (U.S. dollars, foreign currencies, multicurrency units).
These short-term and medium-term debt securities consist of (a) obligations of
governments, agencies or instrumentalities of any member state of the Organiza-
tion for Economic Cooperation and Development ("OECD"), (b) bank deposits and
bank obligations (including certificates of deposit, time deposits and banker's
acceptances) of banks organized under the laws of any member state of the OECD,
denominated in any currency: (c) floating rate securities and other instruments
dominated in any currency issued by international development agencies: (d)
finance company and corporate commercial paper and other short-term corporate
debt obligations of corpora-
 
                                                                              15
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
tions organized under the laws of any member state of the OECD meeting the
Fund's credit quality standards: and (e) repurchase agreements with banks and
broker-dealers covering any of the foregoing securities. The short-term and
medium-term debt securities in which the Fund may invest for temporary defen-
sive purposes will be those that SBMFM and Hansberger believe to be of high
quality, i.e., subject to relatively low risk of loss of interest or princi-
pal. There is currently no rating system for debt securities in most emerging
countries. If rated, these securities will be rated in one of the three high-
est rating categories by rating services such as Moody's Investors Services,
Inc. or Standard & Poor's Ratings Group (i.e., rated at least A).
 
  When-Issued Securities. The Fund may purchase securities on a when-issued or
delayed delivery basis. The price of debt obligations purchased on a when-
issued basis is fixed at the time the Fund commits to purchase, but delivery
and payment for the securities ("settlement") takes place at a later date. The
price of these securities may be expressed in yield terms. The Fund will enter
into these transactions in order to lock in the yield (price) available at the
time of commitment.
 
  Between purchase and settlement, the Fund assumes the ownership risk of the
when-issued securities, including the risk of fluctuations in the securities
market value due to, among other factors, a change in the general level of
interest rates. However, no interest accrues to the Fund during this period.
 
  Forward Foreign Currency Exchange Contracts and Options on Foreign
Currencies. The Fund may enter into forward foreign currency exchange con-
tracts ("forward contracts"), providing for the purchase of or sale of an
amount of a specified currency at a future date. The Fund may use forward con-
tracts to protect against a foreign currency's decline against the U.S. dollar
between the trade date and settlement date for a securities transaction, or to
lock in the U.S. dollar value of dividends declared on securities it holds, or
generally to protect the U.S. dollar value of the securities it holds against
exchange rate fluctuations. The Fund may also use forward contracts to protect
against fluctuating exchange rates and exchange control regulations. Forward
contracts may limit the Fund's losses due to exchange rate fluctuation, but
they will also limit any gains that the Fund might otherwise have realized.
The Fund may also enter into foreign currency futures contracts ("currency
futures").
   
  Except where segregated accounts are not required by the 1940 Act, when the
Fund enters into a forward contract or currency future, it will place in a
segregated account maintained with Chase, eligible segregated assets, in an
amount equal to the value of the Fund's total assets committed to consummation
of forward contracts and currency futures. If the value of these segregated
securities declines, additional cash or securities will be placed in the
account on a daily basis so that the account value is at least equal to the
Fund's commitments to such contracts.     
 
16
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
 
  The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the pre-
mium received, and the Fund could be required to purchase or sell foreign cur-
rencies at disadvantageous exchange rates, thereby incurring losses. The pur-
chase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on U.S. and foreign exchanges or over-the-
counter.
   
  Forward Roll Transactions. In order to enhance current income, the Fund may
enter into forward roll transactions. In a forward roll transaction, the Fund
sells a security to a financial institution, such as a bank or broker-dealer,
and simultaneously agrees to repurchase a similar security from the institution
at a later date at an agreed-upon price. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities sold. Proceeds of the sale will be invested in
short-term investments, particularly repurchase agreements, and the income from
these investments, together with any additional fee income received on the sale
will generate income for the Fund exceeding the yield on the securities sold.
Forward roll transactions involve the risk that the market value of the securi-
ties sold by the Fund may decline below the repurchase price of those securi-
ties. At the time the Fund enters into forward roll transactions, it will place
in a segregated account with Chase, eligible segregated assets having a value
equal to the repurchase price (including accrued interest) and will subse-
quently monitor the account to insure that such equivalent value is maintained.
    
  Non-Publicly Traded Securities. The Fund may invest in securities that are
neither listed on a stock exchange nor traded over the counter, including pri-
vately placed securities. These securities may present a higher degree of busi-
ness and financial risk, which can result in substantial losses. In the absence
of a public trading market for these securities, they may be less liquid than
publicly traded securities. Although these securities may be resold in pri-
vately negotiated transactions, the prices realized from these sales could be
less than those originally paid by the Fund or less than what the Fund may con-
sider the fair value of such securities. Further, companies whose securities
are not publicly traded may not be subject to disclosure and other investor
protection requirements that might apply if their securities were publicly
traded. If such securities are required to be registered under the securities
laws of one or more jurisdictions before being resold, the Fund may
 
                                                                              17
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
be required to bear the costs of registration. The Fund may not invest more
than 15% of its net assets in illiquid securities, including securities for
which there is no readily available secondary market. The Fund may invest in
securities that can be offered and sold to qualified institutional buyers under
Rule 144A under the 1933 Act ("Rule 144A Securities"). The Board of Directors
has delegated to SBMFM and Hansberger, subject to the Board's supervision, the
daily function of determining and monitoring the liquidity of Rule 144A Securi-
ties. Rule 144A Securities held by the Fund which have been determined to be
liquid will not be subject to the 15% limitation described above. However, Rule
144A Securities may become illiquid if qualified institutional buyers are not
interested in acquiring them.
 
  Short Sales. The Fund may sell securities short "against the box", that is,
sell a security that the Fund owns or has the right to acquire, for delivery at
a specified date in the future.
 
RISK FACTORS
 
 
 FOREIGN INVESTMENT
 
  Investment in securities of foreign issuers and in foreign branches of domes-
tic banks, involves some risks different from, or in addition to, those affect-
ing investments in securities of U.S. issuers. For example, publicly available
information about foreign issuers and economies may be limited; foreign issuers
are not generally subject to uniform accounting, auditing and other reporting
standards; securities of foreign issuers may be less liquid and more volatile
than those of domestic issuers; dividends and interest paid by foreign issuers
may be subject to withholding and other foreign taxes; risks of seizure,
nationalization or expropriation of a foreign issuer exists; and, since securi-
ties of foreign issuers are frequently denominated in foreign currencies,
investments in these securities may involve currency exchange risks.
 
 INVESTING IN LOWER RATED DEBT SECURITIES
   
  When deemed appropriate, the Fund may invest up to 10% of its assets in lower
rated or unrated debt securities. Debt considered below investment grade may be
referred to as "junk bonds" or "high risk" securities. The emerging country
debt securities in which the Fund may invest are subject to significant risk
and will not be required to meet any minimum rating standard or equivalent.
Debt securities are subject to the risk of the issuer's inability to meet prin-
cipal and interest payments (credit risk) and may also be subject to price vol-
atility due to such factors as interest rate sensitivity, market perception of
the issuer's creditworthiness and general     
 
18
<PAGE>
 
RISK FACTORS (CONTINUED)
 
market liquidity (market risk). Lower rated or unrated securities are more
likely to react to developments affecting market and credit risk than are more
highly rated securities, which react primarily to movements in general levels
of interest rates. The market values of debt securities tend to vary inversely
with interest rate levels. Yields and market values of lower rated and unrated
debt will fluctuate over time, reflecting not only changing interest rates but
also the market's perception of credit quality and the outlook for economic
growth. When economic conditions appear to be deteriorating, medium to lower
rated securities may decline in value due to heightened concern over credit
quality, regardless of prevailing interest rates. Hansberger will consider
credit risk and market risk in making debt security investment decisions for
the Fund. Investors should carefully consider the relative risks of investing
in the Fund because it purchases lower rated and unrated debt securities, and
should understand that such securities are not generally meant for short-term
investment.
 
  The U.S. market for lower rated and unrated corporate debt is relatively new
and its recent growth paralleled a long period of economic expansion and an
increase in merger, acquisition and leveraged buyout activity. In addition,
trading markets for debt securities of issuers located in emerging countries
may be limited. Adverse economic developments may disrupt the market for U.S.
corporate lower rated and unrated debt securities and for emerging country debt
securities. Such disruptions may severely affect the ability of issuers, espe-
cially highly leveraged issuers, to service their debt obligations or to repay
their obligations upon maturity. In addition, the secondary market for lower
rated and unrated debt securities, which is concentrated in relatively few mar-
ket makers, may not be as liquid as the secondary market for more highly rated
securities. As a result, Hansberger could find it more difficult to sell these
securities or may be able to sell the securities only at prices lower than if
such securities were widely traded. Prices realized upon the sale of such lower
rated or unrated securities, under these circumstances, may be less than the
prices used in calculating the Fund's net asset value.
 
VALUATION OF SHARES
 
 
 The Fund's net asset value per share is determined as of the close of regular
trading on the NYSE on each day that the NYSE is open, by dividing the value of
the Fund's net assets attributable to each Class by the total number of shares
of the Class outstanding.
 
 Generally, the Fund's investments are valued at market value, or, in the
absence of a market value with respect to any securities, at fair value. Secu-
rities listed on an exchange are valued on the basis of the last sale prior to
the time the valuation is made. If there has been no sale since the immediately
previous valuation, then the
 
                                                                              19
<PAGE>
 
VALUATION OF SHARES (CONTINUED)
 
current bid price is used. Quotations are taken from the exchange where the
security is primarily traded. Portfolio securities which are primarily traded
on foreign exchanges may be valued with the assistance of a pricing service and
are generally valued at the preceding closing values of such securities on
their respective exchange, except that when an occurrence subsequent to the
time a foreign security is valued is likely to have changed such 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 Directors. Over-the-counter
securities are valued on the basis of the bid price at the close of business on
each day. Unlisted foreign securities are valued at the mean between the last
available bid and offer price prior to the time of valuation. Any assets or
liabilities initially expressed in terms of foreign currencies will be con-
verted into U.S. dollar values at the mean between the bid and offered quota-
tions of such currencies against U.S. dollars as last quoted by any recognized
dealer. Securities for which market quotations are not readily available are
valued at fair value. Notwithstanding the above, bonds and other fixed-income
securities are valued by using market quotations and may be valued on the basis
of prices provided by a pricing service approved by the Board of Directors.
 
DIVIDENDS, DISTRIBUTIONS AND TAXES
 
 
 DIVIDENDS AND DISTRIBUTIONS
 
 The Fund's policy is to distribute substantially all its investment income
(that is, its income other than its net realized capital gains) and net real-
ized capital gains, if any, once a year, normally at the end of the year in
which earned or at the beginning of the next year.
 
 If a shareholder does not otherwise instruct, dividends and capital gain dis-
tributions will be reinvested automatically in additional shares of the same
Class at net asset value, subject to no sales charge or CDSC. In order to avoid
the application of a 4.00% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed ordi-
nary income or capital gains and expects to pay any other dividends and distri-
butions necessary to avoid the application of this tax.
 
 The per share dividends on Class B and Class C shares of the Fund may be lower
than the per share dividends on Class A and Class Y shares principally as a
result of the distribution fee applicable with respect to Class B and Class C
shares. The per share dividends on Class A shares of the Fund may be lower than
the per share dividends on Class Y shares principally as a result of the serv-
ice fee applicable to Class A shares. Distributions of capital gains, if any,
will be in the same amount for Class A, Class B, Class C and Class Y shares.
 
20
<PAGE>
 
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
 
 
 TAXES
 
  The Fund intends to qualify each year as a regulated investment company
under the Code. Dividends paid from net investment income and distributions of
net realized short-term capital gains will be taxable to shareholders as ordi-
nary income, regardless of how long shareholders have held their Fund shares
and whether such dividends and distributions are received in cash or rein-
vested in additional Fund shares. Distributions of net realized long-term cap-
ital gains will be taxable to shareholders as long-term capital gains, regard-
less of how long shareholders have held Fund shares and whether such distribu-
tions are received in cash or are reinvested in additional Fund shares. Fur-
thermore, as a general rule, a shareholder's gain or loss on a sale or redemp-
tion of Fund shares will be a long-term capital gain or loss if the share-
holder has held the shares for more than one year and will be a short-term
capital gain or loss if the shareholder has held the shares for one year or
less. Some of the Fund's dividends declared from net investment income may
qualify for the Federal dividends-received deduction for corporations.
 
  Statements as to the tax status of each shareholder's dividends and distri-
butions will be mailed annually. Each shareholder also will receive, if appro-
priate, various written notices after the close of the Fund's prior taxable
year as to the Federal income tax status of his or her dividends and distribu-
tions which were received from the Fund during the Fund's prior taxable year.
Shareholders should consult their own tax advisors about the status of the
Fund's dividends and distributions for state and local tax liabilities.
 
PURCHASE OF SHARES
 
 
 GENERAL
 
  The Fund offers four Classes of shares. Class A shares are sold to investors
with an initial sales charge and Class B and Class C shares are sold without
an initial sales charge but are subject to a CDSC payable upon certain redemp-
tions. Class Y shares are sold without an initial sales charge or CDSC and are
available only to investors investing a minimum of $5,000,000 (except for pur-
chases of Class Y shares by Smith Barney Concert Allocation Series Inc., for
which there is no minimum purchase amount). See "Prospectus Summary--Alterna-
tive Purchase Arrangements" for a discussion of factors to consider in select-
ing which Class of shares to purchase.
 
 INITIAL SUBSCRIPTION PERIOD
 
  Smith Barney, the Fund's distributor, will solicit subscriptions for shares
of the Fund during the Subscription Period. Subscriptions for shares must be
made through a brokerage account maintained with Smith Barney or an Introduc-
ing Broker. Shares of the Fund subscribed for during the Subscription Period
for which
 
                                                                             21
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
Smith Barney accepts purchase orders will be issued and sold by the Fund on the
third business day after the end of the Subscription Period (the "Purchase
Date"). Also on the Purchase Date, shareholders of other funds of the Smith
Barney Mutual Funds will be able to exchange shares of such funds for shares of
the Fund. On the Purchase Date, Smith Barney will notify the Fund of the aggre-
gate number of shares for which it has received and accepted subscriptions, and
the Fund will issue shares for such subscriptions and commence operations.
   
  The Fund is offering its Class A shares to the public at a maximum purchase
price per share of $12.00, which equals the Class A share initial net asset
value per share of $11.40 plus the maximum sales charge set forth below under
"Continuous Offerings". The Fund is offering its Class B, Class C and Class Y
shares to the public at each Class' respective initial net asset value per
share of $11.40.     
 
  The Fund and Smith Barney may in their discretion determine to withdraw the
offering without notice for any reason before the end of the Subscription Peri-
od. The Fund also reserves the right to refuse any order in whole or in part.
 
 CONTINUOUS OFFERINGS
 
  Smith Barney will suspend the offering of shares to the public immediately
after the expiration of the Subscription Period or within three weeks thereaf-
ter. During the three-week period, Smith Barney will commence a limited contin-
uous offering of shares to the public. Once Smith Barney suspends the offering
of shares to the public (the "Closing Period"), it is expected to do so for 30
days. This period may be lengthened or shortened in the absolute discretion of
Smith Barney. During the Closing Period, the Fund will invest the proceeds from
its Subscription Period and its continuous offering, if any, and existing
shareholders of the Fund may request redemptions, purchase additional shares
and exchange shares of the Fund for shares of certain other funds of the Smith
Barney Mutual Funds. See "Exchange Privilege." Immediately after the expiration
of the Closing Period, Smith Barney expects to commence a continuous offering
of shares of the Fund.
 
  During the continuous offering, shares may be purchased through a brokerage
account maintained with Smith Barney. Shares may also be purchased through an
Introducing Broker or an investment dealer in the selling group. In addition,
certain investors, including qualified retirement plans and certain other
institutional investors, may purchase shares directly from the Fund through
First Data. When purchasing shares of the Fund, investors must specify whether
the purchase is for Class A, Class B, Class C or Class Y shares. Smith Barney
and other broker/dealers may charge their customers an annual account mainte-
nance fee in connection with a brokerage account through which an investor pur-
chases or holds shares. Accounts held directly at First Data are not subject to
a maintenance fee.
 
  Investors in Class A, Class B and Class C shares may open an account by mak-
ing an initial investment of at least $1,000 for each account, or $250 for an
IRA or
 
22
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
a Self-Employed Retirement Plan, in the Fund. Investors in Class Y shares may
open an account by making an initial investment of $5,000,000. Subsequent
investments of at least $50 may be made for all Classes. For participants in
retirement plans qualified under Section 403(b)(7) or Section 401(a) of the
Code, the minimum initial investment requirement for Class A, Class B and Class
C shares and the subsequent investment requirement for all Classes in the Fund
is $25. For shareholders purchasing shares of the Fund through the Systematic
Investment Plan on a monthly basis, the minimum initial investment requirement
for Class A, Class B and Class C shares and the subsequent investment require-
ment for all Classes is $25. For shareholders purchasing shares of the Fund
through the Systematic Investment Plan on a quarterly basis, the minimum ini-
tial investment requirement for Class A, Class B and Class C shares and subse-
quent investment requirement for all Classes is $50. There are no minimum
investment requirements for Class A shares for employees of Travelers and its
subsidiaries, including Smith Barney, Directors or Trustees of any of the Smith
Barney Mutual Funds and their spouses and children. The Fund reserves the right
to waive or change minimums, to decline any order to purchase its shares and to
suspend the offering of shares from time to time. Shares purchased will be held
in the shareholder's account by First Data. Share certificates are issued only
upon a shareholder's written request to First Data.
 
  Purchase orders received by the Fund or Smith Barney prior to the close of
regular trading on the NYSE, on any day the Fund calculates its net asset val-
ue, are priced according to the net asset value determined on that day (the
"trade date"). Orders received by dealers or Introducing Brokers prior to the
close of regular trading on the NYSE on any day the Fund calculates its net
asset value, are priced according to the net asset value determined on that
day, provided the order is received by the Fund or Smith Barney prior to Smith
Barney's close of business. For shares purchased through Smith Barney or Intro-
ducing Brokers purchasing through Smith Barney, payment for Fund shares is due
on the third business day after the trade date. In all other cases, payment
must be made with the purchase order.
 
 SYSTEMATIC INVESTMENT PLAN
 
  During the continuous offering period, shareholders may make additions to
their accounts at any time by purchasing shares through a service known as the
Systematic Investment Plan. Under the Systematic Investment Plan, Smith Barney
or First Data is authorized through preauthorized transfers of at least $25 on
a monthly basis or at least $50 on a quarterly basis, to charge the regular
bank account or other financial institution indicated by the shareholder on a
monthly or quarterly basis to provide systematic additions to the shareholder's
Fund account. A shareholder who has insufficient funds to complete the transfer
will be charged a fee of up to $25 by Smith Barney or First Data. The System-
atic Investment Plan also authorizes Smith Barney to apply cash held in the
shareholder's Smith Barney bro-
 
                                                                              23
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
kerage account or redeem the shareholder's shares of a Smith Barney money mar-
ket fund to make additions to the account. Additional information is available
from the Fund or a Smith Barney Financial Consultant.
 
 INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
 
  The sales charges applicable to purchases of Class A shares of the Fund are
as follows:
 
<TABLE>
<CAPTION>
                                  SALES CHARGE
                         ------------------------------
                                                             DEALERS'
                              % OF           % OF       REALLOWANCE AS % OF
  AMOUNT OF INVESTMENT   OFFERING PRICE AMOUNT INVESTED   OFFERING PRICE
---------------------------------------------------------------------------
  <S>                    <C>            <C>             <C>
  Less than $25,000           5.00%          5.26%             4.50%
  $ 25,000 - 49,999           4.00           4.17              3.60
    50,000 - 99,999           3.50           3.63              3.15
   100,000 - 249,999          3.00           3.09              2.70
   250,000 - 499,999          2.00           2.04              1.80
   500,000 - and over          *               *                 *
---------------------------------------------------------------------------
</TABLE>
* Purchases of Class A shares of $500,000 or more will be made at net asset
  value without any initial sales charge, but will be subject to a CDSC of
  1.00% on redemptions made within 12 months of purchase. The CDSC on Class A
  shares is payable to Smith Barney, which compensates Smith Barney Financial
  Consultants and other dealers whose clients make purchases of $500,000 or
  more. The CDSC is waived in the same circumstances in which the CDSC
  applicable to Class B and Class C shares is waived. See "Deferred Sales
  Charge Alternatives" and "Waivers of CDSC."
 
  Members of the selling group may receive up to 90% of the sales charge and
may be deemed to be underwriters of the Fund as defined in the Securities Act.
 
  The reduced sales charges shown above apply to the aggregate of purchases of
Class A shares of the Fund made at one time by "any person," which includes an
individual and his or her immediate family, or a trustee or other fiduciary of
a single trust estate or single fiduciary account. The reduced sales charge
minimums may also be met by aggregating the purchase with the net asset value
of all Class A shares offered with a sales charge held in funds sponsored by
Smith Barney that are offered with a sales charge listed under "Exchange Priv-
ilege."
 
 INITIAL SALES CHARGE WAIVERS
   
  Purchases of Class A shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales to (i) Board members and
employees of Travelers and its subsidiaries and any of the Smith Barney Mutual
Funds (including retired Board members and employees); the immediate families
of such persons (including the surviving spouse of a deceased Board member or
employee); and to a pension, profit-sharing or other benefit plan for such
persons, (ii) employees of Hansberger and members of their immediate family
and (iii) employees of members of the National Association of Securities Deal-
ers, Inc., provided such sales are made upon the assurance of the purchaser
that the purchase is made for     
 
24
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
investment purposes and that the securities will not be resold except through
redemption or repurchase; (b) offers of Class A shares to any other investment
company to effect the combination of such company with the Fund by merger,
acquisition of assets or otherwise; (c) purchases of Class A shares by any
client of a newly employed Smith Barney Financial Consultant (for a period up
to 90 days from the commencement of the Financial Consultant's employment with
Smith Barney), on the condition the purchase of Class A shares is made with
the proceeds of the redemption of shares of a mutual fund which (i) was spon-
sored by the Financial Consultant's prior employer, (ii) was sold to the cli-
ent by the Financial Consultant and (iii) was subject to a sales charge; (d)
purchases by shareholders who have redeemed Class A shares in the Fund (or
Class A shares of another fund in the Smith Barney Mutual Funds that are
offered with a sales charge) and who wish to reinvest their redemption pro-
ceeds in the Fund, provided the reinvestment is made within 60 calendar days
of the redemption; (e) purchases by accounts managed by registered investment
advisory subsidiaries of Travelers; (f) direct rollovers by plan participants
from a 401(k) plan offered to employees of Travelers or its subsidiaries or a
401(k) plan enrolled in the Smith Barney 401(k) Program (Note: subsequent
investments will be subject to the applicable sales charge); (g) purchases by
separate accounts used to fund certain unregistered variable annuity con-
tracts; and (h) purchases by investors participating in a Smith Barney fee-
based arrangement. In order to obtain such discounts, the purchaser must pro-
vide sufficient information at the time of purchase to permit verification
that the purchase would qualify for the elimination of the sales charge.
 
 RIGHT OF ACCUMULATION
 
  Class A shares of the Fund may be purchased by "any person" (as defined
above) at a reduced sales charge or at net asset value determined by aggregat-
ing the dollar amount of the new purchase and the total net asset value of all
Class A shares of the Fund and of funds sponsored by Smith Barney which are
offered with a sales charge listed under "Exchange Privilege" then held by
such person and applying the sales charge applicable to such aggregate. In
order to obtain such discount, the purchaser must provide sufficient informa-
tion at the time of purchase to permit verification that the purchase quali-
fies for the reduced sales charge. The right of accumulation is subject to
modification or discontinuance at any time with respect to all shares pur-
chased thereafter.
 
 GROUP PURCHASES
 
  Upon completion of certain automated systems, a reduced sales charge or pur-
chase at net asset value will also be available to employees (and partners) of
the same employer purchasing as a group, provided each participant makes the
minimum initial investment required. The sales charge applicable to purchases
by each member of such a group will be determined by the table set forth above
under
 
                                                                             25
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
"Initial Sales Charge Alternative--Class A Shares," and will be based upon the
aggregate sales of Class A shares of Smith Barney Mutual Funds offered with a
sales charge to, and share holdings of, all members of the group. To be eligi-
ble for such reduced sales charges or to purchase at net asset value, all pur-
chases must be pursuant to an employer- or partnership-sanctioned plan meeting
certain requirements. One such requirement is that the plan must be open to
specified partners or employees of the employer and its subsidiaries, if any.
Such plan may, but is not required to, provide for payroll deductions, IRAs or
investments pursuant to retirement plans under Section 401 or 408 of the Code.
Smith Barney may also offer a reduced sales charge or net asset value purchase
for aggregating related fiduciary accounts under such conditions that Smith
Barney will realize economies of sales efforts and sales related expenses. An
individual who is a member of a qualified group may also purchase Class A
shares at the reduced sales charge applicable to the group as a whole. The
sales charge is based upon the aggregate dollar value of Class A shares offered
with a sales charge that have been previously purchased and are still owned by
the group, plus the amount of the current purchase. A "qualified group" is one
which (a) has been in existence for more than six months, (b) has a purpose
other than acquiring Fund shares at a discount and (c) satisfies uniform crite-
ria which enable Smith Barney to realize economies of scale in its costs of
distributing shares. A qualified group must have more than 10 members, must be
available to arrange for group meetings between representatives of the Fund and
the members, and must agree to include sales and other materials related to the
Fund in its publications and mailings to members at no cost to Smith Barney. In
order to obtain such reduced sales charge or to purchase at net asset value,
the purchaser must provide sufficient information at the time of purchase to
permit verification that the purchase qualifies for the reduced sales charge.
Approval of group purchase reduced sales charge plans is subject to the discre-
tion of Smith Barney.
 
 LETTER OF INTENT
 
  Class A Shares. A Letter of Intent for amounts of $50,000 or more provides an
opportunity for an investor to obtain a reduced sales charge by aggregating the
investments over a 13-month period, provided that the investor refers to such
Letter when placing orders. For purposes of a Letter of Intent, the "Amount of
Investment" as referred to in the preceding sales charge table includes pur-
chases of all Class A shares of the Fund and other funds of the Smith Barney
Mutual Funds offered with a sales charge over the 13-month period based on the
total amount of intended purchases plus the value of all Class A shares previ-
ously purchased and still owned. An alternative is to compute the 13-month
period starting up to 90 days before the date of execution of a Letter of
Intent. Each investment made during the period receives the reduced sales
charge applicable to the total amount of the investment goal. If the goal is
not achieved within the period, the investor must
 
26
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
pay the difference between the sales charges applicable to the purchases made
and the charges previously paid, or an appropriate number of escrowed shares
will be redeemed. Please contact a Smith Barney Financial Consultant or First
Data to obtain a Letter of Intent application.
 
  Class Y Shares. A Letter of Intent may also be used as a way for investors to
meet the minimum investment requirement for Class Y shares (except purchases of
Class Y shares by Smith Barney Concert Allocation Series Inc., for which there
is no minimum purchase amount). Such investors must make an initial minimum
purchase of $1,000,000 in Class Y shares of the Fund and agree to purchase a
total of $5,000,000 of Class Y shares of the same Fund within six months from
the date of the Letter. If a total investment of $5,000,000 is not made within
the six-month period, all Class Y shares purchased to date will be transferred
to Class A shares, where they will be subject to all fees (including a service
fee of 0.25%) and expenses applicable to the Fund's Class A shares, which may
include a CDSC of 1.00%. Please contact a Smith Barney Financial Consultant or
First Data for further information.
 
 DEFERRED SALES CHARGE ALTERNATIVES
 
  "CDSC Shares" are sold at net asset value next determined without an initial
sales charge so that the full amount of an investor's purchase payment may be
immediately invested in the Fund. A CDSC, however, may be imposed on certain
redemptions of these shares. "CDSC Shares" are: (a) Class B shares; (b) Class C
shares; and (c) Class A shares that were purchased without an initial sales
charge but subject to a CDSC.
 
  Any applicable CDSC will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the time of
redemption. CDSC Shares that are redeemed will not be subject to a CDSC to the
extent that the value of such shares represents: (a) capital appreciation of
Fund assets; (b) reinvestment of dividends or capital gain distributions; (c)
with respect to Class B shares, shares redeemed more than five years after
their purchase; or (d) with respect to Class C shares and Class A shares that
are CDSC Shares, shares redeemed more than 12 months after their purchase.
 
  Class C shares and Class A shares that are CDSC Shares are subject to a 1.00%
CDSC if redeemed within 12 months of purchase. In circumstances in which the
CDSC is imposed on Class B shares, the amount of the charge will depend on the
number of years since the shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of determining the number of
years since a purchase payment, all purchase payments made during a month will
be aggregated and deemed to have been made on the last day of the preceding
Smith Barney statement month. The following table sets forth the rates of the
charge for redemptions of Class B shares by shareholders, except in the case of
Class B shares
 
                                                                              27
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
held under Smith Barney 401(k) Program as described below. See "Purchase of
Shares--Smith Barney 401(k) and ExecChoice(TM) Programs."
 
<TABLE>
<CAPTION>
      YEAR SINCE PURCHASE
      PAYMENT WAS MADE      CDSC
---------------------------------
      <S>                   <C>
      First                 5.00%
      Second                4.00
      Third                 3.00
      Fourth                2.00
      Fifth                 1.00
      Sixth and thereafter  0.00
---------------------------------
</TABLE>
 
  Class B shares will convert automatically to Class A shares eight years after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fee. There will also be converted at that time such propor-
tion of Class B Dividend Shares owned by the shareholder as the total number of
his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares (other than Class B Dividend Shares) owned by the
shareholder. In addition, a portion of Class B Dividend Shares will be con-
verted at that time. See "Prospectus Summary--Alternative Purchase Arrange-
ments--Class B Shares Conversion Feature."
 
  In determining the applicability of any CDSC, it will be assumed that a
redemption is made first of shares representing capital appreciation, next of
shares representing the reinvestment of dividends and capital gain distribu-
tions and finally of other shares held by the shareholder for the longest
period of time. The length of time that CDSC Shares acquired through an
exchange have been held will be calculated from the date that the shares
exchanged were initially acquired in one of the other Smith Barney Mutual
Funds, and Fund shares being redeemed will be considered to represent, as
applicable, capital appreciation or dividend and capital gain distribution
reinvestments in such other funds. For Federal income tax purposes, the amount
of the CDSC will reduce the gain or increase the loss, as the case may be, on
the amount realized on redemption. The amount of any CDSC will be paid to Smith
Barney.
 
  To provide an example, assume an investor purchased 100 Class B shares at $10
per share for a cost of $1,000. Subsequently, the investor acquired 5 addi-
tional shares through dividend reinvestment. During the fifteenth month after
the purchase, the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105 shares
at $12 per share). The CDSC would not be applied to the amount which represents
appreciation ($200) and the value of the reinvested dividend shares ($60).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 4.00% (the applicable rate for Class B shares) for a total
deferred sales charge of $9.60.
 
28
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
 
 WAIVERS OF CDSC
 
  The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts up to 1.00% per month of the value of the
shareholder's shares at the time the withdrawal plan commences (see "Automatic
Cash Withdrawal Plan") (provided, however, that automatic cash withdrawal in
amounts up to 2.00% per month of the value of the shareholders shares will be
permitted for withdrawal plans that were established prior to November 7,
1994); (c) redemption of shares within 12 months following the death or dis-
ability of the shareholder; (d) redemption of shares made in connection with
qualified distributions from retirement plans or IRAs upon the attainment of
age 59 1/2; (e) involuntary redemptions; and (f) redemption of shares to effect
a combination of the Fund with any investment company by merger, acquisition of
assets or otherwise. In addition, a shareholder who has redeemed shares from
other funds of the Smith Barney Mutual Funds may, under certain circumstances,
reinvest all or part of the redemption proceeds within 60 days and receive pro
rata credit for any CDSC imposed on the prior redemption.
 
  CDSC waivers will be granted subject to confirmation (by Smith Barney in the
case of shareholders who are also Smith Barney clients or by First Data in the
case of all other shareholders) of the shareholder's status or holdings, as the
case may be.
    
 SMITH BARNEY 401(k) AND EXECCHOICE(TM) PROGRAMS     
 
  During the continuous offering period, investors may be eligible to partici-
pate in the Smith Barney 401(k) Program or the Smith Barney ExecChoice(TM) Pro-
gram. To the extent applicable, the same terms and conditions, which are out-
lined below, are offered to all plans participating ("Participating Plans") in
these programs.
   
  The Fund offers to Participating Plans Class A and Class C shares as invest-
ment alternatives under the Smith Barney 401(k) and ExecChoice(TM) Programs.
Class A and Class C shares acquired through the Participating Plans are subject
to the same service and/or distribution fees as the Class A and Class C shares
acquired by other investors; however, they are not subject to any initial sales
charge or CDSC. Once a Participating Plan has made an initial investment in the
Fund, all of its subsequent investments in the Fund must be in the same Class
of shares, except as otherwise described below.     
 
  Class A Shares. Class A shares of the Fund are offered without any sales
charge or CDSC to any Participating Plan that purchases $1,000,000 or more of
Class A shares of one or more funds of the Smith Barney Mutual Funds.
 
  Class C Shares. Class C shares of the Fund are offered without any sales
charge or CDSC to any Participating Plan that purchases less than $1,000,000 of
Class C shares of one or more funds of the Smith Barney Mutual Funds.
 
                                                                              29
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
 
  401(k) and ExecChoice(TM) Plans Opened On or After June 21, 1996. At the end
of the fifth year after the date the Participating Plan enrolled in the Smith
Barney 401(k) Program or the Smith Barney ExecChoice(TM) Program, if its total
Class C holdings in all non-money market Smith Barney Mutual Funds equal at
least $1,000,000, it will be offered the opportunity to exchange all of its
Class C shares for Class A shares of the Fund. (For Participating Plans that
were originally established through a Smith Barney retail brokerage account,
the five year period will be calculated from the date the retail brokerage
account was opened.) Such Participating Plans will be notified of the pending
exchange in writing within 30 days after the fifth anniversary of the enroll-
ment date and, unless the exchange offer has been rejected in writing, the
exchange will occur on or about the 90th day after the fifth anniversary date.
If the Participating Plan does not qualify for the five year exchange to Class
A shares, a review of the Participating Plan's holdings will be performed each
quarter until either the Participating Plan qualifies or the end of the eighth
year.
 
  401(k) Plans Opened Prior to June 21, 1996. In any year after the date a Par-
ticipating Plan enrolled in the Smith Barney 401(k) Program, if its total Class
C holdings in all non-money market Smith Barney Mutual Funds equal at least
$500,000 as of the calendar year-end, the Participating Plan will be offered
the opportunity to exchange all of its Class C shares for Class A shares of the
Fund. Such Plans will be notified in writing within 30 days after the last
business day of the calendar year and, unless the exchange offer has been
rejected in writing, the exchange will occur on or about the last business day
of the following March.
 
  Any Participating Plan in the Smith Barney 401(k) Program that has not previ-
ously qualified for an exchange into Class A shares will be offered the oppor-
tunity to exchange all of its Class C shares for Class A shares of the Fund,
regardless of asset size, at the end of the eighth year after the date the Par-
ticipating Plan enrolled in the Smith Barney 401(k) Program. Such Plans will be
notified of the pending exchange in writing approximately 60 days before the
eighth anniversary of the enrollment date and, unless the exchange has been
rejected in writing, the exchange will occur on or about the eighth anniversary
date. Once an exchange has occurred, a Participating Plan will not be eligible
to acquire additional Class C shares of the Fund but instead may acquire Class
A shares of the Fund. Any Class C shares not converted will continue to be sub-
ject to the distribution fee.
 
  Participating Plans wishing to acquire shares of the Fund through the Smith
Barney 401(k) Program or the Smith Barney ExecChoice(TM) Program must purchase
such shares directly from First Data. For further information regarding these
Programs, investors should contact a Smith Barney Financial Consultant.
 
30
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
   
  Existing 401(k) Plans Investing in Class B Shares. Class B shares of the
Smith Barney Mutual Funds are not available for purchase by Participating Plans
opened on or after June 21, 1996, but may continue to be purchased by any Par-
ticipating Plan in the Smith Barney 401(k) Program opened prior to such date
and originally investing in such Class. Class B shares acquired are subject to
a CDSC of 3.00% of redemption proceeds, if the Participating Plan terminates
within eight years of the date the Participating Plan first enrolled in the
Smith Barney 401(k) Program.     
 
  At the end of the eighth year after the date the Participating Plan enrolled
in the Smith Barney 401(k) Program, the Participating Plan will be offered the
opportunity to exchange all of its Class B shares for Class A shares of the
Fund. Such Participating Plan will be notified of the pending exchange in writ-
ing approximately 60 days before the eighth anniversary of the enrollment date
and, unless the exchange has been rejected in writing, the exchange will occur
on or about the eighth anniversary date. Once the exchange has occurred, a Par-
ticipating Plan will not be eligible to acquire additional Class B shares of
the fund but instead may acquire Class A shares of the Fund. If the Participat-
ing Plan elects not to exchange all of its Class B shares at that time, each
Class B share held by the Participating Plan will have the same conversion fea-
ture as Class B shares held by other investors. See "Purchase of Shares--
Deferred Sales Charge Alternatives".
 
  No CDSC is imposed on redemptions of Class B shares to the extent that the
net asset value of the shares redeemed does not exceed the current net asset
value of the shares purchased through reinvestment of dividends or capital gain
distributions, plus the current net asset value of Class B shares purchased
more than eight years prior to the redemption, plus increases in the net asset
value of the shareholder's Class B shares above the purchase payments made dur-
ing the preceding eight years. Whether or not the CDSC applies to the redemp-
tion by a Participating Plan depends on the number of years since the Partici-
pating Plan first became enrolled in the Smith Barney 401(k) Program, unlike
the applicability of the CDSC to redemptions by other shareholders, which
depends on the number of years since those shareholders made the purchase pay-
ment from which the amount is being redeemed.
 
  The CDSC will be waived on redemptions of Class B shares in connection with
lump-sum or other distributions made by a Participating Plan as a result of:
(a) the retirement of an employee in the Participating Plan; (b) the termina-
tion of employment of an employee in the Participating Plan; (c) the death or
disability of an employee in the Participating Plan; (d) the attainment of age
59 1/2 by an employee in the Participating Plan; (e) hardship of an employee in
the Participating Plan to the extent permitted under Section 401(k) of the
Code; or (f) redemptions of shares in connection with a loan made by the Par-
ticipating Plan to an employee.
 
                                                                              31
<PAGE>
 
EXCHANGE PRIVILEGE
 
 
  Except as otherwise noted below, shares of each Class may be exchanged at the
net asset value next determined for shares of the same Class in the following
funds of the Smith Barney Mutual Funds, to the extent shares are offered for
sale in the shareholder's state of residence. Exchanges of Class A, Class B and
Class C shares are subject to minimum investment requirements and all shares
are subject to the other requirements of the fund into which exchanges are
made.
 
 FUND NAME
 
 Growth Funds
    Smith Barney Aggressive Growth Fund Inc.
    Smith Barney Appreciation Fund Inc.
    Smith Barney Disciplined Small Cap Fund, Inc.
    Smith Barney Fundamental Value Fund Inc.
    Smith Barney Growth Opportunity Fund
    Smith Barney Large Capitalization 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 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
 
32
<PAGE>
 
EXCHANGE PRIVILEGE (CONTINUED)
 
    *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 Hansberger Global Small Cap Value Fund     
    Smith Barney World Funds, Inc.--Emerging Markets Portfolio
    Smith Barney World Funds, Inc.--European Portfolio
    Smith Barney World Funds, Inc.--Global Government Bond Portfolio
    Smith Barney World Funds, Inc.--International Balanced Portfolio
    Smith Barney World Funds, Inc.--International Equity Portfolio
    Smith Barney World Funds, Inc.--Pacific Portfolio
 
 Smith Barney Concert Allocation 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 Exchange Reserve Fund
    ++Smith Barney Money Funds, Inc.--Cash Portfolio
    ++Smith Barney Money Funds, Inc.--Government Portfolio
    ***Smith Barney Money Funds, Inc.--Retirement Portfolio
    +++Smith Barney Municipal Money Market Fund, Inc.
    +++Smith Barney Muni Funds--California Money Market Portfolio
    +++Smith Barney Muni Funds--New York Money Market Portfolio.
-------------------------------------------------------------------------------
  * Available for exchange with Class A, Class C and Class Y shares of the
    Fund.
 ** Available for exchange with Class A and Class B shares of the Fund. In
    addition, shareholders who own Class C shares of the Fund through the
    Smith Barney 401(k) Program may exchange those shares for Class C shares
    of this Fund.
***Available for exchange with Class A shares of the Fund.
  + Available for exchange with Class B and Class C shares of the Fund.
 ++ Available for exchange with Class A and Class Y shares of the Fund. In
    addition, participating plans opened prior to June 21, 1996 and investing
    in Class C shares may exchange Fund shares for Class C shares of this
    Fund.
+++Available for exchange with Class A and Class Y shares of the Fund.
 
  Class B Exchanges. In the event a Class B shareholder wishes to exchange all
or a portion of his or her shares into any of the funds imposing a higher CDSC
than that imposed by the Fund, the exchanged Class B shares will be subject to
the
 
                                                                             33
<PAGE>
 
EXCHANGE PRIVILEGE (CONTINUED)
 
higher applicable CDSC. Upon an exchange, the new Class B shares will be deemed
to have been purchased on the same date as the Class B shares of the Fund that
have been exchanged.
 
  Class C Exchanges. Upon an exchange, the new Class C shares will be deemed to
have been purchased on the same date as the Class C shares of the Fund that
have been exchanged.
 
  Class A and Class Y Exchanges. Class A and Class Y shareholders of the Fund
who wish to exchange all or a portion of their shares for shares of the respec-
tive class in any of the funds identified above may do so without imposition of
any charge.
 
  Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions can
be detrimental to the Fund's performance and its shareholders. SBMFM may deter-
mine that a pattern of frequent exchanges is excessive and contrary to the best
interests of the Fund's other shareholders. In this event, SBMFM will notify
Smith Barney and Smith Barney may, at its discretion, decide to limit addi-
tional purchases and/or exchanges by the shareholder. Upon such a determina-
tion, Smith Barney will provide notice in writing or by telephone to the share-
holder 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 listed above, 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 "Re-
demption of Shares--Telephone Redemption and Exchange Program". Exchanges will
be processed at the net asset value next determined. Redemption procedures dis-
cussed below are also applicable for exchanging shares, and exchanges will be
made upon receipt of all supporting documents in proper form. If the account
registration of the shares of the fund being acquired is identical to the reg-
istration of the shares of the fund exchanged, no signature guarantee is
required. A capital gain or loss for tax purposes will be realized upon the
exchange, depending upon the cost or other basis of shares redeemed. Before
exchanging shares, investors should read the current prospectus describing the
shares to be acquired. The Fund reserves the right to modify or discontinue
exchange privileges upon 60 days' prior notice to shareholders.
 
 
34
<PAGE>
 
REDEMPTION OF SHARES
 
 
  The Fund is required to redeem the shares of the Fund tendered to it, as
described below, at a redemption price equal to their net asset value per share
next determined after receipt of a written request in proper form at no charge
other than any applicable CDSC. Redemption requests received after the close of
regular trading on the NYSE are priced at the net asset value next determined.
 
  If a shareholder holds shares in more than one Class, any request for redemp-
tion must specify the Class being redeemed. In the event of a failure to spec-
ify which Class, or if the investor owns fewer shares of the Class than speci-
fied, the redemption request will be delayed until First Data receives further
instructions from Smith Barney, or if the shareholder's account is not with
Smith Barney, from the shareholder directly. The redemption proceeds will be
remitted on or before the third business day following receipt of proper ten-
der, except on days on which the NYSE is closed or as permitted under the 1940
Act, in extraordinary circumstances. Generally, if the redemption proceeds are
remitted to a Smith Barney brokerage account, these funds will not be invested
for the shareholder's benefit without specific instruction and Smith Barney
will benefit from the use of temporarily uninvested funds. Redemption proceeds
for shares purchased by check, other than a certified or official bank check,
will be remitted upon clearance of the check, which may take up to ten days or
more.
 
  Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than those
held by Smith Barney as custodian may be redeemed through an investor's Finan-
cial Consultant, Introducing Broker or dealer in the selling group or by sub-
mitting a written request for redemption to:
 
  Smith Barney Hansberger Global Value Fund
  Class A, B, C or Y (please specify)
  c/o First Data Investor Services Group, Inc.
  P.O. Box 5128
  Westborough, Massachusetts 01581-5128
 
  A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are regis-
tered. If the shares to be redeemed were issued in certificate form, the cer-
tificates must be endorsed for transfer (or be accompanied by an endorsed stock
power) and must be submitted to First Data together with the redemption
request. Any signature appearing on a share certificate, stock power or written
redemption request in excess of $2,000 must be guaranteed by an eligible guar-
antor institution such as a domestic bank, savings and loan institution, domes-
tic credit union, member bank of the Federal Reserve System or member firm of a
national securities exchange. Written redemption requests of $2,000 or less do
not require a signature guarantee unless
 
                                                                              35
<PAGE>
 
REDEMPTION OF SHARES (CONTINUED)
 
more than one such redemption request is made in any 10-day period. Redemption
proceeds will be mailed to an investor's address of record. First Data may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees or guardians. A redemption request will not
be deemed properly received until First Data receives all required documents in
proper form.
 
 AUTOMATIC CASH WITHDRAWAL PLAN
 
  The Fund offers shareholders an automatic cash withdrawal plan, under which
shareholders who own shares with a value of at least $10,000 may elect to
receive periodic cash payments of at least $50 monthly or quarterly. Retirement
plan accounts are eligible for automatic cash withdrawal plans only where the
shareholder is eligible to receive qualified distributions and has an account
value of at least $5,000. The withdrawal plan will be carried over on exchanges
between funds or Classes of the Fund. Any applicable CDSC will not be waived on
amounts withdrawn by a shareholder that exceed 1.00% per month of the value of
the shareholder's shares subject to the CDSC at the time the withdrawal plan
commences. For further information regarding the automatic cash withdrawal
plan, shareholders should contact a Smith Barney Financial Consultant.
 
 TELEPHONE REDEMPTION AND EXCHANGE PROGRAM
 
  Shareholders who do not have a Smith Barney brokerage account may be eligible
to redeem and exchange Fund shares by telephone. To determine if a shareholder
is entitled to participate in this program, he or she should contact 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 guaran-
tee that will be provided by First Data upon request. (Alternatively, an
investor may authorize telephone redemptions on the new account application
with the applicant's signature guarantee when making his/her initial investment
in the Fund.)
 
  Redemptions. Redemption requests of up to $10,000 of any class or classes of
the Fund's shares may be made by eligible shareholders by calling 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. Redemption requests received after
the close of regular trading on the NYSE are priced at the net asset value next
determined. 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
 
36
<PAGE>
 
REDEMPTION OF SHARES (CONTINUED)
 
Fund reserves the right to charge shareholders a nominal fee for each wire
redemption. Such charges, if any, will be assessed against the shareholder's
account from which shares were redeemed. In order to change the bank account
designated to receive redemption proceeds, a shareholder must complete a new
Telephone/Wire Authorization Form and, for the protection of the shareholder's
assets, will be required to provide a signature guarantee and certain other
documentation.
 
  Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of 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 Fund nor its agents will be liable for following instruc-
tions communicated by telephone that are reasonably believed to be genuine.
The Fund and its agents will employ procedures designed to verify the identity
of the caller and legitimacy of instructions (for example, a shareholder's
name and account number will be required and phone calls may be recorded). The
Fund reserves the right to suspend, modify or discontinue the telephone
redemption and exchange program or to impose a charge for this service at any
time following at least seven (7) days' prior notice to shareholders.
 
MINIMUM ACCOUNT SIZE
 
 
  The Fund reserves the right to involuntarily liquidate any shareholder's
account in the Fund if the aggregate net asset value of the shares held in the
Fund account is less than $500. (If a shareholder has more than one account in
the Fund, each account must satisfy the minimum account size). The Fund, how-
ever, will not redeem shares based solely on market reductions in net asset
value. Before the Fund exercises such right, shareholders will receive written
notice and will be permitted 60 days to bring accounts up to the minimum to
avoid involuntary liquidation.
 
PERFORMANCE
 
 
  From time to time the Fund may include its total return, average annual
total return and current dividend return in advertisements and/or other types
of sales literature. These figures are computed separately for Class A, Class
B, Class C and Class Y shares of the Fund. These figures are based on histori-
cal earnings and are not intended to indicate future performance. Total return
is computed for a speci-
 
                                                                             37
<PAGE>
 
PERFORMANCE (CONTINUED)
 
fied period of time assuming deduction of the maximum sales charge, if any,
from the initial amount invested and reinvestment of all income dividends and
capital gain distributions on the reinvestment dates at prices calculated as
stated in this Prospectus, then dividing the value of the investment at the
end of the period so calculated by the initial amount invested and subtracting
100%. The standard average annual total return, as prescribed by the SEC, is
derived from this total return, which provides the ending redeemable value.
Such standard total return information may also be accompanied with nonstan-
dard total return information for differing periods computed in the same man-
ner but without annualizing the total return or taking sales charges into
account. The Fund calculates current dividend return for each Class by
annualizing the most recent monthly distribution and dividing by the net asset
value or the maximum public offering price (including sales charge) on the
last day of the period for which current dividend return is presented. The
current dividend return for each Class may vary from time to time depending on
market conditions, the composition of its investment portfolio and operating
expenses. These factors and possible differences in the methods used in calcu-
lating current dividend return should be considered when comparing a Class'
current return to yields published for other investment companies and other
investment vehicles. The Fund may also include comparative performance infor-
mation in advertising or marketing its shares. Such performance information
may include data from Lipper Analytical Services, Inc. and other financial
publications.
 
MANAGEMENT OF THE FUND
 
 
 BOARD OF DIRECTORS
 
  Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Directors. The Directors approve all significant agree-
ments between the Company and the companies that furnish services to the Fund
and the Company, including agreements with its distributor, investment advis-
er, custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's investment manager. The Statement of Additional Infor-
mation contains background information regarding each Director of the Fund and
executive officer of the Company.
 
 INVESTMENT MANAGER--SBMFM
   
  SBMFM, located at 388 Greenwich Street, New York, New York 10013, serves as
the Fund's investment manager and manages the day-to-day operations of the
Fund pursuant to an investment management agreement entered into by the Compa-
ny, on behalf of the Fund. SBMFM renders investment advice to investment com-
panies which had aggregate assets under management as of September 30, 1997,
in excess of $84 billion. For investment management services rendered, the
Fund pays     
 
38
<PAGE>
 
MANAGEMENT OF THE FUND (CONTINUED)
 
SBMFM a monthly fee at the annual rate of 0.95% of the value of its average
daily net assets. From its fee, SBMFM pays Hansberger a fee of 0.50% of the
value of the Fund's average net assets, for its services as sub-investment
adviser.
 
 SUB-INVESTMENT ADVISER--HANSBERGER
   
  Hansberger, located at 515 East Las Olas Blvd., Suite 1300, Fort Lauderdale,
Florida 33301, serves as the Fund's sub-investment adviser. Hansberger provides
investment advisory services to investment companies that had aggregate total
assets under management as of August 31, 1997 of approximately $1.2 billion.
Subject to the supervision and direction of the Company's Board of Directors,
Hansberger manages the Fund's portfolio in accordance with the Fund's stated
investment objective and policies, makes investment decisions for the Fund,
places orders to purchase and sell securities and employs professional portfo-
lio managers and securities analysts who provide research services to the Fund.
    
 PORTFOLIO MANAGEMENT
   
  Thomas L. Hansberger, James Chaney, Francisco Alzuru and John Hock, manage
the day-to-day investment operations of the Fund, including the oversight of
investment decisions. Mr. Hansberger is Chairman and Chief Executive Officer of
Hansberger. Prior to forming Hansberger, he had served as Chairman, President
and Chief Executive Officer of Templeton Worldwide, Inc. ("Templeton"). Mr.
Chaney has been Chief Investment Officer of Hansberger since 1996. Prior to
that time, Mr. Chaney was Executive Vice President of Templeton. Mr. Alzuru has
been a portfolio manager and research analyst for Hansberger since 1994. Prior
to that time, he was a Latin American analyst at Vestcorp Partners. Mr. Hock
has been a research analyst and assistant portfolio manager for Hansberger
since 1996. Prior to that time, he was a Vice President and Senior Analyst in
the Global Securities Research and Economics Group at Merrill Lynch & Co.     
 
DISTRIBUTOR
 
 
  Smith Barney is located at 388 Greenwich Street, New York, New York 10013.
Smith Barney distributes shares of the Fund as principal underwriter and as
such conducts a continuous offering pursuant to a "best efforts" arrangement
requiring Smith Barney to take and pay for only such securities as may be sold
to the public. Pursuant to a plan of distribution adopted by the Fund under
Rule 12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid a service fee
with respect to Class A, Class B and Class C shares of the Fund at the annual
rate of 0.25% of the average daily net assets of the respective Class. Smith
Barney is also paid a distribution fee with respect to Class B and Class C
shares at the annual rate of 0.75% of the average daily net assets attributable
to those Classes. Class B shares that automatically convert to Class A shares
eight years after the date of original purchase will
 
                                                                              39
<PAGE>
 
DISTRIBUTOR (CONTINUED)
 
no longer be subject to distribution fees. The fees are used by Smith Barney
to pay its Financial Consultants for servicing shareholder accounts and, in
the case of Class B and Class C shares, to cover expenses primarily intended
to result in the sale of those shares. These expenses include: advertising
expenses; the cost of printing and mailing prospectuses to potential invest-
ors; payments to and expenses of Smith Barney Financial Consultants and other
persons who provide support services in connection with the distribution of
shares; interest and/or carrying charges; and indirect and overhead costs of
Smith Barney associated with the sale of Fund shares, including lease, utili-
ty, communications and sales promotion expenses.
 
  The payments to Smith Barney Financial Consultants for selling shares of a
Class include a commission or fee paid by the investor or Smith Barney at the
time of sale and, with respect to Class A, Class B and Class C shares, a con-
tinuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
 
  Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney and the pay-
ments may exceed distribution expenses actually incurred. The Company's Board
of Directors will evaluate the appropriateness of the Plan and its payment
terms on a continuing basis and in so doing will consider all relevant fac-
tors, including expenses borne by Smith Barney, amounts received under the
Plan and proceeds of the CDSC.
 
ADDITIONAL INFORMATION
 
 
  The Company was organized as a Maryland corporation pursuant to Articles of
Incorporation dated September 29, 1981, as amended from time to time. The Fund
offers shares of common stock currently classified into four Classes, A, B, C
and Y, with a par value of $.001 per share. Each Class represents an identical
interest in the Fund's investment portfolio. As a result, the Classes have the
same rights, privileges and preferences, except with respect to: (a) the des-
ignation of each Class; (b) the effect of the respective sales charges for
each Class; (c) the distribution and/or service fees borne by each Class pur-
suant to the Plan; (d) the expenses allocable exclusively to each Class; (e)
voting rights on matters exclusively affecting a single Class; (f) the
exchange privilege of each Class; and (g) the conversion feature of the Class
B shares. The Board of Directors does not anticipate that there will be any
conflicts among the interests of the holders of the different Classes. The
Directors, on an ongoing basis, will consider whether any such conflicts
exists and, if so, take appropriate action.
 
  Chase, located at Chase Metrotech Center, Brooklyn, NY 11245, serves as cus-
todian of the Fund's investments.
 
40
<PAGE>
 
ADDITIONAL INFORMATION (CONTINUED)
   
  First Data, located at Exchange Place, Boston, Massachusetts 02109, serves as
the Fund's transfer agent.     
 
  The Company does not hold annual shareholder meetings. There normally will be
no meeting of shareholders for the purpose of electing Directors unless and
until such time as less than a majority of the Directors holding office have
been elected by shareholders. The Directors will call a meeting for any purpose
upon written request of shareholders holding at least 10% of the Company's out-
standing shares and the Company will assist shareholders in calling such a
meeting as required by the 1940 Act. When matters are submitted for shareholder
vote, shareholders of each Class will have one vote for each full share owned
and a proportionate, fractional vote for any fractional share held of that
Class. Generally, shares of the Company will be voted on a Company-wide basis
on all matters except matters affecting only the interests of one Fund or one
Class of shares.
 
  The Fund sends its shareholders a semi-annual report and an audited annual
report, which include a list of the investment securities held by the Fund at
the end of the reporting period. In an effort to reduce the Fund's printing and
mailing costs, the Company plans to consolidate the mailing of its semi-annual
and annual reports by household. This consolidation means that a household hav-
ing multiple accounts with the identical address of record will receive a sin-
gle copy of each report. Shareholders who do not want this consolidation to
apply to their accounts should contact their Smith Barney Financial Consultant
or First Data.
 
                                                                              41
<PAGE>

                                                                    SMITH BARNEY
                                                 -------------------------------

                                               A Member of TravelersGroup [LOGO]
 
 
 
 
 
                                                                    SMITH BARNEY
                                                                      HANSBERGER
                                                                          GLOBAL
                                                                           VALUE
                                                                            FUND
 
                                                            388 Greenwich Street
                                                        New York, New York 10013
                                                                    
                                                                   FD01337 10/97
                                                                                

<PAGE>
PROSPECTUS
 
                                                       
                                                         SMITH BARNEY HANSBERGER
                                                                          Global
                                                                       Small Cap
                                                                     Value Fund 
                                                           OCTOBER 27, 1997     
 
                                                   PROSPECTUS BEGINS ON PAGE ONE
 
 
 

         [LOGO]                                   [LOGO]
                                      
       HANSBERGER                              SMITH BARNEY 
         GLOBAL                                MUTUAL FUNDS 
     INVESTORS, INC.                     INVESTING FOR YOUR FUTURE. 
                                              EVERY DAY./SM/     

<PAGE>
 
   
PROSPECTUS                                               October 27, 1997     
   
Smith Barney Hansberger Global Small Cap Value Fund     
388 Greenwich Street
New York, New York 10013
(800) 451-2010
   
 The primary investment objective of the Smith Barney Hansberger Global Small
Cap Value Fund (the "Fund") is long-term capital growth. The Fund seeks to
achieve this objective by investing primarily in equity securities of U.S. and
foreign issuers with relatively small market capitalizations.     
 
 The Fund is one of a number of funds, each having distinct investment objec-
tives and policies, making up the Smith Barney Investment Funds Inc. (the "Com-
pany"). The Fund is an open-end, management investment company commonly
referred to as a mutual fund.
   
 The initial subscription period for shares is scheduled to end on December 18,
1997, (the "Subscription Period"). After the expiration of the Subscription
Period or a limited continuous offering period, the Fund will suspend the
offering of shares to the public. A continuous offering of shares is expected
to commence on or about January 19, 1998. See "Purchase of Shares."     
 
 This Prospectus sets forth concisely certain information about the Company and
the Fund, including sales charges, distribution and service fees and expenses,
that prospective investors will find helpful in making an investment decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference.
   
 Additional information about the Fund is contained in a Statement of Addi-
tional Information dated October 27, 1997, as amended or supplemented from time
to time, that is available upon request and without charge by calling or writ-
ing the Fund at the telephone number or address set forth above or by contact-
ing a Smith Barney Financial Consultant. The Statement of Additional Informa-
tion 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 Manager
 
HANSBERGER GLOBAL INVESTORS, INC.
Sub-Investment Adviser
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
 
                                                                               1
<PAGE>
 
TABLE OF CONTENTS
 
 
<TABLE>   
<S>                                           <C>
PROSPECTUS SUMMARY                              3
-------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES    9
-------------------------------------------------
RISK FACTORS                                   17
-------------------------------------------------
VALUATION OF SHARES                            19
-------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES             20
-------------------------------------------------
PURCHASE OF SHARES                             21
-------------------------------------------------
EXCHANGE PRIVILEGE                             31
-------------------------------------------------
REDEMPTION OF SHARES                           34
-------------------------------------------------
MINIMUM ACCOUNT SIZE                           37
-------------------------------------------------
PERFORMANCE                                    37
-------------------------------------------------
MANAGEMENT OF THE FUND                         38
-------------------------------------------------
DISTRIBUTOR                                    39
-------------------------------------------------
ADDITIONAL INFORMATION                         39
</TABLE>    
 
--------------------------------------------------------------------------------
 
  No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Fund
or the distributor. This Prospectus does not constitute an offer by the Fund or
the distributor to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
 
--------------------------------------------------------------------------------
 
2
<PAGE>
 
PROSPECTUS SUMMARY
 
 
 The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the Prospec-
tus. See "Table of Contents."
 
INVESTMENT OBJECTIVE The Fund is an open-end, diversified management invest-
ment company whose investment objective is long term capital growth. The Fund
seeks to achieve this objective by investing primarily in equity securities of
U.S. and foreign issuers with relatively small market capitalizations. See
"Investment Objective and Management Policies."
 
ALTERNATIVE PURCHASE ARRANGEMENTS The Fund offers several classes of shares
("Classes") to investors designed to provide them with the flexibility of
selecting an investment best suited to their needs. The general public is
offered three classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of sales charges and rate of
expenses to which they are subject. A fourth Class of shares, Class Y shares,
is offered only to investors meeting an initial investment minimum of
$5,000,000. See "Purchase of Shares" and "Redemption of Shares."
 
 Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.00% and are subject to an annual service fee of 0.25%
of the average daily net assets of the Class. The initial sales charge may be
reduced or waived for certain purchases. Purchases of Class A shares of
$500,000 or more will be made at net asset value with no initial sales charge,
but will be subject to a contingent deferred sales charge ("CDSC") of 1.00% on
redemptions made within 12 months of purchase. See "Prospectus Summary--
Reduced or No Initial Sales Charge."
 
 Class B Shares. Class B shares are offered at net asset value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by 1.00% each year
after the date of purchase to zero. The CDSC may be waived for certain redemp-
tions. Class B shares are subject to an annual service fee of 0.25% and an
annual distribution fee of 0.75% of the average daily net assets of the Class.
The Class B shares' distribution fee may cause that Class to have higher
expenses and pay lower dividends than Class A shares.
 
 Class B Shares Conversion Feature. Class B shares will convert automatically
to Class A shares, based on relative net asset value, eight years after the
date of the original purchase. Upon conversion, these shares will no longer be
subject to an annual distribution fee. In addition, a certain portion of Class
B shares that have been acquired through the reinvestment of dividends and
distributions ("Class B Dividend Shares") will be converted at that time. See
"Purchase of Shares--Deferred Sales Charge Alternatives."
 
                                                                              3
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
 Class C Shares. Class C shares are sold at net asset value with no initial
sales charge. They are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.75% of the average daily net assets of the Class, and
investors pay a CDSC of 1.00% if they redeem Class C shares within 12 months of
purchase. The CDSC may be waived for certain redemptions. The Class C shares'
distribution fee may cause that Class to have higher expenses and pay lower
dividends than Class A shares. Purchases of Fund shares which, when combined
with current holdings of Class C shares of the Fund, equal or exceed $500,000
in the aggregate, should be made in Class A shares at net asset value with no
sales charge, and will be subject to a CDSC of 1.00% on redemptions made within
12 months of purchase.
 
 Class Y Shares. Class Y shares are available only to investors meeting an ini-
tial investment minimum of $5,000,000. Class Y shares are sold at net asset
value with no initial sales charge or CDSC. They are not subject to any service
or distribution fees.
 
 In deciding which Class of Fund shares to purchase, investors should consider
the following factors, as well as any other relevant facts and circumstances:
 
 Intended Holding Period. The decision as to which Class of shares is more ben-
eficial to an investor depends on the amount and intended holding period of his
or her investment. Shareholders who are planning to establish a program of reg-
ular investment may wish to consider Class A shares; as the investment accumu-
lates, shareholders may qualify for reduced sales charges and the shares are
subject to lower ongoing expenses over the term of the investment. As an
investment alternative, Class B shares and Class C shares are sold without any
initial sales charge so the entire purchase price is immediately invested in
the Fund. Any investment return on these additional invested amounts may par-
tially or wholly offset the higher annual expenses of these Classes. Because
the Fund's future return cannot be predicted, however, there can be no assur-
ance that this would be the case.
 
 Finally investors should consider the effect of the CDSC period and any con-
version rights of the Classes in the context of their own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class
B shares, they do not have a conversion feature and, therefore, are subject to
an ongoing distribution fee. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks.
 
 Investors investing a minimum of $5,000,000 must purchase Class Y shares,
which are not subject to an initial sales charge, CDSC or service or distribu-
tion fee. The maximum purchase amount for Class A shares is $4,999,999, Class B
shares is $249,999 and Class C shares is $499,999. There is no maximum purchase
amount for Class Y shares.
 
 
4
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
   
 Reduced or No Initial Sales Charge. The initial sales charge on Class A shares
may be waived for certain eligible purchasers, and the entire purchase price
will be immediately invested in the Fund. In addition, Class A share purchases
of $500,000 or more will be made at net asset value with no initial sales
charge, but may be subject to a CDSC of 1.00% on redemptions made within 12
months of purchase. The $500,000 investment may be met by adding the purchase
to the net asset value of all Class A shares held in funds sponsored by Smith
Barney Inc. ("SmithBarney") listed under "Exchange Privilege." Class A share
purchases may also be eligible for a reduced initial sales charge. See "Pur-
chase of Shares". Because the ongoing expenses of Class A shares may be lower
than those for Class B and Class C shares, purchasers eligible to purchase
Class A shares at net asset value or at a reduced sales charge should consider
doing so.     
 
 Smith Barney Financial Consultants may receive different compensation for
selling different Classes of shares. Investors should understand that the pur-
pose of the CDSC on the Class B and Class C shares is the same as that of the
initial sales charge on the Class A shares.
 
 See "Purchase of Shares" and "Management of the Fund" for a complete descrip-
tion of the sales charges and service and distribution fees for each Class of
shares and "Valuation of Shares," "Dividends, Distributions and Taxes" and "Ex-
change Privilege" for other differences between the Classes of shares.
   
SMITH BARNEY 401(k) AND EXECCHOICE(TM) PROGRAMS Investors may be eligible to
participate in the Smith Barney 401(k) Program, which is generally designed to
assist plan sponsors in the creation and operation of retirement plans under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
as well as other types of participant directed, tax-qualified employee benefit
plans. Investors may also be eligible to participate in the Smith Barney
ExecChoice(TM) Program. Class A and Class C shares are available without sales
charge as investment alternatives under both of these programs. See "Purchase
of Shares--Smith Barney 401(k) and ExecChoice(TM) Programs."     
 
PURCHASE OF SHARES Shares may be purchased through a brokerage account main-
tained at Smith Barney. Shares may also be purchased through a broker that
clears securities transactions through Smith Barney on a fully disclosed basis
(an "Introducing Broker") or an investment dealer in the selling group. In
addition, certain investors, including qualified retirement plans and certain
institutional investors, may purchase shares directly from the Fund through the
Fund's transfer agent, First Data Investor Services Group, Inc. ("First Data").
See "Purchase of Shares."
   
 The initial subscription period for shares is scheduled to end on December 18,
1997, (the "Subscription Period"). After the expiration of the Subscription
Period or a limited continuous offering period, the Fund will suspend the
offering of shares to the public. A continuous offering of shares is expected
to commence on or about January 19, 1998. See "Purchase of Shares."     
 
 
                                                                               5
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
   
INVESTMENT MINIMUMS Investors in Class A, Class B and Class C shares may open
an account by making an initial investment of at least $1,000 for each account,
or $250 for an individual retirement account ("IRA") or a Self-Employed Retire-
ment Plan. Investors in Class Y shares may open an account for an initial
investment of $5,000,000. Subsequent investments of at least $50 may be made
for all Classes. For participants in retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Code, the minimum initial investment
requirement for Class A, Class B and Class C shares and the subsequent invest-
ment requirement for all Classes is $25. The minimum initial investment
requirement for the purchase of Fund shares through the Systematic Investment
Plan is described below. See "Purchase of Shares."     
 
SYSTEMATIC INVESTMENT PLAN During the continuous Offering Period, the Fund
offers shareholders a Systematic Investment Plan under which they may authorize
the automatic placement of a purchase order each month or quarter for Fund
shares. The minimum initial investment requirements for Class A, Class B and
Class C shares and the subsequent investment requirement for all classes for
shareholders purchasing shares through the Systematic Investment Plan on a
monthly basis is $25 and on a quarterly basis is $50. See "Purchase of Shares."
 
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares" and "Re-
demption of Shares."
   
MANAGEMENT OF THE FUND Smith Barney Mutual Funds Management Inc. ("SBMFM")
serves as the Fund's investment manager. SBMFM provides investment advisory and
management services to investment companies affiliated with Smith Barney. SBMFM
is a wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings"). Hold-
ings is a wholly owned subsidiary of Travelers Group Inc. ("Travelers"), a
diversified financial services holding company engaged through its subsidiar-
ies, principally in four business segments: Investment Services, Consumer
Finance Services, Life Insurance Services and Property & Casualty Insurance
Services.     
 
  Hansberger Global Investors, Inc. ("Hansberger"), serves as the Fund's sub-
investment adviser. See "Management of the Fund."
 
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
Class of certain other funds of the Smith Barney Mutual Funds at the respective
net asset values next determined. See "Exchange Privilege."
 
VALUATION OF SHARES Net asset value of the Fund for the prior day generally is
quoted daily in the financial section of most newspapers and is also available
from Smith Barney Financial Consultants. See "Valuation of Shares."
 
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income and distribu-
tions of net realized capital gains, if any, are declared and paid annually.
See "Dividends, Distributions and Taxes."
 
6
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class will be reinvested automatically, unless otherwise specified by an
investor, in additional shares of the same Class at current net asset value.
Shares acquired by dividend and distribution reinvestments will not be subject
to any sales charge or CDSC. Class B shares acquired through dividend and dis-
tribution reinvestments will become eligible for conversion to Class A shares
on a pro-rata basis. See "Dividends, Distributions and Taxes."
   
RISK FACTORS AND SPECIAL CONSIDERATIONS The Fund invests principally in common
stocks. The prices of common stocks and other securities fluctuate and, there-
fore, the value of an investment in the Fund will vary based upon the Fund's
investment performance. Any income from these investments will be incidental
to the goal of capital appreciation. The Fund will invest in foreign securi-
ties which may result in higher costs than investments in U.S. securities,
including foreign government taxes, which may reduce the investment return of
the Fund. In addition foreign investments may include additional risks associ-
ated with currency exchange rates, less complete financial information about
companies, less market liquidity and political instability. The Fund may use
management techniques and strategies involving options, futures contracts and
options on futures (which are sometimes referred to as "derivatives"), as well
as borrowing for leverage purposes. The utilization of these techniques may
involve greater than ordinary investment risks and the likelihood of more vol-
atile price fluctuation. See "Investment Objective and Management Policies."
    
THE FUND'S EXPENSES The following expense table lists the costs and expenses
that an investor will incur either directly or indirectly as a shareholder of
the Fund, based on the maximum sales charge or maximum CDSC that may be
incurred at the time of purchase or redemption and the Fund's estimated oper-
ating expenses:
 
<TABLE>   
<CAPTION>
  SMITH BARNEY HANSBERGER GLOBAL SMALL CAP
  VALUE FUND                                   CLASS A CLASS B CLASS C CLASS Y
------------------------------------------------------------------------------
  <S>                                          <C>     <C>     <C>     <C>
  SHAREHOLDER TRANSACTION EXPENSES
    Maximum sales charge imposed on purchases
      (as a percentage of offering price)       5.00%   None    None    None
    Maximum CDSC (as a percentage of original
      cost or redemption proceeds, whichever
      is lower)                                 None*   5.00%   1.00%   None
------------------------------------------------------------------------------
  ANNUAL FUND OPERATING EXPENSES
    (as a percentage of offering price)
    Management Fees                             1.05%   1.05%   1.05%   1.05%
    12b-1 Fees**                                0.25    1.00    1.00    None
    Other Expenses***                           0.40    0.40    0.40    0.40
------------------------------------------------------------------------------
  TOTAL FUND OPERATING EXPENSES                 1.70%   2.45%   2.45%   1.45%
------------------------------------------------------------------------------
</TABLE>    
   * Purchases of Class A shares of $500,000 or more will be made at net asset
     value with no sales charge, but will be subject to a CDSC of 1.00% on
     redemptions made within 12 months of purchase.
  ** Upon conversion of Class B shares to Class A shares, such shares will no
     longer be subject to a distribution fee. Class C shares do not have a
     conversion feature and, therefore, are subject to an ongoing distribution
     fee. As a result, long-term shareholders of Class C shares may pay more
     than the economic equivalent of the maximum front-end sales charge
     permitted by the National Association of Securities Dealers, Inc.
   
  ***"Other Expenses" have been estimated based on expenses the Fund expects to
     incur during its fiscal year ending April 30, 1998.     
 
                                                                              7
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
 Class A shares of the Fund purchased through the Smith Barney AssetOne Program
will be subject to an annual asset-based fee, payable quarterly, in lieu of the
initial sales charge. The fee will vary to a maximum of 1.50%, depending on the
amount of assets held through the Program. For more information, please call
your Smith Barney Financial Consultant.
 
 The sales charge and CDSC set forth in the above table are the maximum charges
imposed on purchases or redemptions of Fund shares and investors may actually
pay lower or no charges, depending on the amount purchased and, in the case of
Class B, Class C and certain Class A shares, the length of time the shares are
held and whether the shares are held through the Smith Barney 401(k) and
ExecChoice(TM) Programs. See "Purchase of Shares" and "Redemption of Shares."
Smith Barney receives an annual 12b-1 service fee of 0.25% of the value of
average daily net assets of Class A shares. Smith Barney also receives with
respect to Class B shares and Class C shares, an annual 12b-1 fee of 1.00% of
the value of average daily net assets of that Class, consisting of a 0.25%
service fee and a 0.75% distribution fee. "Other Expenses" in the above table
include fees for shareholder services, custodial fees, legal and accounting
fees, printing costs and registration fees.
 
 EXAMPLE
 
  The following example is intended to assist an investor in understanding the
various costs that an investor in the Fund will bear directly or indirectly.
The example assumes payment by the Fund of operating expenses at the levels set
forth in the table above. See "Purchase of Shares," "Redemption of Shares" and
"Management of the Fund."
 
<TABLE>   
<CAPTION>
  SMITH BARNEY HANSBERGER GLOBAL SMALL CAP VALUE FUND           1 YEAR 3 YEARS
------------------------------------------------------------------------------
  <S>                                                           <C>    <C>
  An investor would pay the following expenses on a $1,000
  investment, assuming (1) 5.00% annual return and (2) redemp-
  tion at the end of each time period:
    Class A....................................................   66     101
    Class B....................................................   75     106
    Class C....................................................   35      76
    Class Y....................................................   15      46
  An investor would pay the following expenses on the same
  investment, assuming the same annual return and no redemp-
  tion:
    Class A....................................................   66     101
    Class B....................................................   25      76
    Class C....................................................   25      76
    Class Y....................................................   15      46
------------------------------------------------------------------------------
</TABLE>    
 
 The example also provides a means for the investor to compare expense levels
of funds with different fee structures over varying investment periods. To
facilitate such comparison, all funds are required to utilize a 5.00% annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTA-
TION OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN ABOVE.
 
8
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
 
 
 The Fund's investment objective is long-term capital growth. The Fund seeks
to achieve this objective by investing primarily in equity securities of U.S.
and foreign issuers with relatively small market capitalizations (share price
times number of equity securities outstanding) which, in the opinion of SBMFM
and Hansberger, are undervalued. Income will be an incidental consideration.
 
 In making investment decisions for the Fund, Hansberger relies heavily on a
fundamental analysis of securities with a long-term investment perspective.
Hansberger's valuation methods focus on a company's share price in relation to
earnings, dividends, assets, sales and a variety of other criteria. The Fund
seeks to invest in companies whose securities are trading at the greatest dis-
count to future earnings, cash flow and/or net asset value and Hansberger
utilizes proprietary valuation screens, internal and external research sources
and other fundamental analysis to identify those securities that appear to be
undervalued. Once undervalued securities are identified, Hansberger analyzes
each security, concentrating on a variety of fundamental issues, including
sales growth, cash flow, new product development, management structure and
other economic factors. This fundamental analysis results in a list of securi-
ties meeting a strict value discipline, which are reviewed by Hansberger for
inclusion in the Fund's portfolio.
   
 Hansberger seeks to increase the scope and effectiveness of this fundamental
investment approach by extending the search for value into many countries
around the world. This global search provides Hansberger with more diverse
opportunities and flexibility to shift portfolio investments not only from
company to company and industry to industry, but also country to country, in
search of undervalued securities. Under normal market conditions, the Fund
will invest at least 65% of the value of its total assets in companies with
individual market capitalizations of $1.4 billion U.S. dollars or less (at the
time of purchase). Under normal market conditions the Fund will invest its
assets in at least three countries, which may include the United States.     
 
 INVESTMENT POLICIES
   
 Although the Fund generally invests in common stocks, the Fund may also
invest in preferred stocks and certain debt securities, rated or unrated, such
as convertible bonds and bonds selling at a discount, when Hansberger believes
the potential for appreciation will equal or exceed that available from
investments in common stock. The Fund may also invest in warrants or rights to
subscribe to or purchase such securities, and sponsored or unsponsored Ameri-
can Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") and other depository receipts (collective-
ly, "Depositary Receipts"). The Fund may also lend its portfolio securities
and borrow money for investment purposes (i.e., "leverage" its portfolio). In
addition, the Fund may invest in closed-end invest     -
 
                                                                              9
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
   
ment companies holding foreign securities, and enter into transactions in
options on securities, securities indices and foreign currencies, forward for-
eign currency contracts, and futures contracts and related options. When
deemed appropriate by SBMFM or Hansberger, the Fund may invest cash balances
in repurchase agreements and other money market investments to maintain
liquidity in an amount sufficient to meet expenses or for day-to day operating
purposes. These investment techniques are described below under "Investment
Strategies and Techniques" and "Risk Factors". Whenever, in the judgment of
Hansberger, market or economic conditions warrant, the Fund may adopt a tempo-
rary defensive position and may invest without limit in money market securi-
ties denominated in U.S. dollars or in the currency of any foreign country.
See " Investment Strategies and Techniques--Temporary Investments."     
    
 INVESTMENT STRATEGIES AND TECHNIQUES     
 
 The Fund may also engage in the investment techniques and make the types of
investments described and discussed below.
 
 Options Transactions. The Fund may seek to hedge all or a portion of its
investments through options on other securities in which it may invest.
Options which the Fund may purchase or sell will be traded on a recognized
securities or futures exchange or over the counter. Options markets in emerg-
ing countries are currently limited and the nature of the strategies adopted
by Hansberger and the extent to which those strategies are used will depend on
the development of such markets.
   
 The Fund may write (i.e., sell) covered call options. A call gives the pur-
chaser the right to buy the security underlying the option from the Fund at
the stated exercise price, on or before a specified date (the "termination
date") that is usually not more than nine months from the date the option is
issued. A call is "covered" if the Fund (i) owns the securities underlying the
option or securities convertible or exchangeable (without the payment of any
consideration) into the securities underlying the option, (ii) maintains in a
segregated account with The Chase Manhattan Bank ("Chase"), the Fund's custo-
dian, cash or equity and debt securities of any grade provided such securities
have been determined by SBMFM and Hansberger to be liquid and unencumbered
pursuant to guidelines established by the Board of Directors ("eligible segre-
gated assets") with a value sufficient to meet the Fund's obligations under
the call, or (iii) owns an offsetting call option.     
 
 The Fund may also write (i.e., sell) covered put options. The writer of a put
incurs an obligation to buy the security underlying the option from the put's
purchaser at the exercise price at any time on or before the termination date,
at the purchaser's election (certain options the Fund writes will be exercis-
able by the purchaser only on a specific date ). Generally, a put is "covered"
if the Fund
 
10
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
maintains eligible segregated assets equal to the exercise price of the option
or if the Fund holds a put on the same underlying security with a similar or
higher exercise price.
 
 The Fund may also purchase put or call options on individual securities or
baskets of securities. When the Fund purchases a call, it acquires the right to
buy the underlying security at the exercise price on or before the termination
date, and when the Fund purchases a put, it acquires the right to sell the
underlying security at the exercise price on or before the termination date.
   
 The primary risks associated with the use of options on securities are (i)
imperfect correlation between the change in market value of the securities the
Fund holds and the prices of options relating to the securities purchased or
sold by the Fund; and (ii) possible lack of a liquid secondary market for an
option. Options not traded on an exchange (OTC options) are generally consid-
ered illiquid and may be difficult to value. Hansberger believes that the Fund
will minimize its risk of being unable to close out an option contract by
transacting in options only if there appears to be a liquid secondary market
for those options.     
   
 Real Estate Investment Trust Securities. The Fund may invest up to 10% of its
assets in Real Estate Investment Trusts ("REITs"). REITs are pooled investment
vehicles that invest primarily in either real estate or real estate related
loans. The value of a REIT is affected by changes in the value of the proper-
ties owned by the REIT or securing mortgage loans held by the REIT. A REIT is
dependent upon cash flow from its investments to repay financing costs and the
ability of the REIT's manager. REITs are also subject to risks generally asso-
ciated with investments in real estate.     
 
 Futures Contracts. The Fund may buy and sell financial futures contracts,
stock and bond index futures contracts, foreign currency futures contracts and
options on any of the foregoing for hedging purposes only. A financial futures
contract is an agreement between two parties to buy or sell a specified debt
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
 
 When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In
 
                                                                              11
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
addition, when the Fund enters into a futures contract, it will segregate
assets or "cover" its position in accordance with the Investment Company Act of
1940, as amended (the "1940 Act"). With respect to positions in futures and
related options that do not constitute "bona fide hedging" positions as defined
in regulations of the Commodity Futures Trading Commission, the Fund will not
enter into a futures contract or related option contract if, immediately there-
after, the aggregate initial margin deposits relating to such positions plus
premiums paid by it for open futures option positions, less the amount by which
any such options are "in-the-money," would exceed 5% of the Fund's total
assets. The value of the underlying securities on which futures contracts will
be written at any one time will not exceed 25% of the total assets of the Fund.
 
 The primary risks associated with the use of futures and options on futures
are (i) imperfect correlation between the change in market value of the securi-
ties held by the Fund and the prices of related futures and options on futures
purchased or sold by the Fund, and (ii) possible lack of a liquid secondary
market for a futures contract (or related option) and the resulting inability
to close a futures position, which could have an adverse impact on the Fund's
ability to hedge. The risk of loss in trading on futures contracts and related
options in some strategies can be substantial, due both to the low margin
deposits required and the extremely high degree of leverage involved in futures
pricing. Gains and losses on futures and related options depend on Hansberger's
ability to predict correctly the direction of stock prices, interest rates, and
other economic factors. The risk that the Fund will be unable to close out a
futures position or related options contract will be minimized by only entering
into futures contracts or related options transactions for which there appears
to be a liquid secondary market.
   
 Borrowing. The Fund may borrow money from U.S.-regulated banks in an amount
not to exceed 33 1/3% of the Fund's total assets (including the amount borrow-
ed) less all liabilities and indebtedness other than the borrowing. If the Fund
borrows and uses the proceeds to make additional investments, income and appre-
ciation from such investments will improve its performance if they exceed the
associated borrowing costs but impair its performance if they are less than
such borrowing costs. This speculative factor is known as "leverage."     
   
 Leverage creates an opportunity for increased returns to shareholders of the
Fund but, at the same time, creates special risk considerations. For example,
leverage may exaggerate changes in the net asset value of the Fund's shares and
in the Fund's yield. Although the principal or stated value of such borrowings
will be fixed, the Fund's assets may change in value during the time the bor-
rowing is outstanding. Leverage will create interest or dividend expenses for
the Fund which can exceed the income from the assets retained. To the extent
the income or other     
 
12
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
   
gain derived from securities purchased with borrowed funds exceeds the inter-
est or dividends the Fund will have to pay in respect thereof, the Fund's net
income or other gain will be greater than if leverage had not been used. Con-
versely, if the income or other gain from the incremental assets is not suffi-
cient to cover the cost of leverage, the net income or other gain of the Fund
will be less than if leverage had not been used. If the amount of income from
the incremental securities is insufficient to cover the cost of borrowing,
securities might have to be liquidated to obtain required funds. Depending on
market or other conditions, such liquidations could be disadvantageous to the
Fund.     
   
 Depository Receipts. The Fund may purchase sponsored and unsponsored Deposi-
tory Receipts that are or become available, including ADRs, GDRs, EDRs and
other Depository Receipts. Depositary Receipts are typically issued by a
financial institution ("depository") and evidence ownership interests in a
security or a pool of securities ("underlying securities") that have been
deposited with the depository. The depository for ADRs is typically a U.S.
financial institution and the underlying securities are issued by a foreign
issuer. For other Depositary Receipts, the depository may be a foreign or a
U.S. entity, and the underlying securities may have a foreign or a U.S. issu-
er. For purposes of the Fund's investment policies, investments in Depository
Receipts will be deemed to be investments in the underlying securities. Thus,
a Depository Receipt representing ownership of common stock will be treated as
common stock.     
 
 Sovereign Debt. The Fund may invest in sovereign debt, which may trade at a
substantial discount from face value. The Fund may hold and trade sovereign
debt of emerging market countries in appropriate circumstances and participate
in debt conversion programs. Emerging country sovereign debt is generally low-
er-quality debt and is considered speculative in nature. The issuer or govern-
mental authorities that control sovereign debt repayment ("sovereign debtors")
may be unable or unwilling to repay principal or interest when due in accor-
dance with the terms of the debt. A sovereign debtor's willingness or ability
to repay principal and interest due in a timely manner may be affected by,
among other factors, its cash flow, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the sover-
eign debtor's policy towards the International Monetary Fund and the political
constraints to which the sovereign debtor may be subject.
 
 
 Brady Bonds. The Fund may invest in Brady Bonds as part of its investment in
sovereign debt of countries that have restructured or are in the process of
restructuring their sovereign debt.
   
 Brady Bonds are often viewed as having three or four valuation components:
(i) the collateralized repayment of principal at final maturity; (ii) the col-
lateralized     
 
                                                                             13
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
   
interest payments; (iii) the uncollateralized interest payment; and (iv) any
uncollateralized interest and principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In light of the residual risk of
Brady Bonds and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries issuing
Brady Bonds, investments in Brady Bonds can viewed as speculative.     
   
 Investment Funds. Some emerging countries have laws and regulations that pre-
clude direct foreign investment in the securities of companies located there.
However, indirect foreign investment in the securities of companies listed and
traded on the stock exchanges in these countries is permitted by certain
emerging countries through specifically authorized investment funds. The Fund
may invest in these investment funds, as well as other closed-end investment
companies up to 10% of its assets, as permitted by the 1940 Act.     
   
 Repurchase Agreements. In order to aid in cash management, the Fund may enter
into repurchase agreements with brokers, dealers or banks ("counterparties")
that SBMFM and Hansberger have determined meet the credit guidelines estab-
lished by the Board of Directors. Repurchase agreements will be fully collat-
eralized, and may be viewed for purposes of the 1940 Act as a loan of money by
the Fund to the counterparty. The Fund may incur a loss if the counterparty
defaults and the collateral value declines, or if bankruptcy proceedings are
commenced regarding the counterparty and the Fund's realization upon the col-
lateral is delayed or limited.     
 
 Securities Lending. The Fund is authorized to lend up to 33 1/3% of the total
market value of its portfolio securities to brokers, dealers, domestic and
foreign banks or other financial institutions for the purpose of increasing
its net investment income. Any such loan must be fully secured; however, and
there may be risks of delay in recovery of the securities or even loss of
rights in the collateral should the borrowers of the securities fail finan-
cially.
 
 Temporary Investments. The Fund may make money market investments pending
other investments or settlement for liquidity, or in adverse market condi-
tions. These money market investments include obligations of the U.S. Govern-
ment and its agencies and instrumentalities, obligations or foreign sovereign-
ties, other debt securities, commercial paper including bank obligations, cer-
tificates of deposit (including Eurodollar certificates of deposit) and repur-
chase agreements.
 
 For temporary defensive purposes, during periods in which SBMFM or Hansberger
believes changes in economic, financial or political conditions make it advis-
able, the Fund may reduce its holdings in equity and other securities and may
invest up to 100% of its assets in certain short-term (less than twelve months
to maturity) and medium-term (not greater than five years to maturity) debt
securities
 
14
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
and in cash (U.S. dollars, foreign currencies, multicurrency units). These
short-term and medium-term debt securities consist of (a) obligations of gov-
ernments, agencies or instrumentalities of any member state of the Organization
for Economic Cooperation and Development ("OECD"), (b) bank deposits and bank
obligations (including certificates of deposit, time deposits and banker's
acceptances) of banks organized under the laws of any member state of the OECD,
denominated in any currency: (c) floating rate securities and other instruments
dominated in any currency issued by international development agencies: (d)
finance company and corporate commercial paper and other short-term corporate
debt obligations of corporations organized under the laws of any member state
of the OECD meeting the Fund's credit quality standards: and (e) repurchase
agreements with banks and broker-dealers covering any of the foregoing securi-
ties. The short-term and medium-term debt securities in which the Fund may
invest for temporary defensive purposes will be those that SBMFM and Hansberger
believe to be of high quality, i.e., subject to relatively low risk of loss of
interest or principal. There is currently no rating system for debt securities
in most emerging countries. If rated, these securities will be rated in one of
the three highest rating categories by rating services such as Moody's Invest-
ors Services, Inc. or Standard & Poor's Ratings Group (i.e., rated at least A).
 
 When-Issued Securities. The Fund may purchase securities on a when-issued or
delayed delivery basis. The price of debt obligations purchased on a when-
issued basis is fixed at the time the Fund commits to purchase, but delivery
and payment for the securities ("settlement") takes place at a later date. The
price of these securities may be expressed in yield terms. The Fund will enter
into these transactions in order to lock in the yield (price) available at the
time of commitment.
 
 Between purchase and settlement, the Fund assumes the ownership risk of the
when-issued securities, including the risk of fluctuations in the securities
market value due to, among other factors, a change in the general level of
interest rates. However, no interest accrues to the Fund during this period.
 
 Forward Foreign Currency Exchange Contracts and Options on Foreign
Currencies. The Fund may enter into forward foreign currency exchange contracts
("forward contracts"), providing for the purchase of or sale of an amount of a
specified currency at a future date. The Fund may use forward contracts to pro-
tect against a foreign currency's decline against the U.S. dollar between the
trade date and settlement date for a securities transaction, or to lock in the
U.S. dollar value of dividends declared on securities it holds, or generally to
protect the U.S. dollar value of the securities it holds against exchange rate
fluctuations. The Fund may also use forward contracts to protect against fluc-
tuating exchange rates and exchange control regulations. Forward contracts may
limit the Fund's losses due to exchange rate fluctuation, but they will also
limit any gains that the Fund might
 
                                                                              15
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
otherwise have realized. The Fund may also enter into foreign currency futures
contracts ("currency futures").
   
 Except where segregated accounts are not required by the 1940 Act, when the
Fund enters into a forward contract or currency future, it will place in a seg-
regated account maintained with Chase, eligible segregated assets in an amount
equal to the value of the Fund's total assets committed to consummation of for-
ward contracts and currency futures. If the value of these segregated securi-
ties declines, additional cash or securities will be placed in the account on a
daily basis so that the account value is at least equal to the Fund's commit-
ments to such contracts.     
 
 The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the pre-
mium received, and the Fund could be required to purchase or sell foreign cur-
rencies at disadvantageous exchange rates, thereby incurring losses. The pur-
chase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on U.S. and foreign exchanges or over-the-
counter.
   
 Forward Roll Transactions. In order to enhance current income, the Fund may
enter into forward roll transactions. In a forward roll transaction, the Fund
sells a security to a financial institution, such as a bank or broker-dealer,
and simultaneously agrees to repurchase a similar security from the institution
at a later date at an agreed-upon price. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities sold. Proceeds of the sale will be invested in
short-term instruments, particularly repurchase agreements, and the income from
these investments, together with any additional fee income received on the sale
will generate income for the Fund exceeding the yield on the securities sold.
Forward roll transactions involve the risk that the market value of the securi-
ties sold by the Fund may decline below the repurchase price of those securi-
ties. At the time the Fund enters into forward roll transactions, it will place
in a segregated account with Chase, eligible segregated assets having a value
equal to the repurchase price (including accrued interest) and will subse-
quently monitor the account to insure that such equivalent value is maintained.
    
 Non-Publicly Traded Securities. The Fund may invest in securities that are
neither listed on a stock exchange nor traded over the counter, including pri-
vately placed securities. These securities may present a higher degree of busi-
ness and
 
16
<PAGE>
 
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
 
financial risk, which can result in substantial losses. In the absence of a
public trading market for these securities, they may be less liquid than pub-
licly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized from these sales could be less
than those originally paid by the Fund or less than what the Fund may consider
the fair value of such securities. Further, companies whose securities are not
publicly traded may not be subject to disclosure and other investor protection
requirements that might apply if their securities were publicly traded. If such
securities are required to be registered under the securities laws of one or
more jurisdictions before being resold, the Fund may be required to bear the
costs of registration. The Fund may not invest more than 15% of its net assets
in illiquid securities, including securities for which there is no readily
available secondary market. The Fund may invest in securities that can be
offered and sold to qualified institutional buyers under Rule 144A under the
1933 Act ("Rule 144A Securities"). The Board of Directors has delegated to
SBMFM and Hansberger, subject to the Board's supervision, the daily function of
determining and monitoring the liquidity of Rule 144A Securities. Rule 144A
Securities held by the Fund which have been determined to be liquid will not be
subject to the 15% limitation described above. However, Rule 144A Securities
may become illiquid if qualified institutional buyers are not interested in
acquiring them.
 
 Short Sales. The Fund may sell securities short "against the box", that is,
sell a security that the Fund owns or has the right to acquire, for delivery at
a specified date in the future.
 
RISK FACTORS
 
 
 FOREIGN INVESTMENT
 
 Investment in securities of foreign issuers and in foreign branches of domes-
tic banks, involves some risks different from, or in addition to, those affect-
ing investments in securities of U.S. issuers. For example, publicly available
information about foreign issuers and economies may be limited; foreign issuers
are not generally subject to uniform accounting, auditing and other reporting
standards; securities of foreign issuers may be less liquid and more volatile
than those of domestic issuers; dividends and interest paid by foreign issuers
may be subject to withholding and other foreign taxes; risks of seizure,
nationalization or expropriation of a foreign issuer exists; and, since securi-
ties of foreign issuers are frequently denominated in foreign currencies,
investments in these securities may involve currency exchange risks.
 
 INVESTING IN SMALLER CAPITALIZATION STOCKS
 
 SBMFM and Hansberger believe that the issuers of smaller capitalization stocks
often have sales and earnings growth rates which exceed those of larger compa-
nies,
 
                                                                              17
<PAGE>
 
RISK FACTORS (CONTINUED)
 
and that such growth rates may in turn be reflected in more rapid share price
appreciation. However, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with investing in stocks of larger,
more established companies. For example, smaller capitalization companies often
have limited product lines, markets, or financial resources, may be dependent
for management on one or a few key persons, and can be more susceptible to
losses. Also, their securities may be thinly traded (and therefore have to be
sold at a discount from current prices or sold in small lots over an extended
period of time), may be followed by fewer investment research analysts and may
be subject to wider price swings and thus may create a greater chance of loss
than securities of larger capitalization companies. Transaction costs in stocks
of smaller capitalization companies may be higher than those of larger capital-
ization companies.
 
 INVESTING IN LOWER RATED DEBT SECURITIES
   
 When deemed appropriate, the Fund may invest up to 10% of its assets in lower
rated or unrated debt securities. Debt considered below investment grade may be
referred to as "junk bonds" or "high risk" securities. The emerging country
debt securities in which the Fund may invest are subject to significant risk
and will not be required to meet any minimum rating standard or equivalent.
Debt securities are subject to the risk of the issuer's inability to meet prin-
cipal and interest payments (credit risk) and may also be subject to price vol-
atility due to such factors as interest rate sensitivity, market perception of
the issuer's creditworthiness and general market liquidity (market risk). Lower
rated or unrated securities are more likely to react to developments affecting
market and credit risk than are more highly rated securities, which react pri-
marily to movements in general levels of interest rates. The market values of
debt securities tend to vary inversely with interest rate levels. Yields and
market values of lower rated and unrated debt will fluctuate over time,
reflecting not only changing interest rates but also the market's perception of
credit quality and the outlook for economic growth. When economic conditions
appear to be deteriorating, medium to lower rated securities may decline in
value due to heightened concern over credit quality, regardless of prevailing
interest rates. Hansberger will consider credit risk and market risk in making
debt security investment decisions for the Fund. Investors should carefully
consider the relative risks of investing in the Fund because it purchases lower
rated and unrated debt securities, and should understand that such securities
are not generally meant for short-term investment.     
 
 The U.S. market for lower rated and unrated corporate debt is relatively new
and its recent growth paralleled a long period of economic expansion and an
increase in merger, acquisition and leveraged buyout activity. In addition,
trading markets for debt securities of issuers located in emerging countries
may be limited. Adverse economic developments may disrupt the market for U.S.
corporate lower rated and
 
18
<PAGE>
 
RISK FACTORS (CONTINUED)
 
unrated debt securities and for emerging country debt securities. Such disrup-
tions may severely affect the ability of issuers, especially highly leveraged
issuers, to service their debt obligations or to repay their obligations upon
maturity. In addition, the secondary market for lower rated and unrated debt
securities, which is concentrated in relatively few market makers, may not be
as liquid as the secondary market for more highly rated securities. As a
result, Hansberger could find it more difficult to sell these securities or may
be able to sell the securities only at prices lower than if such securities
were widely traded. Prices realized upon the sale of such lower rated or
unrated securities, under these circumstances, may be less than the prices used
in calculating the Fund's net asset value.
 
VALUATION OF SHARES
 
 
 The Fund's net asset value per share is determined as of the close of regular
trading on the NYSE on each day that the NYSE is open, by dividing the value of
the Fund's net assets attributable to each Class by the total number of shares
of the Class outstanding.
 
 Generally, the Fund's investments are valued at market value, or, in the
absence of a market value with respect to any securities, at fair value. Secu-
rities listed on an exchange are valued on the basis of the last sale prior to
the time the valuation is made. If there has been no sale since the immediately
previous valuation, then the current bid price is used. Quotations are taken
from the exchange where the security is primarily traded. Portfolio securities
which are primarily traded on foreign exchanges may be valued with the assis-
tance of a pricing service and are generally valued at the preceding closing
values of such securities on their respective exchange, except that when an
occurrence subsequent to the time a foreign security is valued is likely to
have changed such value, then the fair value of those securities will be deter-
mined by consideration of other factors by or under the direction of the Board
of Directors. Over-the-counter securities are valued on the basis of the bid
price at the close of business on each day. Unlisted foreign securities are
valued at the mean between the last available bid and offer price prior to the
time of valuation. Any assets or liabilities initially expressed in terms of
foreign currencies will be converted into U.S. dollar values at the mean
between the bid and offered quotations of such currencies against U.S. dollars
as last quoted by any recognized dealer. Securities for which market quotations
are not readily available are valued at fair value. Notwithstanding the above,
bonds and other fixed-income securities are valued by using market quotations
and may be valued on the basis of prices provided by a pricing service approved
by the Board of Directors.
 
                                                                              19
<PAGE>
 
DIVIDENDS, DISTRIBUTIONS AND TAXES
 
 
 DIVIDENDS AND DISTRIBUTIONS
 
 The Fund's policy is to distribute substantially all its investment income
(that is, its income other than its net realized capital gains) and net real-
ized capital gains, if any, once a year, normally at the end of the year in
which earned or at the beginning of the next year.
 
 If a shareholder does not otherwise instruct, dividends and capital gain dis-
tributions will be reinvested automatically in additional shares of the same
Class at net asset value, subject to no sales charge or CDSC. In order to avoid
the application of a 4.00% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed ordi-
nary income or capital gains and expects to pay any other dividends and distri-
butions necessary to avoid the application of this tax.
 
 The per share dividends on Class B and Class C shares of the Fund may be lower
than the per share dividends on Class A and Class Y shares principally as a
result of the distribution fee applicable with respect to Class B and Class C
shares. The per share dividends on Class A shares of the Fund may be lower than
the per share dividends on Class Y shares principally as a result of the serv-
ice fee applicable to Class A shares. Distributions of capital gains, if any,
will be in the same amount for Class A, Class B, Class C and Class Y shares.
 
 TAXES
 
  The Fund intends to qualify each year as a regulated investment company under
the Code. Dividends paid from net investment income and distributions of net
realized short-term capital gains will be taxable to shareholders as ordinary
income, regardless of how long shareholders have held their Fund shares and
whether such dividends and distributions are received in cash or reinvested in
additional Fund shares. Distributions of net realized long-term capital gains
will be taxable to shareholders as long-term capital gains, regardless of how
long shareholders have held Fund shares and whether such distributions are
received in cash or are reinvested in additional Fund shares. Furthermore, as a
general rule, a shareholder's gain or loss on a sale or redemption of Fund
shares will be a long-term capital gain or loss if the shareholder has held the
shares for more than one year and will be a short-term capital gain or loss if
the shareholder has held the shares for one year or less. Some of the Fund's
dividends declared from net investment income may qualify for the Federal divi-
dends-received deduction for corporations.
 
  Statements as to the tax status of each shareholder's dividends and distribu-
tions will be mailed annually. Each shareholder also will receive, if appropri-
ate, various written notices after the close of the Fund's prior taxable year
as to the Federal income tax status of his or her dividends and distributions
which were received from the Fund during the Fund's prior taxable year. Share-
holders should consult their own tax advisors about the status of the Fund's
dividends and distributions for state and local tax liabilities.
 
20
<PAGE>
 
PURCHASE OF SHARES
 
 
 GENERAL
 
  The Fund offers four Classes of shares. Class A shares are sold to investors
with an initial sales charge and Class B and Class C shares are sold without
an initial sales charge but are subject to a CDSC payable upon certain redemp-
tions. Class Y shares are sold without an initial sales charge or CDSC and are
available only to investors investing a minimum of $5,000,000 (except for pur-
chases of Class Y shares by Smith Barney Concert Allocation Series Inc., for
which there is no minimum purchase amount). See "Prospectus Summary--Alterna-
tive Purchase Arrangements" for a discussion of factors to consider in select-
ing which Class of shares to purchase.
 
 INITIAL SUBSCRIPTION PERIOD
 
  Smith Barney, the Fund's distributor, will solicit subscriptions for shares
of the Fund during the Subscription Period. Subscriptions for shares must be
made through a brokerage account maintained with Smith Barney or an Introduc-
ing Broker. Shares of the Fund subscribed for during the Subscription Period
for which Smith Barney accepts purchase orders will be issued and sold by the
Fund on the third business day after the end of the Subscription Period (the
"Purchase Date"). Also on the Purchase Date, shareholders of other funds of
the Smith Barney Mutual Funds will be able to exchange shares of such funds
for shares of the Fund. On the Purchase Date, Smith Barney will notify the
Fund of the aggregate number of shares for which it has received and accepted
subscriptions, and the Fund will issue shares for such subscriptions and com-
mence operations.
   
  The Fund is offering its Class A shares to the public at a maximum purchase
price per share of $12.00, which equals the Class A share initial net asset
value per share of $11.40 plus the maximum sales charge set forth below under
"Continuous Offerings". The Fund is offering its Class B, Class C and Class Y
shares to the public at each Class' respective initial net asset value per
share of $11.40.     
 
  The Fund and Smith Barney may in their discretion determine to withdraw the
offering without notice for any reason before the end of the Subscription
Period. The Fund also reserves the right to refuse any order in whole or in
part.
 
 CONTINUOUS OFFERINGS
 
  Smith Barney will suspend the offering of shares to the public immediately
after the expiration of the Subscription Period or within three weeks thereaf-
ter. During the three-week period, Smith Barney will commence a limited con-
tinuous offering of shares to the public. Once Smith Barney suspends the
offering of shares to the public (the "Closing Period"), it is expected to do
so for 30 days. This period may be lengthened or shortened in the absolute
discretion of Smith Barney. During the Closing Period, the Fund will invest
the proceeds from its Subscription Period and its continuous offering, if any,
and existing shareholders of the Fund may request
 
                                                                             21
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
redemptions, purchase additional shares and exchange shares of the Fund for
shares of certain other funds of the Smith Barney Mutual Funds. See "Exchange
Privilege." Immediately after the expiration of the Closing Period, Smith Bar-
ney expects to commence a continuous offering of shares of the Fund.
 
  During the continuous offering, shares may be purchased through a brokerage
account maintained with Smith Barney. Shares may also be purchased through an
Introducing Broker or an investment dealer in the selling group. In addition,
certain investors, including qualified retirement plans and certain other
institutional investors, may purchase shares directly from the Fund through
First Data. When purchasing shares of the Fund, investors must specify whether
the purchase is for Class A, Class B, Class C or Class Y shares. Smith Barney
and other broker/dealers may charge their customers an annual account mainte-
nance fee in connection with a brokerage account through which an investor pur-
chases or holds shares. Accounts held directly at First Data are not subject to
a maintenance fee.
 
  Investors in Class A, Class B and Class C shares may open an account by mak-
ing an initial investment of at least $1,000 for each account, or $250 for an
IRA or a Self-Employed Retirement Plan, in the Fund. Investors in Class Y
shares may open an account by making an initial investment of $5,000,000. Sub-
sequent invest-ments of at least $50 may be made for all Classes. For partici-
pants in retirement plans qualified under Section 403(b)(7) or Section 401(a)
of the Code, the minimum initial investment requirement for Class A, Class B
and Class C shares and the subsequent investment requirement for all Classes in
the Fund is $25. For shareholders purchasing shares of the Fund through the
Systematic Investment Plan on a monthly basis, the minimum initial investment
requirement for Class A, Class B and Class C shares and the subsequent invest-
ment requirement for all Classes is $25. For shareholders purchasing shares of
the Fund through the Systematic Investment Plan on a quarterly basis, the mini-
mum initial investment requirement for Class A, Class B and Class C shares and
subsequent investment requirement for all Classes is $50. There are no minimum
investment requirements for Class A shares for employees of Travelers and its
subsidiaries, including Smith Barney, Directors or Trustees of any of the Smith
Barney Mutual Funds and their spouses and children. The Fund reserves the right
to waive or change minimums, to decline any order to purchase its shares and to
suspend the offering of shares from time to time. Shares purchased will be held
in the shareholder's account by First Data. Share certificates are issued only
upon a shareholder's written request to First Data.
 
  Purchase orders received by the Fund or Smith Barney prior to the close of
regular trading on the NYSE, on any day the Fund calculates its net asset val-
ue, are priced according to the net asset value determined on that day (the
"trade date"). Orders received by dealers or Introducing Brokers prior to the
close of regular trading on the NYSE on any day the Fund calculates its net
asset value, are priced
 
22
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
according to the net asset value determined on that day, provided the order is
received by the Fund or Smith Barney prior to Smith Barney's close of busi-
ness. For shares purchased through Smith Barney or Introducing Brokers pur-
chasing through Smith Barney, payment for Fund shares is due on the third
business day after the trade date. In all other cases, payment must be made
with the purchase order.
 
 SYSTEMATIC INVESTMENT PLAN
 
  During the continuous offering period, shareholders may make additions to
their accounts at any time by purchasing shares through a service known as the
Systematic Investment Plan. Under the Systematic Investment Plan, Smith Barney
or First Data is authorized through preauthorized transfers of at least $25 on
a monthly basis or at least $50 on a quarterly basis, to charge the regular
bank account or other financial institution indicated by the shareholder on a
monthly or quarterly basis to provide systematic additions to the sharehold-
er's Fund account. A shareholder who has insufficient funds to complete the
transfer will be charged a fee of up to $25 by Smith Barney or First Data. The
Systematic Investment Plan also authorizes Smith Barney to apply cash held in
the shareholder's Smith Barney brokerage account or redeem the shareholder's
shares of a Smith Barney money market fund to make additions to the account.
Additional information is available from the Fund or a Smith Barney Financial
Consultant.
 
 INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
 
  The sales charges applicable to purchases of Class A shares of the Fund are
as follows:
 
<TABLE>
<CAPTION>
                                  SALES CHARGE
                         ------------------------------
                                                             DEALERS'
                              % OF           % OF       REALLOWANCE AS % OF
  AMOUNT OF INVESTMENT   OFFERING PRICE AMOUNT INVESTED   OFFERING PRICE
---------------------------------------------------------------------------
  <S>                    <C>            <C>             <C>
  Less than $25,000           5.00%          5.26%             4.50%
  $ 25,000 - 49,999           4.00           4.17              3.60
    50,000 - 99,999           3.50           3.63              3.15
   100,000 - 249,999          3.00           3.09              2.70
   250,000 - 499,999          2.00           2.04              1.80
   500,000 - and over          *               *                 *
---------------------------------------------------------------------------
</TABLE>
* Purchases of Class A shares of $500,000 or more will be made at net asset
  value without any initial sales charge, but will be subject to a CDSC of
  1.00% on redemptions made within 12 months of purchase. The CDSC on Class A
  shares is payable to Smith Barney, which compensates Smith Barney Financial
  Consultants and other dealers whose clients make purchases of $500,000 or
  more. The CDSC is waived in the same circumstances in which the CDSC
  applicable to Class B and Class C shares is waived. See "Deferred Sales
  Charge Alternatives" and "Waivers of CDSC."
 
 
                                                                             23
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
  Members of the selling group may receive up to 90% of the sales charge and
may be deemed to be underwriters of the Fund as defined in the Securities Act.
 
  The reduced sales charges shown above apply to the aggregate of purchases of
Class A shares of the Fund made at one time by "any person," which includes an
individual and his or her immediate family, or a trustee or other fiduciary of
a single trust estate or single fiduciary account. The reduced sales charge
minimums may also be met by aggregating the purchase with the net asset value
of all Class A shares offered with a sales charge held in funds sponsored by
Smith Barney that are offered with a sales charge listed under "Exchange Priv-
ilege."
 
 INITIAL SALES CHARGE WAIVERS
   
  Purchases of Class A shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales to (i) Board members and
employees of Travelers and its subsidiaries and any of the Smith Barney Mutual
Funds (including retired Board members and employees); the immediate families
of such persons (including the surviving spouse of a deceased Board member or
employee); and to a pension, profit-sharing or other benefit plan for such
persons, (ii) employees of Hansberger and members of their immediate family
and (iii) employees of members of the National Association of Securities Deal-
ers, Inc., provided such sales are made upon the assurance of the purchaser
that the purchase is made for investment purposes and that the securities will
not be resold except through redemption or repurchase; (b) offers of Class A
shares to any other investment company to effect the combination of such com-
pany with the Fund by merger, acquisition of assets or otherwise; (c) pur-
chases of Class A shares by any client of a newly employed Smith Barney Finan-
cial Consultant (for a period up to 90 days from the commencement of the
Financial Consultant's employment with Smith Barney), on the condition the
purchase of Class A shares is made with the proceeds of the redemption of
shares of a mutual fund which (i) was sponsored by the Financial Consultant's
prior employer, (ii) was sold to the client by the Financial Consultant and
(iii) was subject to a sales charge; (d) purchases by shareholders who have
redeemed Class A shares in the Fund (or Class A shares of another fund in the
Smith Barney Mutual Funds that are offered with a sales charge) and who wish
to reinvest their redemption proceeds in the Fund, provided the reinvestment
is made within 60 calendar days of the redemption; (e) purchases by accounts
managed by registered investment advisory subsidiaries of Travelers; (f)
direct rollovers by plan participants from a 401(k) plan offered to employees
of Travelers or its subsidiaries or a 401(k) plan enrolled in the Smith Barney
401(k) Program (Note: subsequent investments will be subject to the applicable
sales charge); (g) purchases by separate accounts used to fund certain unreg-
istered variable annuity contracts; and (h) purchases by investors participat-
ing in a Smith Barney fee-based arrangement. In order to obtain such dis-
counts, the purchaser must provide sufficient information at     
 
24
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
the time of purchase to permit verification that the purchase would qualify for
the elimination of the sales charge.
 
 RIGHT OF ACCUMULATION
 
  Class A shares of the Fund may be purchased by "any person" (as defined
above) at a reduced sales charge or at net asset value determined by aggregat-
ing the dollar amount of the new purchase and the total net asset value of all
Class A shares of the Fund and of funds sponsored by Smith Barney which are
offered with a sales charge listed under "Exchange Privilege" then held by such
person and applying the sales charge applicable to such aggregate. In order to
obtain such discount, the purchaser must provide sufficient information at the
time of purchase to permit verification that the purchase qualifies for the
reduced sales charge. The right of accumulation is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
 
 GROUP PURCHASES
 
  Upon completion of certain automated systems, a reduced sales charge or pur-
chase at net asset value will also be available to employees (and partners) of
the same employer purchasing as a group, provided each participant makes the
minimum initial investment required. The sales charge applicable to purchases
by each member of such a group will be determined by the table set forth above
under "Initial Sales Charge Alternative--Class A Shares," and will be based
upon the aggregate sales of Class A shares of Smith Barney Mutual Funds offered
with a sales charge to, and share holdings of, all members of the group. To be
eligible for such reduced sales charges or to purchase at net asset value, all
purchases must be pursuant to an employer- or partnership-sanctioned plan meet-
ing certain requirements. One such requirement is that the plan must be open to
specified partners or employees of the employer and its subsidiaries, if any.
Such plan may, but is not required to, provide for payroll deductions, IRAs or
investments pursuant to retirement plans under Section 401 or 408 of the Code.
Smith Barney may also offer a reduced sales charge or net asset value purchase
for aggregating related fiduciary accounts under such conditions that Smith
Barney will realize economies of sales efforts and sales related expenses. An
individual who is a member of a qualified group may also purchase Class A
shares at the reduced sales charge applicable to the group as a whole. The
sales charge is based upon the aggregate dollar value of Class A shares offered
with a sales charge that have been previously purchased and are still owned by
the group, plus the amount of the current purchase. A "qualified group" is one
which (a) has been in existence for more than six months, (b) has a purpose
other than acquiring Fund shares at a discount and (c) satisfies uniform crite-
ria which enable Smith Barney to realize economies of scale in its costs of
distributing shares. A qualified group must have more than 10 members, must be
available to arrange for group meetings between representatives of the Fund and
the members, and must agree to include sales and other materials related to the
 
                                                                              25
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
Fund in its publications and mailings to members at no cost to Smith Barney. In
order to obtain such reduced sales charge or to purchase at net asset value,
the purchaser must provide sufficient information at the time of purchase to
permit verification that the purchase qualifies for the reduced sales charge.
Approval of group purchase reduced sales charge plans is subject to the discre-
tion of Smith Barney.
 
 LETTER OF INTENT
 
  Class A Shares. A Letter of Intent for amounts of $50,000 or more provides an
opportunity for an investor to obtain a reduced sales charge by aggregating the
investments over a 13-month period, provided that the investor refers to such
Letter when placing orders. For purposes of a Letter of Intent, the "Amount of
Investment" as referred to in the preceding sales charge table includes pur-
chases of all Class A shares of the Fund and other funds of the Smith Barney
Mutual Funds offered with a sales charge over the 13-month period based on the
total amount of intended purchases plus the value of all Class A shares previ-
ously purchased and still owned. An alternative is to compute the 13-month
period starting up to 90 days before the date of execution of a Letter of
Intent. Each investment made during the period receives the reduced sales
charge applicable to the total amount of the investment goal. If the goal is
not achieved within the period, the investor must pay the difference between
the sales charges applicable to the purchases made and the charges previously
paid, or an appropriate number of escrowed shares will be redeemed. Please con-
tact a Smith Barney Financial Consultant or First Data to obtain a Letter of
Intent application.
 
  Class Y Shares. A Letter of Intent may also be used as a way for investors to
meet the minimum investment requirement for Class Y shares (except purchases of
Class Y shares by Smith Barney Concert Allocation Series Inc., for which there
is no purchase minimum). Such investors must make an initial minimum purchase
of $1,000,000 in Class Y shares of the Fund and agree to purchase a total of
$5,000,000 of Class Y shares of the same Fund within six months from the date
of the Letter. If a total investment of $5,000,000 is not made within the six-
month period, all Class Y shares purchased to date will be transferred to Class
A shares, where they will be subject to all fees (including a service fee of
0.25%) and expenses applicable to the Fund's Class A shares, which may include
a CDSC of 1.00%. Please contact a Smith Barney Financial Consultant or First
Data for further information.
 
 DEFERRED SALES CHARGE ALTERNATIVES
 
  "CDSC Shares" are sold at net asset value next determined without an initial
sales charge so that the full amount of an investor's purchase payment may be
immediately invested in the Fund. A CDSC, however, may be imposed on certain
redemptions of these shares. "CDSC Shares" are: (a) Class B shares; (b) Class C
 
26
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
shares; and (c) Class A shares that were purchased without an initial sales
charge but subject to a CDSC.
 
  Any applicable CDSC will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the time of
redemption. CDSC Shares that are redeemed will not be subject to a CDSC to the
extent that the value of such shares represents: (a) capital appreciation of
Fund assets; (b) reinvestment of dividends or capital gain distributions; (c)
with respect to Class B shares, shares redeemed more than five years after
their purchase; or (d) with respect to Class C shares and Class A shares that
are CDSC Shares, shares redeemed more than 12 months after their purchase.
 
  Class C shares and Class A shares that are CDSC Shares are subject to a 1.00%
CDSC if redeemed within 12 months of purchase. In circumstances in which the
CDSC is imposed on Class B shares, the amount of the charge will depend on the
number of years since the shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of determining the number of
years since a purchase payment, all purchase payments made during a month will
be aggregated and deemed to have been made on the last day of the preceding
Smith Barney statement month. The following table sets forth the rates of the
charge for redemptions of Class B shares by shareholders, except in the case of
Class B shares held under the Smith Barney 401(k) Program as described below.
See "Purchase of Shares--Smith Barney 401(k) and ExecChoice(TM) Programs."
 
<TABLE>
<CAPTION>
      YEAR SINCE PURCHASE
      PAYMENT WAS MADE      CDSC
---------------------------------
      <S>                   <C>
      First                 5.00%
      Second                4.00
      Third                 3.00
      Fourth                2.00
      Fifth                 1.00
      Sixth and thereafter  0.00
---------------------------------
</TABLE>
 
  Class B shares will convert automatically to Class A shares eight years after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fee. There will also be converted at that time such propor-
tion of Class B Dividend Shares owned by the shareholder as the total number of
his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares (other than Class B Dividend Shares) owned by the
shareholder. In addition, a portion of Class B Dividend Shares will be con-
verted at that time. See "Prospectus Summary--Alternative Purchase Arrange-
ments--Class B Shares Conversion Feature."
 
  In determining the applicability of any CDSC, it will be assumed that a
redemption is made first of shares representing capital appreciation, next of
shares repre-
 
                                                                              27
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
senting the reinvestment of dividends and capital gain distributions and
finally of other shares held by the shareholder for the longest period of time.
The length of time that CDSC Shares acquired through an exchange have been held
will be calculated from the date that the shares exchanged were initially
acquired in one of the other Smith Barney Mutual Funds, and Fund shares being
redeemed will be considered to represent, as applicable, capital appreciation
or dividend and capital gain distribution reinvestments in such other funds.
For Federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, on the amount realized on redemption.
The amount of any CDSC will be paid to Smith Barney.
 
  To provide an example, assume an investor purchased 100 Class B shares at $10
per share for a cost of $1,000. Subsequently, the investor acquired 5 addi-
tional shares through dividend reinvestment. During the fifteenth month after
the purchase, the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105 shares
at $12 per share). The CDSC would not be applied to the amount which represents
appreciation ($200) and the value of the reinvested dividend shares ($60).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 4.00% (the applicable rate for Class B shares) for a total
deferred sales charge of $9.60.
 
 WAIVERS OF CDSC
   
  The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts up to 1.00% per month of the value of the
shareholder's shares at the time the withdrawal plan commences (see "Automatic
Cash Withdrawal Plan") (provided, however, that automatic cash withdrawal in
amounts up to 2.00% per month of the value of the shareholders shares will be
permitted for withdrawal plans that were established prior to November 7,
1994); (c) redemption of shares within 12 months following the death or dis-
ability of the shareholder; (d) redemption of shares made in connection with
qualified distributions from retirement plans or IRAs upon the attainment of
age 59 1/2; (e) involuntary redemptions; and (f) redemption of shares to effect
a combination of the Fund with any investment company by merger, acquisition of
assets or otherwise. In addition, a shareholder who has redeemed shares from
other funds of the Smith Barney Mutual Funds may, under certain circumstances,
reinvest all or part of the redemption proceeds within 60 days and receive pro
rata credit for any CDSC imposed on the prior redemption.     
 
  CDSC waivers will be granted subject to confirmation (by Smith Barney in the
case of shareholders who are also Smith Barney clients or by First Data in the
case of all other shareholders) of the shareholder's status or holdings, as the
case may be.
 
 
28
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
    
 SMITH BARNEY 401(K) AND EXECCHOICE(TM) PROGRAMS     
 
  During the continuous offering period, investors may be eligible to partici-
pate in the Smith Barney 401(k) Program or the Smith Barney ExecChoice(TM) Pro-
gram. To the extent applicable, the same terms and conditions, which are out-
lined below, are offered to all plans participating ("Participating Plans") in
these programs.
   
  The Fund offers to Participating Plans Class A and Class C shares as invest-
ment alternatives under the Smith Barney 401(k) and ExecChoice(TM) Programs.
Class A and Class C shares acquired through the Participating Plans are subject
to the same service and/or distribution fees as the Class A and Class C shares
acquired by other investors; however, they are not subject to any initial sales
charge or CDSC. Once a Participating Plan has made an initial investment in the
Fund, all of its subsequent investments in the Fund must be in the same Class
of shares, except as otherwise described below.     
 
  Class A Shares. Class A shares of the Fund are offered without any sales
charge or CDSC to any Participating Plan that purchases $1,000,000 or more of
Class A shares of one or more funds of the Smith Barney Mutual Funds.
 
  Class C Shares. Class C shares of the Fund are offered without any sales
charge or CDSC to any Participating Plan that purchases less than $1,000,000 of
Class C shares of one or more funds of the Smith Barney Mutual Funds.
 
  401(k) and ExecChoice(TM) Plans Opened On or After June 21, 1996. At the end
of the fifth year after the date the Participating Plan enrolled in the Smith
Barney 401(k) Program or the Smith Barney ExecChoice(TM) Program, if its total
Class C holdings in all non-money market Smith Barney Mutual Funds equal at
least $1,000,000, it will be offered the opportunity to exchange all of its
Class C shares for Class A shares of the Fund. (For Participating Plans that
were originally established through a Smith Barney retail brokerage account,
the five year period will be calculated from the date the retail brokerage
account was opened.) Such Participating Plans will be notified of the pending
exchange in writing within 30 days after the fifth anniversary of the enroll-
ment date and, unless the exchange offer has been rejected in writing, the
exchange will occur on or about the 90th day after the fifth anniversary date.
If the Participating Plan does not qualify for the five year exchange to Class
A shares, a review of the Participating Plan's holdings will be performed each
quarter until either the Participating Plan qualifies or the end of the eighth
year.
 
  401(k) Plans Opened Prior to June 21, 1996. In any year after the date a Par-
ticipating Plan enrolled in the Smith Barney 401(k) Program, if its total Class
C holdings in all non-money market Smith Barney Mutual Funds equal at least
$500,000 as of the calendar year-end, the Participating Plan will be offered
the opportunity to exchange all of its Class C shares for Class A shares of the
Fund.
 
                                                                              29
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
Such Plans will be notified in writing within 30 days after the last business
day of the calendar year and, unless the exchange offer has been rejected in
writing, the exchange will occur on or about the last business day of the fol-
lowing March.
 
  Any Participating Plan in the Smith Barney 401(k) Program that has not previ-
ously qualified for an exchange into Class A shares will be offered the oppor-
tunity to exchange all of its Class C shares for Class A shares of the Fund,
regardless of asset size, at the end of the eighth year after the date the Par-
ticipating Plan enrolled in the Smith Barney 401(k) Program. Such Plans will be
notified of the pending exchange in writing approximately 60 days before the
eighth anniversary of the enrollment date and, unless the exchange has been
rejected in writing, the exchange will occur on or about the eighth anniversary
date. Once an exchange has occurred, a Participating Plan will not be eligible
to acquire additional Class C shares of the Fund but instead may acquire Class
A shares of the Fund. Any Class C shares not converted will continue to be sub-
ject to the distribution fee.
 
  Participating Plans wishing to acquire shares of the Fund through the Smith
Barney 401(k) Program or the Smith Barney ExecChoice(TM) Program must purchase
such shares directly from First Data. For further information regarding these
Programs, investors should contact a Smith Barney Financial Consultant.
 
  Existing 401(k) Plans Investing in Class B Shares. Class B shares of the
Smith Barney Mutual Funds are not available for purchase by Participating Plans
opened on or after June 21, 1996, but may continue to be purchased by many Par-
ticipating Plan in the Smith Barney 401(k) Program opened prior to such date
and originally investing in such Class. Class B shares acquired are subject to
a CDSC of 3.00% of redemption proceeds, if the Participating Plan terminates
within eight years of the date the Participating Plan first enrolled in the
Smith Barney 401(k) Program.
 
  At the end of the eighth year after the date the Participating Plan enrolled
in the Smith Barney 401(k) Program, the Participating Plan will be offered the
opportunity to exchange all of its Class B shares for Class A shares of the
Fund. Such Participating Plan will be notified of the pending exchange in writ-
ing approximately 60 days before the eighth anniversary of the enrollment date
and, unless the exchange has been rejected in writing, the exchange will occur
on or about the eighth anniversary date. Once the exchange has occurred, a Par-
ticipating Plan will not be eligible to acquire additional Class B shares of
the Fund but instead may acquire Class A shares of the Fund. If the Participat-
ing Plan elects not to exchange all of its Class B shares at that time, each
Class B share held by the Participating Plan will have the same conversion fea-
ture as Class B shares held by other investors. See "Purchase of Shares--
Deferred Sales Charge Alternatives".
 
  No CDSC is imposed on redemptions of Class B shares to the extent that the
net asset value of the shares redeemed does not exceed the current net asset
value of the shares purchased through reinvestment of dividends or capital gain
distribu-
 
30
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
tions, plus the current net asset value of Class B shares purchased more than
eight years prior to the redemption, plus increases in the net asset value of
the shareholder's Class B shares above the purchase payments made during the
preceding eight years. Whether or not the CDSC applies to the redemption by a
Participating Plan depends on the number of years since the Participating Plan
first became enrolled in the Smith Barney 401(k) Program, unlike the applica-
bility of the CDSC to redemptions by other shareholders, which depends on the
number of years since those shareholders made the purchase payment from which
the amount is being redeemed.
 
  The CDSC will be waived on redemptions of Class B shares in connection with
lump-sum or other distributions made by a Participating Plan as a result of:
(a) the retirement of an employee in the Participating Plan; (b) the termina-
tion of employment of an employee in the Participating Plan; (c) the death or
disability of an employee in the Participating Plan; (d) the attainment of age
59 1/2 by an employee in the Participating Plan; (e) hardship of an employee in
the Participating Plan to the extent permitted under Section 401(k) of the
Code; or (f) redemptions of shares in connection with a loan made by the Par-
ticipating Plan to an employee.
   
EXCHANGE PRIVILEGE     
 
 
  Except as otherwise noted below, shares of each Class may be exchanged at the
net asset value next determined for shares of the same Class in the following
funds of the Smith Barney Mutual Funds, to the extent shares are offered for
sale in the shareholder's state of residence. Exchanges of Class A, Class B and
Class C shares are subject to minimum investment requirements and all shares
are subject to the other requirements of the fund into which exchanges are
made.
       
 FUND NAME
 
 Growth Funds
    Smith Barney Aggressive Growth Fund Inc.
    Smith Barney Appreciation Fund Inc.
    Smith Barney Disciplined Small Cap Fund, Inc.
    Smith Barney Fundamental Value Fund Inc.
    Smith Barney Growth Opportunity Fund
    Smith Barney Large Capitalization 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
 
                                                                              31
<PAGE>
 
EXCHANGE PRIVILEGE (CONTINUED)
 
 
    Smith Barney Growth and Income Fund
    Smith Barney Premium Total Return 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 Hansberger Global Value Fund
    Smith Barney World Funds, Inc.--Emerging Markets Portfolio
    Smith Barney World Funds, Inc.--European Portfolio
    Smith Barney World Funds, Inc.--Global Government Bond Portfolio
    Smith Barney World Funds, Inc.--International Balanced Portfolio
    Smith Barney World Funds, Inc.--International Equity Portfolio
    Smith Barney World Funds, Inc.--Pacific Portfolio
 
 Smith Barney Concert Allocation 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
 
32
<PAGE>
 
EXCHANGE PRIVILEGE (CONTINUED)
 
    Smith Barney Allocation Concert Series Inc.--High Growth Portfolio
    Smith Barney Allocation Concert Series Inc.--Income Portfolio
 
 Money Market Funds
    +Smith Barney Exchange Reserve Fund
    ++Smith Barney Money Funds, Inc.--Cash Portfolio
    ++Smith Barney Money Funds, Inc.--Government Portfolio
    ***Smith Barney Money Funds, Inc.--Retirement Portfolio
    +++Smith Barney Municipal Money Market Fund, Inc.
    +++Smith Barney Muni Funds--California Money Market Portfolio
    +++Smith Barney Muni Funds--New York Money Market Portfolio.
-------------------------------------------------------------------------------
  * Available for exchange with Class A, Class C and Class Y shares of the
    Fund.
 ** Available for exchange with Class A and Class B shares of the Fund. In
    addition, shareholders who own Class C shares of the Fund through the
    Smith Barney 401(k) Program may exchange those shares for Class C shares
    of this Fund.
***Available for exchange with Class A shares of the Fund.
  + Available for exchange with Class B and Class C shares of the Fund.
 ++ Available for exchange with Class A and Class Y shares of the Fund. In
    addition, participating plans opened prior to June 21, 1996 and investing
    in Class C shares may exchange Fund shares for Class C shares of this
    Fund.
+++Available for exchange with Class A and Class Y shares of the Fund.
 
  Class B Exchanges. In the event a Class B shareholder wishes to exchange all
or a portion of his or her shares into any of the funds imposing a higher CDSC
than that imposed by the Fund, the exchanged Class B shares will be subject to
the higher applicable CDSC. Upon an exchange, the new Class B shares will be
deemed to have been purchased on the same date as the Class B shares of the
Fund that have been exchanged.
 
  Class C Exchanges. Upon an exchange, the new Class C shares will be deemed
to have been purchased on the same date as the Class C shares of the Fund that
have been exchanged.
 
  Class A and Class Y Exchanges. Class A and Class Y shareholders of the Fund
who wish to exchange all or a portion of their shares for shares of the
respective class in any of the funds identified above may do so without impo-
sition of any charge.
 
  Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions
can be detrimental to the Fund's performance and its shareholders. SBMFM may
determine that a pattern of frequent exchanges is excessive and contrary to
the best interests of the Fund's other shareholders. In this event, SBMFM will
notify Smith Barney and Smith Barney may, at its discretion, decide to limit
additional purchases and/or exchanges by the shareholder. Upon such a determi-
nation, Smith Barney will provide notice in writing or by telephone to the
shareholder at least 15
 
                                                                             33
<PAGE>
 
EXCHANGE PRIVILEGE (CONTINUED)
 
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 listed above, 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 "Re-
demption of Shares--Telephone Redemption and Exchange Program". Exchanges will
be processed at the net asset value next determined. Redemption procedures dis-
cussed below are also applicable for exchanging shares, and exchanges will be
made upon receipt of all supporting documents in proper form. If the account
registration of the shares of the fund being acquired is identical to the reg-
istration of the shares of the fund exchanged, no signature guarantee is
required. A capital gain or loss for tax purposes will be realized upon the
exchange, depending upon the cost or other basis of shares redeemed. Before
exchanging shares, investors should read the current prospectus describing the
shares to be acquired. The Fund reserves the right to modify or discontinue
exchange privileges upon 60 days' prior notice to shareholders.
 
REDEMPTION OF SHARES
 
 
  The Fund is required to redeem the shares of the Fund tendered to it, as
described below, at a redemption price equal to their net asset value per share
next determined after receipt of a written request in proper form at no charge
other than any applicable CDSC. Redemption requests received after the close of
regular trading on the NYSE are priced at the net asset value next determined.
 
  If a shareholder holds shares in more than one Class, any request for redemp-
tion must specify the Class being redeemed. In the event of a failure to spec-
ify which Class, or if the investor owns fewer shares of the Class than speci-
fied, the redemption request will be delayed until First Data receives further
instructions from Smith Barney, or if the shareholder's account is not with
Smith Barney, from the shareholder directly. The redemption proceeds will be
remitted on or before the third business day following receipt of proper ten-
der, except on days on which the NYSE is closed or as permitted under the 1940
Act, in extraordinary circumstances. Generally, if the redemption proceeds are
remitted to a Smith Barney brokerage account, these funds will not be invested
for the shareholder's benefit without specific instruction and Smith Barney
will benefit from the use of temporarily uninvested funds. Redemption proceeds
for shares purchased by check, other than a certified or official bank check,
will be remitted upon clearance of the check, which may take up to ten days or
more.
 
34
<PAGE>
 
REDEMPTION OF SHARES (CONTINUED)
 
 
  Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than those
held by Smith Barney as custodian may be redeemed through an investor's Finan-
cial Consultant, Introducing Broker or dealer in the selling group or by sub-
mitting a written request for redemption to:
     
  Smith Barney Hansberger Global Small Cap Value Fund
  Class A, B, C or Y (please specify)     
  c/o First Data Investor Services Group, Inc.
  P.O. Box 5128
  Westborough, Massachusetts 01581-5128
 
  A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are regis-
tered. If the shares to be redeemed were issued in certificate form, the cer-
tificates must be endorsed for transfer (or be accompanied by an endorsed stock
power) and must be submitted to First Data together with the redemption
request. Any signature appearing on a share certificate, stock power or written
redemption request in excess of $2,000 must be guaranteed by an eligible guar-
antor institution such as a domestic bank, savings and loan institution, domes-
tic credit union, member bank of the Federal Reserve System or member firm of a
national securities exchange. Written redemption requests of $2,000 or less do
not require a signature guarantee unless more than one such redemption request
is made in any 10-day period. Redemption proceeds will be mailed to an invest-
or's address of record. First Data may require additional supporting documents
for redemptions made by corporations, executors, administrators, trustees or
guardians. A redemption request will not be deemed properly received until
First Data receives all required documents in proper form.
 
 AUTOMATIC CASH WITHDRAWAL PLAN
 
  The Fund offers shareholders an automatic cash withdrawal plan, under which
shareholders who own shares with a value of at least $10,000 may elect to
receive periodic cash payments of at least $50 monthly or quarterly. Retirement
plan accounts are eligible for automatic cash withdrawal plans only where the
shareholder is eligible to receive qualified distributions and has an account
value of at least $5,000. The withdrawal plan will be carried over on exchanges
between funds or Classes of the Fund. Any applicable CDSC will not be waived on
amounts withdrawn by a shareholder that exceed 1.00% per month of the value of
the shareholder's shares subject to the CDSC at the time the withdrawal plan
commences. For further information regarding the automatic cash withdrawal
plan, shareholders should contact a Smith Barney Financial Consultant.
 
 TELEPHONE REDEMPTION AND EXCHANGE PROGRAM
 
  Shareholders who do not have a Smith Barney brokerage account may be eligible
to redeem and exchange Fund shares by telephone. To determine if a share-
 
                                                                              35
<PAGE>
 
REDEMPTION OF SHARES (CONTINUED)
 
holder 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. (Alter-
natively, an investor may authorize telephone redemptions on the new account
application with the applicant's signature guarantee when making his/her ini-
tial investment in the Fund.)
 
  Redemptions. Redemption requests of up to $10,000 of any class or classes of
the Fund's shares may be made by eligible shareholders by calling 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. Redemption requests received
after the close of regular trading on the NYSE are priced at the net asset
value next determined. Redemptions of shares (i) by retirement plans or (ii)
for which certificates have been issued are not permitted under this program.
 
  A shareholder will have the option of having the redemption proceeds mailed
to his/her address of record or wired to a bank account predesignated by the
shareholder. Generally, redemption proceeds will be mailed or wired, as the
case may be, on the next business day following the redemption request. In
order to use the wire procedures, the bank receiving the proceeds must be a
member of the Federal Reserve System or have a correspondent relationship with
a member bank. The Fund reserves the right to charge shareholders a nominal
fee for each wire redemption. Such charges, if any, will be assessed against
the shareholder's account from which shares were redeemed. In order to change
the bank account designated to receive redemption proceeds, a shareholder must
complete a new Telephone/Wire Authorization Form and, for the protection of
the shareholder's assets, will be required to provide a signature guarantee
and certain other documentation.
 
  Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of 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 Fund nor its agents will be liable for following instruc-
tions communicated by telephone that are reasonably believed to be genuine.
The Fund and its agents will employ procedures designed to verify the identity
of the caller and legitimacy of instructions (for example, a shareholder's
name and account number will be required and phone calls may be recorded). The
Fund reserves the right to suspend, modify or discontinue the telephone
redemption and exchange program or to impose a charge for this service at any
time following at least seven (7) days' prior notice to shareholders.
 
36
<PAGE>
 
MINIMUM ACCOUNT SIZE
 
 
  The Fund reserves the right to involuntarily liquidate any shareholder's
account in the Fund if the aggregate net asset value of the shares held in the
Fund account is less than $500. (If a shareholder has more than one account in
the Fund, each account must satisfy the minimum account size). The Fund, howev-
er, will not redeem shares based solely on market reductions in net asset val-
ue. Before the Fund exercises such right, shareholders will receive written
notice and will be permitted 60 days to bring accounts up to the minimum to
avoid involuntary liquidation.
 
PERFORMANCE
 
 
  From time to time the Fund may include its total return, average annual total
return and current dividend return in advertisements and/or other types of
sales literature. These figures are computed separately for Class A, Class B,
Class C and Class Y shares of the Fund. These figures are based on historical
earnings and are not intended to indicate future performance. Total return is
computed for a specified period of time assuming deduction of the maximum sales
charge, if any, from the initial amount invested and reinvestment of all income
dividends and capital gain distributions on the reinvestment dates at prices
calculated as stated in this Prospectus, then dividing the value of the invest-
ment at the end of the period so calculated by the initial amount invested and
subtracting 100%. The standard average annual total return, as prescribed by
the SEC, is derived from this total return, which provides the ending redeem-
able value. Such standard total return information may also be accompanied with
nonstandard total return information for differing periods computed in the same
manner but without annualizing the total return or taking sales charges into
account. The Fund calculates current dividend return for each Class by
annualizing the most recent monthly distribution and dividing by the net asset
value or the maximum public offering price (including sales charge) on the last
day of the period for which current dividend return is presented. The current
dividend return for each Class may vary from time to time depending on market
conditions, the composition of its investment portfolio and operating expenses.
These factors and possible differences in the methods used in calculating cur-
rent dividend return should be considered when comparing a Class' current
return to yields published for other investment companies and other investment
vehicles. The Fund may also include comparative performance information in
advertising or marketing its shares. Such performance information may include
data from Lipper Analytical Services, Inc. and other financial publications.
 
 
                                                                              37
<PAGE>
 
MANAGEMENT OF THE FUND
 
 BOARD OF DIRECTORS
 
  Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Directors. The Directors approve all significant agree-
ments between the Company and the companies that furnish services to the Fund
and the Company, including agreements with its distributor, investment advis-
er, custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's investment manager. The Statement of Additional Infor-
mation contains background information regarding each Director of the Fund and
executive officer of the Company.
 
 INVESTMENT MANAGER--SBMFM
   
  SBMFM, located at 388 Greenwich Street, New York, New York 10013, serves as
the Fund's investment manager pursuant to an investment management agreement
entered into by the Company, on behalf of the Fund. SBMFM renders investment
advice to investment companies which had aggregate assets under management as
of September 30, 1997, in excess of $84 billion. For investment management
services rendered, the Fund pays SBMFM a monthly fee at the annual rate of
1.05% of the value of its average daily net assets. From its fee, SBMFM pays
Hansberger a fee of 0.60% of the value of the Fund's average net assets, for
its services as sub-investment adviser.     
 
 SUB-INVESTMENT ADVISER--HANSBERGER
   
  Hansberger, located at 515 Las Olas Blvd., Suite 1300, Fort Lauderdale,
Florida 33301, serves as the Fund's sub-investment adviser. Hansberger pro-
vides investment advisory services to investment companies that had aggregate
total assets under management as of August 31, 1997 of approximately $1.2 bil-
lion. Subject to the supervision and direction of the Company's Board of
Directors, Hansberger manages the Fund's portfolio in accordance with the
Fund's stated investment objective and policies, makes investment decisions
for the Fund, places orders to purchase and sell securities and employs pro-
fessional portfolio managers and securities analysts who provide research
services to the Fund.     
 
 PORTFOLIO MANAGEMENT
   
  Lauretta (Retz) Reeves, Vladimir Tyurenkov, Robert Mazuelos and Victoria
Gretzky manage the day-to-day investment operations of the Fund, including the
oversight of investment decisions. Ms. Reeves has been a portfolio manager and
Managing Director of Hansberger since 1996. Prior to that time, she was Senior
Vice President of Templeton Worldwide Inc. ("Templeton"). Mr. Tyurenkov has
been a Managing Director of Eastern Europe and Russia for Hansberger since
1995. Prior to that time he worked for the Russian Government. Mr. Mazuelos
has been a research analyst and assistant portfolio manager for Hansberger
since 1995. Prior to that time he was a performance analyst at Templeton
Investment Counsel, Inc. Ms. Gretzky has been a research analyst for
Hansberger since 1995. Prior to that time she was a research analyst for Opti-
mum Consulting, a Russia based firm specializing in restructuring Russian com-
panies.     
 
38
<PAGE>
 
DISTRIBUTOR
 
 
  Smith Barney is located at 388 Greenwich Street, New York, New York 10013.
Smith Barney distributes shares of the Fund as principal underwriter and as
such conducts a continuous offering pursuant to a "best efforts" arrangement
requiring Smith Barney to take and pay for only such securities as may be sold
to the public. Pursuant to a plan of distribution adopted by the Fund under
Rule 12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid a service fee
with respect to Class A, Class B and Class C shares of the Fund at the annual
rate of 0.25% of the average daily net assets of the respective Class. Smith
Barney is also paid a distribution fee with respect to Class B and Class C
shares at the annual rate of 0.75% of the average daily net assets attributable
to those Classes. Class B shares that automatically convert to Class A shares
eight years after the date of original purchase will no longer be subject to
distribution fees. The fees are used by Smith Barney to pay its Financial Con-
sultants for servicing shareholder accounts and, in the case of Class B and
Class C shares, to cover expenses primarily intended to result in the sale of
those shares. These expenses include: advertising expenses; the cost of print-
ing and mailing prospectuses to potential investors; payments to and expenses
of Smith Barney Financial Consultants and other persons who provide support
services in connection with the distribution of shares; interest and/or carry-
ing charges; and indirect and overhead costs of Smith Barney associated with
the sale of Fund shares, including lease, utility, communications and sales
promotion expenses.
 
  The payments to Smith Barney Financial Consultants for selling shares of a
Class include a commission or fee paid by the investor or Smith Barney at the
time of sale and, with respect to Class A, Class B and Class C shares, a con-
tinuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
 
  Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney and the payments
may exceed distribution expenses actually incurred. The Company's Board of
Directors will evaluate the appropriateness of the Plan and its payment terms
on a continuing basis and in so doing will consider all relevant factors,
including expenses borne by Smith Barney, amounts received under the Plan and
proceeds of the CDSC.
 
ADDITIONAL INFORMATION
 
 
  The Company was organized as a Maryland corporation pursuant to Articles of
Incorporation dated September 29, 1981, as amended from time to time. The Fund
offers shares of common stock currently classified into four Classes, A, B, C
and Y, with a par value of $.001 per share. Each Class represents an identical
interest in the Fund's investment portfolio. As a result, the Classes have the
same rights, privileges and preferences, except with respect to: (a) the desig-
nation of
 
                                                                              39
<PAGE>
 
ADDITIONAL INFORMATION (CONTINUED)
 
each Class; (b) the effect of the respective sales charges for each Class; (c)
the distribution and/or service fees borne by each Class pursuant to the Plan;
(d) the expenses allocable exclusively to each Class; (e) voting rights on mat-
ters exclusively affecting a single Class; (f) the exchange privilege of each
Class; and (g) the conversion feature of the Class B shares. The Board of
Directors does not anticipate that there will be any conflicts among the inter-
ests of the holders of the different Classes. The Directors, on an ongoing
basis, will consider whether any such conflicts exists and, if so, take appro-
priate action.
 
  Chase, located at Chase Metrotech Center, Brooklyn, New York 11245, serves as
custodian of the Fund's investments.
   
  First Data, located at Exchange Place, Boston, Massachusetts 02109, serves as
the Fund's transfer agent.     
 
  The Company does not hold annual shareholder meetings. There normally will be
no meeting of shareholders for the purpose of electing Directors unless and
until such time as less than a majority of the Directors holding office have
been elected by shareholders. The Directors will call a meeting for any purpose
upon written request of shareholders holding at least 10% of the Company's out-
standing shares and the Company will assist shareholders in calling such a
meeting as required by the 1940 Act. When matters are submitted for shareholder
vote, shareholders of each Class will have one vote for each full share owned
and a proportionate, fractional vote for any fractional share held of that
Class. Generally, shares of the Company will be voted on a Company-wide basis
on all matters except matters affecting only the interests of one Fund or one
Class of shares.
 
  The Fund sends its shareholders a semi-annual report and an audited annual
report, which include a list of the investment securities held by the Fund at
the end of the reporting period. In an effort to reduce the Fund's printing and
mailing costs, the Company plans to consolidate the mailing of its semi-annual
and annual reports by household. This consolidation means that a household hav-
ing multiple accounts with the identical address of record will receive a sin-
gle copy of each report. Shareholders who do not want this consolidation to
apply to their accounts should contact their Smith Barney Financial Consultant
or First Data.
 
40
<PAGE>
 
 
                                                                             
                                                                     SmithBarney
                                                                     -----------

                                                A Member of TravelersGroup[LOGO]

                                                                     
                                                                    SMITH BARNEY
                                                                      HANSBERGER
                                                                          GLOBAL
                                                                       SMALL CAP
                                                                      VALUE FUND
 
                                                            388 Greenwich Street
                                                        New York, New York 10013
 
                                                             FD 01336 10/97     
                                                             




SMITH BARNEY INVESTMENT FUNDS 
PART C

Smith Barney
Investment Funds Inc.
388 Greenwich Street
New York, New York  10013
800-451-2010
   
Statement of Additional Information	October 27, 
1997
    

   
This Statement of Additional Information expands upon and 
supplements the information contained in the current Prospectuses 
each dated October 27, 1997, as amended or supplemented from time 
to time, of Smith Barney Hansberger Global Value Fund ("Global 
Value Fund") and Smith Barney Hansberger Global Small Cap Value 
Fund ("Global Small Cap Value Fund")(each a "Fund" and collectively 
the "Funds"), each a separate series of Smith Barney Investment Funds 
Inc. (the "Company"), and should be read in conjunction with the 
Funds' Prospectuses.  Each Fund Prospectus may be obtained from a 
Smith Barney Financial Consultant, or by writing or calling the 
Company at the address or telephone number listed above.  This 
Statement of Additional Information, although not in itself a 
prospectus, is incorporated by reference into the Prospectuses in its 
entirety.

    

CONTENTS
For ease of reference, the same section headings are used in the 
Prospectuses and this Statement of Additional Information, except 
where shown below:

	Management of the Company
	 (see in the Prospectuses "Management of the Company
	 and the Fund")                                                          1
	Investment Objectives and Management Policies                        4
	Purchase of Shares                                                   16
	Redemption of Shares                                                 17
	Distributor                                                          17
	Valuation of Shares                                                  18
	Exchange Privilege                                                   19
	Performance Data (See in the Prospectus "Performance")      19
	Taxes (See in the Prospectus 
	"Dividends, Distributions and Taxes")                                  21
	Additional Information                                                 23
	Appendix                                                               A-1

MANAGEMENT OF THE COMPANY
The executive officers of the Company are employees of certain of the 
organizations that provide services to the Company.  These 
organizations are the following:

Name	Service
Smith Barney Inc. ("Smith Barney")                                  Distributor
Smith Barney Mutual Funds 
Management Inc. ("SBMFM")                            Investment Manager
Hansberger Global Investors, Inc.
("Hansberger")                                         Sub-Investment Adviser
The Chase Manhattan Bank ("Chase")                               Custodian
First Data Investor Services Group, Inc.
("First Data")                                                Transfer Agent

These organizations and the functions they perform for the Company 
are discussed in the Prospectuses and in this Statement of Additional 
Information.

Directors and Executive Officers of the Company

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

	Paul R. Ades, Director (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, Director (Age 73). Private investor. His address is 
273 Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.

	Dwight B. Crane, Director (Age 59). Professor, Graduate School of 
Business Administration, Harvard University. His address is Graduate 
School of Business Administration, Harvard University, Boston, 
Massachusetts 02163.

	Frank G. Hubbard, Director (Age 61).  Vice President, S&S 
Industries; Former Corporate Vice President, Materials Management 
and Marketing Services of Huls America, Inc.  His address is 80 
Centennial Avenue P.O. Box 456, Piscataway, New Jersey 08855-
0456.

   
*Heath B. McLendon, Chairman of the Board and Investment Officer 
(Age 64). Managing Director of Smith Barney, Chairman of the Board 
of Strategy Advisers and President of SBMFM; prior to July 1993, 
Senior Executive Vice President of Shearson Lehman Brothers Inc. 
("Shearson Lehman Brothers"), Vice Chairman of Asset Management. 
His address is 388 Greenwich Street, New York, New York 10013.
    
	Ken Miller, Director (Age 55). President of Young Stuff Apparel 
Group, Inc.  His address is 1411 Broadway, New York, New York 
10018.
   
    
Lewis E. Daidone, Senior Vice President and Treasurer (Age 40). 
Director and Senior Vice President of SBMFM.  Mr. Daidone serves 
as Senior Vice President and Treasurer of 41 investment companies 
associated with Smith Barney.  His address is 388 Greenwich Street, 
New York, New York 10013. 

Christina T. Sydor, Secretary (Age 46).  Managing Director of 
Smith Barney and Secretary of SBMFM; General Counsel and  
Secretary of SBMFM.  Ms. Sydor serves as Secretary of 41 investment 
companies associated with Smith Barney.  Her address is 388 
Greenwich Street, New York, New York 10013. 

Each Director also serves as a director, trustee and/or general partner 
of certain other mutual funds for which Smith Barney serves as 
distributor.  As of January 31, 1997, the Directors and officers of the 
Company, as a group, owned less than 1.00% of the outstanding 
common stock of the Company.

No officer, director or employee of Smith Barney or any parent or 
subsidiary receives any compensation from the Company for serving as 
an officer or Director of the Company.  The Company pays each 
Director who is not an officer, director or employee of Smith Barney 
or any of its affiliates a fee of $16,000 per annum plus $2,500 per 
meeting attended and reimburses travel and out-of-pocket expenses.  
For the fiscal year ended December 31, 1996, the Directors of the 
Company were paid the following compensation:
   
					Agregate Compensation
		Agregate Compensation    from Smith Barney 
Director(***)         from the Company            Mutual Funds
Paul R. Ades (5)        $28,600.00                     $52,475.00
	Herbert Barg (20)        28,600.00                     105,175.00
Dwight B. Crane (26)  26,100.00                     140,375.00
Frank G. Hubbard (5)   28,600.00                      52,475.00
Heath McLendon (41)           N/A                               N/A
Ken Miller (5)               26,100.00**                 49,475.00
John F. White (5)(*)      28,500.00**	                 52,375.00
Allan G. Johnson (5)(*) 18,035.51                      33,125.00
***	Number of funds for which director serves within fund 
complex
* 	Director Emeritus.  Mr. White became a director emeritus as 
of October 23, 1997.
**	Mr. Miller and Mr. White have deferred $6,500 and $26,000, 
respectively, of compensation from the Company in 1996.

    
	Upon attainment of age 80 Directors are required to change to 
emeritus status.  Directors Emeritus are entitled to serve in emeritus 
status for a maximum of 10 years during which time they are paid 
50% of the retainer fee and meeting fees otherwise applicable to the 
Company Directors together with reasonable out-of-pocket expenses 
for each meeting attended.  During the Fund's last fiscal year 
aggregate compensation paid by the Company to Directors achieving 
emeritus status totaled $18,035.51.

Investment Manager and Sub-Adviser
   
SBMFM serves as investment adviser to the Funds pursuant to 
separate investment management agreements (the "Management 
Agreements").  SBMFM is a wholly owned subsidiary of Smith Barney 
Holdings Inc. ("Holdings").  Holdings is a wholly owned subsidiary of 
Travelers Group Inc. ("Travelers"). Hansberger serves as sub-adviser 
to the Funds pursuant to separate sub-advisory agreements (the "Sub-
Advisory Agreements). The Management Agreements and the Sub-
Advisory Agreements were approved by the Board of Directors, 
including a majority of the Directors who are not "interested persons" 
of the Company or the investment advisers (the "Independent 
Directors"), and by shareholders of the respective Funds on on 
September 23, 1997.  The services provided by SBMFM and 
Hansberger under the Management Agreements and Sub-Advisory 
Agreements are described in the Prospectuses under "Management of 
the Company and the Fund."  SBMFM provides investment advisory 
and management services to investment companies affiliated with 
Smith Barney.

    
As compensation for investment management services rendered to 
Global Value Fund and Global Small Cap Value Fund, each Fund pays 
SBMFM a fee computed daily and paid monthly at the annual rates of 
0.95% and 1.05%, respectively, of the value of their average daily net 
assets. As compensation for sub-advisory services rendered to Global 
Value Fund and Global Small Cap Value Fund, SBMFM pays 
Hansberger a fee, computed daily and paid monthly, at the annual 
rates of 0.50% and 0.60%, respectively, of the value of the respective 
Fund's average daily net assets. SBMFM and Hansberger bear all 
expenses in connection with the performance of their services.  

Counsel and Auditors

Willkie Farr & Gallagher serves as counsel to the Company.  The 
Directors who are not "interested persons" of the Company have 
selected Stroock & Stroock & Lavan LLP as their legal counsel.
   
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 
10154, has been selected as each Fund's independent auditor to 
examine and report on the Fund's financial statements and highlights 
for the fiscal year ending April 30, 1998.
    



INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

	Except as described under "INVESTMENT 
RESTRICTIONS," the investment policies described in the 
Prospectuses and in this Statement of Additional Information are not 
fundamental and the Board of Directors may change such policies 
without shareholder approval. 

	Each of the following investment policies is subject to the 
limitations set forth under "Investment Restrictions." 

Repurchase Agreements.  As described in the applicable Prospectus, 
each Fund may enter into repurchase agreements.  A repurchase 
agreement is a contract under which a Fund acquires a security for a 
relatively short period (usually not more than one week) subject to the 
obligation of the seller to repurchase and the Fund to resell such 
security at a fixed time and price (representing the Fund's cost plus 
interest).  It is each Fund's present intention to enter into repurchase 
agreements only upon receipt of fully adequate collateral and only with 
commercial banks (whether U.S. or foreign) and registered broker-
dealers.  Repurchase agreements may also be viewed as loans made by 
a Fund which are collateralized primarily by the securities subject to 
repurchase.  A Fund bears a risk of loss in the event that the other 
party to a repurchase agreement defaults on its obligations and the 
Fund is delayed or prevented from exercising its rights to dispose of 
the collateral securities.  Pursuant to policies established by the Board 
of Directors, SBMFM monitors the creditworthiness of all issuers with 
which each Fund enters into repurchase agreements. 

   
Reverse Repurchase Agreements.  The Fund does not currently intend 
to commit more than 5% of its Fund's net assets to reverse repurchase 
agreements.  The Fund may enter into reverse repurchase agreements 
with broker/dealers and other financial institutions.  Such agreements 
involve the sale of Fund securities with an agreement to repurchase the 
securities at an agreed-upon price, date and interest payment and are 
considered to be borrowings by a Fund and are subject to the 
borrowing limitations set forth under "Investment Restrictions."  Since 
the proceeds of reverse repurchase agreements are invested, this would 
introduce the speculative factor known as "leverage."  The securities 
purchased with the funds obtained from the agreement and securities 
collateralizing the agreement will have maturity dates no later than the 
repayment date.  Such transactions are only advantageous if the Fund 
has an opportunity to earn a greater rate of interest on the cash derived 
from the transaction than the interest cost of obtaining that cash.  
Opportunities to realize earnings from the use of the proceeds equal to 
or greater than the interest required to be paid may not always be 
available, and the Fund intends to use the reverse repurchase 
technique only when the Manager believes it will be advantageous to 
the Fund.  The use of reverse repurchase agreements may exaggerate 
any interim increase or decrease in the value of the participating 
Fund's assets.  The Fund's custodian bank will maintain a separate 
account for the Fund with securities having a value equal to or greater 
than such commitments. 
    
Securities Lending.  Each Fund may seek to increase its net 
investment income by lending its securities provided such loans are 
callable at any time and are continuously secured by cash or U.S. 
Government Obligations equal to no less than the market value, 
determined daily, of the securities loaned.  Each Fund will receive 
amounts equal to dividends or interest on the securities loaned.  It will 
also earn income for having made the loan because cash collateral 
pursuant to these loans will be invested in short-term money market 
instruments.  In connection with lending of securities the Fund may 
pay reasonable finders, administrative and custodial fees.  
Management will limit such lending to not more than one-third of the 
value of the total assets of each Fund.  Where voting or consent rights 
with respect to loaned securities pass to the borrower, management 
will follow the policy of calling the loan, in whole or in part as may be 
appropriate, to permit the exercise of such voting or consent rights if 
the issues involved have a material effect on the Fund's investment in 
the securities loaned.  Apart from lending its securities and acquiring 
debt securities of a type customarily purchased by financial 
institutions, no Fund will make loans to other persons. 

Commercial Bank Obligations.  For the purposes of each Fund's 
investment policies with respect to bank obligations, obligations of 
foreign branches of U.S. banks and of foreign banks may be general 
obligations of the parent bank in addition to the issuing bank, or may 
be limited by the terms of a specific obligation and by government 
regulation.  As with investment in non-U.S. securities in general, 
investments in the obligations of foreign branches of U.S. banks and of 
foreign banks may subject the Fund to investment risks that are 
different in some respects from those of investments in obligations of 
domestic issuers.  Although a Fund will typically acquire obligations 
issued and supported by the credit of U.S. or foreign banks having 
total assets at the time of purchase in excess of U.S. $1 billion (or the 
equivalent thereof), this is not a fundamental investment policy or 
restriction of the Fund.  For calculation purposes with respect to the 
U.S. $1 billion figure, the assets of a bank will be deemed to include 
the assets of its U.S. and non-U.S. branches. 

Commercial Paper.  Commercial paper consists of short-term (usually 
from 1 to 270 days) unsecured promissory notes issued by corporations 
in order to finance their current operations.  A variable amount master 
demand note (which is a type of commercial paper) represents a direct 
borrowing arrangement involving periodically fluctuating rates of 
interest under a letter agreement between a commercial paper issuer 
and an institutional lender, such as one of the Funds, pursuant to 
which the lender may determine to invest varying amounts.  Transfer 
of such notes is usually restricted by the issuer, and there is no 
secondary trading market for such notes.  Each Fund, therefore, may 
not invest in a master demand note, if as a result more than 15% of the 
value of the Fund's total assets would be invested in such notes and 
other illiquid securities. 

ADRs, EDRs and GDRs.  Each Fund may also purchase American 
Depository Receipts ("ADRs"), European Depository Receipts 
("EDRs") and Global Depository Receipts ("GDRs") or other securities 
representing underlying shares of foreign companies.  ADRs are 
publicly traded on exchanges or over-the-counter in the United States 
and are issued through "sponsored" or "unsponsored" arrangements.  
In a sponsored ADR arrangement, the foreign issuer assumes the 
obligation to pay some or all of the depository's transaction fees, 
whereas under an unsponsored arrangement, the foreign issuer 
assumes no obligation and the depository's transaction fees are paid by 
the ADR holders.  In addition, less information is available in the 
United States about an unsponsored ADR than about a sponsored 
ADR, and the financial information about a company may not be as 
reliable for an unsponsored ADR as it is for a sponsored ADR.  The 
Funds may invest in ADRs through both sponsored and unsponsored 
arrangements.

Writing Covered Call Options.  Each Fund may write (sell) covered 
call options for hedging purposes.  Covered call options will generally 
be written on securities and currencies which, in the opinion of the 
sub-investment adviser, are not expected to make any major price 
moves in the near future but which, over the long term, are deemed to 
be attractive investments for the Fund. 

	A call option gives the holder (buyer) the right to purchase a 
security or currency at a specified price (the exercise price) at any time 
until a certain date (the expiration date).  So long as the obligation of 
the writer of a call option continues, he may be assigned an exercise 
notice by the broker-dealer through whom such option was sold, 
requiring him to deliver the underlying security or currency against 
payment of the exercise price.  This obligation terminates upon the 
expiration of the call option, or such earlier time at which the writer 
effects a closing purchase transaction by purchasing an option 
identical to that previously sold.

	Fund securities or currencies on which call options may be 
written will be purchased solely on the basis of investment 
considerations consistent with each Fund's investment objective.  
When writing a covered call option, the Fund, in return for the 
premium, gives up the opportunity for profit from a price increase in 
the underlying security or currency above the exercise price and 
retains the risk of loss should the price of the security or currency 
decline.  Unlike one who owns securities or currencies not subject to 
an option, the Fund has no control over when it may be required to sell 
the underlying securities or currencies, since the option may be 
exercised at any time prior to the option's expiration.  If a call option 
which the Fund has written expires, the Fund will realize a gain in the 
amount of the premium; however, such gain may be offset by a decline 
in the market value of the underlying security or currency during the 
option period.  If the call option is exercised, the Fund will realize a 
gain or loss from the sale of the underlying security or currency.  The 
security or currency covering the call option will be maintained in a 
segregated account of the Fund's custodian.  The Fund does not 
consider a security or currency covered by a call option to be "pledged" 
as that term is used in the Fund's policy which limits the pledging or 
mortgaging of its assets. 

	The premium the Fund receives for writing a call option is 
deemed to constitute the market value of an option.  The premium the 
Fund will receive from writing a call option will reflect, among other 
things, the current market price of the underlying security or currency, 
the relationship of the exercise price to such market price, the implied 
price volatility of the underlying security or currency, and the length of 
the option period.  In determining whether a particular call option 
should be written on a particular security or currency, Hansberger will 
consider the reasonableness of the anticipated premium and the 
likelihood that a liquid secondary market will exist for those options.  
The premium received by the Fund for writing covered call options 
will be recorded as a liability in the Fund's statement of assets and 
liabilities.  This liability will be adjusted daily to the option's current 
market value, which will be calculated as described in "Determination 
of Net Asset Value" in the Prospectus.  The liability will be 
extinguished upon expiration of the option or delivery of the 
underlying security or currency upon the exercise of the option.  The 
liability with respect to a listed option will also be extinguished upon 
the purchase of an identical option in a closing transaction. 

   
	Closing transactions will be effected in order to realize a 
profit or to limit losses on an outstanding call option, to prevent an 
underlying security or currency from being called, or to permit the sale 
of the underlying security or currency.  Furthermore, effecting a 
closing transaction will permit the Fund to write another call option on 
the underlying security or currency with either a different exercise 
price, expiration date or both.  If the Fund desires to sell a particular 
security or currency from its Fund on which it has written a call option 
or purchases a put option, it will seek to effect a closing transaction 
prior to, or concurrently with, the sale of the security or currency.  
There is no assurance that the Fund will be able to effect such closing 
transactions at a favorable price.  If the Fund cannot enter into such a 
transaction, it may be required to hold a security or currency that it 
might otherwise have sold, in which case it would continue to be at 
market risk with respect to the security or currency. 

    
	Each Fund will pay transaction costs in connection with the 
writing of options and in entering into closing purchase contracts.  
Transaction costs relating to options activity are normally higher than 
those applicable to purchases and sales of Fund securities. 

	Call options written by each Fund will normally have 
expiration dates of less than nine months from the date written.  The 
exercise price of the options may be below, equal to or above the 
current market values of the underlying securities or currencies at the 
time the options are written.  From time to time, the Fund may 
purchase an underlying security or currency for delivery in accordance 
with the exercise of an option, rather than delivering such security or 
currency from its Fund.  In such cases, additional costs will be 
incurred. 

	Each Fund will realize a profit or loss from a closing 
purchase transaction if the cost of the transaction is less or more, 
respectively, than the premium received from the writing of the option.  
Because increases in the market price of a call option will generally 
reflect increases in the market price of the underlying security or 
currency, any loss resulting from the repurchase of a call option is 
likely to be offset in whole or in part by appreciation of the underlying 
security or currency owned by the Fund. 

Purchasing Put Options.  Each Fund may purchase put options.  As the 
holder of a put option, the Fund has the right to sell the underlying 
security or currency at the exercise price at any time during the option 
period.  The Fund may enter into closing sale transactions with respect 
to such options, exercise them or permit them to expire. 

	Each Fund may purchase a put option on an underlying 
security or currency (a "protective put") owned by the Fund as a 
hedging technique in order to protect against an anticipated decline in 
the value of the security or currency.  Such hedge protection is 
provided only during the life of the put option when the Fund, as the 
holder of the put option, is able to sell the underlying security or 
currency at the put exercise price regardless of any decline in the 
underlying security's market price or currency's exchange value.  The 
premium paid for the put option and any transaction costs would 
reduce any capital gain otherwise available for distribution when the 
security or currency is eventually sold. 

	Each Fund may also purchase put options at a time when the 
Fund does not own the underlying security or currency.  By purchasing 
put options on a security or currency it does not own, the Fund seeks to 
benefit from a decline in the market price of the underlying security or 
currency.  If the put option is not sold when it has remaining value, 
and if the market price of the underlying security or currency remains 
equal to or greater than the exercise price during the life of the put 
option, the Fund will lose its entire investment in the put option.  In 
order for the purchase of a put option to be profitable, the market price 
of the underlying security or currency must decline sufficiently below 
the exercise price to cover the premium and transaction costs, unless 
the put option is sold in a closing sale transaction. 

	The premium paid by a Fund when purchasing a put option 
will be recorded as an asset in the Fund's statement of assets and 
liabilities.  This asset will be adjusted daily to the option's current 
market value, which will be calculated as described in "Determination 
of Net Asset Value" in the Prospectus.  The asset will be extinguished 
upon expiration of the option or the delivery of the underlying security 
or currency upon the exercise of the option.  The asset with respect to 
a listed option will also be extinguished upon the writing of an 
identical option in a closing transaction. 

Purchasing Call Options.  Each Fund may purchase call options.  As 
the holder of a call option, a Fund has the right to purchase the 
underlying security or currency at the exercise price at any time during 
the option period.  The Fund may enter into closing sale transactions 
with respect to such options, exercise them or permit them to expire.  
Call options may be purchased by the Fund for the purpose of 
acquiring the underlying security or currency for its Fund.  Utilized in 
this fashion, the purchase of call options enables the Fund to acquire 
the security or currency at the exercise price of the call option plus the 
premium paid.  At times the net cost of acquiring the security or 
currency in this manner may be less than the cost of acquiring the 
security or currency directly.  This technique may also be useful to the 
Fund in purchasing a large block of securities that would be more 
difficult to acquire by direct market purchases.  So long as it holds 
such a call option rather than the underlying security or currency 
itself, the Fund is partially protected from any unexpected decline in 
the market price of the underlying security or currency and in such 
event could allow the call option to expire, incurring a loss only to the 
extent of the premium paid for the option. 

	Each Fund may also purchase call options on underlying 
securities or currencies it owns in order to protect unrealized gains on 
call options previously written by it.  A call option would be purchased 
for this purpose where tax considerations make it inadvisable to realize 
such gains through a closing purchase transaction.  Call options may 
also be purchased at times to avoid realizing losses that would result in 
a reduction of the Fund's current return. 



Interest Rate and Currency Futures Contracts.  Each Fund may enter 
into interest rate or currency futures contracts ("Futures" or "Futures 
Contracts") as a hedge against changes in prevailing levels of interest 
rates or currency exchange rates in order to establish more definitely 
the effective return on securities or currencies held or committed to be 
acquired by the Fund.  A Fund's hedging may include holding Futures 
as an offset against anticipated changes in interest or currency 
exchange rates.  A Fund may also enter into Futures Contracts based 
on financial indices including any index of U.S. Government 
securities, foreign government securities or corporate debt securities.

	A Futures Contract provides for the future sale by one party 
and purchase by another party of a specified amount of a specific 
financial instrument or currency for a specified price at a designated 
date, time and place.  The purchaser of a Futures Contract on an index 
agrees to take or make delivery of an amount of cash equal to the 
difference between a specified dollar multiple of the value of the index 
on the expiration date of the contract ("current contract value") and 
the price at which the contract was originally struck.  No physical 
delivery of the debt securities underlying the index is made.  
Brokerage fees are incurred when a Futures Contract is bought or sold, 
and margin deposits must be maintained at all times that the Futures 
Contract is outstanding. 

	Although techniques other than sales and purchases of 
Futures Contracts could be used to reduce the Fund's exposure to 
interest rate and currency exchange rate fluctuations, the Fund may be 
able to hedge its exposure more effectively and at a lower cost through 
using Futures Contracts. 

	Although Futures Contracts typically require future delivery 
of and payment for financial instruments or currencies, Futures 
Contracts are usually closed out before the delivery date.  Closing out 
an open Futures Contract sale or purchase is effected by entering into 
an offsetting Futures Contract purchase or sale, respectively, for the 
same aggregate amount of the identical financial instrument or 
currency and the same delivery date.  If the offsetting purchase price is 
less than the original sale price, the Fund realizes a gain; if it is more, 
the Fund realizes a loss.  Conversely, if the offsetting sale price is 
more than the original purchase price, the Fund realizes a gain; if it is 
less, the Fund realizes a loss.  The transaction costs must also be 
included in these calculations.  There can be no assurance, however, 
that the Fund will be able to enter into an offsetting transaction with 
respect to a particular Futures Contract at a particular time.  If the 
Fund is not able to enter into an offsetting transaction, the Fund will 
continue to be required to maintain the margin deposits of the 
underlying financial instrument or currency on the relevant delivery 
date.  The Fund intends to enter into Futures transactions only on 
exchanges or boards of trade where there appears to be a liquid 
secondary market.  However, there can be no assurance that such a 
market will exist for a particular contract at a particular time. 

	As an example of an offsetting transaction, the contractual 
obligations arising from the sale of one Futures Contract of September 
Treasury Bills on an exchange may be fulfilled at any time before 
delivery under the Futures Contract is required (i.e., on a specific date 
in September, the "delivery month") by the purchase of another 
Futures Contract of September Treasury Bills on the same exchange.  
In such instance the difference between the price at which the Futures 
Contract was sold and the price paid for the offsetting purchase, after 
allowance for transaction costs, represents the profit or loss to the 
Fund. 

	Persons who trade in Futures Contracts may be broadly 
classified as "hedgers" and "speculators."  Hedgers, whose business 
activity involves investment or other commitment in securities or other 
obligations, use the Futures markets to offset unfavorable changes in 
value that may occur because of fluctuations in the value of the 
securities and obligations held or committed to be acquired by them or 
fluctuations in the value of the currency in which the securities or 
obligations are denominated.  Debtors and other obligers may also 
hedge the interest cost of their obligations.  The speculator, like the 
hedger, generally expects neither to deliver nor to receive the financial 
instrument underlying the Futures Contract, but, unlike the hedger, 
hopes to profit from fluctuations in prevailing interest rates or 
currency exchange rates. 

	Each Fund's Futures transactions will be entered into for 
traditional hedging purposes; that is, Futures Contracts will be sold to 
protect against a decline in the price of securities or currencies that the 
Fund owns, or Futures Contracts will be purchased to protect a Fund 
against an increase in the price of securities or currencies it has 
committed to purchase or expects to purchase.

	"Margin" with respect to Futures Contracts is the amount of 
funds that must be deposited by the Fund with a broker in order to 
initiate Futures trading and to maintain the Fund's open positions in 
Futures Contracts.  A margin deposit made when the Futures Contract 
is entered into ("initial margin") is intended to assure the Fund's 
performance of the Futures Contract.  The margin required for a 
particular Futures Contract is set by the exchange on which the 
Futures Contract is traded, and may be significantly modified from 
time to time by the exchange during the term of the Futures Contract.  
Futures Contracts are customarily purchased and sold on margin, 
which may be 5% or less of the value of the Futures Contract being 
traded. 

	If the price of an open Futures Contract changes (by increase 
in the case of a sale or by decrease in the case of a purchase) so that 
the loss on the Futures Contract reaches a point at which the margin 
on deposit does not satisfy margin requirements, the broker will 
require an increase in the margin deposit ("variation margin").  If, 
however, the value of a position increases because of favorable price 
changes in the Futures Contract so that the margin deposit exceeds the 
required margin, it is anticipated that the broker will pay the excess to 
the Fund.  In computing daily net asset values, the Fund will mark to 
market the current value of its open Futures Contracts.  Each Fund 
expects to earn interest income on its margin deposits. 

Risks of Using Futures Contracts.  The prices of Futures Contracts are 
volatile and are influenced, among other things, by actual and 
anticipated changes in interest rates, which in turn are affected by 
fiscal and monetary policies and national and international political 
and economic events. 

	At best, the correlation between changes in prices of Futures 
Contracts and of the securities or currencies being hedged can be only 
approximate.  The degree of imperfection of correlation depends upon 
circumstances such as: variations in speculative market demand for 
Futures and for debt securities or currencies, including technical 
influences on Futures trading; and differences between the financial 
instruments being hedged and the instruments underlying the standard 
Futures Contracts available for trading, with respect to interest rate 
levels, maturities, and creditworthiness of issuers.  A decision of 
whether, when, and how to hedge involves skill and judgment, and 
even a well-conceived hedge may be unsuccessful to some degree 
because of unexpected market behavior or interest rate trends. 

	Because of the low margin deposits required, Futures trading 
involves an extremely high degree of leverage.  As a result, a relatively 
small price movement in a Futures Contract may result in immediate 
and substantial loss, as well as gain, to the investor.  For example, if at 
the time of purchase, 10% of the value of the Futures Contract is 
deposited as margin, a subsequent 10% decrease in the value of the 
Futures Contract would result in a total loss of the margin deposit, 
before any deduction for the transaction costs, if the account were then 
closed out.  A 15% decrease would result in a loss equal to 150% of 
the original margin deposit, if the Futures Contract were closed out.  
Thus, a purchase or sale of a Futures Contract may result in losses in 
excess of the amount invested in the Futures Contract.  A Fund, 
however, would presumably have sustained comparable losses if, 
instead of the Futures Contract, it had invested in the underlying 
financial instrument and sold it after the decline.  Where a Fund enters 
into Futures transactions for non-hedging purposes, it will be subject 
to greater risks and could sustain losses which are not offset by gains 
on other Fund assets. 



	Furthermore, in the case of a Futures Contract purchase, in 
order to be certain that each Fund has sufficient assets to satisfy its 
obligations under a Futures Contract, the Fund segregates and 
commits to back the Futures Contract an amount of cash, U.S. 
Government securities and other liquid, high-grade debt securities 
equal in value to the current value of the underlying instrument less 
the margin deposit. 

	Most U.S. Futures exchanges limit the amount of fluctuation 
permitted in Futures Contract prices during a single trading day.  The 
daily limit establishes the maximum amount that the price of a Futures 
Contract may vary either up or down from the previous day's 
settlement price at the end of a trading session.  Once the daily limit 
has been reached in a particular type of Futures Contract, no trades 
may be made on that day at a price beyond that limit.  The daily limit 
governs only price movement during a particular trading day and 
therefore does not limit potential losses, because the limit may prevent 
the liquidation of unfavorable positions.  Futures Contract prices have 
occasionally moved to the daily limit for several consecutive trading 
days with little or no trading, thereby preventing prompt liquidation of 
Futures positions and subjecting some Futures traders to substantial 
losses. 

Options on Futures Contracts.  Options on Futures Contracts are 
similar to options on securities or currencies except that options on 
Futures Contracts give the purchaser the right, in return for the 
premium paid, to assume a position in a Futures Contract (a long 
position if the option is a call and a short position if the option is a 
put), rather than to purchase or sell the Futures Contract, at a specified 
exercise price at any time during the period of the option.  Upon 
exercise of the option, the delivery of the Futures position by the writer 
of the option to the holder of the option will be accompanied by 
delivery of the accumulated balance in the writer's Futures margin 
account which represents the amount by which the market price of the 
Futures Contract, at exercise, exceeds (in the case of a call) or is less 
than (in the case of a put) the exercise price of the option on the 
Futures Contract.  If an option is exercised on the last trading day 
prior to the expiration date of the option, the settlement will be made 
entirely in cash equal to the difference between the exercise price of 
the option and the closing level of the securities or currencies upon 
which the Futures Contracts are based on the expiration date.  
Purchasers of options who fail to exercise their options prior to the 
exercise date suffer a loss of the premium paid. 

	As an alternative to purchasing call and put options on 
Futures, each Fund may purchase call and put options on the 
underlying securities or currencies themselves (see "Purchasing Put 
Options" and "Purchasing Call Options" above).  Such options would 
be used in a manner identical to the use of options on Futures 
Contracts. 

	To reduce or eliminate the leverage then employed by the 
Fund or to reduce or eliminate the hedge position then currently held 
by the Fund, the Fund may seek to close out an option position by 
selling an option covering the same securities or currency and having 
the same exercise price and expiration date.  The ability to establish 
and close out positions on options on Futures Contracts is subject to 
the existence of a liquid market.  It is not certain that this market will 
exist at any specific time. 

	In order to assure that the Funds will not be deemed to be 
"commodity pools" for purposes of the Commodity Exchange Act, 
regulations of the Commodity Futures Trading Commission ("CFTC") 
require that each Fund enter into transactions in Futures Contracts and 
options on Futures Contracts only (i) for bona fide hedging purposes 
(as defined in CFTC regulations), or (ii) for non-hedging purposes, 
provided that the aggregate initial margin and premiums on such non-
hedging positions does not exceed 5% of the liquidation value of the 
Fund's assets.  The Funds will enter into transactions in Futures 
Contracts and options on Futures Contracts only for hedging purposes. 

Forward Currency Contracts and Options on Currency.  A forward 
currency contract is an obligation to purchase or sell a currency 
against another currency at a future date and price as agreed upon by 
the parties.  A Fund may either accept or make delivery of the 
currency at the maturity of the forward contract or, prior to maturity, 
enter into a closing transaction involving the purchase or sale of an 
offsetting contract.  Each Fund engages in forward currency 
transactions in anticipation of, or to protect itself against, fluctuations 
in exchange rates.  A Fund might sell a particular foreign currency 
forward, for example, when it holds bonds denominated in that 
currency but anticipates, and seeks to be protected against, decline in 
the currency against the U.S. dollar.  Similarly, a Fund might sell the 
U.S. dollar forward when it holds bonds denominated in U.S. dollars 
but anticipates, and seeks to be protected against, a decline in the U.S. 
dollar relative to other currencies.  Further, a Fund might purchase a 
currency forward to "lock in" the price of securities denominated in 
that currency which it anticipates purchasing. 

	The matching of the increase in value of a forward contract 
and the decline in the U.S. dollar equivalent value of the foreign 
currency denominated asset that is the subject of the hedge generally 
will not be precise.  In addition, a Fund may not always be able to 
enter into foreign currency forward contracts at attractive prices and 
this will limit the Fund's ability to use such contracts to hedge or 
cross-hedge its assets.  Also, with regard to a Fund's use of cross-
hedges, there can be no assurance that historical correlations between 
the movement of certain foreign currencies relative to the U.S. dollar 
will continue.  Thus, at any time poor correlation may exist between 
movements in the exchange rates of the foreign currencies underlying 
the Fund's cross-hedges and the movements in the exchange rates of 
the foreign currencies in which the Fund's assets that are the subject of 
such cross-hedges are denominated. 

	Forward contracts are traded in an interbank market 
conducted directly between currency traders (usually large commercial 
banks) and their customers.  A forward contract generally has no 
deposit requirement and is consummated without payment of any 
commission.  Each Fund, however, may enter into forward contracts 
with deposit requirements or commissions. 

	A put option gives a Fund, as purchaser, the right (but not the 
obligation) to sell a specified amount of currency at the exercise price 
until the expiration of the option.  A call option gives a Fund, as 
purchaser, the right (but not the obligation) to purchase a specified 
amount of currency at the exercise price until its expiration.  A Fund 
might purchase a currency put option, for example, to protect itself 
during the contract period against a decline in the value of a currency 
in which it holds or anticipates holding securities.  If the currency's 
value should decline, the loss in currency value should be offset, in 
whole or in part, by an increase in the value of the put.  If the value of 
the currency instead should rise, any gain to the Fund would be 
reduced by the premium it had paid for the put option.  A currency call 
option might be purchased, for example, in anticipation of, or to 
protect against, a rise in the value of a currency in which the Fund 
anticipates purchasing securities. 

	Each Fund's ability to establish and close out positions in 
foreign currency options is subject to the existence of a liquid market.  
There can be no assurance that a liquid market will exist for a 
particular option at any specific time.  In addition, options on foreign 
currencies are affected by all of those factors that influence foreign 
exchange rates and investments generally. 

	A position in an exchange-listed option may be closed out 
only on an exchange that provides a secondary market for identical 
options.  Exchange markets for options on foreign currencies exist but 
are relatively new, and the ability to establish and close out positions 
on the exchanges is subject to maintenance of a liquid secondary 
market.  Closing transactions may be effected with respect to options 
traded in the over-the-counter ("OTC") markets (currently the primary 
markets for options on foreign currencies) only by negotiating directly 
with the other party to the option contract or in a secondary market for 
the option if such market exists.  Although each Fund intends to 
purchase only those options for which there appears to be an active 
secondary market, there is no assurance that a liquid secondary market 
will exist for any particular option at any specific time.  In such event, 
it may not be possible to effect closing transactions with respect to 
certain options, with the result that the Fund would have to exercise 
those options which it has purchased in order to realize any profit.  
The staff of the Securities and Exchange Commission ("SEC") has 
taken the position that, in general, purchased OTC options and the 
underlying securities used to cover written OTC options are illiquid 
securities.  However, a Fund may treat as liquid the underlying 
securities used to cover written OTC options, provided it has 
arrangements with certain qualified dealers who agree that the Fund 
may repurchase any option it writes for a maximum price to be 
calculated by a predetermined formula.  In these cases, the OTC option 
itself would only be considered illiquid to the extent that the maximum 
repurchase price under the formula exceeds the intrinsic value of the 
option. 

Swap Agreements. Among the hedging transactions into which the 
Funds may enter are interest rate swaps and the purchase or sale of 
interest rate caps and floors.  Each Fund expects to enter into these 
transactions primarily to preserve a return or spread on a particular 
investment or portion of its Fund or to protect against any increase in 
the price of securities the Fund anticipates purchasing at a later date.  
Each Fund intends to use these transactions as a hedge and not as a 
speculative investment.  Each Fund will not sell interest rate caps or 
floors that it does not own.  Interest rate swaps involve the exchange 
by a Fund with another party of their respective commitments to pay 
or receive interest, e.g., an exchange of floating rate payments for 
fixed rate payments.  The purchase of an interest rate cap entitles the 
purchaser, to the extent that a specified index exceeds a predetermined 
interest rate, to receive payments of interest on a notional principal 
amount from the party selling such interest rate cap.  The purchase of 
an interest rate floor entitles the purchaser, to the extent that a 
specified index falls below a predetermined interest rate, to receive 
payments of interest on a notional principal amount from the party 
selling such interest rate floor. 

   
	A Fund may enter into interest rate swaps, caps and floors on 
either an asset-based or liability-based basis, depending on whether it 
is hedging its assets or its liabilities, and will usually enter into interest 
rate swaps on a net basis, i.e., the two payment streams are netted, 
with the Fund receiving or paying, as the case may be, only the net 
amount of the two payments.  Inasmuch as these hedging transactions 
are entered into for good faith hedging purposes, the investment 
adviser and the Funds believe such obligations do not constitute senior 
securities and, accordingly will not treat them as being subject to its 
borrowing restrictions.  The net amount of the excess, if any, of a 
Fund's obligations over its entitlement with respect to each interest 
rate swap will be accrued on a daily basis and an amount of cash or 
liquid securities having an aggregate net asset value at least equal to 
the accrued excess will be maintained in a segregated account by a 
custodian that satisfies the requirements of the Investment Company 
Act of 1940 (the "1940 Act").  The Funds will not enter into any 
interest rate swap, cap or floor transaction unless the unsecured senior 
debt or the claims-paying ability of the other party thereto is rated in 
the highest rating category of at least one nationally recognized rating 
organization at the time of entering into such transaction.  If there is a 
default by the other party to such a transaction, a Fund will have 
contractual remedies pursuant to the agreements related to the 
transaction.  The swap market has grown substantially in recent years 
with a large number of banks and investment banking firms acting 
both as principals and as agents utilizing swap documentation.  As a 
result, the swap market has become relatively liquid.  Caps and floors 
are more recent innovations for which standardized documentation has 
not yet been developed and, accordingly, they are less liquid than 
swaps. 
    
	New options and Futures Contracts and various combinations 
thereof continue to be developed and the Funds may invest in any such 
options and contracts as may be developed to the extent consistent 
with its investment objective and regulatory requirements applicable to 
investment companies. 

   
Sovereign Debt.    Each Fund may invest in sovereign debt, which may 
trade at a substantial discount from face value.  Each Fund may hold 
and trade sovereign debt of emerging market countries in appropriate 
circumstances and to participate in debt conversion programs.  
Emerging country Sovereign Debt involves a high degree of risk, is 
generally lower-quality debt, and is considered speculative in nature.  
The issuer or governmental authorities that control sovereign debt 
repayment ("sovereign debtors") may be unable or unwilling to repay 
principal or interest when due in accordance with the terms of the 
debt.  A sovereign debtor's willingness or ability to repay principal 
and interest due in a timely manner may be affected by, among other 
factors, its cash flow situation, the extent of its foreign reserves, the 
availability of sufficient foreign exchange on the date a payment is 
due, the relative size of the debt service burden to the economy as a 
whole, the sovereign debtor's policy towards the International 
Monetary Fund (the "IMF") and the political constraints to which the 
sovereign debtor may be subject.  Sovereign debtors may also be 
dependent on expected disbursements from foreign governments, 
multilateral agencies and others abroad to reduce principal and 
interest arrearage on their debt.  The commitment of these third 
parties to make such disbursements may be conditioned on the 
sovereign debtor's implementation of economic reforms or economic 
performance and the timely service of the debtor's obligations.  The 
sovereign debtor's failure to meet these conditions may cause these 
third parties to cancel their commitments to provide funds to the 
sovereign debtor, which may further impair the debtor's ability or 
willingness to timely service its debts.
    

Brady Bonds.    Each Fund may invest in Brady Bonds as part of its 
investment in Sovereign Debt of countries that have restructured or are 
in the process of restructuring their Sovereign Debt pursuant to the 
Brady Plan (discussed below).
   
	Brady Bonds are issued under the framework of the Brady 
Plan, an initiative announced by former U.S. Treasury Secretary 
Nicholas F. Brady in 1989 as a mechanism for debtor nations to 
restructure their outstanding external indebtedness.  The Brady Plan 
contemplates, among other things, the debtor nation's adoption of 
certain economic reforms and the exchange of commercial bank debt 
for newly issued bonds.  In restructuring its external debt under the 
Brady Plan framework, a debtor nation negotiates with its existing 
bank lenders as well as the World Bank or IMF.  The World Bank or 
IMF supports the restructuring by providing funds pursuant to loan 
agreements or other arrangements that enable the debtor nation to 
collateralize the new Brady Bonds or to replenish reserves used to 
reduce outstanding bank debt.  Under these loan agreements or other 
arrangements with the World Bank or IMF, debtor nations have been 
required to agree to implement certain domestic monetary and fiscal 
reforms.  The Brady Plan sets forth only general guiding principles for 
economic reform and debt reduction, emphasizing that solutions must 
be negotiated on a case-by-case basis between debtor nations and their 
creditors.
    
	Agreements implemented under the Brady Plan are designed 
to achieve debt and debt-service reduction through specific options 
negotiated by a debtor nation with its creditors.  As a result, each 
country offers different financial packages.  Options have included the 
exchange of outstanding commercial bank debt for bonds issued at 
100% of face value of such debt, bonds issued at a discount of face 
value of such debt, and bonds bearing an interest rate that increases 
over time and the advancement of the new money for bonds.  The 
principal of certain Brady Bonds has been collateralized by U.S. 
Treasury zero coupon bonds with a maturity equal to the final maturity 
of the Brady Bonds.  Collateral purchase are financed by the IMF, 
World Bank and the debtor nation's reserves.  Interest payments may 
also be collateralized in part in various ways.

	Brady Bonds are often viewed as having three or four 
valuation components: (i) the collateralized repayment of principal at 
final maturity; (ii) the collateralized interest payments; (iii) the 
uncollateralized interest payment; and (iv) any uncollateralized 
interest and principal at maturity (these uncollateralized amounts 
constitute the " residual risk").  In light of the residual risk of Brady 
Bonds and, among other factors, the history of defaults with respect to 
commercial bank loans by public and private entities of countries 
issuing Brady Bonds, investments in Brady Bonds can viewed as 
speculative.

Investment Restrictions

	The Company has adopted the following investment 
restrictions with respect to each Fund.  Restrictions 1 through 8 cannot 
be changed for a Fund without approval by the holders of a majority of 
the outstanding shares of the respective Fund, defined as the lesser of 
(a) 67% or more of the Fund's shares present at a meeting, if the 
holders of more than 50% of the outstanding shares are present in 
person or by proxy or (b) more than 50% of the Fund's outstanding 
shares.  The remaining restrictions may be changed by the Board of 
Directors at any time.  Each Fund may not:

	1.	Deviate from the definition of a "diversified 
company" as defined in the Investment Company Act of 
1940, as amended (the "1940 Act").

	2	Issue senior securities as defined in the Investment 
Company Act of 1940, as amended (the "1940 Act") and 
any rules and orders thereunder, except as permitted under 
the 1940 Act.
   
	3	Invest more than 25% of its total assets in securities, 
the issuers of which conduct their principal business 
activities in the same industry.  For purposes of this 
limitation, U.S. or foreign government securities and 
securities of state or municipal governments and their 
political subdivisions are not considered to be issued by 
members of any industry.
    
	4	The Fund will not make loans.  This restriction does 
not apply to:  (a) the purchase of debt obligations in which the 
Fund may invest consistent with its investment objectives and 
policies; (b) repurchase agreements; and (c) loans of its 
portfolio securities.

	5	The Fund will not engage in the business of 
underwriting securities issued by other persons, except to the 
extent that the Fund may technically be deemed to be an 
underwriter under the Securities Act of 1933, as amended 
(the "1933 Act"), in disposing of portfolio securities.
   
	6.	The Fund will not purchase or sell real estate, real 
estate mortgages, commodities or commodity contracts, but 
this restriction shall not prevent the Fund from (a) investing 
in and selling securities of issuers engaged in the real estate 
business and securities which are secured by real estate or 
interests therein; (b) holding or selling real estate received in 
connection with securities it holds; (c) trading in futures 
contracts and option on futures contracts or (d) investing in or 
purchasing real estate investment trust securities.

	7.	The Fund will not purchase any securities on margin 
(except for such short-term credits as are necessary for the 
clearance of purchases and sales of portfolio securities) or sell 
any securities short (except against the box).  For purposes of 
this restriction, the deposit or payment by the Fund of 
underlying securities and other assets in escrow and collateral 
agreements with respect to initial or maintenance margin in 
connection with futures contracts and related options and 
options on securities, indexes or similar items is not 
considered to be the purchase of a security on margin.

	8	The Fund will not borrow money, except that (a) the 
Fund may borrow from banks in an amount not exceeding 33 
1/3% of the value of the Fund's total assets (including the 
amount borrowed) valued at market less liabilities (not 
including the amount borrowed) at the time the borrowing is 
made and (b) the Fund may, to the extent consistent with its 
investment policies, enter into reverse repurchase agreements, 
forward roll transactions and similar investment strategies 
and techniques.
    
	9	The Fund will not purchase or otherwise acquire any 
security if, as a result, more than 15% of its net assets would 
be invested in securities that are illiquid.

	10	Invest in companies for the purpose of exercising 
management or control.
   
	11	Invest in securities of other investment companies, 
except as part of a merger, consolidation, or acquisition of 
assets or as permitted by Section 12d-1(A) through (E) the 
1940 Act.
    


Brokerage and Portfolio Transactions

	Hansberger is responsible for allocating the Fund's brokerage.  
Orders may be directed to any broker including, to the extent and in 
the manner permitted by applicable law, Smith Barney .  No Fund will 
deal with Smith Barney in any transaction in which Smith Barney acts 
as principal. 

	The Fund attempts to obtain the most favorable execution of 
each Fund's transaction, that is, the best combination  of net price and 
prompt reliable execution.  In the opinion of Hansberger, however, it 
is not possible to determine in advance that any particular broker will 
actually be able to effect the most favorable execution because, in the 
context of a constantly changing market, order execution involves 
judgments as to price, commission rates, volume, the direction of the 
market and the likelihood of future change.  In making its decision as 
to which broker or brokers are most likely to provide the most 
favorable execution, Hansberger takes into account the relevant 
circumstances.  These include, in varying degrees, the size of the 
order, the importance of prompt execution, the breadth and trends of 
the market in the particular security, anticipated commission rates, the 
broker's familiarity with such security including its contacts with 
possible buyers and sellers and its level of activity in the security, the 
possibility of a block transaction and the general record of the broker 
for prompt, competent and reliable service in all aspects of order 
processing, execution and settlement. 

	Commissions are negotiated and take into account the 
difficulty involved in execution of a transaction, the time it took to 
conclude, the extent of the broker's commitment of its own capital, if 
any, and the price received.  Anticipated commission rates are an 
important consideration in all trades and are weighed along with the 
other relevant factors affecting order execution set forth above.  In 
allocating brokerage among those brokers who are believed to be 
capable of providing equally favorable execution, the Fund takes into 
consideration the fact that a particular broker may, in addition to 
execution capability, provide other services to the Fund such as 
research and statistical information.  It is not possible to place a dollar 
value on such services nor does their availability reduce Hansberger's 
expenses in a determinable amount.  These various services may, 
however, be useful to Hansberger in connection with its services 
rendered to other advisory clients and not all such services may be 
used in connection with the Fund. 

	The Board of Directors of the Fund has adopted certain 
policies and procedures incorporating the standard of Rule 17e-1 
issued by the SEC under the 1940 Act which requires that the 
commissions paid to Smith Barney  must be "reasonable and fair 
compared to the commission fee or other remuneration received or to 
be received by other brokers in connection with comparable 
transactions involving similar securities during a comparable period of 
time." The Rule and the policy and procedures also contain review 
requirements and require SBMFM and Hansberger to furnish reports 
to the Board of Directors and to maintain records in connection with 
such reviews. 


PURCHASE OF SHARES

Volume Discounts
   
The schedules of sales charges on Class A shares described in the 
Prospectuses apply to purchases made by any "purchaser," which 
defined to include the following: (a) an individual; (b) an individual's 
spouse and his or her children purchasing shares for his or her own 
account; (c) a trustee or other fiduciary purchasing shares for a single 
trust estate or single fiduciary account; (d) a pension, profit-sharing or 
other employee benefit plan qualified under Section 401(a) of the 
Internal Revenue Code of 1986, as amended (the "Code"), and 
qualified employee benefit plans of employers who are "affiliated 
persons" of each other within the meaning of the 1940 Act; (e) tax-
exempt organizations enumerated in Section 501(c)(3) or (13) of the 
Code; and (f) a trustee or other professional fiduciary (including a 
bank, or an investment adviser registered with the SEC under the 
Investment Advisers Act of 1940, as amended) purchasing shares of a 
Fund for one or more trust estates or fiduciary accounts.  Purchasers 
who wish to combine purchase orders to take advantage of volume 
discounts on Class A shares should contact a Smith Barney Financial 
Consultant.

Combined Right of Accumulation

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

Each Fund offers its shares to the public on a continuous basis.  The 
public offering price for a Class A and Class Y share of each Fund is 
equal to the net asset value per share at the time of purchase plus, for 
Class A shares, an initial sales charge based on the aggregate amount 
of the investment.  The public offering price for a Class B share and 
Class C share, and Class A share purchases, including applicable right 
of accumulation, equaling or exceeding $500,000, is equal to the net 
asset value per share at the time of purchase and no sales charge is 
imposed at the time of purchase.  A contingent deferred sales charge 
("CDSC"), however, is imposed on certain redemptions of Class B 
shares, Class C shares, and Class A shares when purchased in 
amounts equaling or exceeding $500,000.  The method of computation 
of the public offering price is shown in each Fund's financial 
statements, incorporated by reference in their entirety into this 
Statement of Additional Information.


REDEMPTION OF SHARES

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

Distributions in Kind

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

Automatic Cash Withdrawal Plan

An automatic cash withdrawal plan (the "Withdrawal Plan") is 
available to shareholders who own shares with a value of at least 
$10,000 ($5,000 for retirement plan accounts) and who wish to receive 
specific amounts of cash monthly or quarterly.  Withdrawals of at least 
$50 may be made under the Withdrawal Plan by redeeming as many 
shares of a Fund as may be necessary to cover the stipulated 
withdrawal payment.  Any applicable CDSC will not be waived on 
amounts withdrawn by shareholders that exceed 1.00% per month of 
the value of a shareholder's shares at the time the Withdrawal Plan 
commences.  To the extent withdrawals exceed dividends, 
distributions and appreciation of a shareholder's investment in a Fund, 
there will be a reduction in the value of the shareholder's investment 
and continued withdrawal payments may reduce the shareholder's 
investment and ultimately exhaust it.  Withdrawal payments should 
not be considered as income from investment in the Fund.  
Furthermore, as it generally would not be advantageous to a 
shareholder to make additional investments in the Fund at the same 
time that he or she is participating in the Withdrawal Plan, purchases 
by such shareholders in amounts of less than $5,000 will not ordinarily 
be permitted.

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

DISTRIBUTOR

Smith Barney serves as the Company's distributor on a best efforts 
basis pursuant to a distribution agreement (the "Distribution 
Agreement") which was most recently approved by the Company's 
Board of Directors on July 24, 1997.

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

Distribution Arrangements

To compensate Smith Barney for the services it provides and for the 
expense it bears under the Distribution Agreement, the Company has 
adopted a services and distribution plan (the "Plan") pursuant to Rule 
12b-1 under the 1940 Act.  Under the Plan, each Fund pays Smith 
Barney a service fee, accrued daily and paid monthly, calculated at the 
annual rate of 0.25% of the value of each Fund's average daily net 
assets attributable to the Class A, Class B and Class C shares.  In 
addition, the Fund pays Smith Barney a distribution fee, with respect 
to the Class B and Class C shares primarily intended to compensate 
Smith Barney for its initial expense of paying its Financial 
Consultants a commission upon sales of those shares.  Such shares' 
distribution fees, which are accrued daily and paid monthly, are 
calculated at the annual rate of 0.75% of the value of average daily net 
assets attributable to the Class B and Class C shares.

Under its terms, the Plan continues from year to year, provided such 
continuance is approved annually by vote of the Board of Directors, 
including a majority of the Independent Directors. The Plan may not 
be amended to increase the amount to be spent for the services 
provided by Smith Barney without shareholder approval, and all 
amendments of the Plan also must be approved by the Directors in the 
manner described above. The Plan may be terminated at any time, 
without penalty, by vote of a majority of the Independent Directors or 
by vote of a majority of the outstanding voting securities of the 
Company (as defined in the 1940 Act). Pursuant to the Plan, Smith 
Barney will provide the Board of Directors periodic reports of amounts 
expended under the Plan and the purpose for which such expenditures 
were made.

VALUATION OF SHARES

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

A security which is listed or traded on more than one exchange is 
valued at the quotation on the exchange determined to be the primary 
market for such security.  All assets and liabilities initially expressed 
in foreign currency values will be converted into U.S. dollar values at 
the mean between the bid and offered quotations of such currencies 
against U.S. dollars as last quoted by any recognized dealer. If such 
quotations are not available, the rate of exchange will be determined in 
good faith by the Board of Directors.  In carrying out the Board of 
Directors' valuation policies, SBMFM, as administrator, may consult 
with an independent pricing service (the "Pricing Service") retained by 
the Company.

Debt securities of United States issuers (other than U.S. government 
securities and short-term investments) are valued by SBMFM, as 
administrator, after consultation with the Pricing Service approved by 
the Board of Directors.  When, in the judgment of the Pricing Service, 
quoted bid prices for investments are readily available and are 
representative of the bid side of the market, these investments are 
valued at the mean between the quoted bid prices and asked prices.  
Investments for which, in the judgment of the Pricing Service, there 
are not readily obtainable market quotations are carried at fair value as 
determine by the Pricing Service.  The procedures of the Pricing 
Service are reviewed periodically by the officers of the Company under 
the general supervision and responsibility of the Board of Directors.

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 and provided your Registered Representative or your 
investment dealer is authorized to distribute shares of the fund, on the 
basis of relative net asset value per share at the time of exchange.  
Class B shares of any fund may be exchanged without a CDSC.  Class 
B shares of the Fund exchanged for Class B shares of another fund 
will be subject to the higher applicable CDSC of the two funds and, for 
the purposes of calculating CDSC rates and conversion periods, will be 
deemed to have been held since the date the shares being exchanged 
were deemed to be purchased.

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

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

PERFORMANCE DATA

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

Yield

A Fund's 30-day yield figure described below is calculated according 
to a formula prescribed by the SEC.  The formula can be expressed as 
follows:
   
YIELD = 2[(a-b/cd + 1)6 - 1]
    

Where:	a = 	dividends and interest earned during the 
period.
	b = 	expenses accrued for the period (net of 
reimbursement).
	c =	the average daily number of shares 
outstanding during the period that were entitled to receive dividends.
	d =	the maximum offering price per share on 
the last day of the period.

For the purpose of determining the interest earned (variable "a" in the 
formula) on debt obligations purchased by the Fund at a discount or 
premium, the formula generally calls for amortization of the discount 
or premium; the amortization schedule will be adjusted monthly to 
reflect changes in the market values of the debt obligations.

Investors should recognize that in periods of declining interest rates a 
Fund's yield will tend to be somewhat higher than prevailing market 
rates, and in periods of rising interest rates, the Fund's yield will tend 
to be somewhat lower.  In addition, when interest rates are falling, the 
inflow of net new money to the Fund from the continuous sales of its 
shares will likely be invested in portfolio instruments producing lower 
yields than the balance of the Fund's investments, thereby reducing 
the current yield of the Fund.  In periods of rising interest rates, the 
opposite can be expected to occur.



Average Annual Total Return

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

P(1+T)n = ERV

Where:	P 	=a hypothetical initial payment of 
$1,000.
	T	=average annual total return.
	n 	=number of years.
	ERV	=Ending Redeemable Value of a 
hypothetical $1,000 investment made at the beginning of a 1-, 5- or 
10-year period at the end of the 1-, 5- or 10- year period (or fractional 
portion thereof), assuming reinvestment of all dividends and 
distributions.  A Class' total return figures calculated in accordance 
with the above formula assume that the maximum applicable sales 
charge or maximum applicable CDSC, as the case may be, has been 
deducted from the hypothetical $1,000 initial investment at the time of 
purchase or redemption, as applicable.

Aggregate Total Return

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


	AGGREGATE TOTAL RETURN = 		
	ERV-P
				P

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

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

Performance information may be useful in evaluating a Fund and for 
providing a basis for comparison with other financial alternatives.  
Since the performance of the Fund changes in response to fluctuations 
in market conditions, interest rates and Fund expenses, no 
performance quotation should be considered a representation as to the 
Fund's performance for any future period. 



A Fund may from time to time compare its investment results with the 
following: 

	(1) The Consumer Price Index, which is a measure 
of the average change in prices over time in a fixed 
market basket of goods and services (e.g., food, 
clothing, shelter, fuels, transportation fares, charges 
for doctors' and dentists' services, prescription  
medicines, and other goods and services that people 
buy for day-to-day living). 

	(2) Data and mutual fund rankings published or 
prepared by Lipper Analytical Services, Inc., which 
ranks mutual funds by overall performance, 
investment objectives and assets. 

	(3) Dow Jones Industrial Average which is a price-
weighted average of 30 actively traded stocks of 
highly reputable companies prepared by Dow Jones 
& Co.

	(4) Financial News Composite Index. 

	(5) Morgan Stanley Capital International World 
Indices, including, among others, the Morgan 
Stanley Capital International Europe, Australia, Far 
East Index ("EAFE Index").  The EAFE Index is an 
unmanaged index of more than 800 companies of 
Europe, Australia and the Far East. 

	(6) Data and comparative performance rankings 
published or prepared by CDA Investment 
Technologies, Inc. 

	(7) Data and comparative performance rankings 
published or prepared by Wiesenberger Investment 
Company Service. 

	Indices prepared by the research departments of such 
financial organizations as Salomon Brothers, Inc., Merrill Lynch, Bear 
Stearns & Co., Inc., Morgan Stanley, and Ibbottson Associates may be 
used, as well as information provided by the Federal Reserve Board.  
In addition, performance rankings and ratings reported periodically in 
national financial publications, including but not limited to Money 
Magazine, Forbes, Business Week, The Wall Street Journal and 
Barron's may also be used. 

TAXES

	The following summary addresses the principal United States 
income tax considerations regarding the purchase, ownership and 
disposition of shares in a Fund. 

General
   
	Each Fund intends to qualify and elect to be treated for each 
taxable year as a "regulated investment company" under Sections 851-
855 of the Internal Revenue Service Code of 1986, as amended ("the 
Code").  To so qualify, a Fund must, among other things, (i) derive at 
least 90% of its gross income in each taxable year from dividends, 
interest, proceeds from loans of stock and securities, gains from the 
sale or other disposition of stock, securities or foreign currency, or 
certain other income (including but not limited to gains from options, 
Futures and forward contracts) derived from its business of investing 
in stock, securities or currency; and (ii) diversify its holdings so that, 
at the end of each quarter of its taxable year, the following two 
conditions are met: (a) at least 50% of the market value of the Fund's 
total assets is represented by cash, U.S. Government securities, 
securities of other regulated investment companies and other 
securities,  with such other securities limited, in respect of any one 
issuer, to an amount not greater than 5% of the Fund's assets and not 
more than 10% of the outstanding voting securities of such issuer; and 
(b) not more than 25% of the value of the Fund's assets is invested in 
securities of any one issuer (other than U.S. Government securities or 
securities of other regulated investment companies).  The 
diversification requirements described above may limit the Fund's 
ability to engage in hedging transactions by writing or buying options 
or by entering into Futures or forward contracts. 
    
	Foreign currency gains that are not directly related to a 
Fund's principal business of investing in stock or securities, or options 
or forward contracts thereon, might be excluded by regulations from 
income that counts toward the 90% gross income requirement 
described above. 

	As a regulated investment company, each Fund will not be 
subject to U.S. federal income tax on net investment income and net 
long-term capital gains distributed to shareholders if, as is intended, 
the Fund distributes at least 90% of its ordinary income and net short-
term capital gains to the Fund's shareholders each year. 

	Each Fund, however, will generally be subject to a 
nondeductible excise tax of 4% to the extent that it does not meet 
certain minimum distribution requirements as of the end of each 
calendar year.  Each Fund intends to make timely distributions of its 
income (including any net capital gains) in compliance with these 
requirements.  As a result, it is anticipated that each Fund will not be 
subject to the excise tax. 

	For federal income tax purposes, dividends declared by each 
Fund in October, November or December as of a record date in such 
month and which are actually paid in January of the following year 
will be treated as if they were paid on December 31.  These dividends 
will be taxable to shareholders in the year declared, and not in the year 
in which shareholders actually receive the dividend. 

   
	Gains or losses that a Fund recognizes upon the sale or other 
disposition of stock or securities will be treated as long-term capital 
gains or losses if the securities have been held by it for more than one 
year, except in certain cases where the Fund sells the stock or security 
short or acquires a put or writes a call thereon.  Other gains or losses 
on the sale of stock or securities will be short-term capital gains or 
losses.  Gains and losses on the sale, lapse or other termination of 
options on stock or securities will generally be treated as gains and 
losses from the sale of stock or securities.  If an option written for a 
Fund lapses or is terminated through a closing transaction the Fund 
may realize a short-term capital gain or loss, depending on whether 
the premium income is greater or less than the amount paid in the 
closing transaction.  If a Fund sells stock or securities pursuant to the 
exercise of a call option written by it, the Fund will add the premium 
received to the sale price of the stock or securities delivered in 
determining the amount of gain or loss on the sale.
    
	Under the Code, gains or losses attributable to foreign 
currency contracts, or to fluctuations in exchange rates between the 
time a Fund accrues income or receivables or expenses or other 
liabilities denominated in a foreign currency and the time the Fund 
actually collects such income or pays such liabilities, are treated as 
ordinary income or ordinary loss.  Similarly, gains or losses on the 
disposition of debt securities held by the Fund denominated in foreign 
currency, to the extent attributable to fluctuations in exchange rates 
between the acquisition and disposition dates, are also treated as 
ordinary income or loss. 
   
	Forward currency contracts, options and Futures contracts 
entered into by a Fund may create "straddles" for federal income tax 
purposes and this may affect the character and timing of gains or 
losses realized by the Fund on such contracts or options or on the 
underlying securities.
    
	Certain options, Futures and foreign currency contracts held 
by a Fund at the end of each fiscal year will be required to be "marked 
to market" for federal income tax purposes; that is, treated as having 
been sold at market value.  Sixty percent of any capital gain or loss 
recognized on these deemed sales and on actual dispositions will be 
treated as long-term capital gain or loss, and the remainder will be 
treated as short-term capital gain or loss regardless of how long the 
Fund has held such options or contracts. 

	If a Fund purchases shares in certain foreign investment 
entities, referred to as "passive foreign investment companies," the 
Fund itself may be subject to U.S. federal income tax and an additional 
charge in the nature of interest on a portion of any "excess 
distribution" from such company or gain from the disposition of such 
shares, even if the distribution or gain is distributed by the Fund to its 
shareholders in a manner that satisfies the requirements described 
above.  If the Fund were able and elected to treat a passive foreign 
investment company as a "qualified electing fund," in lieu of the 
treatment described above, the Fund would be required each year to 
include in income, and distribute to shareholders in accordance with 
the distribution requirements described above, the Fund's pro rata 
share of the ordinary earnings and net capital gains of the company, 
whether or not actually received by the Fund. 

Distributions 

	If the net asset value of shares of a Fund is reduced below a 
shareholder's cost as a result of distribution by the Fund, such 
distribution will be taxable even though it represents a return of 
invested capital. 

Redemption of Shares 

	Any gain or loss realized on the redemption or exchange of 
Fund shares by a shareholder who is not a dealer in securities will be 
treated as long-term capital gain or loss if the shares have been held 
for more than one year, and otherwise as short-term capital gain or 
loss. 

	However, any loss realized by a shareholder upon the 
redemption or exchange of Fund shares held six months or less will be 
treated as long-term capital loss to the extent of any long-term capital 
gain distributions received by the shareholder with respect to such 
shares.  Additionally, any loss realized on a redemption or exchange of 
Fund shares will be disallowed to the extent the shares disposed of are 
replaced within a period of 61 days beginning 30 days before and 
ending 30 days after such disposition, such as pursuant to 
reinvestment of dividends in Fund shares. 

ADDITIONAL INFORMATION

The Company was incorporated on September 29, 1981 under the 
name Hutton Investment Series Inc.  The Company's corporate name 
was changed on December 29, 1988, July 30, 1993 and October 28, 
1994, to SLH Investment Portfolios Inc., Smith Barney Shearson 
Investment Funds Inc., and Smith Barney Investment Funds, Inc., 
respectively.

Chase , located at Chase Metrotech Center, Brooklyn NY 11245, 
serves as the custodian of the Company.  Under its custody agreement 
with the Company, Chase holds the Company's fund securities and 
keeps all necessary accounts and records.  For its services, Chase 
receives a monthly fee based upon the month-end market value of 
securities held in custody and also receives transaction charges.  Chase 
bank is authorized to establish separate accounts for foreign securities 
owned by the Company to be held with foreign branches of other 
domestic banks as well as with certain foreign banks and securities 
depositories.  The assets of the Company are held under bank 
custodianship in compliance with the 1940 Act.
   
First Data, located at Exchange Place, Boston, Massachusetts 02109, 
serves as the Company's transfer agent.  For these services, First Data 
receives a monthly fee computed on the basis of the number of 
shareholder accounts it maintains for the Company during the month 
and is reimbursed for out-of-pocket expenses.
    


APPENDIX

BOND (AND NOTE) RATINGS

Moody's Investors Service, Inc. ("Moody's")

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

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

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

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

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

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

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

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

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

	Moody's applies the numerical modifiers 1, 2 and 3 in each 
generic rating classification from Aa through B.  The modifier 1 
indicates that the security ranks in the higher end of its generic rating 
category; the modifier 2 indicates a mid-range ranking; and the 
modifier 3 indicates that the issue ranks in the lower end of its generic 
rating category. 



Standard & Poor's Ratings Group ("S&P") 

	AAA - Debt rated "AAA" has the highest rating assigned by 
S&P.  Capacity to pay interest and repay principal is extremely strong. 

	AA - Debt rated "AA" has a very strong capacity to pay 
interest and repay principal and differs from the highest rated issues 
only in small degree. 

	A - Debt rated "A" has a strong capacity to pay interest and 
repay principal although it is somewhat more susceptible to the 
adverse effects of changes in circumstances and economic conditions 
than debt in higher rated categories. 

	BBB - Debt rated "BBB" is regarded as having an adequate 
capacity to pay interest and repay principal.  Whereas it normally 
exhibits adequate protection parameters, adverse economic conditions 
or changing circumstances are more likely to lead to a weakened 
capacity to pay interest and repay principal for debt in this category 
than in higher rated categories. 

	BB, B and CCC - Bonds rated BB and B are regarded, on 
balance, as predominantly speculative with respect to capacity to pay 
interest and repay principal in accordance with the terms of the 
obligation.  BB represents a lower degree if speculation than B and 
CCC the highest degree of speculation.  While such bonds will likely 
have some quality and protective characteristics, these are outweighed 
by large uncertainties or major risk exposures to adverse conditions. 

	C - The rating C is reserved for income bonds on which no 
interest is being paid. 

	D - Bonds rated D are in default, and payment of interest 
and/or repayment of principal is in arrears. 

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

COMMERCIAL PAPER RATINGS
   
Moody's 
    
Issuers rated "Prime-1" (or related supporting institutions) have a 
superior capacity for repayment of short-term promissory obligations.  
Prime-1 repayment capacity will normally be evidenced by the 
following characteristics: leading market positions in well-established 
industries; high rates of return on funds employed; conservative 
capitalization structures with moderate reliance on debt and ample 
asset protection; broad margins in earnings coverage of fixed financial 
charges and high internal cash generation; well-established access to a 
range of financial markets and assured sources of alternate liquidity. 

Issuers rated "Prime-2" (or related supporting institutions) have a 
strong capacity for repayment of short-term promissory obligations.  
This will normally be evidenced by many of the characteristics cited 
above but to a lesser degree.  Earnings trends and coverage ratios, 
while sound, will be more subject to variation.  Capitalization 
characteristics, while still appropriate, may be more affected by 
external conditions.  Ample alternate liquidity is maintained. 


   
S&P
    
     A-1 - This designation indicates that the degree of safety regarding 
timely payment is either overwhelming or very strong.  Those issues 
determined to possess overwhelming safety characteristics will be 
denoted with a plus (+) sign designation.

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

Supplementary Description of Interest Rate Futures Contracts and 
Related Options

Characteristics of Futures Contracts.  Currently, futures contracts can 
be purchased and sold on such securities as U.S. Treasury bonds, U.S. 
Treasury notes, GNMAs and U.S. Treasury bills.  Unlike when the 
Fund purchases or sells a security, no price is paid or received by the 
Fund upon the purchase or sales of a futures contract.  The Fund will 
initially be required to deposit with the custodian or the broker an 
amount of "initial margin" of cash or U.S. Treasury bills.  The nature 
of initial margin in futures transactions is different from that of 
margin in security transactions in that futures contract initial margin 
does not involve the borrowing of funds by the customer to finance the 
transaction.  Rather, the initial margin is in the nature of a 
performance bond or good faith deposit on the contract which is 
returned to the Fund upon termination of the futures contract, 
assuming all contractual obligations have been satisfied.  Subsequent 
payments, called maintenance margin, to and from the broker, will be 
made on a daily basis as the price of the underlying debt security 
fluctuates, making the long and short positions in the futures contract 
more or less valuable, a process known as "marking-to-market."  For 
example, when the Fund has purchased a futures contract and the 
price of the underlying debt security has risen, that position will have 
increased in value and the Fund will receive from the broker a 
maintenance margin payment equal to that increase in value.  
Conversely, when the Fund has purchased a futures contract and the 
price of the underlying debt security has declined, the position would 
be less valuable and the Fund would be required to make a 
maintenance margin payment to the broker.  At any time prior to 
expiration of the futures contract, the Fund may elect to close the 
position by taking an opposite position which will operate to terminate 
the Fund's position in the futures contract.  A final determination of 
maintenance margin is then made, additional cash is required to be 
paid by or released to the Fund, and the Fund realizes a loss or a gain.

While futures contracts based on debt securities do provide for the 
delivery and acceptance of securities, such deliveries and acceptances 
are very seldom made.  Generally, the futures contract is terminated by 
entering into an offsetting transaction.  An offsetting transaction for a 
futures contract sale is effected by the Fund entering into a futures 
contract purchase for the same aggregate amount of the specific type of 
financial instrument and same delivery date.  If the price in the sale 
exceeds the price in the offsetting purchase, the Fund pays the 
difference and realizes the loss.  Similarly, the closing out of a futures 
contract purchase is effected by the Fund entering into a futures 
contract sale.  If the offsetting sale price exceeds the purchase price, 
the Fund realizes a gain, and if the purchase price exceeds the 
offsetting price, the Fund realizes a loss.

Risks of Transactions in Futures Contracts.  There are several risks in 
connection with the use of futures contracts by the Fund as a hedging 
device.  One risk arises because of the imperfect correlation between 
movements in the price of the futures contracts and movements in the 
price of the debt securities which are the subject of the hedge.  The 
price of the futures contract may move more than or less than the price 
of the debt securities being hedged.  If the price of the futures contract 
moves less than the price of the securities which are the subject of the 
hedge, the hedge will not be fully effective, but, if the price of the 
securities being hedged has moved in an unfavorable direction, the 
Fund would be in a better position than if it has not hedged at all.  If 
the price of the securities being hedged has moved in a favorable 
direction, this advantage will be partially offset by the movement in 
the price of the futures contract.  If the price of the futures contracts 
moves more than the price of the security, the Fund will experience 
either a loss or a gain on the future which will not be completely offset 
by movements in the prices of the debt securities which are the subject 
of the hedge.  To compensate for the imperfect correlation of 
movements in the price of debt securities being hedged and 
movements in the prices of the futures contracts, the Fund may buy or 
sell futures contracts in a greater dollar amount of the securities being 
hedged if the historical volatility of the prices of such securities has 
been greater than the historical volatility of the futures contracts.  
Conversely, the Fund may buy or sell fewer futures contracts if the 
historical volatility of the price of the securities being hedged is less 
than the historical volatility of the futures contracts.  It is also possible 
that, where the Fund has sold futures to hedge its portfolio against a 
decline in the market, the market may advance and the value of 
securities held in the Fund's portfolio may decline.  If this occurred, 
the Fund would lose money on the futures contracts and also 
experience a decline in value in its portfolio securities.  However, 
while this could occur for a very brief period or to a very small degree, 
over time the value of a diversified portfolio will tend to move in the 
same direction as the futures contracts.  Where futures are purchased 
to hedge against a possible increase in prices of securities before the 
Fund is able to invest its cash (or cash equivalents) in U.S. 
government securities (or options) in an orderly fashion, it is possible 
that the market may decline instead; if the Fund then concludes not to 
invest in U.S. government securities or options at that time because of 
concern as to possible further market decline or for other reasons, the 
Fund will realize a loss on the futures contract that is not offset by a 
reduction in the price of securities purchased.

In addition to the possibility that there may be an imperfect 
correlation, or no correlation at all, between movements in the futures 
contracts and the portion of the portfolio being hedged, the market 
prices of futures contracts may be affected by certain factors.  First, all 
participants in the futures market are subject to margin deposit and 
maintenance requirements.  Rather than meeting additional margin 
deposit requirements, investors may close futures contracts though 
offsetting transactions which could distort the normal relationship 
between the debt securities and futures markets; second, from the point 
of view of speculators, the deposit requirements in the futures market 
are less onerous than margin requirements in the securities market.  
Therefore, increased participation by speculators in the futures market 
may also cause temporary price distortions.  Due to the possibility of 
price distortion in the futures market and because of the imperfect 
correlation between movements in the debt securities and movements 
in the prices of futures contracts, a correct forecast of interest rate 
trends by the investment advisor may still not result in a successful 
hedging transaction over a very short time frame.

Positions in futures contracts may be closed out only on an exchange 
or board of trade which provides a secondary market for such futures.  
Although the Fund intends to purchase or sell futures only on 
exchanges or boards of trade where there appears to be an active 
secondary market, there is no assurance that a liquid secondary market 
on an exchange or board of trade will exist for any particular contract 
or at any particular time.  In such event, it may not be possible to close 
a futures position, and in the event of adverse price movements, the 
Fund would continue to be required to make daily cash payments of 
variation margin.  However, in the event that the futures contracts 
have been used to hedge portfolio securities, such securities will not be 
sold until the futures contracts can be terminated.  In such 
circumstances, an increase in the price of the securities, if any, may 
partially or completely offset losses on the futures contracts.  However, 
as described above, there is no guarantee that the price of the securities 
will, in fact, correlate with the price movements of the futures 
contracts and thus provide an offset to losses on futures contracts.  
Successful use of futures contracts by the Fund is also subject to the 
investment adviser's ability to predict correctly movements in the 
direction of interest rates and other factors affecting markets of debt 
securities.  For example, if the Fund has hedged against the possibility 
of an increase in interest rates which would adversely affect debt 
securities held in its portfolio and prices of such securities increase 
instead, the Fund will lose part or all of the benefit of the increased 
value of its securities which it has hedged because it will have 
offsetting losses in its futures positions.  In addition, in such situations, 
if the Fund has insufficient cash, it may have to sell securities to meet 
daily variation margin requirements.  Such sale of securities may be, 
but will not necessarily be, at increased prices which reflect the rising 
market.  The Fund may have to sell securities at a time when it may be 
disadvantageous to do so.

Characteristics of Options on Futures Contracts.  As with options on 
debt securities, the holder of an option may terminate his position by 
selling an option of the same series.  There is no guarantee that such 
closing transactions can be effected.  The Fund will be required to 
deposit initial margin and maintenance margin with respect to put and 
call options on futures contracts described above, and, in addition, net 
option premiums received will be included as initial margin deposits.

In addition to the risks which apply to all options transaction, there are 
several special risks relating to options on futures contracts.  The 
ability to establish and close out positions on such options will be 
subject to the development and maintenance of a liquid secondary 
market.  It is not certain that this market will develop.  The Fund will 
not purchase options on futures contracts on any exchange unless and 
until, in the investment advisor's opinion, the market for such options 
had developed sufficiently that the risks in connection with options on 
futures contracts are not greater than the risks in connection with 
futures contracts.  Compared to the use of futures contracts, the 
purchase of options on futures contracts involves less potential risk to 
the Fund because the maximum amount of risk is the premium paid 
for the options (plus transaction costs).  However, there may be 
circumstances when the use of an option on a futures contract would 
result in a loss to the Fund when the use of a futures contract would 
not, such as when there is no movement in the prices of debt 
securities.  Writing an option on a futures contract involves risks 
similar to those arising in the sale of futures contracts, as described 
above.

HANSSAI.DOC.40	A-40	8/11/97  8:38 AM



Item 24. Financial Statements and Exhibits

(a) Not Applicable

Included in Part B:

(b) Exhibits

All references are to the Registrant's registration statement on Form N-1A (the 
"Registration Statement") as filed with the SEC on October 2, 1981 (File Nos. 
2-74288 and 811-3275).

(1)  Articles of Restatement dated September 17, 1993 to Registrant's  Articles 
of  Incorporation dated September 28, 1981, Articles of Amendment dated 
October 14, 1994, Articles Supplementary, Articles  of Amendment dated  
October 14, 1994, Articles Supplementary, Articles of Amendments and 
Certificates of Correction dated November 7, 1994, are incorporated by 
reference to Post-Effective Amendment No. 37 to the Registration Statement 
filed on  November 7, 1994 ("Post Effective Amendment No. 37").  Articles of
Amendment dated October 23, 1997 (filed herewith).

(2) Registrant's By-Laws, as amended on September 30, 1992 are incorporated 
by reference to Post-Effective Amendment No. 30 to the Registration Statement 
filed on April 30, 1993.

(3) Not Applicable.

(4) Registrant's form of stock certificate for Smith Barney Hansberger Global 
Value Fund ("Global Value Fund") and Smith Barney Hansberger Global Value 
Small Cap Value Fund ("Small Cap Value Fund") will be filed herewith.

(5) (a) Investment Advisory Agreement dated July 30, 1993, between the 
Registrant on behalf of Smith Barney Investment Grade Bond Fund, Smith 
Barney Government Securities Fund and Smith Barney Special Equities Fund 
and Greenwich Street Advisors is incorporated by reference to the Registration 
Statement filed on Form N-14 on September 2, 1993, File No. 33-50153.

    (b) Investment Advisory Agreements on behalf of Smith Barney Growth 
Opportunity Fund and Smith Barney Managed Growth Fund is incorporated by 
reference to Post-Effective Amendment No. 40 filed on June 27, 1995.

    (c) Investment Management Agreements on behalf of Global Value Fund 
and Global Small Cap Value Fund between Registrant and Smith Barney Mutual 
Funds Management Inc. will be filed herewith.

    (d) Sub-Advisory Agreements on behalf of Global Value Fund and Global 
Small Cap Value Fund between SBMFM and Hansberger Global Investors Inc.
 will be filed herewith.

(6) (a) Distribution Agreement dated July 30, 1993, between the Registrant and 
Smith Barney Shearson Inc. is incorporated by reference to the registration 
statement filed on Form N-14 on September 2, 1993.  File 33-50153.

     (b) Form of Distribution Agreement between the Registrant and PFS 
Distributors on behalf of Smith Barney Investment Funds Inc. is incorporated 
by reference to Post-Effective Amendment No. 40 filed on June 27, 1995.

(7) Not Applicable.

8 (a) Custodian Agreement with PNC Bank, National Association is 
incorporated by reference to Post -Effective Amendment  No. 44 filed on April 
29, 1997.

   (b) Global Custodian Agreement with Chase Manhattan Bank will be filed 
herewith.

9 (a)  Transfer Agency and Registrar Agreement dated August 5, 1993 with 
First Data Investor Services Group, Inc. (formerly The Shareholder Services 
Group, Inc.) is incorporated by reference to Post-Effective Amendment No. 31 
as filed on December 22, 1993 (Post-Effective Amendment No. 31").

   (b)	Sub-Transfer Agency Agreement between the Registrant and PFS 
Shareholders Services on behalf of  Smith Barney Investment Funds Inc. is 
incorporated by reference to Post-Effective Amendment No. 40 filed on June 
27, 1995.

(10)  Opinion of Robert A. Vegliante, Deputy General Counsel of Smith Barney 
Mutual Funds Management Inc. filed with the Registrant's rule 24-f2 Notice 
(Accession No. 000091155-97-000104) is incorporated by reference.

(11)  Not Applicable
 
(12) Not Applicable

(13)  Not Applicable

(14)  Not Applicable

(15) (a) Amended Services and Distribution Plans pursuant to Rule 12b-1 
between the Registrant on behalf of Smith Barney Invest Grade Bond Fund, 
Smith Barney Government Securities Fund, Smith Barney Special Equities 
Fund and Smith Barney European Fund and Smith Barney, Inc. ("Smith 
Barney") are incorporated by reference to Post-Effective Amendment No. 37'

    (b) Form of Services and Distribution Plans pursuant to Rule 12b-1 between 
the Registrant on behalf  of Smith Barney Growth Opportunity Fund and Smith 
Barney Managed Growth Fund is incorporated by reference to Post-Effective 
Amendment No. 40 filed on June 27, 1995.

    (c) Form of Services and Distribution Plans pursuant to Rule 12b-1 between 
the Registrant on behalf of  the Global Value Fund and Small Cap Value Fund 
will be filed herewith.

(16) Performance Date is incorporated by reference to Post-Effective 
Amendment No. 22 as filed on May 1, 1989.

(17) Not Applicable

(18)  Plan pursuant to Rule 18f-3 is incorporated by reference to Post-Effective
 
Amendment No. 42 to Registration Statement dated January 10, 1996.

Item 25  Persons Controlled by or Under Common Control with Registrant

None.

Item 26.  Number of Holders of Securities

	Smith Barney Hansberger	Number of Holders
	Global Value Fund		of Securities

	Class A				1
	Class B				1
	Class C				1
	Class Y				1
	Class Z				1

	Smith Barney Hansberger	
	Global Small Cap 		Number of Holders
	Value Fund			of Securities

	Class A				1
	Class B				1
	Class C				1
	Class Y				1
	Class Z				1

Item  27.  Indemnification

	The response to this item is incorporated by reference to Pre-Effective 
Amendment No. 1 to the registration statement filed on Form N-14 on October 
8, 1993 (File No. 33-50153).

Item 28(a).  Business and Other Connections of Investment Adviser

Investment Adviser - - Smith Barney Mutual Funds Management Inc., formerly 
known as Smith Barney Advisers, Inc. ("SBMFM")

SBMFM was incorporated in December 1968 under the laws of the State of 
Delaware. SBMFM is a wholly owned subsidiary of Smith Barney Holdings 
Inc. ("Holdings") (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 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).

Item 29.	Principal Underwriters

Smith Barney Inc. ("Smith Barney") currently acts as distributor for Consulting 
Group Capital Markets Funds; Global Horizons Investment Series (Cayman 
Islands); Greenwich Street California Municipal Fund Inc.; Greenwich Street 
Municipal Fund Inc.; High Income Opportunity Fund Inc.; The Italy Fund Inc.; 
Managed High Income Portfolio Inc.; Managed Municipals Portfolio II Inc.; 
Managed Municipals Portfolio Inc.; Municipal High Income Fund Inc.; Puerto 
Rico Daily Liquidity Fund Inc.; Smith Barney Adjustable Rate Government 
Income Fund; Smith Barney Aggressive Growth Fund Inc.; Smith Barney 
Appreciation Fund Inc.; Smith Barney Arizona Municipals Fund Inc.; Smith 
Barney California Municipals Fund Inc.; Smith Barney Concert Series Inc.; 
Smith Barney Disciplined Small Cap Fund, Inc.; Smith Barney Equity Funds; 
Smith Barney Fundamental Value Fund Inc.; Smith Barney Funds, Inc.; Smith 
Barney Income Funds; Smith Barney Income Trust; Smith Barney Institutional 
Cash Management Fund, Inc.; Smith Barney Intermediate Municipal Fund, 
Inc.; Smith Barney Investment Funds Inc.; Smith Barney Investment Trust; 
Smith Barney Managed Governments Fund Inc.; Smith Barney Managed 
Municipals Fund Inc.; Smith Barney Massachusetts Municipals Fund; Smith 
Barney Money Funds, Inc.; Smith Barney Muni Funds; Smith Barney 
Municipal Fund, Inc.; Smith Barney Municipal Money Market Fund, Inc.; 
Smith Barney Natural Resources Fund Inc.; Smith Barney New Jersey 
Municipals Fund Inc.; Smith Barney Oregon Municipals Fund Inc.; Smith 
Barney Principal Return Fund; Smith Barney Series Fund; Smith Barney 
Telecommunications Trust; Smith Barney Variable Account Funds; Smith 
Barney World Funds, Inc.; Smith Barney Worldwide Special Fund N.V. 
(Netherlands Antilles); Travelers Series Fund Inc.; The USA High Yield Fund 
N.V.; Worldwide Securities Limited  (Bermuda); Zenix Income Fund Inc. and 
various series of unit investment trusts. 

    Smith Barney is a wholly owned subsidiary of Holdings.  The information 
required by this Item 29 with respect to each director, officer and partner of 
Smith Barney is incorporated by reference to Schedule A of Form BD filed by 
Smith Barney pursuant to the Securities Exchange Act of 1934 (SEC File No. 
812-8510).

Item 30.  Location of Accounts and Records

(1) 	Smith Barney Investment Funds Inc.
	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

(4)	The Chase Manhattan Bank
	Chase Metrotech Center
	Brooklyn, New York 11245

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

Item 31. Management Services

	Not Applicable.

Item 32. Undertakings

    (b) The Registrant hereby undertakes to file a post-effective amendment, 
which includes financial statements, within four to six month from the effective
 
date of this Registration Statement.

    (c) The Registrant hereby undertakes to furnish to each person to whom a 
prospectus of any series of the Registrant is delivered a copy of the
 Registrant's latest annual report, upon request and without charge.

SIGNATURES

	Pursuant to the requirements of the Securities Act of 1933, as 
amended, and the Investment Company Act of 1940, as amended, the 
Registrant, SMITH BARNEY INVESTMENT FUNDS INC., 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 24th day of October, 1997.

SMITH BARNEY INVESTMENT FUNDS INC.

By: /s/ Heath B. McLendon
      Heath B. McLendon*
      Chief Executive Officer

	WITNESS our hands on the date set forth below.

	Pursuant to the requirements of the Securities Act of 1933, as 
amended, this Post-Effective 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		10/24/97
Heath B. McLendon	(Chief Executive Officer)

/s/ Lewis E. Daidone	 Senior Vice President
Lewis E. Daidone	 and Treasurer			10/24/97
			(Chief Financial 
			and Accounting Officer)

/s/ Paul R. Ades	*	Director			10/24/97
Paul R. Ades

/s/ Herbert Barg*		Director		10/24/97
Herbert Barg

/s/ Dwight B. Crane*	Director			10/24/97
Dwight B. Crane

/s/ Frank Hubbard*	Director			10/24/97
Frank Hubbard

/s/ Ken Miller*		Director			10/24/97
Ken Miller

*Signed by Heath B. McLendon, their duly authorized attorney-in-fact, 
pursuant to power of attorney dated November 3, 1994.

/s/ Heath B. McLendon
Heath B. McLendon

EXHIBITS

Exhibit No.			Description of Exhibit

1.				Articles of Amendment

4				Form of Stock Certificate
				for the Global Value
				 Fund and Small Cap Value 
				Fund.

5(c)				Investment Management Agreements
				on behalf of the Global Value Fund
				and the Small Cap Global Value Fund.

5(d)				Sub-Advisory Agreements
				on behalf of the Global Value Fund
				and the Small Cap Global Value Fund.

8(b)				Global Custodian Agreement with 
				Chase Manhattan Bank.

15(c)				Form of Service and Distribution Plans
				pursuant to Rule 12b-1 between the 
				Registrant on behalf of the Global Value 
				Fund and the Small Cap Value Fund.