Filed with the Securities and Exchange Commission on April 18, 1997

Registration Nos.: 33-43446
811-6444
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933                                         X  

	Pre-Effective Amendment No. ___                                    


	Post-Effective Amendment No.       13            X

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940              X

	Amendment No.        13         X

SMITH BARNEY INVESTMENT TRUST
                                                                       .
(Exact name of Registrant as specified in Charter)

388 Greenwich Street, New York, New York  10013
(Address of Principal Executive Offices) (Zip Code)

Christina T. Sydor
Secretary

Smith Barney Investment Trust
388 Greenwich Street
New York, New York  10013
(212) 816-6474 
(Name and Address of Agent for Service)

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

It is proposed that this filing will becomes effective:
			   
			       immediately upon filing pursuant to Rule 485(b)
			 on ________ pursuant to Rule 485(b)
		X	75 days after filing pursuant to Rule 485(a)(2)
			____ on _______ pursuant to Rule 485(a)
			    
Registrant previously registered an indefinite number of its shares pursuant 
to Rule 24f-2 of the Investment Company Act of 1940.     The Registrants Rule 
24f-2 Notice for the fiscal year ended November 30, 1996 was filed on January 
28, 1997 as Accession No. 000091155-97-000045.<R/>


CONTENTS OF REGISTRATION STATEMENT

Front Cover

Contents Page

Cross Reference Sheet


Part A:	Prospectus dated July ___, 1997 for 
Large Capitalization Growth Fund


Part B:	Statement of Additional Information 
dated March 25, 1997, as amended
July __, 1997  for Smith 
Barney Investment Trust

Part C:	Other Information

    



SMITH BARNEY INVESTMENT TRUST

FORM N-1A

CROSS-REFERENCE SHEET
PURSUANT TO RULE 495(b)


Part A Item No.

Prospectus Caption

1.  Cover Page

Cover Page

2.  Synopsis

Prospectus Summary

3.  Financial Highlights

Financial Highlights

4.  General Description of 
Registrant

Cover Page; Prospectus Summary; 
Investment
Objective and Management Policies; 
Additional Information


5.  Management of the Fund

Management of the Trust and the 
Fund; Distributor; Additional 
Information; Annual Report


6.  Capital Stock and Other 
Securities

Investment Objective and 
Management Policies; Dividends, 
Distributions and Taxes; 
Additional Information


7.  Purchase of Securities Being 
Offered

Purchase of Shares; Valuation of 
Shares; Exchange Privilege; 
Redemption of Shares; Minimum 
Account Size; Distributor; 
Additional Information


8.  Redemption or Repurchase

Purchase of Shares; Redemption of 
Shares; Exchange Privilege


9.  Pending Legal Proceedings

Not applicable



Part B Item No.
Statement of Additional 
Information Caption


10.  Cover Page

Cover Page

11.  Table of Contents

Table of Contents

12.  General Information and 
History

Distributor; Additional 
Information

13.  Investment Objective and 
Policies

Investment Objectives and 
Management Policies


14.  Management of the Fund

Management of the Trust and the 
Funds; Distributor



15.  Control Persons and Principal 
Holders of 
       Securities

Management of the Trust and the 
Funds

16.  Investment Advisory and Other 
Services

Management of the Trust and the 
Funds; Distributor


17.  Brokerage Allocation and Other 
Services

Investment Objectives and 
Management Policies; Distributor


18.  Capital Stock and Other 
Securities

Investment Objectives and 
Management Policies; Purchase of 
Shares; Redemption of Shares; 
Taxes


19.  Purchase, Redemption and 
Pricing of
       Securities Being Offered

Purchase of Shares; Redemption of 
Shares; Valuation of Shares; 
Distributor; Exchange Privilege


20.  Tax Status

Taxes

21.  Underwriters

Distributor

22.  Calculation of Performance 
Data

Performance Data

23.  Financial Statements

Financial Statements




SMITH BARNEY INVESTMENT TRUST


PART A

 
 
 
SMITH BARNEY 
LARGE 
CAPITALIZATION 
GROWTH 
FUND 
 
July , 1997  
 
Prospectus begins on page one  
 
 
 
 
P R O S P E C T U S 
  
LOGO 
 
 
Prospectus 
 
 
Smith Barney Large Capitalization Growth Fund 
388 Greenwich Street  
New York, New York 10013  
1-800-451-2010 
 
Smith Barney Large Capitalization Growth Fund (the ''Fund'') is a  
mutual fund that seeks long-term growth of capital by investing, under  
normal market conditions, 65% of its assets in equity securities of  
companies with large market capitalizations.  The Fund defines large  
capitalization companies as those companies with market capitalizations  
of $5 billion or more at the time of the Fund's investment.  The Fund is  
one of a number of funds, each having distinct investment objectives and  
policies, making up the Smith Barney Investment Trust (the "Trust").  The  
Trust is an open-end management investment company commonly referred to  
as a mutual fund. 
 
The initial subscription period for shares is scheduled to end on  
August 25, 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 September 30, 1997.  See  
"Purchase of Shares." 
 
 
 
This Prospectus sets forth concisely certain information about 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  
Additional Information dated July  , 1997, as amended or supplemented  
from time to time, that is available upon request and without charge by  
calling or writing the Fund at the telephone number or address set forth  
above or by contacting a Smith Barney Financial Consultant.  The  
Statement of Additional Information has been filed with the Securities  
and Exchange Commission (the ''SEC'') and is incorporated by reference  
into this Prospectus in its entirety.  
 
SMITH BARNEY INC.  
Distributor  
 
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.  
Investment Manager  
 
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.  
 
 
 
 
Table of Contents 
 
 
 Prospectus Summary 
 
 
 Financial Highlights 
  
 
 Investment Objective and Management Policies 
  
 
 Valuation of Shares 
  
 
 Dividends, Distributions and Taxes 
  
 
 Purchase of Shares 
  
 
 Exchange Privilege 
  
 
 Redemption of Shares 
  
 
 Minimum Account Size 
  
 
 Performance 
  
 
 Management of the Trust and the Fund 
  
 
 Distributor 
  
 
 Additional Information 
  
 
 
 
 
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.  
 
 
 
 
Prospectus Summary  
 
The following summary is qualified in its entirety by detailed  
information appearing elsewhere in this Prospectus and in the Statement  
of Additional Information.  Cross references in this summary are to  
headings in the Prospectus.  See ''Table of Contents.''  
 
INVESTMENT OBJECTIVE The Fund is an open-end, diversified, management  
investment company whose investment objective is to seek long-term growth  
of capital by investing, under normal market conditions, 65% of its  
assets in equity securities of companies with large 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 rates 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.  This CDSC may be waived  
for certain redemptions.  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. 
 
 
 
 
Prospectus Summary (continued)  
 
Class B Shares Conversion Feature.  Class B shares will convert  
automatically to Class A shares, based on relative net asset value, eight  
years after the date of the original purchase.  Upon conversion, these  
shares will no longer be subject to an annual distribution fee.  In  
addition, a certain portion of Class B shares that have been acquired  
through the reinvestment of dividends and distributions (''Class B  
Dividend Shares'') will be converted at that time.  See ''Purchase of  
Shares - Deferred Sales Charge Alternatives.''  
 
Class 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 initial investment minimum of $5,000,000.  Class Y shares are sold at  
net asset value with no initial sales charge or CDSC.  They are not  
subject to any service or distribution fees.  
 
In deciding which Class of Fund shares to purchase, investors should  
consider the following factors, as well as any other relevant facts and  
circumstances:  
 
Intended Holding Period.  The decision as to which Class of shares is  
more beneficial to an investor depends on the amount and intended  
duration of his or her investment.  Shareholders who are planning to  
establish a program of regular investment may wish to consider Class A  
shares; as the investment accumulates, shareholders may qualify for  
reduced sales charges and the shares are subject to lower ongoing  
expenses over the term of the investment.  As an alternative, Class B 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 partially or wholly  
offset the higher annual expenses of these Classes.  Because the Fund's  
future return cannot be predicted, however, there can be no assurance  
that this would be the case.  
 
 
Prospectus Summary (continued)  
 
Finally, investors should consider the effect of the CDSC period and  
any conversion rights of the Classes in the context of their own  
investment time frame.  For example, while Class 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.  
 
Reduced or No Initial Sales Charge.  The initial sales charge on Class  
A shares may be waived for certain eligible purchasers, and the entire  
purchase price will be immediately invested in the Fund.  In addition,  
Class A share purchases of $500,000 or more will be made at net asset  
value with no initial sales charge, but will be subject to a CDSC of  
1.00% on redemptions made within 12 months of purchase.  The $500,000  
investment may be met by adding the purchase to the net asset value of  
all Class A shares offered with a sales charge held in funds sponsored by  
Smith Barney listed under ''Exchange Privilege.'' Class A share purchases  
may also be eligible for a reduced initial sales charge.  See ''Purchase  
of Shares.'' Because the ongoing expenses of Class A shares may be lower  
than those for Class B and Class C shares, purchasers eligible to  
purchase Class A shares at net asset value or at a reduced sales charge  
should consider doing so.  
 
Smith Barney Financial Consultants may receive different compensation  
for selling different Classes of shares.  Investors should understand  
that the purpose of the CDSC on the Class B and Class 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 description of the sales charges and service and distribution  
fees for each Class of shares and ''Valuation of Shares,'' ''Dividends,  
Distributions and Taxes'' and ''Exchange Privilege'' for other  
differences between the Classes of shares.  
 
SMITH BARNEY 401(k) AND EXECCHOICE 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 
 
 
Prospectus Summary (continued)  
 
other types of participant directed, tax-qualified employee benefit  
plans.  Other investors may be eligible to participate in the Smith  
Barney ExecChoice Program.  Class A and Class C shares are available as  
investment alternatives under both of these programs.  See ''Purchase of  
Shares - Smith Barney 401(k) and ExecChoice Program Programs.''  
 
PURCHASE OF SHARES Shares may be purchased through a brokerage account  
maintained by 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 Investors Services Group, Inc. ("First Data") during the  
continuous offering period.   
 
The initial subscription period for shares is scheduled to end on  
August 25, 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 September 30, 1997.  See  
''Purchase of Shares.''  
 
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 Retirement 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 investment requirement for all  
Classes of shares is $25.  The minimum investment requirements for  
purchases of Fund shares through the Systematic Investment Plan are  
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 requirement 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 ''Redemption of Shares.''  
 
MANAGEMENT OF THE FUND Smith Barney Mutual Funds Management Inc.  
(''SBMFM'') serves as the Fund's investment manager.  SBMFM is a wholly  
owned subsidiary of Smith Barney Holdings Inc. (''Holdings'').  Holdings  
is a wholly owned subsidiary of Travelers Group Inc. (''Travelers''), a  
diversified financial services 
 
 
Prospectus Summary (continued)  
 
holding company engaged, through its subsidiaries, principally in four  
business segments: Investment Services, Consumer Finance Services, Life  
Insurance Services and Property & Casualty Insurance Services.  See  
''Management of 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 After meeting certain standards imposed by the NASD  
with respect to total net assets and members of shareholder accounts, the  
Fund's net asset value per share for the prior business day generally  
will quoted daily in the financial section of most newspapers and, in any  
event, is also available from a Smith Barney Financial Consultant.  See  
''Valuation of Shares.''  
 
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income and  
distributions of net realized capital gains, if any, are declared and  
paid annually.  See ''Dividends, Distributions and Taxes.''  
 
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a  
Class will be reinvested automatically, unless otherwise specified by an  
investor, in additional shares of the same Class at current net asset  
value.  Shares acquired by dividend and distribution reinvestments will  
not be subject to any sales charge or CDSC.  Class B shares acquired  
through dividend and distribution reinvestments will become eligible for  
conversion to Class A shares on a pro rata basis.  See ''Dividends,  
Distributions and Taxes.''  
 
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no assurance that  
the Fund's investment objective will be achieved.  The value of the  
Fund's investments and thus the net asset value of the Fund's shares,  
will fluctuate in response to changes in market and economic conditions,  
as well as the financial condition and prospects of issuers in which the  
Fund invests.  The Fund may invest in foreign securities, though  
management intends to limit such investments to 10% of the Fund's assets.   
Foreign investments may include additional risks associated with currency  
exchange rates, less complete financial information about individual  
companies, less market liquidity and political instability.  See  
''Investment Objective and Management Policies.''  
 
 
Prospectus Summary (continued)  
 
THE FUND'S EXPENSES The following expense table lists the costs and  
expenses an investor will incur either directly or indirectly as a  
shareholder of the Fund, based on the maximum sales charge or maximum  
CDSC that may be incurred at the time of purchase or redemption and the  
Fund's estimated operating expenses: 
 
Smith Barney Large Capitalization  
Growth Fund 
 Class  
A  
 Class  
B  
 Class  
C  
 Class  
Y  
 
	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 average net  
assets) 
 
 
 
 
 
			Management fees 
0.75% 
0.75% 
0.75% 
0.75% 
 
			12b-1 fees** 
0.25    
1.00   
  
1.00   
  
None  
 
			Other expenses*** 
0.15    
0.15   
  
0.15   
  
0.15   
  
 
 
 
 
 
 
 
	TOTAL FUND OPERATING EXPENSES 
1.15% 
1.90% 
1.90 % 
0.90 % 
 
 
 
 
 
 
 
 
	*	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 ended November 30, 1998.  
 
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 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 and  
Class C shares, an annual 12b-1 fee of 1.00% of the value of average  
daily net assets of each respective Class, consisting of a 0.75%  
distribution fee and a 0.25% service fee.  ''Other expenses'' in the  
above table include fees for shareholder services, custodial fees, legal  
and accounting fees, printing costs and registration fees.  
 
 
Prospectus Summary (continued)  
 
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.''  
 
 	 
 1 year 
 3 years 
 
 	An investor would pay the  
following expenses on a $1,000 
investment, assuming (1) 5.00%  
annual return and  
(2) redemption at the end of  
each time period: 
 
 
 
 		Class A 
 $60 
$81 
 
 		Class B 
  68 
  86 
 
 		Class C 
  28 
  56 
 
 		Class Y 
   8 
  25 
 
 	An investor would pay the  
following expenses on the same 
investment, assuming the same  
annual return and no 
redemption: 
 
 
 
 		Class A 
$60 
$81 
 
 		Class B 
 18 
 56 
 
 		Class C 
 18 
 56 
 
 		Class Y 
   8 
 25 
 
 
The example also provides a means for the investor to compare expense  
levels of funds with different fee structures over varying investment  
periods.  To facilitate such comparison, all funds are required to  
utilize a 5.00% annual return assumption.  However, the Fund's actual  
return will vary and may be greater or less than 5.00%.  This example  
should not be considered a representation of future expenses and actual  
expenses may be greater or less than those shown.  
 
 
 
Investment Objective and Management Policies  
 
 
The Fund's investment objective is long term growth of capital by  
investing in equity securities of companies with large market  
capitalizations.  This investment objective may not be changed without  
the approval of the holders of a majority of the Fund's outstanding  
shares.  There can be no assurance that the Fund's investment objective  
will be achieved.  
 
The Fund attempts to achieve its investment objective by investing  
primarily in equity securities consisting of common stocks which are  
believed to afford attractive opportunities for investment growth.  The  
core holdings of the Fund are large capitalization companies that are  
dominant in their industries, global in scope and have a long term  
history of performance.  The Fund  normally invests at least 65% of its  
total assets in these securities.  The Fund does have the flexibility,  
however, to invest the balance in companies with other market  
capitalizations.  The Fund defines large market capitalization companies  
as those having $5 billion or more at the time of the Fund's investment.   
Companies whose capitalization falls below this level after purchase will  
continue to be considered large capitalization companies for purposes of  
the 65% policy. 
 
Companies with large market capitalizations typically have a large  
number of publicly held shares and a high trading volume resulting in a  
high degree of liquidity.  When choosing the Fund's investments, the Fund  
seeks companies that it expects will demonstrate consistent and  
sustainable long term growth in earnings per share, strong cash flow, a  
high return on equity and a quality balance sheet.  This method of  
selecting stocks is based on the belief that a company's earnings growth  
will eventually translate into growth in the price of its stock.  In  
analyzing securities for investment, SBMFM considers many different  
factors, including past growth records, management capability, future  
earnings prospects and technological innovation, as well as general  
market and economic factors that can influence the price of securities.   
The value of the Fund's investments, and thus the net asset value of the  
Fund's shares, will fluctuate in response to changes in market and  
economic conditions, as well as the financial condition and prospects of  
issuers in which the Fund invests.  
 
Under normal market conditions, the majority of the Fund's portfolio  
will consist of common stocks, but it also may contain money market  
instruments for cash management purposes.  The Fund reserves the right as  
a defensive measure to hold money market securities, including repurchase  
agreements or cash, in such proportions as, in the opinion of management,  
prevailing market or economic conditions warrant. 
 
 
Investment Objective and Management Policies  
 
Further information about the Fund's investment policies, including a  
list of those restrictions on its investment activities that cannot be  
changed without shareholder approval, appears in the Statement of  
Additional Information.  
 
INVESTMENT STRATEGIES AND TECHNIQUES 
 
Equity Securities.  The Fund will normally invest at least 65% of its  
assets in equity securities, primarily common stocks and, to a lesser  
extent, securities convertible into common stock and rights to subscribe  
for common stock.  Common stocks represent an equity (ownership) interest  
in a corporation.  Although equity securities have a history of long-term  
growth in value, their prices fluctuate based on changes in a company's  
financial condition and on overall market and economic conditions. 
 
Short-Term Investments.  The Fund may also invest in money market  
instruments, such as: U.S. government securities; certificates of  
deposit, time deposits and bankers' acceptances issued by domestic banks  
(including their branches located outside the United States and  
subsidiaries located in Canada), domestic branches of foreign banks,  
savings and loan associations and similar institutions; high grade  
commercial paper; and repurchase agreements with respect to such  
instruments.  
 
When-Issued Securities and Delayed-Delivery Transactions.  In order to  
secure yields or prices deemed advantageous at the time, the Fund may  
purchase or sell securities on a when-issued or delayed-delivery basis.   
The Fund will enter into a when-issued transaction for the purpose of  
acquiring portfolio securities and not for the purpose of leverage.  In  
such transactions delivery of the securities occurs beyond the normal  
settlement periods, but no payment or delivery is made by the Fund prior  
to the actual delivery or payment by the other party to the transaction.   
Due to fluctuations in the value of securities purchased or sold on a  
when-issued or delayed-delivery basis, the yields obtained on those  
securities may be higher or lower than the yields available in the market  
on the dates when the investments are actually delivered to the buyers.   
The Fund will establish with its custodian a segregated account  
consisting of cash or equity and debt securities of any grade provided  
such securities have been determined by SBMFM to be liquid and  
unencumbered pursuant to guidelines established by the Trustees in an  
amount equal to the amount of its when-issued and delayed-delivery  
commitments.  Placing securities rather than cash in the segregated  
account may have a leveraging effect on the Fund's net assets. 
 
Foreign Securities.  The Fund may invest in securities of non-U.S.  
issuers in the form of American Depository Receipts (''ADRs''), European  
Depository Receipts (''EDRs'') or similar securities representing  
interests in the common stock of foreign issuers.  Management intends to  
limit the Fund's investment in these types of securities, to 10% of the  
Fund's net assets.  ADRs are receipts, typically issued by a U.S. bank or  
trust company, which evidence ownership of underlying securities issued  
by a foreign corporation.  EDRs are receipts issued in Europe which  
evidence a similar ownership arrangement.  Generally, ADRs, in registered  
form, are designed for use in the U.S. securities markets and EDRs are  
designed for use in European securities markets.  The underlying  
securities are not always denominated in the same currency as the ADRs or  
EDRs.  Although investment in the form of ADRs or EDRs facilitates  
trading in foreign securities, it does not mitigate the risks associated  
with investing in foreign securities.  
 
Investments in foreign securities incur higher costs than investments  
in U.S. securities, including higher costs in making securities  
transactions as well as 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 individual companies, less market  
liquidity and political instability.  
 
 
Portfolio Transactions and Turnover.  Portfolio securities transactions  
on behalf of the Fund are placed by SBMFM with a number of brokers and  
dealers, including Smith Barney Inc. (''Smith Barney'').  Smith Barney  
has advised the Fund that in transactions with the Fund, Smith Barney  
charges a commission rate at least as favorable as the rate that Smith  
Barney charges its comparable unaffiliated customers in similar  
transactions.  
 
The Fund generally does not engage in short-term trading but intends to  
purchase securities for long-term growth.  Accordingly, the Fund's annual  
portfolio turnover rate is not expected to exceed 100%.  
 
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  
as determined by or under the direction of the Trust's Board of Trustees.   
Short-term investments that mature in 60 days or less are valued at  
amortized cost.  Amortized cost involves valuing an investment at its  
cost initially and, thereafter, assuming a constant amortization to  
maturity of any discount or premium, regardless of the impact of  
fluctuating interest rates on the market value of the instrument.   
Further information regarding the Fund's valuation policies is contained  
in the Statement of Additional Information.  
 
Dividends, Distributions and Taxes  
 
DIVIDENDS AND DISTRIBUTIONS  
 
The Fund's policy is to distribute substantially all its net investment  
income (that is, its income other than its net realized capital gains)  
and net realized 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  
gains distributions will be reinvested automatically in additional shares  
of the same Class at net asset value, subject to no sales charge or CDSC.   
In order to avoid the application of a 4.00% nondeductible 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 ordinary income or capital gains and  
expects to pay any other dividends and distributions 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 service 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 dividends-received deduction for corporations.   
 
Statements as to the tax status of each shareholder's dividends and  
distributions will be mailed annually.  Each shareholder also will  
receive, if appropriate, 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.  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 currently 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 redemptions.  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 purchases of Class Y  
shares by Smith Barney Concert Allocation Series, Inc. for which there is  
no minimum purchase amount).  See "Prospectus Summary-Alternative  
Purchase Arrangements" for a discussion of factors to consider in  
selecting which Class of shares to purchase. 
 
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 Introducing 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  
commence operations. 
 
The Fund is offering its Class A shares to the public at a maximum  
purchase price per share of $12.50, which equals the Class A share  
initial net asset value per share of $11.88 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 $11.88. 
 
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. 
 
 
 
 
Purchase of Shares (continued)  
 
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 thereafter.  During the three-week period, Smith Barney will  
commence a limited continuous 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 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 maintenance  
fee in connection with a brokerage account through which an investor  
purchases 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  
making 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.  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 requirement for all Classes is $25.  For shareholders  
purchasing shares of the Fund through the Systematic Investment Plan on a  
quarterly basis, the minimum initial investment requirement for Class A,  
Class B, and Class C shares and the subsequent investment requirement for  
all Classes is $50.  There are no minimum investment requirements in  
Class A shares for employees of Travelers and its subsidiaries, including  
Smith Barney, 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 the Fund's transfer agent,  
First Data.  Share certificates are issued only upon a shareholder's  
written request to First Data. 
 
 
Purchase of Shares (continued)  
 
Purchase orders received by the Fund or Smith Barney prior to the  
close of regular trading on the NYSE on any day the Fund calculates its  
net asset value are priced according to the net asset value determined on  
that day (the "trade date").  Orders received by dealers or Introducing  
Brokers prior to the close of regular trading on the NYSE on any day the  
Fund calculates its net asset value, are priced according to the net  
asset value determined on that day, provided the order is received by the  
Fund or Smith Barney prior to Smith Barney's close of business.  For  
shares purchased through Smith Barney or Introducing Brokers purchasing  
through Smith Barney, payment for Fund shares is due on the third  
business day (the "settlement date") after the trade date.  In all other  
cases, payments 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 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 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:  
 
 
 
 	Amount of  
Investment 
 
 Sales Charge as %  
of Offering Price    
 
 Sales Charge as %  
of Amount Invested   
  
 Dealers  
Reallowance as  
%  
of Offering  
Price    
 
 
 
 
 
 
 	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 
 *    
 *    
 *    
 
 
*	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.''  
 
 
Purchase of Shares (continued)  
 
Members of the selling group may receive up to 90% of the sales charge  
and may be deemed to be underwriters of the Fund as defined in the  
Securities Act of 1933, as amended.  
 
The 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. 
 
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 and (ii)  
employees of members of the National Association of Securities Dealers,  
Inc., provided such sales are made upon the assurance of the purchaser  
that the purchase is made for investment purposes and that the securities  
will not be resold except through redemption or repurchase; (b) offers of  
Class A shares to any other investment company in connection with the  
combination of such company with the Fund by merger, acquisition of  
assets or otherwise; (c) purchases of Class A shares by any client of a  
newly employed Smith Barney Financial Consultant (for a period up to 90  
days from the commencement of the Financial Consultant's employment with  
Smith Barney), on the condition the purchase of Class A shares is made  
with the proceeds of the redemption of shares of a mutual fund which (i)  
was sponsored by the Financial Consultant's prior employer, (ii) was sold  
to the client by the Financial Consultant and, (iii) was subject to a  
sales charge; (d) purchases by shareholders who have redeemed Class A  
shares in the Fund (or Class A shares of another fund of the Smith Barney  
Mutual Funds that are offered with a sales charge) 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 of distributions  
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 contracts; and (h) purchases by investors participating  
in a Smith Barney fee-based arrangement.  In order to obtain such  
discounts, the purchaser must provide sufficient information at the time  
of purchase to permit verification that the purchase would qualify for  
the elimination of the sales charge. 
 
 
Purchase of Shares (continued)  
 
RIGHT OF ACCUMULATION  
 
Class A shares of the Fund may be purchased by ''any person'' (as  
defined above) at a reduced sales charge or at net asset value determined  
by aggregating the dollar amount of the new purchase and the total net  
asset value of all Class A shares of the Fund and of funds sponsored by  
Smith Barney which are offered with a sales charge 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 purchase at net asset value will also be available to employees (and  
partners) of the same employer purchasing as a group, provided each  
participant makes the minimum initial investment required.  The sales  
charge applicable to purchases by each member of such a group will be  
determined by the table set forth above under ''Initial Sales Charge  
Alternative - Class A Shares,'' and will be based upon the aggregate  
sales of Class A shares of the Smith Barney Mutual Funds offered with a  
sales charge to, and share holdings of, all members of the group.  To be  
eligible for such reduced sales charges or to purchase at net asset  
value, all purchases must be pursuant to an employer- or partnership- 
sanctioned plan meeting certain requirements.  One such requirement is  
that the plan must be open to specified partners or employees of the  
employer and its subsidiaries, if any.  Such plan may, but is not  
required to, provide for payroll deductions, IRAs or investments pursuant  
to retirement plans under Sections 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 criteria  
which enable Smith Barney to realize economies of scale in its costs of  
distributing shares.  A qualified group must have more than 10 
 
 
Purchase of Shares (continued)  
 
members, must be available to arrange for group meetings between  
representatives of the Fund and the members, and must agree to include  
sales and other materials related to the Fund in its publications and  
mailings to members at no cost to Smith Barney.  In order to obtain such  
reduced sales charge or to purchase at net asset value, the purchaser  
must provide sufficient information at the time of purchase to permit  
verification that the purchase qualifies for the reduced sales charge.   
Approval of group purchase reduced sales charge plans is subject to the  
discretion of Smith Barney.  
 
LETTER OF INTENT  
 
Class A Shares.  A Letter of Intent for amounts of $50,000 or more  
provides an opportunity for an investor to obtain a reduced sales charge  
by aggregating investments over a 13 month period, provided that the  
investor refers to such Letter when placing orders.  For purposes of a  
Letter of Intent, the ''Amount of Investment'' as referred to in the  
preceding sales charge table includes purchases of all Class A shares of  
the Fund and other Smith Barney Mutual Funds offered with a sales charge  
over the 13 month period based on the total amount of intended purchases  
plus the value of all Class A shares previously purchased and still  
owned.  An alternative is to compute the 13 month period starting up to  
90 days before the date of execution of a Letter of Intent.  Each  
investment made during the period receives the 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 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.   
Such investors must make an initial minimum purchase of $1,000,000 in  
Class Y shares of the Fund and agree to purchase a total of $5,000,000 of  
Class Y shares of the Fund within six months from the date of the Letter.   
If a total investment of $5,000,000 is not made within the six-month  
period, all Class Y shares purchased to date will be transferred to Class  
A shares, where they will be subject to all fees (including a service fee  
of 0.25%) and expenses applicable to the Fund's Class A shares, which may  
include a CDSC of 1.00%.  The Fund expects that such transfer will not be  
subject to Federal income taxes.  Please contact a Smith Barney Financial  
Consultant or First Data for further information.  
 
 
Purchase of Shares (continued)  
 
DEFERRED SALES CHARGE ALTERNATIVES  
 
''CDSC Shares'' are sold at the 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 held under the Smith Barney 401(k) Program, as described  
below.  See ''Purchase of Shares - Smith Barney 401(k) and ExecChoice  
Programs.''  
 
   Year Since  
Purchase  
Payment was Made 
 
 CDSC    
 
 First 
 5.00% 
 
 Second 
 4.00    
 
 Third 
 3.00    
 
 Fourth 
 2.00    
 
 Fifth 
 1.00    
 
 Sixth and  
thereafter 
 0.00    
 
 
Class B shares will convert automatically to Class A shares eight  
years after the date on which they were purchased and thereafter will no  
longer be subject to any distribution fees.  There also will be converted  
at that 
 
 
Purchase of Shares (continued)  
 
time such proportion 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.  See ''Prospectus Summary   
Alternative Purchase Arrangements -  Class B Shares Conversion Feature.''  
The length of time that CDSC Shares acquired through an exchange have  
been held will be calculated from the date that the shares exchanged were  
initially acquired in one of the other applicable Smith Barney Mutual  
Funds, and Fund shares being redeemed will be considered to represent, as  
applicable, capital appreciation or dividend and capital gain  
distribution reinvestments in such other funds.  For Federal income tax  
purposes, the amount of the CDSC will reduce the gain or increase the  
loss, as the case may be, on the amount realized on redemption.  The  
amount of any CDSC will be paid to Smith Barney.  
 
To provide an example, assume an investor purchased 100 Class B shares  
at $10 per share for a cost of $1,000.  Subsequently, the investor  
acquired 5 additional shares through dividend reinvestment.  During the  
fifteenth month after the purchase, the investor decided to redeem $500  
of his or her investment.  Assuming at the time of the redemption the net  
asset value had appreciated to $12 per share, the value of the investor's  
shares would be $1,260 (105 shares at $12 per share).  The CDSC would not  
be applied to the amount which represents appreciation ($200) and the  
value of the reinvested dividend shares ($60).  Therefore, $240 of the  
$500 redemption proceeds ($500 minus $260) would be charged at a rate of  
4.00% (the applicable rate for Class B shares) for a total deferred sales  
charge of $9.60.  
 
WAIVERS OF CDSC  
 
The CDSC will be waived on: (a) exchanges (see ''Exchange  
Privilege''); (b) automatic cash withdrawals in amounts equal to or less  
than 1.00% per month of the value of the shareholder's shares at the time  
the withdrawal 
 
 
Purchase of Shares (continued)  
 
plan commences (see ''Automatic Cash Withdrawal Plan'') (provided,  
however, that automatic cash withdrawals in amounts equal to or less than  
2.00% per month of the value of the shareholder's shares will be  
permitted for withdrawal plans that were established prior to November 7,  
1994); (c) redemptions of shares within 12 months following the death or  
disability of the shareholder; (d) redemptions of shares made in  
connection with qualified distributions from retirement plans or IRAs  
upon the attainment of age 59; (e) involuntary redemptions; and (f)  
redemptions of shares to effect a combination of the Fund with any  
investment company by merger, acquisition of assets or otherwise.  In  
addition, a shareholder who has redeemed shares from other Smith Barney  
Mutual Funds may, under certain circumstances, reinvest all or part of  
the redemption proceeds within 60 days and receive pro rata credit for  
any CDSC imposed on the prior redemption.  
 
CDSC waivers will be granted subject to confirmation (by Smith Barney  
in the case of shareholders who are also Smith Barney clients or by the  
Transfer Agent in the case of all other shareholders) of the  
shareholder's status or holdings, as the case may be.  
 
SMITH BARNEY 401(k) PROGRAM AND EXECCHOICE PROGRAMS 
 
During the continuous offering period, investors may be eligible to  
participate in the Smith Barney 401(k) Program or the Smith Barney  
ExecChoice Program.  To the extent applicable, the same terms and  
conditions, which are outlined below, are offered to all plans  
participating ("Participating Plans") in these programs. 
  
Each Fund offers to Participating Plans Class A and Class C shares as  
investment alternatives under the Smith Barney 401(k) and ExecChoice  
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 contingent deferred sales  
charge ("CDSC").  Once a Participating Plan has made an initial  
investment in a 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 a 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 a 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 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 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 a 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 enrollment 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 Participating 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 a 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  
previously qualified for an exchange into Class A shares will be offered  
the opportunity to exchange all of its Class C shares for Class A shares  
of a Fund, regardless of asset size, at the end of the eighth year after  
the date the Participating 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 subject to  
the distribution fee. 
  
 
 
 
Participating Plans wishing to acquire shares of a Fund through the  
Smith Barney 401(k) Program or the Smith Barney ExecChoice Program must  
purchase such shares directly from the Transfer Agent.  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 any Participating 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 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 the exchange has occurred, a Participating 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 Participating  
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 feature 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 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 applicability 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 termination 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 Participating  
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 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 Fundamental Value Fund Inc.  
Smith Barney Growth Opportunity Fund  
Smith Barney Managed Growth Fund  
Smith Barney Natural Resources Fund Inc.  
Smith Barney Special Equities Fund  
 
Growth and Income Funds  
Smith Barney Convertible Fund  
Smith Barney Funds, Inc. - Equity Income Portfolio  
Smith Barney Growth and Income Fund  
Smith Barney Premium Total Return Fund  
Concert Social Awareness 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  
 
Exchange Privilege (continued) 
 
International Funds  
Smith Barney World Funds, Inc. -  Emerging Markets Portfolio  
Smith Barney World Funds, Inc.  - European Portfolio  
Smith Barney World Funds, Inc. - Global Government Bond Portfolio  
Smith Barney World Funds, Inc. -  International Balanced Portfolio  
Smith Barney World Funds, Inc. - International Equity Portfolio  
Smith Barney World Funds, Inc. -  Pacific Portfolio  
 
Smith Barney Concert Allocation Series Inc.  
Smith Barney Concert Allocation Series Inc. - Balanced Portfolio  
Smith Barney Concert Allocation Series Inc. - Conservative Portfolio  
Smith Barney Concert Allocation Series Inc. - Growth Portfolio  
Smith Barney Concert Allocation Series Inc. - High Growth Portfolio  
Smith Barney Concert Allocation Series Inc. - Income Portfolio  
 
Money Market Funds  
Smith Barney Exchange Reserve Fund  
Smith Barney Money Funds, Inc. - Cash Portfolio  
Smith Barney Money Funds, Inc. - Government Portfolio  
***	Smith Barney Money Funds, Inc. - Retirement Portfolio  
Smith Barney Municipal Money Market Fund, Inc.  
Smith Barney Muni Funds -  California Money Market Portfolio  
Smith Barney Muni Funds - New York Money Market Portfolio  
 
	*	Available for exchange with Class A, Class C and Class Y shares of  
the Fund.  
	**	Available for exchange with Class A and Class B and 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, shareholders who own Class C shares of the Fund through  
the Smith Barney 401(k) and ExecChoice Programs may exchange those  
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 in any of the funds  
imposing a CDSC higher 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. 
 
 
Exchange Privilege (continued)  
 
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 imposition of any charge.  
 
Additional Information Regarding the Exchange Privilege.  Although the  
exchange privilege is an important benefit, excessive exchange  
transactions can be detrimental to the Fund's performance and its  
shareholders.  SBMFM may determine that a pattern of frequent exchanges  
is excessive and contrary to the best interests of the Fund's other  
shareholders.  In this event, the Fund may, at its discretion, decide to  
limit additional purchases and/or exchanges by a shareholder.  Upon such  
a determination, the Fund will provide notice in writing or by telephone  
to the shareholder at least 15 days prior to suspending the exchange  
privilege and during the 15 day period the shareholder will be required  
to (a) redeem his or her shares in the Fund or (b) remain invested in the  
Fund or exchange into any of the funds of the Smith Barney Mutual Funds  
ordinarily available, which position the shareholder would be expected to  
maintain for a significant period of time.  All relevant factors will be  
considered in determining what constitutes an abusive pattern of  
exchanges.  
 
Certain shareholders may be able to exchange shares by telephone.  See  
''Redemption of Shares - Telephone Redemption and Exchange Program.''  
Exchanges will be processed at the net asset value next determined.   
Redemption procedures discussed below are also applicable for exchanging  
shares, and exchanges will be made upon receipt of all supporting  
documents in proper form.  If the account registration of the shares of  
the fund being acquired is identical to the registration of the shares of  
the fund exchanged, no signature guarantee is required. 
 
 
Exchange Privilege (continued)  
 
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 shares tendered to it, as described  
below, at a redemption price equal to their net asset value per share  
next determined after receipt of a written request in proper form at no  
charge other than any applicable CDSC.  Redemption requests received  
after the close of regular trading on the NYSE are priced at the net  
asset value next determined.  
 
If a shareholder holds shares in more than one Class, any request for  
redemption must specify the Class being redeemed.  In the event of a  
failure to specify which Class, or if the investor owns fewer shares of  
the Class than specified, the redemption request will be delayed until  
the Transfer Agent receives further instructions from Smith Barney, or if  
the shareholder's account is not with Smith Barney, from the shareholder  
directly.  The redemption proceeds will be remitted on or before the  
third business day following receipt of proper tender, except on any days  
on which the NYSE is closed or as permitted under the Investment Company  
Act of 1940, as amended (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 
 
 
Redemption of Shares (continued)  
 
investor's Financial Consultant, Introducing Broker or dealer in the  
selling group or by submitting a written request for redemption to:  
 
Smith Barney Large Capitalization Growth 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 registered.  If the shares to be redeemed were issued in  
certificate form, the certificates must be endorsed for transfer (or be  
accompanied by an endorsed stock power) and must be submitted to 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 guarantor institution such as a  
domestic bank, savings and loan institution, domestic credit union,  
member bank of the Federal Reserve System or member firm of a national  
securities exchange.  Written redemption requests of $2,000 or less do  
not require a signature guarantee unless more than one such redemption  
request is made in any 10-day period or the redemption proceeds are to be  
sent to an address other than the address of record.  Unless otherwise  
directed, redemption proceeds will be mailed to an investor's address of  
record.  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.  
 
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, including a signature guarantee, that will be  
provided by First Data upon request.  (Alternatively, an investor may  
authorize telephone redemptions on the new account application with a  
signature guarantee when making his/her initial investment in the Fund.)  
 
Redemptions.  Redemption requests of up to $10,000 of any class or  
classes of the Fund's shares may be made by eligible shareholders by  
calling 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. 
 
 
Redemption of Shares (continued)  
 
A shareholder will have the option of having the redemption proceeds  
mailed to his/her address of record or wired to a bank account  
predesignated by the shareholder.  Generally, redemption proceeds will be  
mailed or wired, as the case may be, on the next business day following  
the redemption request.  In order to use the wire procedures, the bank  
receiving the proceeds must be a member of the Federal Reserve System or  
have a correspondent relationship with a member bank.  The Fund reserves  
the right to charge shareholders a nominal fee for each wire redemption.   
Such charges, if any, will be assessed against the shareholder's account  
from which shares were redeemed.  In order to change the bank account  
designated to receive redemption proceeds, a shareholder must complete a  
new Telephone/Wire Authorization Form and, for the protection of the  
shareholder's assets, will be required to provide a signature guarantee  
and certain other documentation.  
 
Exchanges.  Eligible shareholders may make exchanges by telephone if  
the account registration of the 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 the NYSE  
is open.  
 
Additional Information Regarding Telephone Redemption and Exchange  
Program.  Neither the Fund nor its agents will be liable for following  
instructions communicated by telephone that are reasonably believed to be  
genuine.  The Fund and its agents will employ procedures designed to  
verify the identity of the caller and legitimacy of instructions (for  
example, a shareholder's name and account number will be required and  
phone calls may be recorded).  The Fund reserves the right to suspend,  
modify or discontinue the telephone redemption and exchange program or to  
impose a charge for this service at any time following at least seven (7)  
days prior notice to shareholders.  
 
AUTOMATIC CASH WITHDRAWAL PLAN  
 
The Fund offers shareholders an automatic cash withdrawal plan, under  
which shareholders who own shares with a value of at least $10,000 may  
elect to receive 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 
 
 
Redemption of Shares (continued)  
 
withdrawn by a shareholder that exceed 1.00% per month of the value of  
the shareholder's shares subject to the CDSC at the time the withdrawal  
plan commences.  (With respect to withdrawal plans in effect prior to  
November 7, 1994, any applicable CDSC will be waived on amounts withdrawn  
that do not exceed 2.00% per month of the shareholder's shares subject to  
the CDSC.) For further information regarding the automatic cash  
withdrawal plan, shareholders should contact a Smith Barney Financial  
Consultant.  
 
Minimum Account Size  
 
The Fund reserves the right to involuntarily liquidate any  
shareholder's account in the Fund if the aggregate net asset value of the  
shares held in the Fund account is less than $500.  (If a shareholder has  
more than one account in the Fund, each account must satisfy the minimum  
account size.) The Fund, however, will not redeem shares based solely on  
market reductions in net asset value.  Before the Fund exercises such  
right, shareholders will receive written notice and will be permitted 60  
days to bring accounts up to the minimum to avoid involuntary  
liquidation.  
 
Performance  
 
From time to time the Fund may advertise its total return and average  
annual total 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 investment at the end of  
the period so calculated by the initial amount invested and subtracting  
100%.  The standard average annual total return, as prescribed by the SEC  
is derived from this total return, which provides the ending redeemable  
value.  Such standard total return information may also be accompanied  
with nonstandard total return information for differing periods computed  
in the same manner but without annualizing the total return or taking  
sales charges into account.  The Fund 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. 
 
 
Management of the Fund  
 
BOARD OF TRUSTEES 
 
Overall responsibility for the management and supervision of the Trust  
rests with the Trust's Board of Trustees.  The Trustees approve all  
significant agreements between the Trust and the persons and companies  
that furnish services to the Fund, including agreements with the Fund's  
distributor, investment manager, custodian and transfer agent.  The day- 
to-day operations of the Fund are delegated to the Fund's investment  
manager.  The Statement of Additional Information contains background  
information regarding each Trustee of the Trust and executive officers of  
the Fund.  
 
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 approved by the Trust's Board of Trustees on April  
16, 1997.  SBMFM (through predecessor entities) has been in the  
investment counseling business since 1934 and is a registered investment  
adviser.  SBMFM renders investment advice to investment companies that  
had aggregate assets under management as of March 31, 1997 in excess of  
$80 billion.  
 
Subject to the supervision and direction of the Trust's Board of  
Trustees, SBMFM manages the Fund's portfolio in accordance with the  
Fund's stated investment objective and policies, makes investment  
decisions for the Fund, places orders to purchase and sell securities,  
and employs professional portfolio managers and securities analysts who  
provide research services to the Fund.  For investment management  
services rendered, the Fund pays SBMFM a monthly fee at the annual rate  
of 0.75% of the value of the Fund's average daily net assets. 
 
PORTFOLIO MANAGEMENT  
 
Alan Blake, Investment Officer of SBMFM and Managing Director of Smith  
Barney Investment Advisors, a division of Smith Barney Inc., is the  
portfolio manager and manages the day-to-day operations of the Fund,  
including making all investment decisions. 
 
Distributor  
 
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 an annual 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 an annual 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 which 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 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; the cost of printing and mailing  
prospectuses to potential investors; payments to and expenses of Smith  
Barney Financial Consultants and other persons who provide support  
services in connection with the distribution of shares; interest and/or  
carrying charges; and indirect and overhead costs of Smith Barney  
associated with the sale of Fund shares, including lease, utility,  
communications and sales promotion expenses.  
 
The payments to Smith Barney Financial Consultants for selling shares  
of a Class include a commission or fee paid by the investor or Smith  
Barney at the time of sale and, with respect to Class A, Class B and  
Class C shares, a continuing fee for servicing shareholder accounts for  
as long as a shareholder remains a holder of that Class.  Smith Barney  
Financial Consultants may receive different levels of compensation for  
selling different Classes of shares.  
 
Payments under the Plan are not tied exclusively to the distribution  
and shareholder service expenses actually incurred by Smith Barney and  
the payments may exceed distribution expenses actually incurred.  The  
Fund's Board of Directors will evaluate the appropriateness of the Plan  
and its payment terms on a continuing basis and in so doing will consider  
all relevant factors, including expenses borne by Smith Barney, amounts  
received under the Plan and proceeds of the CDSC.  
 
Additional Information  
 
The Trust was organized on October 17, 1991 under the laws of the  
Commonwealth of Massachusetts and is a business entity commonly known as  
a "Massachusetts business trust."  The Trust offers shares of beneficial  
interest of separate funds with a par value of $.001 per share.  The Fund  
offers shares of beneficial interest currently classified into four  
Classes - A, B, C and Y.  Each Class of the Fund represents an identical  
interest in the Fund's investment portfolio.  As a result, the Classes  
have the same rights, privileges and preferences, except with respect to:  
(a) the designation of each Class; 
 
 
 
Additional Information (continued) 
 
(b) the effect of the respective sales charges; if any, for each Class;  
(c) the distribution and/or service fees borne by each Class pursuant to  
the Plan; (d) the expenses allocable exclusively to each Class; (e)  
voting rights on matters exclusively affecting a single Class; (f) the  
exchange privilege of each Class; and (g) the conversion feature of the  
Class B shares.  The Trust's Board of Trustees does not anticipate that  
there will be any conflicts among the interests of the holders of the  
different Classes.  The Trustees, on an ongoing basis, will consider  
whether any such conflict exists and, if so, take appropriate action. 
 
The Fund does not hold annual shareholder meetings.  There normally  
will be no meetings of shareholders for the purpose of electing Trustees  
unless and until such time as less than a majority of the Trustees  
holding office have been elected by shareholders, at which time the  
Trustees then in office will call a shareholders' meeting for the  
election of Trustees.  Shareholders of record of no less than two-thirds  
of the outstanding shares of the Trust may remove a Trustee through a  
declaration in writing or by vote cast in person or by proxy at a meeting  
called for that purpose.  The Trustees will call a meeting for any  
purpose upon written request of shareholders holding at least 10% of the  
Trust's outstanding shares and the Trust will assist shareholders in  
calling such a meeting as required by the 1940 Act. 
 
When matters are submitted for shareholder vote, shareholders of each  
Class will have one vote for each full share owned and a proportionate,  
fractional vote for any fractional share held of that Class.  Generally,  
shares of the Fund will be voted on a Fund-wide basis on all matters  
except matters affecting only the interests of one Class, in which case  
only shares of the affected Class would be entitled to vote. 
 
PNC Bank, National Association, located at 17th and Chestnut Streets,  
Philadelphia, Pennsylvania 19103, serves as custodian of the Fund's  
investments. 
 
First Data, located at Exchange Place, Boston, Massachusetts 02109,  
serves as the Fund's transfer agent. 
 
The Fund sends its shareholders a semi-annual report and an audited  
annual report, which include listings 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 Fund plans to consolidate the  
mailing of its semi-annual and annual reports by household.  This  
consolidation means that a household having multiple accounts with the  
identical address of record will receive a single copy of each report.   
Shareholders who do not want this consolidation to apply to their  
accounts should contact their Smith Barney Financial Consultant or the  
Fund's Transfer Agent.  
 
 
 
 
 
 
 
LOGO  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Smith Barney 
Large 
Capitalization 
Growth Fund Inc. 
 
 
388 Greenwich Street 
 New York, New York 10013  
 
 
 
 
 
FD		/97 
 
  
 
 
 
 
 
 
 
 
 
 
 
37 
 
 


PART B
Smith Barney 
INVESTMENT TRUST 
388 Greenwich Street 
New York, New York 10013 
(212) 723-9218 
	March 25, 1997 
	As amended July __, 1997 
 
This Statement of Additional Information supplements the information contained  
in the current Prospectuses of the Smith Barney Intermediate Maturity  
California Municipals Fund (the "California Fund"), the Smith Barney  
Intermediate Maturity New York Municipals Fund (the "New York Fund") dated  
March 25, 1997 and the prospectus of the Smith Barney
Large Capitalization Growth Fund  
("Large Capitalization Growth Fund") dated July __, 1997, as amended or  
supplemented from time to time and should be read in conjunction with the  
Prospectuses.  The Prospectuses may be obtained by contacting a Smith Barney  
Financial Consultant, or by writing or calling Smith Barney Investment Trust  
(the "Trust"), of which each of California Fund, New York Fund and Large  
Capitalization Fund (individually referred to as a "Fund" and collectively  
referred to as the "Funds") is a series, at the address or telephone number  
set forth above.  This Statement of Additional Information, although not in  
itself a prospectus, is incorporated by reference into each Prospectus in its  
entirety. 
TABLE OF CONTENTS 
For ease of reference, the same section headings used in this Statement of  
Additional Information are identical to those used in each Prospectus except  
as noted in parentheses below: 
Management of the Trust and the Funds				1 
Investment Objectives and Management Policies the New York & California Fund	 
	7 
Investment Objectives & Management Policy for Large Capitalization Growth Fund 
			34 
Purchase of Shares		38 
Redemption of Shares 		39 
Distributor		40 
Valuation of Shares		43 
Exchange Privilege		44 
Performance Data (See in the Prospectuses "Performance ")		44 
Taxes (See in the Prospectuses "Dividend, Distribution and Taxes")	 
	50 
Additional Information		52 
Financial Statements		53 
Appendix		54 
MANAGEMENT OF THE TRUST AND THE FUNDS 
The executive officers of the Funds are employees of certain of the  
organizations that provide services to the Fund.  These organizations are as  
follows: 
NAME	SERVICE 
Smith Barney Inc. ("Smith Barney")	Distributor 
Smith Barney Mutual Funds Management Inc. 
("SBMFM")		Investment Adviser and Administrator  
for the New York and California Fund 
SBMFM.		Investment Manager for the Large  
Capitalization Fund 
PNC Bank, National Association ("PNC")	Custodian 
First Data Investor Services Group, Inc., 
("First Data")		Transfer Agent 
These organizations and the functions they perform for the Funds are discussed  
in the Prospectuses and in this Statement of Additional Information 
 
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST 
The names of the Trustees of the Trust and executive officers of the Funds,  
together with information as to their principal business occupations, are set  
forth below.  The executive officers of the Funds are employees of  
organizations that provide services to the Funds.  Each Trustee who is an  
"interested person" of the Trust, as defined in the Investment Company Act of  
1940, as amended (the "1940 Act"), is indicated by an asterisk. 
Herbert Barg, Trustee (Age 73).  Private investor.  His address is 273  
Montgomery Avenue, Ball Cynwyd, Pennsylvania 19004. 
Alfred J. Bianchetti, Trustee (Age 74).  Retired; formerly Senior  
consultant to Dean Witter Reynolds Inc.  His address is 19 Circle End Drive,  
Ramsey, New Jersey 07466. 
Martin Brody Trustee (Age 75).  Vice Chairman of the Board of Restaurant  
Associates, Corp.  His address is HMK Associates, 30 Columbia Turnpike,  
Florham Park, New Jersey 07932. 
Dwight B. Crane, Trustee (Age 59).  Professor, Graduate School of  
Business Administration, Harvard University; Business Consultant.  His address  
is Graduate School of Business Administration, Harvard University, Boston,  
Massachusetts 02163. 
Burt N. Dorsett, Trustee (Age 67).  Managing Partner of Dorsett, McCabe  
Capital Management, Inc., an investment counseling firm; Director of Research  
Corporation Technologies Inc., a non-profit patent-clearing and licensing  
firm.  His address is 540 Madison Avenue, New York, New York 10021. 
Elliot S. Jaffe, Trustee (Age 70).  Chairman of the Board and Chief  
Executive of The Dress Barn, Inc.  His address is 30 Dunnigan Drive, Suffern,  
New York 10901. 
Stephen E. Kaufman, Trustee (Age 65).  Attorney.  His address is 277  
Park Avenue, New York, New York 10172. 
Joseph J. McCann, Trustee  (Age 66).  Financial Consultant.  His address  
is 200 Oak Park Place, Pittsburgh, Pennsylvania 15243. 
Heath B. McLendon, Chairman of the Board and Investment Officer (Age  
63).  Managing Director of Smith Barney, Chairman of Smith Barney Strategy  
Advisers Inc. and President of SBMFM; prior to July 1993, Senior Executive  
Vice President of Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers")  
and Vice Chairman of Asset Management Division of Shearson Lehman Brothers.   
Mr. McLendon is Chairman of the Board of 42 Smith Barney Mutual Funds.  His  
address is 388 Greenwich Street, New York, New York 10013. 
Cornelius C. Rose, Jr., Trustee (Age 63).  Chairman of the Board,  
Cornelius C. Rose Associates, Inc., financial consultants, and Chairman and  
Director of Performance Learning Systems, an education consultant.  His  
address is P.O. Box 355, Fair Oaks, Enfield, New Hampshire 03748. 
James J. Crisona, Trustee emeritus (Age 89).  Attorney; formerly Justice  
of the Supreme Court of the State of New York.  His address is 118 East 60th  
Street, New York, New York 10022. 
Jessica M. Bibliowicz, President (Age 37).  Executive Vice President of  
Smith Barney; prior to 1994, Director of Sales and Marketing for Prudential  
Mutual Funds; prior to 1990, First Vice President, Asset Management Division  
of Shearson Lehman Brothers.  Ms. Bibliowicz serves as President of 40 Smith  
Barney Mutual Funds.  Her address is 388 Greenwich Street; New York, New York  
10013. 
Lewis E. Daidone, Senior Vice President and Treasurer (Age 39).   
Managing Director of Smith Barney; and Chief Financial Officer of the Smith  
Barney Mutual Funds; Director and Senior Vice President of SBMFM; Prior to  
January 1990, Senior Vice President and Chief Financial Officer of Cortland  
Financial Group, Inc.  Mr. Daidone serves as Senior Vice President and  
Treasurer of 42 Smith Barney Mutual Funds.  His address is 388 Greenwich  
Street, New York, New York 10013. 
Joseph P. Deane, Vice President and Investment Officer (Age 49).   
Investment Officer of SBMFM; prior to July 1993, Managing Director of Shearson  
Lehman Advisors.  Mr. Deane also serves as Investment Officer of 5 Smith  
Barney Mutual Funds.  His address is 388 Greenwich Street, New York, New York  
10013. 
Peter Coffey, Vice President and Investment Officer (Age 52).   
Investment Officer of SBMFM; Managing Director of Greenwich Street Advisors, a  
division of SBMFM; Mr. Coffey also serves as Investment Officer of 8 Smith  
Barney Mutual Funds.  His address is 388 Greenwich Street, New York, New York  
10013. 
Alan Blake (Age 48), Managing Director of Smith Barney Investment  
Advisors, a division of Smith Barney.  His address is 388 Greenwich Street,  
New York, New York 10013. 
Christina T. Sydor, Secretary (Age 46).  Managing Director of Smith  
Barney; General Counsel and Secretary of SBMFM.  Ms. Sydor serves as Secretary  
of 42 Smith Barney Mutual Funds.  Her address is 388 Greenwich Street New  
York, New York 10013. 
As of March 6, 1997, the Trustees and officers, as a group, owned less than  
1.00% of the outstanding common stock of each Fund.  To the best knowledge of  
the Trustees, as of March 6, 1997, no shareholder or "group" (as that term is  
used in Section 13(d) of the Securities and Exchange Act of 1934) owned  
beneficially or of record more than 5% of the shares of either Fund. 
No officer, director or employee of Smith Barney or any of its affiliates  
receives any compensation from the Trust for serving as an officer of the  
Funds or Trustee of the Trust.  The Trust pays each Trustee who is not an  
officer, director or employee of Smith Barney or any of its affiliates a fee  
of $4,000 per annum plus $500 per in-person meeting and $100 per telephonic  
meeting.  Each Trustee emeritus who is not an officer, director or employee of  
Smith Barney or its affiliates receives a fee of $2,000 per annum plus $250  
per in-person meeting and $50 per telephonic meeting.  All Trustees are  
reimbursed for travel and out-of-pocket expenses incurred to attend such  
meetings. 
 
 
For the fiscal year ended November 30, 1996, the Trustees of the Trust were  
paid the following compensation:  
 
<TABLE> 
<CAPTION> 
 
Trustee (*)                        Aggregate Compensation         Aggregate Compensation  
                                         from the Trust                          from all Smith Barney  
                                                                                         Mutual Funds ** 
                                                                                                                  
<S>                                   <C>                                        <C>   
Herbert Barg (18) 	$6,600                                      $105,175     
 
Alfred J. Bianchetti (13) 	  6,500                                        51,500 
 
Martin Brody (21)               6,500                                      124,286 
 
Dwight B. Crane (24) 	  6,500                                      140,375 
 
Burt N. Dorsett (13) 	  6,100+                                     47,400+ 
 
Elliot S. Jaffe (13)               6,600                                       51,100 
 
Stephen E. Kaufman (15) 	  6,600                                       92,336 
 
Joseph J. McCann (13)        6,600                                      52,700 
 
Heath B. McLendon (42) 	   --                                                   -- 
 
Cornelius C. Rose (13)         6,600                                      51,400 
</TABLE> 
 
*	Number of directorships/trusteeships held with other Smith Barney Mutual  
Funds. 
**	Aggregate compensation for all Smith Barney Mutual Funds is for calendar  
year ended December 31, 	1996. 
+ 	Pursuant to the Funds' deferred compensation plan, Mr. Dorsett has elected  
to defer the payment of some or all of the compensation due to him from  
the Funds. 
 
Investment Adviser and Administrator for New York and California Fund - SBMFM 
SBMFM serves as investment adviser to each of the Funds pursuant to an  
investment advisory agreement with the Trust which was most recently approved  
by the Board of Trustees, including a majority of Trustees who are not  
"interested persons" of the Trust or SBMFM, on July 17, 1996.  SBMFM is a  
wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings"), which, in  
turn, is a wholly owned subsidiary of Travelers Group Inc. ("Travelers").  The  
Advisory Agreement is dated July 30, 1993 (the "Advisory Agreement"), and was  
first approved by the Trustees, including a majority of those Trustees who are  
not "interested persons" of the Trust or Smith Barney, on April 7, 1993.  The  
services provided by SBMFM under the Advisory Agreement are described in the  
Prospectuses under "Management of the Trust and the Fund." SBMFM pays the  
salary of any officer and employee who is employed by both it and the Trust.   
SBMFM bears all expenses in connection with the performance of its services. 
As compensation for investment advisory services, each Fund pays SBMFM a fee  
computed daily and paid monthly at the annual rate of 0.30% of the Fund's  
average daily net assets. 
 
 
For the fiscal year ended November 30, 1994, the Funds paid SBMFM, and/or its  
predecessor investment adviser, investment advisory fees, and the investment  
adviser waived fees and reimbursed expenses as follows: 
 
<TABLE> 
<CAPTION> 
 
                                                                       Fees Waived 
                                                                       and Expenses 
Fund                           Fees Paid                     Reimbursed 
 
<S>                             <C>                             <C>  
California Fund            $12,828                       $ 98,519 
 
New York Fund              97,097                        144,592 
 
</TABLE> 
 
For the fiscal year ended November 30, 1995, the Funds paid SBMFM investment  
advisory fees, and the investment adviser waived fees and reimbursed expenses  
as follows:  
 
 
<TABLE> 
<CAPTION> 
 
                                                                       Fees Waived 
                                                                       and Expenses 
Fund                           Fees Paid                     Reimbursed 
<S>                             <C>                             <C> 
California Fund           $22,385                       $ 65,910 
 
New York Fund             82,898                        115,831 
 
</TABLE> 
 
For the fiscal year ended November 30, 1996, the Funds paid SBMFM investment  
advisory fees, and the investment adviser waived fees and reimbursed expenses  
as follows: 
 
 
<TABLE> 
<CAPTION> 
 
                                                                       Fees Waived 
                                                                       and Expenses 
Fund                           Fees Paid                     Reimbursed 
<S>                             <C>                             <C> 
 
California Fund           $       0                          $128,361 
 
New York Fund            32,306                           122,796 
</TABLE> 
 
SBMFM also serves as administrator to the New York and California Funds  
pursuant to a written agreement dated April 20, 1994 (the "Administration  
Agreement"), which was most recently approved by the Trustees of the Trust,  
including a majority of Trustees who are not "interested persons" of the Trust  
or SBMFM, on July 17, 1996.  The services provided by SBMFM under the  
Administration Agreement are described in the Prospectuses under "Management  
of the Trust and the Fund." SBMFM pays the salary of any officer and employee  
who is employed by both it and the Trust and bears all expenses in connection  
with the performance of its services. 
As compensation for administrative services rendered to each Fund, SBMFM  
receives a fee computed daily and paid monthly at the annual rate of 0.20% of  
the Fund's average daily net assets. 
Prior to June 26, 1995, and July 10, 1995, for New York Fund and California  
Fund, respectively, The Boston Company Advisors, Inc. ("Boston Advisors"), an  
indirect wholly owned subsidiary of Mellon Bank Corporation, served as the  
Funds' sub-administrator. 
 
 
For the fiscal year ended November 30, 1994, the Funds paid Boston Advisors  
and SBMFM administration fees and Boston Advisors and SBMFM waived fees as  
follows:  
 
 
<TABLE> 
<CAPTION> 
 
                                                                       Fees Waived 
                                                                       and Expenses 
Fund                           Fees Paid                     Reimbursed 
 
<S>                             <C>                             <C> 
California Fund           $ 7,330                         $56,297 
 
New York Fund            55,483                          82,625 
</TABLE> 
 
For the fiscal year ended November 30, 1995 the Funds paid SBMFM  
administration fees and SBMFM waived fees as follows: 
 
 
<TABLE> 
<CAPTION> 
 
                                                                       Fees Waived 
                                                                       and Expenses 
Fund                           Fees Paid                     Reimbursed 
 
<S>                             <C>                             <C> 
California Fund           $17,121                        $37,626 
 
New York Fund            47,695                          65,864 
</TABLE> 
 
For the fiscal year ended November 30, 1996 the Funds paid SBMFM  
administration fees and SBMFM waived fees as follows: 
 
 
<TABLE> 
<CAPTION> 
 
                                                                       Fees Waived 
                                                                       and Expenses 
Fund                           Fees Paid                     Reimbursed 
 
<S>                             <C>                             <C> 
California Fund           $       0                         $85,575 
 
New York Fund            10,906                          92,495 
</TABLE> 
 
The Trust bears expenses incurred in its operation, including: taxes,  
interest, brokerage fees and commissions, if any; fees of Trustees who are not  
officers, directors, shareholders or employees of Smith Barney or SBMFM,  
Securities and Exchange Commission ("SEC") fees and state Blue Sky  
qualification fees; charges of custodians; transfer and dividend disbursing  
agent fees; certain insurance premiums; outside auditing and legal expenses;  
costs of maintaining corporate existence; costs of investor services  
(including allocated telephone and personnel expenses); costs of preparing and  
printing prospectuses for regulatory purposes and for distribution to existing  
shareholders; costs of shareholders' reports and shareholder meetings; and  
meetings of the officers or Board of Trustees of the Trust. 
SBMFM has agreed that if in any fiscal year the aggregate expenses of the  
Trust (including fees pursuant to the Advisory Agreement and Administration  
Agreement, but excluding interest, taxes, brokerage fees paid pursuant to the  
Trust's services and distribution plan, and, with the prior written consent of  
the necessary state securities commissions, extraordinary expenses) exceed the  
expense limitation of any state having jurisdiction over the Trust, SBMFM  
will, to the extent required by state law, reduce its fees by the amount of  
such excess expenses.  Such fee reductions, if any, will be reconciled on a  
monthly basis.  The most restrictive state limitation currently applicable to  
the Trust would require SBMFM to reduce its fees in any year that such  
expenses exceed 2.50% of the first $30 million of average daily net assets,  
2.00% of the next $70 million of average daily net assets and 1.50% of the  
remaining average daily net assets.  No fee reduction was required for the  
fiscal years ended November 30, 1994, 1995 and 1996. 
 
 
Investment Manager For Large Capitalization Growth Fund - SBMFM 
SBMFM serves as investment manager to the Large Capitalization Growth Fund  
pursuant to an investment management agreement with the Trust which was  
approved by the Board of Trustees, including a majority of Trustees who are  
not "interested persons" of the Trust or SBMFM, on April 16, 1997.  SBMFM is a  
wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings"), which in  
turn, is a wholly owned subsidiary of Travelers Group Inc. ("Travelers").  The  
services provided by SBMFM under the Investment Management Agreement are  
described in the prospectus under "Management of the Trust and the Fund."   
SBMFM pays the salary of any officer and employee who is employed by both it  
and the Trust.  SBMFM bears all expenses in connection with the performance of  
its services. 
As compensation for investment management services, the Large Capitalization  
Growth Fund pays SBMFM a fee computed daily and paid monthly at the annual  
rate of 0.75% of the Fund's average daily net assets. 
Counsel and Auditors 
Willkie Farr & Gallagher serves as legal counsel to the Trust.  The Trustees  
who are not "interested persons" of the Trust have selected Stroock & Stroock  
& Lavan LLP as their counsel. 
KPMG Peat Marwick LLP, independent auditors, 345 Park Avenue, New York, New  
York 10154, have been selected to serve as auditors of the Trust and to render  
opinions on the Fund's financial statements for the fiscal year ended November  
30, 1997. 
 
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES  
FOR THE NEW YORK AND CALIFORNIA FUND 
The Prospectuses discuss the investment objective of each Fund and the  
principal policies to be employed to achieve that objective.  Supplemental  
information is set out below concerning the types of securities and other  
instruments in which the Funds may invest, the investment policies and  
strategies that the Funds may utilize and certain risks attendant to those  
investments, policies and strategies. 
United States Government Securities 
Securities issued or guaranteed by the United States government or one of its  
agencies, authorities or instrumentalities ("U.S. government securities") in  
which each of the California Fund and the New York Fund may invest include  
debt obligations of varying maturities issued by the United States Treasury or  
issued or guaranteed by an agency or instrumentality of the United States  
government, including the Federal Housing Administration, Export-Import Bank  
of the United States, Small Business Administration, Government National  
Mortgage Association, General Services Administration, Federal Home Loan  
Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit  
Banks, Federal National Mortgage Association, Maritime Administration,  
Tennessee Valley Authority, District of Columbia Armory Board, Student Loan  
Marketing Association, Resolution Trust Corporation and various institutions  
that previously were or currently are part of the Farm Credit System (which  
has been undergoing a reorganization since 1987).  Direct obligations of the  
United States Treasury include a variety of securities that differ in their  
interest rates, maturities and dates of issuance.  Because the United States  
government is not obligated by law to provide support to an instrumentality  
that it sponsors, neither of the Funds will invest in obligations issued by an  
instrumentality of the United States government unless SBMFM determines that  
the instrumentality's credit risk does not make its securities unsuitable for  
investment by the Fund. 
Municipal Obligations 
Each of the Funds invests principally in debt obligations issued by, or on  
behalf of, states, territories and possessions of the United States and the  
District of Columbia and their political subdivisions, agencies and  
instrumentalities or multistate agencies or authorities, the interest from  
which debt obligations is, in the opinion of bond counsel to the issuer,  
excluded from gross income for Federal income tax purposes ("Municipal  
Obligations").  Municipal Obligations generally are understood to include debt  
obligations issued to obtain funds for various public purposes, including the  
construction of a wide range of public facilities, refunding of outstanding  
obligations, payment of general operating expenses and extensions of loans to  
public institutions and facilities.  Private activity bonds that are issued by  
or on behalf of public authorities to finance privately operated facilities  
are considered to be Municipal Obligations if the interest paid on them  
qualifies as excluded from gross income (but not necessarily from alternative  
minimum taxable income) for Federal income tax purposes in the opinion of bond  
counsel to the issuer.  Municipal Obligations may be issued to finance life  
care facilities, which are an alternative form of long-term housing for the  
elderly that offer residents the independence of a condominium life-style and,  
if needed, the comprehensive care of nursing home services.  Bonds to finance  
these facilities have been issued by various state industrial development  
authorities.  Because the bonds are secured only by the revenues of each  
facility and not by state or local government tax payments, they are subject  
to a wide variety of risks, including a drop in occupancy levels, the  
difficulty of maintaining adequate financial reserves to secure estimated  
actuarial liabilities, the possibility of regulatory cost restrictions applied  
to health care delivery and competition from alternative health care or  
conventional housing facilities. 
Municipal Leases 
Municipal leases are Municipal Obligations that may take the form of a lease  
or an installment purchase issued by state and local government authorities to  
obtain funds to acquire a wide variety of equipment and facilities such as  
fire and sanitation vehicles, computer equipment and other capital assets.   
These obligations have evolved to make it possible for state and local  
government authorities to acquire property and equipment without meeting  
constitutional and statutory requirements for the issuance of debt.  Thus,  
municipal leases have special risks not normally associated with Municipal  
Obligations.  These obligations frequently contain "non-appropriation" clauses  
that provide that the governmental issuer of the municipal lease has no  
obligation to make future payments under the lease or contract unless money is  
appropriated for such purposes by the legislative body on a yearly or other  
periodic basis.  In addition to the non-appropriation risk, municipal leases  
represent a type of financing that has not yet developed the depth of  
marketability associated with Municipal Obligations; moreover, although the  
obligations will be secured by the leased equipment, the disposition of the  
equipment in the event of foreclosure might prove difficult.  In order to  
limit the risks, the Fund will purchase either (a) municipal leases that are  
rated in the four highest categories by Moody's Investor Services, Inc.  
("Moody's") or Standard & Poor's Corporation ("S&P") or (b) unrated municipal  
leases that are purchased principally from domestic banks or other responsible  
third parties that have entered into an agreement with the Fund providing the  
seller will either remarket or repurchase the municipal leases within a short  
period after demand by the Fund. 
From time to time, proposals to restrict or eliminate the Federal income tax  
exemption for interest on Municipal Obligations have been introduced before  
Congress.  Similar proposals may be introduced in the future.  In addition,  
the Internal Revenue Code of 1986, as amended, (the "Code") currently provides  
that small issue private activity bonds will not be tax-exempt if the bonds  
were issued after December 31, 1986, and the proceeds were used to finance  
projects other than manufacturing facilities. 
Special Considerations Relating To California 
Exempt Obligations 
As indicated in its Prospectus, the California Fund seeks its objective by  
investing principally in a portfolio of Municipal Obligations, the interest  
from which is exempt from California State personal income taxes ("California  
Exempt Obligations").   
Some of the significant financial considerations relating to the California  
Fund's investments in California Exempt Obligations are summarized below.   
This summary information is derived principally from official statements and  
prospectuses relating to securities offerings of the State of California and  
various local agencies in California, available as of the date of this  
Statement of Additional lnformation and does not purport to be a complete  
description of any of the considerations mentioned herein.  It is also based  
on the disclosure statement filed in the County of Orange bankruptcy case.   
The accuracy and completeness of the information contained in such official  
statements and disclosure statement has not been independently verified. 
Risk Factors 
Beginning in the 1990-91 fiscal year, California faced the worst economic,  
fiscal and budget conditions since the 1930s.  Construction, manufacturing  
(especially aerospace), exports and financial services, among others, were  
severely affected.  Job losses were the worst of any post-war recession and  
have been estimated to exceed 800,000. 
The recession seriously affected State tax revenues.  It also caused increased  
expenditures for health and welfare programs.  The State has also faced a  
structural imbalance in its budget with the largest programs supported by the  
General Fund K-12 schools and community colleges, health, welfare and  
corrections growing at rates higher than the growth rates for the principal  
revenue sources of the General Fund.  (The General Fund, the State's main  
operating fund, consists of revenues which are not required to be credited to  
any other fund.)  The State experienced recurring budget deficits.  The State  
Controller reported that expenditures exceeded revenues for the four of the  
six fiscal years ending with 1992-93, and were essentially equal in 1993-94.   
According to the Department of Finance, the State suffered a continuing budget  
deficit of approximately $2.8 billion in the Special Fund for Economic  
Uncertainties.  (Special Funds account for revenues obtained from specific  
revenue sources, and which are legally restricted to expenditures for  
specified purposes.)  The 1993-94 Budget Act incorporated a Deficit Reduction  
Plan to repay this deficit over two years.  The original budget for 1993-94  
reflected revenues which exceeded expenditures by approximately $2.8 billion.   
As a result of continuing recession, the excess of revenues over expenditures  
for the 1993-94 fiscal year was less than $300 million.  The accumulated  
budget deficit at June 30, 1994 was not able to be retired by June 30, 1995 as  
planned.  When the economy failed to recover sufficiently in 1993-94, a second  
two-year plan was implemented in 1994-95.  The accumulated budget deficits  
over the past several years, together with expenditures for school funding  
which have not been reflected in the budget, and the reduction of available  
internal borrowable funds, have combined to significantly deplete the State's  
cash resources to pay its ongoing expenses.  In order to meet its cash needs,  
the State has had to rely for several years on a series of external  
borrowings, including borrowings past the end of a fiscal year.  At the end of  
its 1995-96 fiscal year, however, the State did not borrow moneys into the  
subsequent fiscal year. 
Since the severe recession, California's economy has been recovering.   
Employment has grown by over 500,000 in 1994 and 1995, and the prerecession  
level of total employment is expected to be matched by early 1996.  The  
strongest growth has been in export-related industries, business services,  
electronics, entertainment and tourism, all of which have offset the  
recession-related losses which were heaviest in aerospace and defense-related  
industries (accounting for approximately two-thirds of the job losses),  
finance and insurance.  Residential housing construction, with new permits for  
under 100,000 annual new units issued in 1994 and 1995, is weaker than in  
previous recoveries, but has been growing slowly since 1993. 
Sectors which are now contributing to California's recovery include  
construction and related manufacturing, wholesale and retail trade,  
transportation and several service industries such as amusements and  
recreation, business services, and management consulting.  Electronics is  
showing modest growth and the rate of decline in aerospace manufacturing is  
slowly diminishing.  As a result of these factors, average 1994 non-farm  
employment exceeded expectations and grew beyond 1993 levels. 
Many California counties continue to be under severe fiscal stress.  Such  
stress has impacted smaller, rural counties and larger urban counties such as  
Los Angeles, and Orange County which declared bankruptcy in 1994.  Orange  
County has implemented significant reductions in services and personnel, and  
continues to face fiscal constraints in the aftermath of its bankruptcy. 
The 1994-95 Fiscal Year represented the fourth consecutive year the Governor  
and Legislature were faced with a very difficult budget environment to produce  
a balanced budget.  Many program cuts and budgetary adjustments have already  
been made in the last three years.  The Governor's May Revision to his budget  
proposal, recognized that the accumulated deficit could not be repaid in one  
year, and proposed a two-year solution.  The May Revision sets forth revenue  
and expenditure forecasts and revenue and expenditure proposals which would  
result in operating surpluses for the budget for both 1994-95 and 1995-96, and  
would lead to the elimination of the accumulated budget deficit, estimated at  
about $2.0 billion at June 30, 1994, by June 30, 1996. 
The 1994-95 Budget Act, signed by the Governor on July 8, 1994, projects  
revenues and transfers of $41.9 billion, about $2.1 billion higher than  
revenues in 1993-94.  This reflected the Administration's forecast of an  
improved economy.  Also included in this figure was the projected receipt of  
about $360 million from the Federal government to reimburse the State for the  
cost of incarcerating undocumented immigrants. 
The 1994-95 Budget Act projects General Fund expenditures of $40.9 billion, an  
increase of $1.6 billion over 1993-94.  The Budget Act also projected Special  
Fund expenditures of $13.7 billion, a 5.4% increase over 1993-94 estimated  
expenditures.  The principal features of the Budget Act were the following:  
1.	Reductions of approximately $1.1 billion in health and welfare costs. 
2.	A General Fund increase of approximately $38 million in support for  
the University of California and $65 million for California State  
University.  It was anticipated that student fees for both the U.C. and  
the C.S.U. will increase up to 10%. 
3.	Proposition 98 funding for K-14 schools was increased by $526 million  
from 1993-94 levels, representing an increase for enrollment growth and  
inflation.  Consistent with previous budget agreements, Proposition 98  
funding provided approximately $4,217 per student for K-12 schools,  
equal to the level in the past three years. 
4.	Legislation enacted with the Budget clarified laws passed in 1992 and  
1993 requiring counties and other local agencies to transfer funds to  
local school districts, thereby reducing State aid.  Some counties had  
implemented programs providing less moneys to schools if there were  
redevelopment agencies projects.  The legislation banned this method of  
transfer.  If all counties had implemented this method, General Fund aid  
to K-12 schools would have increased by $300 million in each of the  
1994-95 and 1995-96 Fiscal Years. 
5.	The Budget Act provided funding for anticipated growth in the State's  
prison inmate population, including provisions for implementing recent  
legislation (the so-called "Three Strikes" law) which requires mandatory  
life sentences for certain third-time felony offenders. 
6.	Additional miscellaneous cuts ($500 million) and fund transfers ($255  
million) totaling in the aggregate approximately $755 million. 
The 1994-95 Budget Act contained no tax increases.  Under legislation enacted  
for the 1993-94 Budget, the renters' tax credit was suspended for 1993 and  
1994.  A ballot proposition to permanently restore the renters' credit after  
this year failed at the June 1994 election.  The Legislature enacted a further  
one-year suspension of the renters' tax credit, saving about $390 million in  
the 1995-96 Fiscal Year.  The 1994-95 Budget assumed that the State will use a  
cash flow borrowing program in 1994-95 which would combine one-year notes and  
warrants.  Issuance of warrants would allow the State to defer repayment of  
approximately $1 billion of its accumulated budget deficit into the 1995-96  
Fiscal Year. 
May 1995 reports by the Department of Finance indicated that General Fund  
revenues for the 1994-95 Fiscal Year exceeded projections, and expenditures  
were lower than projected due to slower than anticipated health/welfare  
caseload growth and school enrollments.  The overall effect was to improve the  
budget by approximately $500 million, leaving an estimated deficit of about  
$630 million as of June 30, 1995. 
Department of Finance analysis of the 1994-95 fiscal Year budget indicated  
that approximately $98 million was appropriated for the State to offset costs  
of incarcerating illegal immigrants, in contrast to the $356 million assumed  
for this purpose by the State's 1994-95 Budget Act. Approximately $33 million  
of these funds were estimated to be received by the State during the 1994-95  
Fiscal Year, with the remainder to be received the following fiscal year.   
Departing from 1994-95 Fiscal Year assumptions, the federal budget contains  
$400 million in additional funding for refugee assistance and health costs.   
However, the Department of Finance did not expect that the State would  
continue its efforts to obtain all or a portion of these federal funds. 
The state began the 1995-96 Fiscal Year with strengthening revenues based on  
an improving economy and the smallest nominal "budget gap" to be closed in  
many years. 
The 1995-96 Budget Act, signed by the Governor on August 3, 1995, projects  
General Fund revenues and transfers of $44.1 billion, about $2.2 billion  
higher than projected revenues in 1994-95.  The Budget Act projects Special  
Fund revenues of $21.7 billion, an increase from $12.1 billion projected in  
1994-95.  The Department of Finances released updated projections for the  
1995-96 fiscal year in May, 1996, estimating that revenues and transfers to be  
$46.1 billion, approximately $2 billion over the original fiscal year  
estimate. Expenditures also increased, to an estimated $45.4 billion, as a  
result of the requirement to expend revenues for schools under Proposition 98,  
and, among other things, failure of the federal government to budget new aid  
for illegal immigrant costs which had been counted on to allow reductions in  
costs. 
The principal features of the Budget Act were the following: 
1. 	Proposition 98 funding for schools and community colleges will  
increase by about $1 billion (General Fund) and $1.2 billion total  
above revised 1994-95 levels.  Because of higher than projected  
revenues in 1994-95, an additional $543 million is appropriated to the  
1994-95 Proposition 98 entitlement.  A significant component of this  
amount is a block grant of about $54 per pupil for any one-time  
purpose.  Per-pupil expenditures are projected to increase by another  
$126 in 1995-96 to $4,435.  A full 2.7% cost of living allowance is  
funded for the first time in several years.  The budget compromise  
anticipated a settlement of the CTA v. Gould litigation. 
2. 	Cuts in health and welfare costs totaling about $900 million, some of  
which would require federal legislative approval. 
3. 	A 3.5% increase in funding for the University of California ($90  
million General Fund) and the California State University system ($24  
million General Fund), with no increases in student fees. 
4. 	The updated Budget assumes receipt of $494 million in new federal aid  
for costs of illegal immigrants, in excess of federal government  
commitments. 
5. 	General Fund support for the Department of corrections is increased  
by about 8 percent over 1994-95, reflecting estimates of increased  
prison population.  This amount is less than was proposed in the 1995  
Governor's Budget. 
 
 
 
1996-97 Budget 
The 1996-97 Budget Act was signed by the Governor on July 15, 1996, and  
projected General Fund revenues and transfers of approximately $47.64 billion  
and General Fund expenditures of approximately $47.25 billion.  The Governor  
vetoed abut $82 million of appropriations (both General Fund and Special Fund)  
and the State has implemented its regular cash flow borrowing program with the  
issuance of $3.0 billion of Revenue Anticipation Notes to mature on or before  
June 30, 1997.  The 1996-97 Budget Act appropriated a budget reserve in the  
Special Fund for Economic Uncertainties of $305 million, as of June 30, 1997.   
The Department of Finance projects that, on June 30, 1997, the State's  
available internal borrowable (cash) resources will be approximately $2.9  
billion, after payment of all obligations due by that date, so that no cross- 
fiscal year borrowing will be needed. 
The State Legislature rejected the Governor's proposed 15% cut in personal  
income taxes (to be phased over three years), but did approve a 5% cut in bank  
and corporation taxes, to be effective for income years starting on June 1,  
1997.  As a result, revenues for the Fiscal Year will be an estimated $550  
million higher than projected in the May Revision to the 1996-97 Budget, and  
are now estimated to total $47.643 billion, a 3.3 percent increase over the  
final estimated 1995-96 revenues.  Special Fund revenues are estimated to be  
$13.3 billion. 
The Budget Act contains General Fund appropriations totaling $47.251 billion,  
a 4.0 percent increase over the final estimated 1995-96 expenditures.  Special  
Fund expenditures are budgeted at $12.6 billion. 
The following are the principal features of the 1996-97 Budget Act: 
1. 	Proposition 98 funding for schools and community colleges will  
increase by about $1.6 billion.  Almost half of this money was budgeted  
to fund class-size reduction in kindergarten and grades 1-3.  Also, for  
the second year in a row, the full cost of living allowance (3.2  
percent) was funded.  The Proposition 98 increases have brought K-12  
expenditures to almost $4,800 per pupil (also called per ADA, or  
Average Daily Attendance), an almost 15% increase over the level  
prevailing during the recession years.  Community colleges will receive  
an increase in funding of $157 million for 1996-97 out of this $1.6  
billion total. 
2. 	Proposed cuts in health and welfare totaling $660 million.  All of  
these cuts require federal law changes (including welfare reform),  
federal waivers, or federal budget appropriations in order to be  
achieved.  The 1996-97 Budget Act assumes approval/action by October,  
1996, with the savings to be achieved beginning in November, 1996.  The  
1996-97 Budget Act was based on continuation of previously approved  
assistance levels for Aid to Families with Dependent Children and other  
health and welfare programs, which had been reduced in prior years,  
including suspension of State authorized cost of living increases.   
Part of the federal actions referred to above is approval to maintain  
reduced assistance levels in 1996-97.  The Legislature did not approve  
the Governor's proposal for further cuts in these assistance levels.   
The Budget Act does include some $92 million for a variety of  
preventive programs in health and social services areas such as the  
prevention of teenage pregnancy and domestic violence. 
3. 	A 4.9 percent increase in funding for the University of California  
($130 million General Fund) and the California State University system  
($101 million General Fund), with no increases in student fees,  
maintaining the second year of the Governor's four-year "Compact" with  
the State's higher education units. 
4. 	The 1996-97 Budget Act assumed the federal government will provide  
approximately $700 million in new aid for incarceration and health care  
costs of illegal immigrants.  These funds reduce appropriations in  
these categories that would otherwise have to be paid from the General  
Fund.  (For purposes of cash flow projections, the Department of  
Finance expects $540 million of this amount to be received during the  
1996-97 fiscal year.) 
5. 	General Fund support for the Department of Corrections was increased  
by about 7 percent over the prior year, reflecting estimates of  
increased prison population. 
6. 	With respect to aid to local governments, the principal new programs  
included in the 1996-97 Budget Act are $100 million in grants to cities  
and counties for law enforcement purposes, and budgeted $50 million for  
competitive grants to local governments for programs to combat juvenile  
crime.  The 1996-97 Budget Act also assumed that legislation will be  
adopted to revise the Trial Court Funding program, so that future  
increases in trial court costs will be funded by the State; this change  
will not have a significant impact in 1996-97. 
The 1996-97 Budget Act did not contain any tax increases.  As noted, there was  
a reduction in corporate taxes.  In addition, the Legislature approved another  
one-year suspension of the Renters Tax Credit, saving $520 million in  
expenditures. 
THE FOREGOING DISCUSSION IS BASED ON OFFICIAL STATEMENTS AND OTHER 
INFORMATION  
PROVIDED BY THE STATE OF CALIFORNIA.  THE STATE HAS INDICATED THAT ITS  
DISCUSSION OF BUDGETARY INFORMATION IS BASED ON ESTIMATES AND PROJECTIONS 
OF  
REVENUES AND EXPENDITURES FOR THE CURRENT FISCAL YEAR AND MUST NOT BE  
CONSTRUED AS STATEMENTS OF FACT; THE ESTIMATES AND PROJECTIONS ARE BASED 
UPON  
VARIOUS ASSUMPTIONS WHICH MAY BE AFFECTED BY NUMEROUS FACTORS, INCLUDING  
FUTURE ECONOMIC CONDITIONS IN THE STATE AND THE NATION, AND THERE CAN BE 
NO  
ASSURANCE THAT THE ESTIMATES WILL BE ACHIEVED. 
Recent Voter Initiative 
"Proposition 218" or the "Right to vote on Taxes Act" (the "Proposition") was  
approved by the California electorate at the November, 1996 general election.   
Officially titled "Voter Approval For Local Government Taxes, Limitation on  
Fees, Assessments and Charges Initiative Constitutional Amendment," the Act  
was approved by a majority of the voters voting at the election and adds  
Articles XIIIC and XIIID to the California Constitution. 
The Proposition, among other things, requires local government to follow  
certain procedures in imposing or increasing any fee or charge as defined.   
"Fee" or "charge" is defined to mean "any levy other than an ad valorem tax, a  
special tax or an assessment imposed by an agency upon a parcel or upon a  
person as an incident of property ownership, including user fees or charges  
for a property related service." 
The procedure required by the Proposition to impose or increase any fee or  
charge include a public hearing upon the proposed fee or charge and the  
opportunity to present written protests by the owners of the parcels subject  
to the proposed fee or charge.  If written protests against the proposed fee  
or charge are presented by a majority of owners of the identified parcels, the  
local government shall not impose the fee or charge. 
The Proposition further provides as follows: 
"Except for fees or charges for sewer, water, and refuse collection  
services, no property related fee or charge shall be imposed or increased  
unless and until such fee or charge is submitted and approved by a majority  
vote of the property owners of the property subject to the fee or charge  
or, at the option of the agency, by a two thirds vote of the electorate  
residing in the affected area." 
Additionally, the Proposition provides, with respect to standby charges, as  
follows: 
"No fee or charge may be imposed for a service unless that service is  
actually used by, or immediately available to, the owner of the property in  
question.  Fees or charges based on potential or future use of a service  
are not permitted.  Standby charges, whether characterized as charges or  
assessments, shall be classified as assessments and shall not be imposed  
without compliance with Section 4 of this Article." 
The Proposition provides that beginning July 1, 1997, all fees and charges  
shall comply with the Proposition's requirements. 
The Proposition is silent with respect to future increases of pre-existing  
fees or charges which are pledged to payment of indebtedness or obligations  
previously incurred by the local government.  Presumably, the Proposition  
cannot preempt outstanding contractual obligations protected by the contract  
impairment clause of the federal constitution.  However, with respect to any  
given situation or case, litigation may be the method which will settle any  
question concerning the authority of a local government to increase fees or  
charges outside of the strictures of the Proposition in order to meet  
contractual obligations. 
Proposition 218 also contains a new provision subjecting "matters of reducing  
or repealing any local tax, assessments and charges" to the initiative power.   
This means that no city or local agency revenue source is safe from reduction  
or repeal pursuant to the initiative process. 
Litigation concerning various elements of the Proposition may ultimately ensue  
and clarifying legislation may be enacted. 
State Appropriations Limit 
The State is subject to an annual appropriations limit imposed by Article  
XIIIB of the State Constitution (the "Appropriations Limit"), and is  
prohibited from spending "appropriations subject to limitation" in excess of  
the Appropriations Limit.  Article XIIIB originally adopted in 1979, was  
modified substantially by Propositions 98 and 111 in 1988 and 1990,  
respectively.  "Appropriations subject to limitation" are authorizations to  
spend "proceeds of taxes," which consist of tax revenues and certain other  
funds, including proceeds from regulatory licenses, user charges or other fees  
to the extent that such proceeds exceed the reasonable cost of providing the  
regulation, product or service.  The Appropriations Limit is based on the  
limit for the prior year, adjusted annually for certain changes, and is tested  
over consecutive two-year periods.  Any excess of the aggregate proceeds of  
taxes received over such two-year period above the combined Appropriation  
Limits for those two years is divided equally between transfers to K-14  
districts and refunds to taxpayers. 
Exempted from the Appropriation Limit are debt service costs of certain bonds,  
court or federally mandated costs, and, pursuant to Proposition 111, qualified  
capital outlay projects and appropriations or revenues derived from any  
increase in gasoline taxes and motor vehicle weight fees above January 1, 1990  
levels.  Some recent initiatives were structured to create new tax revenues  
dedicated to specific uses and expressly exempted from the Article XIIIB  
limits.  The Appropriations Limit may also be exceeded in cases of emergency  
arising from civil disturbance or natural disaster declared by the Governor  
and approved by two-thirds of the Legislature.  If not so declared and  
approved, the Appropriations Limit for the next three years must be reduced by  
the amount of the excess. 
Article XIIIB, as amended by Proposition 98 on November 8, 1988, also  
establishes a minimum level of state funding for school and community college  
districts and requires that excess revenues up to a certain limit be  
transferred to schools and community college districts instead of returned to  
the taxpayers.  Determination of the minimum level of funding is based on  
several tests set forth in proposition 98.  During fiscal year 1991-1992  
revenues were smaller than expected, thus reducing the payment owed to schools  
in 1991-92 under alternate "test" provisions.  In response to the changing  
revenue situation, and to fully fund the Proposition 98 guarantee in the 1991- 
1992 and 1992-1993 fiscal years without exceeding it, the Legislature enacted  
legislation to reduce 1991-92 appropriations.  The amount budgeted to schools  
but which exceeded the reduced appropriations treated as a non-Proposition 98  
short-term loan in 1991-92.  As part of the 1992-93 Budget, $1.083 billion of  
the amount budgeted to K-14 schools was designated to "repay" the prior year  
loan, thereby reducing cash outlays in 1992-93 by that amount.  To maintain  
per-average daily attendance ("ADA") funding, the 1992-93 Budget included  
loans of $732 million to K-12 schools and $241 million to community colleges,  
to be repaid from future Proposition 98 entitlements.  The 1993-94 Budget also  
provided new loans to $609 million to K-12 schools and $178 million to  
community colleges to maintain ADA funding.  These loans have been combined  
with the 1992-93 fiscal year loans into one loan of $1.760 billion, to be  
repaid from future years' Proposition 98 entitlements, and conditioned upon  
maintaining current funding levels per pupil at K-12 schools. 
A Sacramento County Superior Court in California Teachers Association, et al.  
v Gould, et al., ruled that the 1992-93 loans to K-12 schools and community  
colleges violate Proposition 98.  As part of the negotiations leading to the  
1995-96 Budget Act, an oral agreement was reached to settle this case.  The  
parties reached a conditional final settlement of the case in April, 1996.   
The settlement required adoption of legislation satisfactory to the parties to  
implement its terms, which has occurred, and final approval by the court,  
which was pending in early July, 1996. 
The settlement provides, among other things, that both the State and K-14  
schools share in the repayment of prior years' emergency loans to schools.  Of  
the total $1.76 billion in loans, the State will repay $935 million by  
forgiveness of the amount owed, while schools will repay $825 million.  The  
State share of the repayment will be reflected as expenditures above the  
current Proposition 98 base circulation.  The schools' share of the repayment  
will count as appropriations that count toward satisfying the Proposition 98  
guarantee, or from "below" the current base.  Repayments are to be spread over  
the eight-year period beginning 1994-95 through 2002-03.  Once the Director of  
Finance certifies that a settlement has occurred, approximately $377 million  
in appropriations from the 1995-96 fiscal year to schools will be disbursed. 
Because of the complexities of Article XIIIB, the ambiguities and possible  
inconsistencies in its terms, the applicability of its exceptions and  
exemptions and the impossibility of predicting future appropriations, the  
Trust cannot predict the impact of this or related legislation on the bonds in  
the Trust Portfolio.  Other Constitutional amendments affecting state and  
local taxes and appropriations have been proposed from time to time.  If any  
such initiatives are adopted, the state could be pressured to provide addition  
financial assistance to local governments or appropriate revenues as mandated  
by such initiatives.  Propositions such a Proposition 98 and others that may  
be adopted in the future, may place increasing pressure on the State's budget  
over future years, potentially reducing resources available for other State  
programs, especially to the extent that the Article XIIIB spending limit would  
restrain the State's ability to fund such other programs by raising taxes. 
State Indebtedness 
As of July 1, 1996, the State had over $18.20 billion aggregate amount of its  
general obligation bonds outstanding.  General obligation bond authorizations  
in an aggregate amount of approximately $4.31 billion remained unissued as of  
July 1, 1996.  The State also builds and acquires capital facilities through  
the use of lease purchase borrowing.  As of July 1, 1996, the State had  
approximately $5.85 billion of outstanding Lease-Purchase Debt. 
In addition to the general obligation bonds, State agencies and authorities  
had approximately $20.77 billion aggregate principal amount of revenue bonds  
and notes outstanding as of June 30,1996.  Revenue bonds represent both  
obligations payable from State revenue-producing enterprises and projects,  
which are not payable from the General Fund, and conduit obligations payable  
only from various public works and exposition projects, educational facilities  
(including the California State University and University of California's  
systems), housing, health facilities and pollution control facilities. 
Litigation 
The State is a party to numerous legal proceedings.  In addition, the State is  
involved in certain other legal proceedings that, if decided against the  
State, might require the State to make significant future expenditures or  
impair future revenue sources.  Examples of such cases include challenges to  
certain vehicle license fees and challenges to the State's use of Public  
Employee Retirement System funds to offset future State and local pension  
contributions.  Other cases which could significantly impact revenue or  
expenditures involve challenges of payments of wages under the Fair Labor  
Standards Act, the method of determining gross insurance premiums involving  
health insurance, property tax challenges, challenges of transfer of moneys  
from State Treasury special fund accounts to the State's General Fund pursuant  
to 1991, 1992, 1993 and 1994 Budget Acts.  Because of the prospective nature  
of these proceedings, it is not presently possible to predict the outcome of  
such litigation or estimate the potential impact on the ability of the State  
to pay debt service on its obligation. 
Ratings 
During 1996, the ratings of California's general obligation bonds was upgraded  
by the following rating agencies.  Recently Standard & Poor's Ratings Group  
upgraded its rating of such debt to A+; the same rating has been assigned to  
such debt by Fitch Investors Service.  Moody's Investors Service has assigned  
such debt an A1 rating.  There is no assurance that such ratings will continue  
for any given period of time or that they will not be revised downward or  
withdrawn entirely if, in the judgment of the particular rating agency,  
circumstances so warrant. 
The Trust believes the information summarized above describes some of the more  
significant aspects relating to the California Trust.  The sources of such  
information are Preliminary Official Statements and Official Statements  
relating to the State's general obligation bonds and the States revenue  
anticipation notes, or obligations of other issuers located in the State of  
California, or other publicly available documents.  Although the Sponsor has  
not independently verified this information, it has no reason to believe that  
such information is not correct in all material respects. 
CONSTITUTIONAL, LEGISLATIVE AND OTHER FACTORS.  Certain California  
Constitutional amendments, legislative measures, executive orders,  
administrative regulations and voter initiatives could result in the adverse  
effects described below.  The following information constitutes only a brief  
summary, does not purport to be a complete description, and is based on  
information drawn from official statements and prospectuses relating to  
securities offerings the State of California and various local agencies in  
California available as of the date of the Statement of Additional  
Information.   
Certain of the California Municipal Obligations in which the Fund may invest  
may be obligations of issuers which rely in whole or in part on California  
State revenues for payment of these obligations.  Property tax revenues and a  
portion of the State's General Fund surplus are distributed to counties,  
cities and their various taxing entities and the State assumes certain  
obligations therefore paid out of local funds.  Whether and to what extent a  
portion of the State's General Fund will be distributed in the future to  
counties, cities and their various entities, is unclear.  In 1988, California  
enacted legislation providing for a water's-edge combined reporting method if  
an election fee was paid and other conditions met.  On October 6, 1993,  
California Governor Pete Wilson signed Senate Bill 671 (Alquist) which  
modifies the unitary tax law by deleting the requirements that a taxpayer  
electing to determine its income on a water's-edge basis pay a fee and file a  
domestic disclosure spreadsheet and instead requiring an annual information  
return.  The Franchise Tax Board is reported to have estimated state revenue  
losses from the Legislation as growing from $27 million in 1993-94 to $616  
million in 1999-2000, but others, including former Assembly Speaker Willie  
Brown, disagree with that estimate and assert that more revenue will be  
generated for California, rather than less, because of an anticipated increase  
in economic activity and additional revenue generated by the incentives in the  
Legislation.   
Certain of the California Municipal Obligations may be obligations of issuers  
who rely in whole or in part on ad valorem real property taxes as a source of  
revenue.  On June 6, 1978, California voters approved an amendment to the  
California Constitution known as Proposition 13, which added Article XIIIA to  
the California Constitution.  The effect of Article XIIIA is to limit ad  
valorem taxes on real property and to restrict the ability of taxing entities  
to increase real property tax revenues.  On November 7, 1978, California  
voters approved Proposition 8, and on June 3, 1986, California voters approved  
Proposition 46, both of which amended Article XIIIA.  Section 1 of Article  
XIIIA limits the maximum ad valorem tax on real property to 1% of full cash  
value (as defined in Section 2), to be collected by the counties and  
apportioned according to law; provided that the 1% limitation does not apply  
to ad valorem taxes or special assessments to pay the interest and redemption  
charges on (a) any indebtedness approved by the voters prior to July 1, 1978,  
or (b) any bonded indebtedness for the acquisition or improvement of real  
property approved on or after July 1, 1978, by two-thirds of the votes cast by  
the voters voting on the proposition.  Section 2 of Article XIIIA defines  
"full cash value" to mean "the County Assessor's valuation of real property as  
shown on the 1975/76 tax bill under 'full cash value' or, thereafter, the  
appraised value of real property when purchased, newly constructed, or a  
change in ownership has occurred after the 1975 assessment." The full cash  
value may be adjusted annually to reflect inflation at a rate not to exceed 2%  
per year, or reduction in the consumer price index or comparable local data,  
or reduced in the event of declining property value caused by damage,  
destruction or other factors.  The California State Board of Equalization has  
adopted regulations, binding on county assessors, interpreting the meaning of  
"change in ownership" and "new construction" for purposes of determining full  
cash value of property under Article XIIIA. 
Legislation enacted by the California Legislature to implement Article XIIIA  
(Statutes of 1978, Chapter 292, as amended) provides that notwithstanding any  
other law, local agencies may not levy any ad valorem property tax except to  
pay debt service on indebtedness approved by the voters prior to July 1, 1978,  
and that each county will levy the maximum tax permitted by Article XIIIA of  
$4.00 per $100 assessed valuation (based on the former practice of using 25%,  
instead of 100%, of full cash value as the assessed value for tax purposes).   
The legislation further provided that, for the 1978/79 fiscal year only, the  
tax levied by each county was to be apportioned among all taxing agencies  
within the county in proportion to their average share of taxes levied in  
certain previous years.  The apportionment of property taxes for fiscal years  
after 1978/79 has been revised pursuant to Statutes of 1979, Chapter 282,  
which provides relief funds from State moneys beginning in fiscal year 1979/80  
and is designed to provide a permanent system for sharing State taxes and  
budget funds with local agencies.  Under Chapter 282, cities and counties  
receive more of the remaining property tax revenues collected under  
Proposition 13 instead of direct State aid.  School districts receive a  
correspondingly reduced amount of property taxes, but receive compensation  
directly from the State and are given additional relief.  Chapter 282 does not  
affect the derivation of the base levy ($4.00 per $100 of assessed valuation)  
and the bonded debt tax rate. 
On November 6, 1979, an initiative known as "Proposition 4" or the "Gann  
Initiative" was approved by the California voters, which added Article XIIIB  
to the California Constitution.  Under Article XIIIB, State and local  
governmental entities have an annual "appropriations limit" and are not  
allowed to spend certain monies called "appropriations subject to limitation"  
in an amount higher than the "appropriations limit." Article XIIIB does not  
affect the appropriation of moneys which are excluded from the definition of  
"appropriations subject to limitation," including debt service on indebtedness  
existing or authorized as of January 1, 1979, or bonded indebtedness  
subsequently approved by the voters.  In general terms, the "appropriations  
limit" is required to be based on the limit for the prior year adjusted  
annually for certain changes and is tested over consecutive two year periods.   
Article XXIIIB also provides that any excess of aggregate proceeds of taxes  
received over such two year period above the combined appropriation limits for  
those two years is divided equally between transfers to K-14 districts and  
refunds to taxpayers. 
At the November 8, 1988 general election, California voters approved an  
initiative known as Proposition 98.  This initiative amends Article XIIIB to  
require that (a) the California Legislature establish a prudent state reserve  
fund in an amount as it shall deem reasonable and necessary and (b) revenues  
in excess of amounts permitted to be spent and which would otherwise be  
returned pursuant to Article XIIIB by revision of tax rates or fee schedules,  
be transferred and allocated (up to a maximum of 4%) to the State School Fund  
and be expended solely for purposes of instructional improvement and  
accountability.  No such transfer or allocation of funds will be required if  
certain designated state officials determine that annual student expenditures  
and class size meet certain criteria as set forth in Proposition 98.  Any  
funds allocated to the State School Fund shall cause the appropriation limits  
established in Article XIIIB to be annually increased for any such allocation  
made in the prior year. 
Proposition 98 also amends Article XVI to require that the State of California  
provide a minimum level of funding for public schools and community colleges.   
Commencing with the 1988-89 fiscal year, state monies to support school  
districts and community college districts shall equal or exceed the lesser of  
(a) an amount equaling the percentage of state general revenue bonds for  
school and community college districts in fiscal year 1986-87, or (b) an  
amount equal to the prior year's state general fund proceeds of taxes  
appropriated under Article XIIIB plus allocated proceeds of local taxes, after  
adjustment under Article XIIIB.  The initiative permits the enactment of  
legislation, by a two-thirds vote, to suspend the minimum funding requirement  
for one year. 
On June 30, 1989, the California Legislature enacted Senate Constitutional  
Amendment 1, a proposed modification of the California Constitution to alter  
the spending limit and the education funding provisions of Proposition 98.   
Senate Constitutional Amendment 1, on the June 5, 1990 ballot as Proposition  
111, was approved by the voters and took effect on July 1, 1990.  Among a  
number of important provisions, Proposition 111 recalculates spending limits  
for the State and for local governments, allows greater annual increases to  
the limits, allows the averaging of two years' tax revenues before requiring  
action regarding excess tax revenues, reduces the amount of the funding  
guarantee in recession years for school districts and community college  
districts (but with a floor of 40.9% of State General Fund tax revenues),  
removes the provision of Proposition 98 which included excess moneys  
transferred to school districts and community college districts in the base  
calculation for the next year, limits the amount of State tax revenue over the  
limit which would be transferred to school districts and community college  
districts, and exempts increased gasoline taxes and truck weight fees from the  
State appropriations limit.  Additionally, Proposition 111 exempts from the  
State appropriations limit funding for capital outlays. 
Article XIIIB, like Article XIIIA, may require further interpretation by both  
the Legislature and the courts to determine its applicability to specific  
situations involving the State and local taxing authorities.  Depending upon  
the interpretation, Article XIIIB may limit significantly a governmental  
entity's ability to budget sufficient funds to meet debt service on bonds and  
other obligations. 
On November 4, 1986, California voters approved an initiative statute known as  
Proposition 62.  This initiative (a) requires that any tax for general  
governmental purposes imposed by local governments be approved by resolution  
or ordinance adopted by a two-thirds vote of the governmental entity's  
legislative body and by a majority vote of the electorate of the governmental  
entity, (b) requires that any special tax (defined as taxes levied for other  
than general governmental purposes) imposed by a local governmental entity be  
approved by a two-thirds vote of the voters within that jurisdiction, (c)  
restricts the use of revenues from a special tax to the purposes or for the  
service for which the special tax was imposed, (d) prohibits the imposition of  
ad valorem taxes on real property by local governmental entities except as  
permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes  
and sales taxes on the sale of real property by local governments, (f)  
requires that any tax imposed by a local government on or after August 1, 1985  
be ratified by a majority vote of the electorate within two years of the  
adoption of the initiative or be terminated by November 15, 1988, (g) requires  
that, in the event a local government fails to comply with the provisions of  
this measure, a reduction in the amount of property tax revenue allocated to  
such local government occurs in an amount equal to the revenues received by  
such entity attributable to the tax levied in violation of the initiative, and  
(h) permits these provisions to be amended exclusively by the voters of the  
State of California.  A decision of the California Supreme Court upholding the  
validity of Proposition 62 became final in December of 1995. 
On November 8, 1988, California voters approved Proposition 87.  Proposition  
87 amended Article XVI, Section 16, of the California Constitution by  
authorizing the California Legislature to prohibit redevelopment agencies from  
receiving any of the property tax revenue raised by increased property tax  
rates levied to repay bonded indebtedness of local governments which is  
approved by voters on or after January 1, 1989.  It is not possible to predict  
whether the California Legislature will enact such a prohibition nor is it  
possible to predict the impact of Proposition 87 on redevelopment agencies and  
their ability to make payments on outstanding debt obligations. 
Certain California Exempt Obligations in which the Fund may invest may be  
obligations that are payable solely from the revenues of health care  
institutions.  Certain provisions under California law may adversely affect  
such revenues and, consequently, payment on those California Exempt  
Obligations. 
The Federally sponsored Medicaid program for health care services to eligible  
welfare beneficiaries in California is known as the Medi-Cal program.   
Historically, the Medi-Cal program has provided for a cost-based system of  
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any  
hospital wanting to participate in the Medi-Cal program, provided such  
hospital met applicable requirements for participation.  California law now  
provides that the State of California shall selectively contract with  
hospitals to provide acute inpatient services to Medi-Cal patients.  Medi-Cal  
contracts currently apply only to acute inpatient services.  Generally, such  
selective contracting is made on a flat per diem payment basis for all  
services to Medi-Cal beneficiaries, and generally such payment has not  
increased in relation to inflation, costs or other factors.  Other reductions  
or limitations may be imposed on payment for services rendered to Medi-Cal  
beneficiaries in the future. 
Under this approach, in most geographical areas of California, only those  
hospitals which enter into a Medi-Cal contract with the State of California  
will be paid for non-emergency acute inpatient services rendered to Medi-Cal  
beneficiaries.  The State may also terminate these contracts without notice  
under certain circumstances and is obligated to make contractual payments only  
to the extent the California legislature appropriates adequate funding  
therefor. 
In February 1987, the Governor of the State of California announced that  
payments to Medi-Cal providers for certain services (not including hospital  
acute inpatient services) would be decreased by 10% through June 1987.   
However, a Federal district court issued a preliminary injunction preventing  
application of any cuts until a trial on the merits can be held.  If the  
injunction is deemed to have been granted improperly, the State of California  
would be entitled to recapture the payment differential for the intended  
reduction period.  It is not possible to predict at this time whether any  
decreases will ultimately be implemented. 
California enacted legislation in 1982 that authorizes private health plans  
and insurers to contract directly with hospitals for services to beneficiaries  
on negotiated terms.  Some insurers have introduced plans known as "preferred  
provider organizations" ("PPOs"), which offer financial incentives for  
subscribers who use only the hospitals which contract with the plan.  Under an  
exclusive provider plan, which includes most health maintenance organizations  
('HMOs"), private payors limit coverage to those services provided by selected  
hospitals.  Discounts offered to HMOs and PPOs may result in payment to the  
contracting hospital of less than actual cost and the volume of patients  
directed to a hospital under an HMO or PPO contract may vary significantly  
from projections.  Often, HMO or PPO contracts are enforceable for a stated  
term, regardless of provider losses or of bankruptcy of the respective HMO or  
PPO.  It is expected that failure to execute and maintain such PPO and HMO  
contracts would reduce a hospital's patient base or gross revenues.   
Conversely, participation may maintain or increase the patient base, but may  
result in reduced payment and lower net income to the contracting hospitals. 
Such California Exempt Obligations may also be insured by the State of  
California pursuant to an insurance program implemented by the Office of  
Statewide Health Planning and Development for health facility construction  
loans.  If a default occurs on insured California Exempt Obligations, the  
State Treasurer will issue debentures payable out of a reserve fund  
established under the insurance program or will pay principal and interest, on  
an unaccelerated basis from unappropriated State funds.  At the request of the  
Office of Statewide Health Planning and Development, Arthur D. Little, Inc.  
prepared a study in December 1983 to evaluate the adequacy of the reserve fund  
established under the insurance program and, based on certain formulations and  
assumptions found the reserve fund substantially underfunded.  In 1986, Arthur  
D. Little, Inc. prepared an update of the study and concluded that an  
additional 10% reserve be established for "multi-level" facilities.  For the  
balance of the reserve fund, the update recommended maintaining the current  
reserve calculation method.  In March 1990, Arthur D. Little, Inc. prepared a  
further review of the study and recommended that separate reserves continue to  
be established for "multi-level" facilities at a reserve level consistent with  
those that would be required by an insurance company. 
Certain California Exempt Obligations in the Fund may be obligations which are  
secured in whole or in part by a mortgage or deed of trust on real property.   
California has five principal statutory provisions which limit the remedies of  
a creditor secured by a mortgage or deed of trust.  Two limit the creditor's  
right to obtain a deficiency judgment, one limitation being based on the  
method of foreclosure and the other on the type of debt secured.  Under the  
former, a deficiency judgment is barred when the foreclosure is accomplished  
by means of a nonjudicial trustee's sale.  Under the latter, a deficiency  
judgment is barred when the foreclosed mortgage or deed of trust secures  
certain purchase money obligations.  Another California statute, commonly  
known as the "one form of action" rule, requires creditors secured by real  
property to exhaust their real property security by foreclosure before  
bringing a personal action against the debtor.  The fourth statutory provision  
limits any deficiency judgment obtained by a creditor secured by real property  
following a judicial sale of such property to the excess of the outstanding  
debt over the fair value of the property at the time of the sale, thus  
preventing the creditor from obtaining a large deficiency judgment against the  
debtor as the result of low bids at a judicial sale.  The fifth statutory  
provision gives the debtor the right to redeem the real property from any  
judicial foreclosure sale as to which a deficiency judgment may be ordered  
against the debtor. 
Upon the default of a mortgage or deed of trust with respect to California  
real property, the creditor's nonjudicial foreclosure rights under the power  
of sale contained in the mortgage or deed of trust are subject to the  
constraints imposed by California law upon transfers of title to real property  
by private power of sale.  During the three-month period beginning with the  
filing of a formal notice of default, the debtor is entitled to reinstate the  
mortgage by making any overdue payments.  Under standard loan servicing  
procedures, the filing of the formal notice of default does not occur unless  
at least three full monthly payments have become due and remain unpaid.  The  
power of sale is exercised by posting and publishing a notice of sale for at  
least 20 days after expiration of the three-month reinstatement period.   
Therefore, the effective minimum period for foreclosing on a mortgage could be  
in excess of seven months after the initial default.  Such time delays in  
collections could disrupt the flow of revenues available to an issuer for the  
payment of debt service on the outstanding obligations if such defaults occur  
with respect to a substantial number of mortgages or deeds of trust securing  
an issuer's obligations. 
In addition, a court could find that there is sufficient involvement of the  
issuer in the nonjudicial sale of property securing a mortgage for such  
private sale to constitute "state action," and could hold that the private- 
right-of-sale proceedings violate the due process requirements of the Federal  
or State Constitutions, consequently preventing an issuer from using the  
nonjudicial foreclosure remedy described above. 
Certain California Exempt Obligations in the Fund may be obligations which  
finance the acquisition of single family home mortgages for low and moderate  
income mortgagors.  These obligations may be payable solely from revenues  
derived from the home mortgages, and are subject to California's statutory  
limitations described above applicable to obligations secured by real  
property.  Under California antideficiency legislation, there is no personal  
recourse against a mortgagor of a single family residence purchased with the  
loan secured by the mortgage, regardless of whether the creditor chooses  
judicial or nonjudicial foreclosure. 
Under California law, mortgage loans secured by single-family owner-occupied  
dwellings may be prepaid at any time.  Prepayment charges on such mortgage  
loans may be imposed only with respect to voluntary prepayments made during  
the first five years during the term of the mortgage loan, and cannot in any  
event exceed six months' advance interest on the amount prepaid in excess of  
20% of the original principal amount of the mortgage loan.  This limitation  
could affect the flow of revenues available to an issuer for debt service on  
the outstanding debt obligations which financed such home mortgages. 
ADDITIONAL CONSIDERATIONS.  With respect to Municipal Obligations issued by  
the State of California and its political sub-divisions, (i.e., California  
Exempt Obligations) the Fund cannot predict what legislation, if any, may be  
proposed in the California State Legislature as regards the California State  
personal income tax status of interest on such obligations, or which  
proposals, if any, might be enacted.  Such proposals, if enacted, might  
materially adversely affect the availability of California Exempt Obligations  
for investment by the Fund and the value of the Fund's portfolio.  In such an  
event, the Trustees would reevaluate the Fund's investment objective and  
policies and consider changes in its structure or possible dissolution. 
 
Special Consideration Relating to New York 
Exempt Obligations 
New York Trust 
Risk Factors-The information set forth below is derived from the official  
statements and/or preliminary drafts of official statements prepared in  
connection with the issuance of New York State and New York City municipal  
bonds.  The Trust has not independently verified this information. 
Economic Trends.	Over the long term, the State of New York (the "State") and  
the City of New York (the "City") face serious economic problems.  The City  
accounts for approximately 41% of the State's population and personal income,  
and the City's financial health affects the State in numerous ways.  The State  
historically has been one of the wealthiest states in the nation.  For  
decades, however, the State has grown more slowly than the nation as a whole,  
gradually eroding its relative economic affluence.  Statewide, urban centers  
have experienced significant changes involving migration of the more affluent  
to the suburbs and an influx of generally less affluent residents.   
Regionally, the older Northeast cities have suffered because of the relative  
success that the South and the West have had in attracting people and  
business.  The City has also had to face greater competition as other major  
cities have developed financial and business capabilities which make them less  
dependent on the specialized services traditionally available almost  
exclusively in the City. 
The State has for many years had a very high State and local tax burden  
relative to other states.  The State and its localities have used these taxes  
to develop and maintain their transportation networks, public schools and  
colleges, public health systems, other social services and recreational  
facilities.  Despite these benefits, the burden of State and local taxation,  
in combination with the many other causes of regional economic dislocation,  
has contributed to the decisions of some businesses and individuals to  
relocate outside, or not locate within, the State. 
Notwithstanding the numerous initiatives that the State and its localities may  
take to encourage economic growth and achieve balanced budgets, reductions in  
Federal spending could materially and adversely affect the financial condition  
and budget projections of the State and its localities. 
New York City.	The City, with a population of approximately 7.3 million, is  
an international center of business and culture.  Its non-manufacturing  
economy is broadly based, with the banking and securities, life insurance,  
communications, publishing, fashion design, retailing and construction  
industries accounting for a significant portion of the City's total employment  
earnings.  Additionally, the City is the nation's leading tourist 
destination.   
The City's manufacturing activity is conducted primarily in apparel and  
printing. 
The national economic downturn which began in July 1990 adversely affected the  
local economy, which had been declining since late 1989.  As a result, the  
City experienced job losses in 1990 and 1991 and real Gross City Product  
("GCP") fell in those two years.  Beginning in calendar year 1992, the  
improvement in the national economy helped stabilize conditions in the City.   
Employment losses moderated toward year-end and real GCP increased, boosted by  
strong wage gains.  After noticeable improvements in the City's economy during  
calendar year 1994, economic growth slowed in calendar year 1995, and the  
City's current four-year financial plan assumes that moderate economic growth  
will continue through calendar year 2000. 
For each of the 1981 through 1996 fiscal years, the City achieved balanced  
operating results as reported in accordance with generally accepted accounting  
principles ("GAAP").  The City was required to close substantial budget gaps  
in recent years in order to maintain balanced operating results.  There can be  
no assurance that the City will continue to maintain a balanced budget as  
required by State law without additional tax or other revenue increases or  
reductions in City services, which could adversely affect the City's economic  
base. 
Pursuant to the New York State Financial Emergency Act for the City of New  
York, the City prepares an annual four-year financial plan, which is reviewed  
and revised on a quarterly basis and which includes the City's capital,  
revenue and expense projections and outlines proposed gap-closing programs for  
years with projected budget gaps.  The City's current four-year financial plan  
projects substantial budget gaps for each of the 1998 through 2000 fiscal  
years, before implementation of the proposed gap-closing program contained in  
the current financial plan.  The City is required to submit its financial  
plans to review bodies, including the New York State Financial Control Board  
("Control Board"). 
The City depends on State aid both to enable the City to balance its budget  
and to meet its cash requirements.  The State's 1995-1996 Financial Plan  
projects a balanced General Fund.  There can be no assurance that there will  
not be reductions in State aid to the City from amounts currently projected or  
that State budgets in future fiscal years will be adopted by the April 1  
statutory deadline and that such reductions or delay will not have adverse  
effects on the City's cash flow or expenditures.  In addition, the Federal  
Budget negotiation process could result in a reduction in or a delay in the  
receipt of Federal grants which could have additional adverse effects on the  
City's cash flow or revenues. 
The Mayor is responsible for preparing the City's four-year financial plan,  
including the City's current financial plan for the 1997 through 2000 fiscal  
years (the "1997-2000 Financial Plan" or "Financial Plan").  The City's  
projections set forth in the Financial Plan are based on various assumptions  
and contingencies which are uncertain and which may not materialize.  Changes  
in major assumptions could significantly affect the City's ability to balance  
its budget as required by State law and to meet its annual cash flow and  
financing requirements.  Such assumptions and contingencies include the  
condition of the regional and local economies, the impact on real estate tax  
revenues of the real estate market, wage increases for City employees  
consistent with those assumed in the Financial Plan, employment growth, the  
results of a pending actuarial audit of the City's pension system which is  
expected to significantly increase the City's annual pension costs, the  
ability to implement proposed reductions in City personnel and other cost  
reduction initiatives, which may require in certain cases the cooperation of  
the City's municipal unions, the ability of the New York City Health and  
Hospitals Corporation ("HHC") and the Board of Education ("BOE") to take  
actions to offset reduced revenues, the ability to complete revenue generating  
transactions and provision of State and Federal aid and mandate relief and the  
impact on City revenues of proposals for Federal and State welfare reform and  
any future legislation affecting Medicare or other entitlements. 
Implementation of the Financial Plan is also dependent upon the City's ability  
to market its securities successfully.  The City's financing program for  
fiscal years 1997 through 2000 contemplates the issuance of $9.0 billion of  
general obligation bonds and $3.8 billion of bonds to be issued by the  
proposed New York City Infrastructure Finance Authority ("Finance Authority")  
to finance City capital projects.  The creation of Finance Authority, which is  
subject to the enactment of State legislation, is being proposed as part of  
the City's effort to assist in keeping the City's indebtedness within the  
forecast level of the  constitutional restrictions on the amount of debt the  
City is authorized to incur.  Indebtedness subject to the constitutional debt  
limit includes liability on capital contracts that are expected to be funded  
with general obligation bonds.  The City's projections of total debt subject  
to the general debt limit that would be required to be issued to fund the  
Updated Ten-Year Capital Strategy published in April 1995 indicates that  
projected contracts for capital projects and debt issuance may exceed the  
general debt limit by the end of fiscal year 1997 and would exceed the general  
debt limit by a substantial amount thereafter, unless legislation is enacted  
creating a Finance Authority or other legislative initiatives are identified  
and implemented.  Depending on a number of factors, including whether the  
Legislature is expected to enact legislation creating the Finance Authority or  
to take other action that would provide relief under the general debt limit,  
the City may find it necessary to curtail its currently defined capital  
program before the end of fiscal year 1997 to ensure that there is ongoing  
capacity to enter into capital contracts necessary to preserve projects  
designed to safeguard health and safety in the City.  Without the Finance  
Authority or other legislative relief, the City's general obligation financed  
capital program with respect to new projects would be virtually brought to a  
halt during the Financial Plan period.  General obligation borrowing would  
continue to reimburse the City's general fund for ongoing costs of existing  
contractual commitments.  In addition, the City issues revenue and tax  
anticipation notes to finance its seasonal working capital requirements.  The  
success of projected public sales of City bonds and notes and Finance  
Authority bonds will be subject to prevailing market conditions, and no  
assurance can be given that such sales will be completed.  If the City were  
unable to sell its general obligation bonds and notes or bonds of the proposed  
Finance Authority, it would be prevented from meeting its planned capital and  
operating expenditures.  Future developments concerning the City and Public  
discussion of such developments, as well as prevailing market conditions, may  
affect the market for outstanding City general obligation bonds and notes. 
On November 14, 1996, the City submitted to the Control Board the Financial  
Plan for the 1997 through 2000 fiscal years, which relates to the City, the  
BOE and the City University of New York ("CUNY").  The Financial Plan is a  
modification to the financial plan submitted to the Control Board on June 21,  
1996 (the "June Financial Plan"). 
The June Financial Plan identified actions to close a previously projected gap  
of approximately $2.6 billion for the 1997 fiscal year.  The proposed actions  
in the June Financial Plan for the 1997 fiscal year included (i) agency  
actions totaling $1.2 billion; (ii) a revised tax reduction program which  
would increase projected tax revenues by $369 million due to the four year  
extension of the 12.5% personal income tax surcharge and other actions; (iii)  
savings resulting from cost containment in entitlement program to reduce City  
expenditures and additional proposed State aid of $75 million; (iv) the  
assumed receipt of revenues relating to rent payments for the City's airports,  
which are currently the subject of a dispute with the Port Authority of New  
York and New Jersey (the "Port Authority"); (v) the sale of the City's  
television station for $207 million; and (vi) pension costs savings totaling  
$134 million resulting from a proposed increase in the earnings assumption for  
pension assets from 8.5% to 8.75%. 
The 1997-2000 Financial Plan published on November 14, 1996 reflects actual  
receipts and expenditures and changes in forecast revenues and expenditures  
since the June Financial Plan.  The 1997-2000 Financial Plan projects revenues  
and expenditures for 1997 fiscal year balanced in accordance with GAAP, and  
projects gaps of $1.2 billion, $2.1 billion and $3.0 billion for the 1998,  
1999 and 2000 fiscal years, respectively.  Changes since the June Financial  
Plan include (i) an increase in projected tax revenues of $450 million, $120  
million, $50 million and $45 million in fiscal years 1997 through 2000,  
respectively; (ii) a delay in the assumed receipt of $304 million relating to  
projected rent payments for the City airports from the 1997 fiscal year to the  
1998 and 1999 fiscal years, and a $34 million reduction in assumed State and  
Federal aid for the 1997 fiscal year; (iii) an approximately $200 million  
increase in projected overtime and other expenditures in each of the fiscal  
years 1997 through 2000; (iv) a $70 million increase in expenditures for BOE  
in the 1997 fiscal year for school text books; (v) a reduction in projected  
pension costs of $34 million, $50 million, $49 million and $47 million in  
fiscal years 1997 through 2000, respectively; and (vi) additional agency  
actions totaling $179 million, $386 million, $473 million and $589 million in  
fiscal years 1997 through 2000, including personnel reductions through  
attrition and early retirement. 
The Financial Plan assumes (i) approval by the Governor and the State  
Legislature of the extension of the 12.5% personal income tax surcharge, which  
is projected to provide revenue of $170 million, $463 million, $492 million,  
and $521 million, in the 1997 through 2000 fiscal years, respectively; (ii)  
collection of the projected rent payments for the City's airports, totaling  
$270 million and $180 million in the 1998 and 1999 fiscal years, respectively,  
which may depend on the successful completion of negotiations with the Port  
Authority or the enforcement of the City's rights under the existing leases  
thereto through pending legal actions; (iii) the ability of HHC and BOE to  
identify actions to offset substantial City and State revenue reductions and  
the receipt by BOE of additional State aid; (iv) State approval of the cost  
containment initiatives and State aid proposed by the City; and (v) a  
reduction in City funding for labor settlements for certain public authorities  
or corporations.  Legislation extending the 12.5% personal income tax  
surcharge beyond December 31, 1996, was not enacted in the special legislative  
session held in December 1996.  Such legislation may be enacted in the 1997  
State Legislative Session.  The Financial plan does not reflect any increased  
costs which the City might incur as a result of welfare legislation recently  
enacted by Congress or legislation proposed by the Governor, which would, if  
enacted implement such Federal welfare legislation.  In addition, the economic  
and financial condition of the City may be affected by various financial,  
social, economic and political factors which could have a material effect on  
the City. 
In January 1997, the Mayor is expected to publish a modification (the "January  
Modification") to the financial plan for the City's 1997 through 2001 fiscal  
years and a preliminary budget of the City's 1998 fiscal year.  The January  
Modification will reflect changes since the Financial Plan, including the  
City's program to address the currently forecast gap of approximately $1.2  
billion in the 1998 fiscal year.  The gap-closing program, as proposed in the  
Financial Plan, is currently being further developed and is subject to change  
in connection with the January Modification.  The Governor released the 1997- 
1998 Executive Budget on January 14, 1997, which will be considered for  
adoption by the State Legislature.  Based on a preliminary evaluation of  
currently available information, the City's Office of Management and Budget  
("OMB") believes that the reductions in Medicaid reimbursement rates and other  
entitlement and welfare initiatives proposed in the 1997-1998 Executive  
Budget, if approved by the State Legislature without change, would provide the  
City with a portion of the $650 million of additional aid and reductions in  
entitlement costs assumed in the City's gap-closing program for the 1998  
fiscal year.  OMB expects that the January Modification will reflect  
additional initiatives proposed by the City relating to reductions in cost  
containment and other initiatives have been previously considered and rejected  
by the State Legislature.  The nature and extent of the impact on the City of  
the State budget, when adopted, is uncertain, and no assurance can be given  
that the State actions included in the State adopted budget may not have a  
significant adverse impact on the City's budget and its Financial Plan.  It  
can be expected that the proposals contained in the January Modification to  
close the projected budget gap for the 1998 fiscal year will engender  
substantial public debate which will continue through the time the budget is  
scheduled to be adopted in June 1997. 
The City's financial plans have been the subject of extensive public comment  
and criticism.  On July, 1996, the staff of the City Comptroller issued a  
report on the June Financial Plan.  The report concluded that the City's  
fiscal situation remains serious, and that the City faces budgetary risks of  
approximately $787 million to $941 million for the 1997 fiscal year, which  
increase to $4.16 billion to $4.31 billion for fiscal year 2000. 
The projections for the 1997 through 2000 fiscal years reflect the costs of  
the settlements with the United Federation of Teachers ("UFT") and a coalition  
of unions headed by District Council 37 of the American Federation of State,  
County and Municipal Employees, which together represent approximately two- 
thirds of the City's workforce, and assume that the City will reach agreement  
with its remaining municipal unions under terms which are generally consistent  
with such settlements.  The settlement provides for a wage freeze in the first  
two years, followed by a cumulative effective wage increase of 11% by the end  
of the five year period covered by the proposed agreements, ending in fiscal  
years 2000 and 2001.  Additional benefit increases would raise the total  
cumulative effective increase to 13% above present costs.  Costs associated  
with similar settlements for all City-funded employees would total $49  
million, $459 million and $1.2 billion in the 1997, 1998 and 1999 fiscal  
years, respectively, and exceed $2 billion in each fiscal year after the 1999  
fiscal year.  There can be no assurance that the City will reach an agreement  
with the unions that have not yet reached a settlement with the City on the  
terms contained in the Financial Plan. 
In the event of a collective bargaining impasse, the terms of wage settlements  
could be determined through statutory impasse procedures, which can impose a  
binding settlement except in the case of collective bargaining with the UFT,  
which may be subject to non-binding arbitration.  On January 23, 1996, the  
City requested the Office of Collective Bargaining to declare an impasse  
against the Patrolmen's Benevolent Association and the Uniformed Firefighters  
Association. 
On July 10, 1995, Standard & Poor's revised downward its rating on City  
general obligation bonds from A to BBB+ and removed City bonds from  
CreditWatch.  Standard & Poor's stated that "structural budgetary balance  
remains elusive because of persistent softness in the City's economy,  
highlighted by weak job growth and a growing dependence on the historically  
volatile financial services sector".  Other factors identified by Standard &  
Poor's in lowering its rating on City bonds included a trend of using one-time  
measures, including debt refinancings, to close projected budget gaps,  
dependence on unratified labor savings to help balance the Financial Plan,  
optimistic projections of additional federal and State aid or mandate relief,  
a history of cash flow difficulties caused by State budget delays and  
continued high debt levels. 
On March 1, 1996, Moody's stated that the rating for City general obligation  
bonds remains under review pending the outcome of the adoption of the City's  
budget for the 1997 fiscal year, and, in light of the status of the debate on  
public assistance and Medicaid reform; the enactment of a State budget, upon  
which major assumptions regarding State aid are dependent, which may be  
extensively delayed; and the seasoning of the City's economy with regard to  
its strength and direction in the face of a potential national economic  
slowdown.  Since July 15, 1993, Fitch has rated City bonds A-.  On February  
28, 1996, Fitch placed the City's general obligation bonds on FitchAlert with  
negative implications.  On November 5, 1996, Fitch removed the City's general  
obligation bonds from FitchAlert, although Fitch stated that the outlook  
remains negative. 
New York State and its Authorities.    The State's current fiscal year  
commenced on April 1, 1996, and ends on March 31, 1997, and is referred to  
herein as the State's 1996-97 fiscal year.  The State's budget for the 1996-97  
fiscal year was enacted by the Legislature on July 13, 1996, more than three  
months after the start of the fiscal year.  The State Financial Plan for the  
1996-97 fiscal year was formulated on July 25, 1996 and is based on the  
State's budget as enacted by the Legislature and signed into law by the  
Governor, as well as actual results for the first quarter of the current  
fiscal year.  The State's prior fiscal year commenced on April 1, 1995, and  
ended on March 31, 1996, and is referred to herein as the State's 1995-96  
fiscal year. 
The State closed projected budget gaps of $5.0 billion and $3.9 billion for  
its 1995-96 and 1996-97 fiscal years, respectively.  The 1997-98 gap was  
projected at $1.44 billion, based on the Governor's proposed budget of  
December 1995.  As a result of changes made in the enacted budget, that gap is  
now expected to be larger.  The gap, however, is not expected to be as large  
as those faced in the prior two fiscal years.  The Governor has indicated that  
he will propose to close any potential imbalance primarily through General  
Fund expenditure reductions and without increases in taxes or deferrals of  
scheduled tax reductions. 
The 1996-97 State Financial Plan is projected to be balanced on a cash basis.   
As compared to the Governor's proposed budget as revised on March 20, 1996,  
the State's adopted budget for 1996-97 increases General Fund spending by $842  
million, primarily from increases for education, special education and higher  
education ($563 million).  The balance represents funding increases to a  
variety of other programs, including community projects and increased  
assistance to fiscally distressed cities.  Resources used to fund these  
additional expenditures include $540 million in increased revenues projected  
for 1996-97 based on higher-than-projected tax collections during the first  
half of calendar 1996, $110 million in projected receipts from a new State tax  
amnesty program, and other resources including certain non-recurring  
resources.  The total amount of non-recurring resources included in the 1996- 
97 State budget is projected by the State Division of the Budget ("DOB") to be  
$1.3 billion, or 3.9 percent of total General Fund receipts. 
The State issued its first update to the cash-basis 1996-97 State Financial  
Plan (the "Mid-Year Update") on October 25, 1996.  The Mid-Year Update  
reflects a balanced 1996-97 State Financial Plan, with a reserve for  
contingencies in the General Fund of $300 million.  This reserve will be  
utilized to help offset a variety of potential risks and other unexpected  
contingencies that the State may face during the balance of the 1996-97 fiscal  
year. 
The State Financial Plan is based on a June 1996 projection by DOB of national  
and State economic activity.  The national economy has resumed a more robust  
rate of growth after a "soft landing" in 1995, with over 11 million jobs added  
nationally since early 1992.  The State economy has continued to expand, but  
growth remains somewhat slower than in the nation.  Although the State has  
added approximately 240,000 jobs since late 1992, employment growth in the  
State has been hindered during recent years by significant cutbacks in the  
computer and instrument manufacturing, utility, defense, and banking  
industries.  Government downsizing has also moderated these job gains. 
In its Mid-Year Update the State revised its forecast of national and State  
economic activity through the end of calendar year 1997 to reflect the  
stronger-than-expected growth in the first half of 1996.  The national  
economic forecast has been changed slightly from the initial forecast on which  
the original 1996-97 State Financial Plan was based.  The revised forecast  
projects real Gross Domestic Product growth in the nation of 2.5 percent for  
1996 and 2.4 percent in 1997.  The inflation rate is expected to be 3.0  
percent in 1996 and 2.9 percent in 1997.  The annual rate of job growth is  
expected to slow gradually to about 1.8 percent in 1997, down from 2.3 percent  
in 1996.  Growth in personal income and wages are expected to slow  
accordingly. 
The State economic forecast has been changed slightly from the one formulated  
with the July 1996-97 State Financial Plan.  Moderate growth is projected to  
continue through the second half of 1996, with employment, wages and incomes  
continuing their modest rise.  Personal income is projected to increase by 5.2  
percent in 1996 and 4.7 percent in 1997, reflecting robust projected wage  
growth fueled in part by financial sector bonus payments.  Overall employment  
growth will continue at a modest rate, reflecting the slowdown in the national  
economy, continued spending restraint in government, and restructuring in the  
health care and financial sectors. 
The forecast for continued moderate growth, and any resultant impact on the  
State's 1996-97 Financial Plan, contains some uncertainties.  Stronger-than- 
expected gains in employment could lead to a significant improvement in  
consumption spending.  Investments could also remain robust.  Conversely, the  
prospect of a continuing deadlock on federal budget deficit reduction or fears  
of excessively rapid economic growth could create upward pressures on interest  
rates.  In addition, the State economic forecast could over- or underestimate  
the level of future bonus payments or inflation growth, resulting in  
forecasted average wage growth that could differ significantly from actual  
growth.  Similarly, the State forecast could fail to correctly account for  
expected declines in government and banking employment and the direction of  
employment change that is likely to accompany telecommunications deregulation. 
The DOB believes that its projections of receipts and disbursements relating  
to the current State Financial Plan, and the assumptions on which they are  
based, are reasonable.  Actual results, however, could differ materially and  
adversely from the projections set forth below, and those projections may be  
changed materially and adversely from time to time. 
The economic and financial condition of the State may be affected by various  
financial, social, economic and political factors.  Those factors can be very  
complex, may vary from fiscal year to fiscal year, and are frequently the  
result of actions taken not only by the State and its agencies and  
instrumentalities, but also by entities, such as the Federal government, that  
are not under the control of the State.  Because of the uncertainty and  
unpredictability of changes in these factors, their impact cannot be fully  
included in the assumptions underlying the State's projections.  There can be  
no assurance that the State economy will not experience results that are worse  
than predicted, with corresponding material and adverse effects on the State's  
financial projection. 
The General Fund is the principal operating fund of the State and is used to  
account for all financial transactions, except those required to be accounted  
for in another fund.  It is the State's largest fund and receives almost all  
State taxes and other resources not dedicated to particular purposes.  In the  
State's 1996-97 fiscal year, the General Fund is expected to account for  
approximately 47 percent of total governmental-fund receipts and 71 percent of  
total governmental-fund disbursements.  General Fund moneys are also  
transferred to other funds, primarily to support certain capital projects and  
debt service payments in other fund types. 
The General Fund is projected to be balanced on a cash basis for the 1996-97  
fiscal year.  Actual receipts through the first two quarters of the 1996-97  
State fiscal year reflect stronger-than-expected growth in most taxes, with  
actual receipts exceeding expectations by $276 million.  Based on the revised  
economic outlook and actual receipts for the first six months of 1996-97,  
projected General Fund receipts for the 1996-97 State fiscal year have been  
increased by $420 million.  Most of this projected increase is in the yield of  
the personal income tax ($241 million), with additional increases now expected  
in business taxes ($124 million) and other tax receipts ($49 million).   
Projected collections from user taxes and fees have been revised downward  
slightly ($5 million).  Revisions were also made to both miscellaneous  
receipts and in transfers from other funds (an $11 million combined projected  
increase). 
Disbursements through the first six months of the fiscal year were $415  
million less than projected, primarily because of delays in processing  
payments following delayed enactment of the State budget.  As a result, no  
savings are included in the Mid-Year Update from this slower-than-expected  
spending.  Projections of 1996-97 General Fund disbursements are increased by  
$120 million, since increased General Fund disbursements for education are  
required to replace a projected decrease in lottery receipts.  This  
modification is shown in the form of an increased transfer of General Fund  
monies to the Lottery Fund in the Special Revenue fund type.  The projected  
closing fund balance in the General Fund of $337 million reflects a balance of  
$252 million in the Tax Stabilization Reserve Fund (following a payment of $15  
million during the current fiscal year) and a deposit of $85 million to the  
Contingency Reserve Fund. 
On January 13, 1992, Standard & Poor's reduced its ratings on the State's  
general obligation bonds from A to A- and, in addition, reduced its ratings on  
the State's moral obligation, lease purchase, guaranteed and contractual  
obligation debt.  Standard & Poor's also continued its negative rating outlook  
assessment on State general obligation debt.  On April 26, 1993, Standard &  
Poor's revised the rating outlook assessment to stable.  On February 14, 1994,  
Standard & Poor's raised its outlook to positive and, on August 5, 1996,  
confirmed its A- rating.  On January 6, 1992, Moody's reduced its ratings on  
outstanding limited-liability State lease purchase and contractual obligations  
from A to Baa1.  On July 26, 1996, Moody's reconfirmed its A rating on the  
State's general obligation long-term indebtedness. 
Litigation.	A number of court actions have been brought involving State  
finances.  The court actions in which the State is a defendant generally  
involve State programs and miscellaneous tort, real property, and contract  
claims.  While the ultimate outcome and fiscal impact, if any, on the State of  
those proceedings and claims are not currently predictable, adverse  
determinations in certain of them might have a material adverse effect upon  
the State's ability to maintain a balanced 1996-97 State Financial Plan. 
The claims involving the City other than routine litigation incidental to the  
performance of their governmental and other functions and certain other  
litigation arise out of alleged constitution violations, torts, breaches of  
contract and other violations of law and condemnation proceedings.  While the  
ultimate outcome and fiscal impact, if any, on the City of those proceedings  
and claims are not currently predictable, adverse determinations in certain of  
them might have a material adverse effect upon the City's ability to carry out  
the 1997-2000 Financial Plan.  The City has estimated that its potential  
future liability on account of outstanding claims against it as of June 30,  
1996 amounted to approximately $2.8 billion. 
The Governor presented his 1996-97 Executive Budget to the Legislature on  
December 15, 1995, one month before the legal deadline.  There can be no  
assurance that the Legislature will enact the Executive Budget into law or  
that the projections set forth in the Executive Budget will not differ  
materially and adversely from actual results. 
The Governor's Executive Budget projected balance on a cash basis in the  
General Fund.  It reflected a continuing strategy of substantially reduced  
State spending, including programming restructuring, reductions in social  
welfare spending, and efficiency and productivity initiatives.  In his 1996-97  
Executive Budget, the Governor indicated that the 1996-97 General Fund  
financial plan (based on current law governing spending and revenues) would  
have been out of balance by almost $3.9 billion as a result of the underlying  
disparity between receipts and disbursements caused by anticipated spending  
demands, the effect of current and prior-year tax changes, and the use of one- 
time revenues to fund recurring spending in the 1995-96 State Financial Plan.   
The Executive Budget proposes to close this gap primarily through a series of  
spending reductions and cost containment measures. 
To make progress toward addressing recurring budgetary imbalances, the 1996-97  
Executive Budget proposes significant actions to align recurring receipts and  
disbursements in future fiscal years.  The Governor has proposed closing the  
1996-97 fiscal year imbalance primarily through General Fund expenditure  
reductions and without increases in taxes or deferrals of scheduled tax  
reductions.  However, there can be no assurance that the Legislature will  
enact the Governor's proposals or that the State's actions will be sufficient  
to preserve budgetary balance or to align recurring receipts and disbursements  
in future fiscal years.  The 1996-97 Executive Budget includes action that  
will have an effect on the budget outlook for the State fiscal year 1997-98  
and beyond.  The net impact of these and other factors is expected to produce  
a potential imbalance in receipts and disbursements in State fiscal year 1997- 
98, which the Governor proposes to close with further spending reductions.   
The Executive Budget contains projections of a potential imbalance in the  
1997-98 fiscal year of $1.4 billion and in the 1998-99 fiscal year of $2.5  
billion, assuming implementation of the 1996-97 Executive Budget  
recommendations. 
The 1995-96 State Financial Plan and the Financial Plan Updates were based on  
a number of assumptions and projections.  Because it is not possible to  
predict accurately the occurrence of all factors that may affect the 1995-96  
State Financial Plan or the Financial Plan Updates, actual results could  
differ materially and adversely from projections made at the outset of a  
fiscal year.  There can be no assurance that the State will not face  
substantial potential budget gaps in future years resulting from a significant  
disparity between tax revenues projected from a lower recurring receipts base  
and the spending required to maintain State programs at current levels.  To  
address any potential budgetary imbalance, the State may need to take  
significant actions to align recurring receipts and disbursements in future  
fiscal years. 
A significant risk to the 1995-96 State Financial Plan projections arise from  
tax legislation under consideration by Congress and the President.   
Congressionally-adopted retroactive changes to federal tax treatment of  
capital gains would flow through automatically to the State personal income  
tax.  Such changes, if ultimately enacted, could produce revenue losses in  
both the 1995-96 fiscal year and the 1996-97 fiscal year. 
RECENT FINANCIAL RESULTS.  The General Fund is the principal operating fund of  
the State and is used to account for all financial transactions, except those  
required to be accounted for in another fund.  It is the State's largest fund  
and receives almost all State taxes and other resources not dedicated to  
particular purposes. 
The State reported a General Fund operating deficit of $1.426 billion for the  
1994-95 fiscal year, as compared to an operating surplus of $914 million for  
the prior fiscal year.  The 1994-95 fiscal year deficit was caused by several  
factors, including the use of $1.026 billion of the 1993-94 cash-based surplus  
to fund operating expenses in 1994-95 and the adoption of changes in  
accounting methodologies by the State Comptroller.  These factors were offset  
by net proceeds of $315 million in bonds issued by the Local Government  
Assistance Corporation.  The General Fund is projected to be balanced on a  
cash basis for the 1995-96 fiscal year. 
Total revenues for 1994-95 were $31.455 billion.  Revenues decreased by $173  
million over the prior fiscal year, a decrease of less than one percent.   
Total expenditures for 1994-95 totaled $33.079 billion, an increase of $2.083  
billion, or 6.7 percent over the prior fiscal year. 
The State's financial position on a GAAP (generally accepted accounting  
principles) basis as of March 31, 1995 showed an accumulated deficit in its  
combined governmental funds of $1.666 billion, reflecting liabilities of  
$14.778 billion and assets of $13.112 billion. 
DEBT LIMITS AND OUTSTANDING DEBT.  There are a number of methods by which the  
State of New York may incur debt.  Under the State Constitution, the State may  
not, with limited exceptions for emergencies, undertake long-term general  
obligation borrowing (i.e., borrowing for more than one year) unless the  
borrowing is authorized in a specific amount for a single work or purpose by  
the Legislature and approved by the voters.  There is no limitation on the  
amount of long-term general obligation debt that may be so authorized and  
subsequently incurred by the State. 
The State may undertake short-term borrowings without voter approval (i) in  
anticipation of the receipt of taxes and revenues, by issuing tax and revenue  
anticipation notes, and (ii) in anticipation of the receipt of proceeds from  
the sale of duly authorized but unissued general obligation bonds, by issuing  
bond anticipation notes.  The State may also, pursuant to specific  
constitutional authorization, directly guarantee certain obligations of the  
State of New York's authorities and public benefit corporations  
("Authorities").  Payments of debt service on New York State general  
obligation and New York State-guaranteed bonds and notes are legally  
enforceable obligations of the State of New York. 
The State employs additional long-term financing mechanisms, lease-purchase  
and contractual-obligation financings, which involve obligations of public  
authorities or municipalities that are State-supported but are not general  
obligations of the State.  Under these financing arrangements, certain public  
authorities and municipalities have issued obligations to finance the  
construction and rehabilitation of facilities or the acquisition and  
rehabilitation of equipment, and expect to meet their debt service  
requirements through the receipt of rental or other contractual payments made  
by the State.  Although these financing arrangements involve a contractual  
agreement by the State to make payments to a public authority, municipality or  
other entity, the State's obligation to make such payments is generally  
expressly made subject to appropriation by the Legislature and the actual  
availability of money to the State for making the payments.  The State has  
also entered into a contractual-obligation financing arrangement with the  
Local Government Assistance Corporation ("LGAC") in an effort to restructure  
the way the State makes certain local aid payments. 
In 1990, as part of a State fiscal reform program, legislation was enacted  
creating LGAC, a public benefit corporation empowered to issue long-term  
obligations to fund certain payments to local governments traditionally funded  
through New York State's annual seasonal borrowing.  The legislation empowered  
LGAC to issue its bonds and notes in an amount not in excess of $4.7 billion  
(exclusive of certain refunding bonds) plus certain other amounts.  Over a  
period of years, the issuance of these long-term obligations, which are to be  
amortized over no more than 30 years, was expected to eliminate the need for  
continued short-term seasonal borrowing.  The legislation also dedicated  
revenues equal to one-quarter of the four cent State sales and use tax to pay  
debt service on these bonds.  The legislation also imposed a cap on the annual  
seasonal borrowing of the State at $4.7 billion, less net proceeds of bonds  
issued by LGAC and bonds issued to provide for capitalized interest, except in  
cases where the Governor and the legislative leaders have certified the need  
for additional borrowing and provided a schedule for reducing it to the cap.   
If borrowing above the cap is thus permitted in any fiscal year, it is  
required by law to be reduced to the cap by the fourth fiscal year after the  
limit was first exceeded.  As of June 1995, LGAC had issued bonds to provide  
net proceeds of $4.7 billion, completing the program.  The impact of LGAC's  
borrowing is that the State is able to meet its cash flow needs in the first  
quarter of the fiscal year without relying on short-term seasonal borrowings.   
The 1995-96 State Financial Plan includes no spring borrowing nor did the  
1994-95 State Financial Plan, which was the first time in 35 years there was  
no short-term seasonal borrowing. 
In June 1994, the Legislature passed a proposed constitutional amendment that  
would significantly change the long-term financing practices of the State and  
its public authorities.  The proposed amendment would permit the State, within  
a formula-based cap, to issue revenue bonds, which would be debt of the State  
secured solely by a pledge of certain State tax receipts (including those  
allocated to State funds dedicated for transportation purposes), and not by  
the full faith and credit of the State.  In addition, the proposed amendment  
would (i) permit multiple purpose general obligation bond proposals to be  
proposed on the same ballot, (ii) require that State debt be incurred only for  
capital projects included in a multi-year capital financing plan, and (iii)  
prohibit, after its effective date, lease-purchase and contractual-obligation  
financing mechanisms for State facilities. 
Before the approved constitutional amendment can be presented to the voters  
for their consideration, it must be passed by a separately elected  
legislature.  The amendment must therefore be passed by the newly elected  
Legislature in 1995 prior to presentation to the voters in November 1995.  The  
amendment was passed by the Senate in June 1995, and the Assembly is expected  
to pass the amendment shortly.  If approved by the voters, the amendment would  
become effective January 1, 1996. 
On January 13, 1992, S&P reduced its ratings on the State's general obligation  
bonds from A to A- and, in addition, reduced its ratings on the State's moral  
obligation, lease purchase, guaranteed and contractual obligation debt.  S&P  
also continued its negative rating outlook assessment on State general  
obligation debt.  On April 26, 1993, S&P revised the rating outlook assessment  
to stable.  On February 14, 1994, S&P raised its outlook to positive and, on  
February 28, 1994, confirmed its A- rating.  On January 6, 1992, Moody's  
reduced its ratings on outstanding limited-liability State lease purchase and  
contractual obligations from A to Baal.  On February 28, 1994, Moody's  
reconfirmed its A rating on the State's general obligation long-term  
indebtedness. 
The State anticipates that its capital programs will be financed, in part, by  
State and public authorities borrowings in 1995-96.  The State expects to  
issue $248 million in general obligation bonds (including $170 million for  
purposes of redeeming outstanding bond anticipation notes) and $186 million in  
general obligation commercial paper.  The Legislature has also authorized the  
issuance of up to $33 million in certificates of participation during the  
State's 1995-96 fiscal year for equipment purchases and $14 million for  
capital purposes.  These projections are subject to change if circumstances  
require. 
Principal and interest payments on general obligation bonds and interest  
payments on bond anticipation notes and on tax and revenue anticipation notes  
were $793.3 million for the 1994-95 fiscal year, and are estimated to be  
$774.4 million for the 1995-96 fiscal year.  These figures do not include  
interest payable on State General Obligation Refunding Bonds issued in July  
1992 ("Refunding Bonds) to the extent that such interest was paid from an  
escrow fund established with the proceeds of such Refunding Bonds.  Principal  
and interest payments on fixed rate and variable rate bonds issued by LGAC  
were $239.4 million for the 1994-95 fiscal year, and are estimated to be  
$328.2 million for 1995-96.  State lease-purchase rental and contractual  
obligation payments for 1994-95, including State installment payments relating  
to certificates of participation, were $1.607 billion and are estimated to be  
$1.641 billion in 1995-96. 
New York State has never defaulted on any of its general obligation  
indebtedness or its obligations under lease purchase or contractual-obligation  
financing arrangements and has never been called upon to make any direct  
payments pursuant to its guarantees. 
AUTHORITIES.  The fiscal stability of New York State is related, in part, to  
the fiscal stability of its Authorities, which generally have responsibility  
for financing, constructing and operating revenue-producing public benefit  
facilities.  Authorities are not subject to the constitutional restrictions on  
the incurrence of debt which apply to the State itself, and may issue bonds  
and notes within the amounts of, and as otherwise restricted by, their  
legislative authorization.  The State's access to the public credit markets  
could be impaired, and the market price of its outstanding debt may be  
materially and adversely affected, if any of the Authorities were to default  
on their respective obligations, particularly with respect to debt that is  
State-supported or State-related.  As of September 30, 1994, the date of the  
latest data available, there were 18 Authorities that had outstanding debt of  
$100 million or more.  The aggregate outstanding debt, including refunding  
bonds, of these 18 Authorities was $70.3 billion.  As of March 31, l995,  
aggregate public authority debt outstanding as State-supported debt was $27.9  
billion and as State related debt was $36.1 billion. 
Authorities are generally supported by revenues generated by the projects  
financed or operated, such as fares, user fees on bridges, highway tolls and  
rentals for dormitory rooms and housing.  In recent years, however, New York  
State has provided financial assistance through appropriations, in some cases  
of a recurring nature, to certain of the 18 Authorities for operating and  
other expenses and, in fulfillment of its commitments on moral obligation  
indebtedness or otherwise, for debt service.  This operating assistance is  
expected to continue to be required in future years.  In addition, certain  
statutory arrangements provide for State local assistance payments otherwise  
payable to localities to be made under certain circumstances to certain  
Authorities.  The State has no obligation to provide additional assistance to  
localities whose local assistance payments have been paid to Authorities under  
these arrangements.  However, in the event that such local assistance payments  
are so diverted, the affected localities could seek additional State funds. 
NEW YORK CITY AND OTHER LOCALlTIES.  The fiscal health of the State of New  
York may also be impacted by the fiscal health of its localities, particularly  
the City of New York, which has required and continues to require significant  
financial assistance from New York State.  The City depends on State aid both  
to enable the City to balance its budget and to meet its cash requirements.   
The City has achieved balanced operating results for each of its fiscal years  
since 1981 as reported in accordance with the then applicable GAAP. 
In 1975, New York City suffered a fiscal crisis that impaired the borrowing  
ability of both the City and New York State.  In that year the City lost  
access to public credit markets.  The City was not able to sell short-term  
notes to the public again until 1979. 
In 1975, S&P suspended its A rating of City bonds.  This suspension remained  
in effect until March 1981, at which time the City received an investment  
grade rating of BBB from S&P.  On July 2, 1985, S&P revised its rating of City  
bonds upward to BBB+ and on November 19, 1987, to A-.  On July 2, 1993, S&P  
reconfirmed its A- rating of City bonds, continued its negative rating outlook  
assessment and stated that maintenance of such rating depended upon the City's  
making further progress towards reducing budget gaps in the outlying years.   
Moody's ratings of City bonds were revised in November 1981 from B (in effect  
since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baal, in May  
1988 to A and again in February 1991 to Baal.  On July 10, 1995, S&P  
downgraded its rating on the City's $23 billion of outstanding general  
obligation bonds to "BBB+" from "A-", citing to the City's chronic structural  
budget problems and weak economic outlook.  S&P stated that New York City's  
reliance on one-time revenue measures to close annual budget gaps, a  
dependence on unrealized labor savings, overly optimistic estimates of  
revenues and state and federal aid and the City's continued high debt levels  
also contributed to its decision to lower the rating. 
New York City is heavily dependent on New York State and federal assistance to  
cover insufficiencies in its revenues.  There can be no assurance that in the  
future federal and State assistance will enable the City to make up its budget  
deficits.  To help alleviate the City's financial difficulties, the  
Legislature created the Municipal Assistance Corporation ("MAC") in 1975.  MAC  
is authorized to issue bonds and notes payable from certain stock transfer tax  
revenues, from the City's portion of the State sales tax derived in the City  
and, subject to certain prior claims, from State per capita aid otherwise  
payable by the State to the City.  Failure by the State to continue the  
imposition of such taxes, the reduction of the rate of such taxes to rates  
less than those in effect on July 2, 1975, failure by the State to pay such  
aid revenues and the reduction of such aid revenues below a specified level  
are included among the events of default in the resolutions authorizing MAC's  
long-term debt.  The occurrence of an event of default may result in the  
acceleration of the maturity of all or a portion of MAC's debt.  MAC bonds and  
notes constitute general obligations of MAC and do not constitute an  
enforceable obligation or debt of either the State or the City.  As of June  
30, 1995, MAC had outstanding an aggregate of approximately $4.882 billion of  
its bonds.  MAC is authorized to issue bonds and notes to refund its  
outstanding bonds and notes and to fund certain reserves, without limitation  
as to principal amount, and to finance certain capital commitments to certain  
authorities in the event the City fails to provide such financing. 
Since 1975, the City's financial condition has been subject to oversight and  
review by the New York State Financial Control Board (the "Control Board") and  
since 1978 the City's financial statements have been audited by independent  
accounting firms.  To be eligible for guarantees and assistance, the City is  
required during a "control period" to submit annually for Control Board  
approval, and when a control period is not in effect for Control Board review,  
a financial plan for the next four fiscal years covering the City and certain  
agencies showing balanced budgets determined in accordance with GAAP.  New  
York State also established the Office of the State Deputy Comptroller for New  
York City ("OSDC") to assist the Control Board in exercising its powers and  
responsibilities.  On June 30, 1986, the City satisfied the statutory  
requirements for termination of the control period.  This means that the  
Control Board's powers of approval are suspended, but the Board continues to  
have oversight responsibilities. 
From time to time, the Control Board staff, OSDC, the City comptroller and  
others issue reports and make public statements regarding the City's financial  
condition, commenting on, among other matters, the City's financial plans,  
projected revenues and expenditures and actions by the City to eliminate  
projected operating deficits.  Some of these reports and statements have  
warned that the City may have underestimated certain expenditures and  
overestimated certain revenues and have suggested that the City may not have  
adequately provided for future contingencies.  Certain of these reports have  
analyzed the City's future economic and social conditions and have questioned  
whether the City has the capacity to generate sufficient revenues in the  
future to meet the costs of its expenditure increases and to provide necessary  
services. 
The City submitted to the Control Board on July 21, 1995 a fourth quarter  
modification to the City's financial plan for the 1995 fiscal year (the "1995  
Modification"), which projects a balanced budget in accordance with GAAP for  
the 1995 fiscal year, after taking into account a discretionary transfer of  
$75 million.  On July 11, 1995, the City submitted to the Control Board the  
Financial Plan for the 1996 through 1999 fiscal years (the "1996-1999  
Financial Plan"). 
The 1996-1999 Financial Plan projected revenues and expenditures for the 1996  
fiscal year balanced in accordance with GAAP.  The projections for the 1996  
fiscal year reflected proposed actions to close a previously projected gap of  
approximately $3.1 billion for the 1996 fiscal year.  The proposed actions in  
the 1996-1999 Financial Plan for the 1996 fiscal year included (i) a reduction  
in spending of $400 million, primarily affecting public assistance and  
Medicaid payment to the City; (ii) expenditure reductions in agencies,  
totaling $1.2 billion; (iii) transitional labor savings, totaling $600  
million; and (iv) the phase-in of the increased annual pension funding cost  
due to revisions resulting from an actuarial audit of the City's pension  
systems, which would reduce such costs in the 1996 fiscal year. 
Ratings as Investment Criteria 
In general, the ratings of Moody's, S&P and Fitch Investors Service, L.P.   
("Fitch") represent the opinions of those agencies as to the quality of debt  
obligations that they rate.  These ratings, however, are relative and  
subjective, are not absolute standards of quality and do not evaluate the  
market risk of securities.  Ratings will be used with respect to the Funds as  
initial criteria for the selection of portfolio securities; the Funds will  
also rely upon the independent advice of SBMFM to evaluate potential  
investments.  Among the factors that will be considered by SBMFM are the long- 
term ability of the issuer to pay principal and interest and general economic  
trends.  The Appendix to this Statement of Additional Information contains  
further information concerning the ratings of Moody's, S&P and Fitch, together  
with a brief discussion of the significance of those ratings. 
An issue of debt obligations may, subsequent to its purchase by a Fund, cease  
to be rated or its ratings may be reduced below the minimum required for  
purchase by the Fund.  Neither event will require the sale of the debt  
obligation by a Fund, but SBMFM will consider the event in its determination  
of whether the Fund should continue to hold the obligation.  In addition, to  
the extent that ratings change as a result of changes in rating organizations  
or their rating systems or as a result of a corporate restructuring of  
Moody's, S&P or Fitch, SBMFM will attempt to use comparable ratings as  
standards for each Fund's investments. 
 
 
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES FOR THE LARGE 
CAPITALIZATION  
GROWTH FUND 
The Prospectus discusses the Large Capitalization Fund's investment objective  
and the policies it employs to achieve its objective.  This section contains  
supplemental information concerning the types of securities and other  
instruments in which the Fund may invest, the investment policies and  
portfolio strategies that the Fund may utilize and certain risks attendant to  
such investments, policies and strategies. 
Money Market Instruments. As stated in the Prospectus, the Fund may invest for  
temporary defensive purposes in corporate and government bonds and notes and  
money market instruments.  Money market instruments in which the Fund may  
invest include: obligations issued or guaranteed by the United States  
government, its agencies or instrumentalities ("U.S. government securities");  
certificates of deposit, time deposits and bankers' acceptances issued by  
domestic banks (including their branches located outside the United States and  
subsidiaries located in Canada), domestic branches of foreign banks, savings  
and loan associations and similar institutions; high grade commercial paper;  
and repurchase agreements with respect to the foregoing types of instruments.   
The following is a more detailed description of such money market instruments. 
Certificates of deposit ("CDs") are short-term, negotiable obligations of  
commercial banks.  Time deposits ("TDs") are non-negotiable deposits  
maintained in banking institutions for specified periods of time at stated  
interest rates.  Bankers' acceptances are time drafts drawn on commercial  
banks by borrowers, usually in connection with international transactions. 
Domestic commercial banks organized under Federal law are supervised and  
examined by the Comptroller of the Currency and are required to be members of  
the Federal Reserve System and to be insured by the Federal Deposit Insurance  
Corporation the ("FDIC").  Domestic banks organized under state law are  
supervised and examined by state banking authorities but are members of the  
Federal Reserve System only if they elect to join.  Most state banks are  
insured by the FDIC (although such insurance may not be of material benefit to  
the Fund, depending upon the principal amount of CDs of each bank held by the  
Fund) and are subject to Federal examination and to a substantial body of  
Federal law and regulation.  As a result of governmental regulations, domestic  
branches of domestic banks are, among other things, generally required to  
maintain specialized levels of reserves, and are subject to other supervision  
and regulation designed to promote financial soundness. 
Obligations of foreign branches of domestic banks, such as CDs and TDs, may be  
general obligations of the parent bank in addition to the issuing branch, or  
may be limited by the terms of a specific obligation and governmental  
regulation.  Such obligations are subject to different risks than are those of  
domestic banks or domestic branches of foreign banks. These risks include  
foreign economic and political developments, foreign governmental restrictions  
that may adversely affect payment of principal and interest on the  
obligations, foreign exchange controls and foreign withholding and other taxes  
on interest income.  Foreign branches of domestic banks are not necessarily  
subject to the same or similar regulatory requirements that apply to domestic  
banks, such as mandatory reserve requirements, loan limitations, and  
accounting, auditing and financial recordkeeping requirements.  In addition,  
less information may be publicly available about a foreign branch of a  
domestic bank than about a domestic bank.  CDs issued by wholly owned Canadian  
subsidiaries of domestic banks are guaranteed as to repayment of principal and  
interest (but not as to sovereign risk) by the domestic parent bank. 
Obligations of domestic branches of foreign banks may be general obligations  
of the parent bank in addition to the issuing branch, or may be limited by the  
terms of a specific obligation and by Federal and state regulation as well as  
governmental action in the country in which the foreign bank has its head  
office.  A domestic branch of a foreign bank with assets in excess of $1  
billion may or may not be subject to reserve requirements imposed by the  
Federal Reserve System or by the state in which the branch is located if the  
branch is licensed in that state.  In addition, branches licensed by the  
Comptroller of the Currency and branches licensed by certain states ("State  
Branches") may or may not be required: (a) to pledge to the regulator by  
depositing assets with a designated bank within the state, an amount of its  
assets equal to 5% of its total liabilities; and (b) to maintain assets within  
the state in an amount equal to a specified percentage of the aggregate amount  
of liabilities of the foreign bank payable at or through all of its agencies  
or branches within the state.  The deposits of State Branches may not  
necessarily be insured by the FDIC.  In addition, there may be less publicly  
available information about a domestic branch of a foreign bank than about a  
domestic bank. 
In view of the foregoing factors associated with the purchase of CDs and TDs  
issued by foreign branches of domestic banks or by domestic branches of  
foreign banks, SBMFM will carefully evaluate such investments on a case-by- 
case basis.  Savings and loans associations whose CDs may be purchased by the  
Fund are supervised by the Office of Thrift Supervision and are insured by the  
Savings Association  Insurance Fund.  As a result, such savings and loan  
associations are subject to regulation and examination. 
American, European and Continental Depositary Receipts.  The Fund may invest  
in the securities of foreign and domestic issuers in the form of American  
Depositary Receipts ("ADRs") and European Depositary Receipts ("EDRs").  These  
securities may not necessarily be denominated in the same currency as the  
securities into which they may be converted.  ADRs are receipts typically  
issued by a U.S. bank or trust company that evidence ownership of underlying  
securities issued by a foreign corporation.  EDRs, which sometimes are  
referred to as Continental Depositary Receipts ("CDRs"), are receipts issued  
in Europe typically by foreign banks and trust companies that evidence  
ownership of either foreign or domestic securities.  Generally, ADRs, in  
registered form, are designed for use in U.S. securities markets and EDRs and  
CDRs, in bearer form, are designed for use in European securities markets. 
Miscellaneous Investment Policies 
Each Fund may invest up to an aggregate amount equal to 10% of its net assets  
of illiquid securities, which term includes securities subject to contractual  
or other restrictions on resale and other instruments that lack readily  
available markets.  Neither of the Funds will lend its portfolio securities. 
Repurchase Agreements - New York and California Funds 
Both the New and California Funds may engage in repurchase agreement  
transactions with banks which are the issuers of instruments acceptable for  
purchase by the Fund and certain dealers on the Federal Reserve Bank of New  
York's list of reporting dealers.  A repurchase agreement is a contract under  
which the buyer of a security simultaneously commits to resell the security to  
the seller at an agreed-upon price on an agreed-upon date. 
Under the terms of a typical repurchase agreement, a Fund would acquire an  
underlying debt obligation for a relatively short period subject to an  
obligation of the seller to repurchase, and the Fund to resell, the obligation  
at an agreed-upon price and time, thereby determining the yield during the  
Fund's holding period.  This arrangement results in a fixed rate of return  
that is not subject to market fluctuations during the Fund's holding period.   
Under each repurchase agreement, the selling institution will be required to  
maintain the value of the securities subject to the repurchase agreement at  
not less than their repurchase price.  Although the amount of a Fund's assets  
that may be invested in purchase agreements terminable in less than seven days  
is not limited, repurchase agreements maturing in more than seven days,  
together with other securities lacking readily available markets held by the  
Fund, will not exceed 10% of the Fund's net assets. 
The value of the securities underlying a repurchase agreement of a Fund will  
be monitored on an ongoing basis by SBMFM to ensure that the value is at least  
equal at all times to the total amount of the repurchase obligation, including  
interest.  SBMFM will also monitor, on an ongoing basis to evaluate potential  
risks, the creditworthiness of the banks and dealers with which a Fund enters  
into repurchase agreements. 
When-Issued and Delayed-Delivery Transactions - New York and California Funds 
When a Fund engages in when-issued or delayed-delivery securities  
transactions, it will rely on the other party to consummate the trade.   
Failure of the seller to do so may result in a Fund's incurring a loss or  
missing an opportunity to obtain a price considered to be advantageous. 
Investment Restrictions 
The investment restrictions numbered 1 through 12 below have been adopted by  
the Trust as fundamental policies of the Funds.  Under the 1940 Act, a  
fundamental policy may not be changed with respect to a Fund without the vote  
of a majority of the outstanding voting securities of the Fund.  Majority is  
defined in the 1940 Act as the lesser of (a) 67% or more of the shares present  
at a Fund meeting, if the holders of more than 50% of the outstanding shares  
of the Fund are present or represented by proxy, or (b) more than 50% of  
outstanding shares.  Investment restrictions 13 through 17 may be changed by a  
vote of a majority of the Trust's Board of Trustees at any time. 
Under the investment restrictions adopted by the Trust with respect to the  
Funds:  
1.  No Fund will purchase securities other than Municipal Obligations and  
Taxable Investments as those terms are defined in the Prospectuses or this  
Statement of Additional Information. 
2.  No Fund will invest more than 25% of the value of its total assets in  
securities of issuers in any one industry, except that this limitation is not  
applicable to a Fund's investments in U.S. government securities. 
3.  No Fund will borrow money, except that a Fund may borrow from banks for  
temporary or emergency (not leveraging) purposes, including the meeting of  
redemption requests that might otherwise require the untimely disposition of  
securities, in an amount not to exceed 10% of the value of the Fund's total  
assets (including the amount borrowed) valued at market less liabilities (not  
including the amount borrowed) at the time the borrowing is made.  Whenever a  
Fund's borrowings exceed 5% of the value of its total assets, the Fund will  
not make any additional investments. 
4.  No Fund will pledge, hypothecate, mortgage or otherwise encumber its  
assets, except to secure permitted borrowings. 
5.  No Fund will lend money to other persons except through purchasing  
Municipal Obligations or Taxable Investments and entering into repurchase  
agreements, each in a manner consistent with the Fund's investment objective  
and policies. 
6.  No Fund will purchase securities on margin, except that a Fund may obtain  
any short-term credits necessary for the clearance of purchases and sales of  
securities. 
7.  No Fund will make short sales of securities or maintain a short position. 
8.  No Fund will purchase or sell real estate or real estate limited  
partnership interests. 
9.  No Fund will purchase or sell commodities or commodity contracts. 
10.  No Fund will act as an underwriter of securities, except that a Fund may  
acquire securities under circumstances in which, if the securities were sold,  
the Fund could be deemed to be an underwriter for purposes of the Securities  
Act of 1933, as amended. 
11.  No Fund will invest in oil, gas or other mineral leases or exploration or  
development programs. 
12.  No Fund may write or sell puts, calls, straddles, spreads or combinations  
of those transactions, except as permitted under the Fund's investment  
objective and policies. 
13.  No Fund will purchase any security if, as a result (unless the security  
is acquired pursuant to a plan of reorganization or an offer of exchange), the  
Fund would own any securities of an open-end investment company or more than  
3% of the total outstanding voting stock of any closed-end investment company,  
or more than 5% of the value of the Fund's total assets would be invested in  
securities of any one or more closed-end investment companies. 
14.  No Fund will purchase a security if, as a result, the Fund would then  
have more than 5% of its total assets invested in securities of issuers  
(including predecessors) that have been in continuous operation for fewer than  
three years, except that this limitation will be deemed to apply to the entity  
supplying the revenues from which the issue is to be paid, in the case of  
private activity bonds purchased. 
15.  No Fund may make investments for the purpose of exercising control of  
management. 
16.  No Fund will purchase or retain securities of any issuer if, to the  
knowledge of the Trust, any of the Trust's officers or Trustees or any officer  
or director of SBMFM individually owns more than 1/2 of 1% of the outstanding  
securities of the issuer and together they own beneficially more than 5% of  
the securities. 
17.  No Fund will lend its portfolio securities.  The Trust may make  
commitments more restrictive than the restrictions listed above to enable the  
sale of shares of any Fund in certain states.  Should the Trust determine that  
a commitment is no longer in the best interests of a Fund and its  
shareholders, the Trust will revoke the commitments by terminating the sale of  
shares of the Fund in the state involved.  The percentage limitations  
contained in the restrictions listed above apply at the time of purchase of  
securities. 
Portfolio Transactions  
Decisions to buy and sell securities for each Fund are made by SBMFM, subject  
to the overall review of the Trust's Board of Trustees.  Although investment  
decisions for each Fund are made independently from those of the other  
accounts managed by SBMFM, investments of the type that a Fund may make also  
may be made by those other accounts.  When a Fund and one or more other  
accounts managed by SBMFM are prepared to invest in, or desire to dispose of,  
the same security, available investments or opportunities for sales will be  
allocated in a manner believed by SBMFM to be equitable to each.  In some  
cases, this procedure may adversely affect the price paid or received by a  
Fund or the size of the position obtained or disposed of by a Fund.  The Trust  
has paid no brokerage commissions since its commencement of operations. 
Allocation of transactions on behalf of the Funds, including their frequency,  
to various dealers is determined by SBMFM in its best judgment and in a manner  
deemed fair and reasonable to the Funds' shareholders.  The primary  
considerations of SBMFM in allocating transactions are availability of the  
desired security and the prompt execution of orders in an effective manner at  
the most favorable prices.  Subject to these considerations, dealers that  
provide supplemental investment research and statistical or other services to  
SBMFM may receive orders for portfolio transactions by a Fund.  Information so  
received is in addition to, and not in lieu of, services required to be  
performed by SBMFM, and the fees of SBMFM are not reduced as a consequence of  
their receipt of the supplemental information.  The information may be useful  
to SBMFM in serving both a Fund and other clients, and conversely,  
supplemental information obtained by the placement of business of other  
clients may be useful to SBMFM in carrying out its obligations to a Fund. 
No Fund will purchase U.S. government securities or Municipal Obligations  
during the existence of any underwriting or selling group relating to the  
securities, of which SBMFM is a member, except to the extent permitted by the  
SEC.  Under certain circumstances, a Fund may be at a disadvantage because of  
this limitation in comparison with other funds that have similar investment  
objectives but that are not subject to a similar limitation. 
Portfolio Turnover 
While a Fund's portfolio turnover rate (the lesser of purchases or sales of  
portfolio securities during the year, excluding purchases or sales of short- 
term securities, divided by the monthly average value of portfolio securities)  
is generally not expected to exceed 100%, it has in the past exceeded 100%  
with respect to these funds.  The rate of turnover will not be a limiting  
factor, however, when a Fund deems it desirable to sell or purchase  
securities.  This policy should not result in higher brokerage commissions to  
a Fund, as purchases and sales of portfolio securities are usually effected as  
principal transactions.  Securities may be sold in anticipation of a rise in  
interest rates (market decline) or purchased in anticipation of a decline in  
interest rates (market rise) and later sold.  In addition, a security may be  
sold and another security of comparable quality purchased at approximately the  
same time to take advantage of what the Fund believes to be a temporary  
disparity in the normal yield relationship between the two securities.  These  
yield disparities may occur for reasons not directly related to the investment  
quality of particular issues or the general movement of interest rates, such  
as changes in the overall demand for, or supply of, various types of tax- 
exempt securities. 
The portfolio turnover rates are as follows:  
 
<TABLE> 
<CAPTION> 
 
                                               Year                                 Year 
                                              Ended                               Ended 
Fund                                    11/30/96                             11/30/95 
 
<S>                                         <C>                                   <C> 
California Fund                       15%                                    8% 
 
New York Fund                       67%                                    0% 
 
Large Capitalization  
Growth Fund                      Not Applicable                 Not Applicable 
</TABLE> 
 
 
PURCHASE OF SHARES 
Volume Discounts 
The schedules of sales charges described in the Prospectuses apply to  
purchases of shares of each Fund made by any "purchaser," which term is  
defined to include the following: (a) an individual; (b) an individual's  
spouse and his or her children purchasing shares for his or her own account;  
(c) a trustee or other fiduciary purchasing shares for a single trust estate  
or single fiduciary account; (d) a pension, profit-sharing or other employee  
benefit plan qualified under Section 401(a) of the Code and qualified employee  
benefit plans of employers who are "affiliated persons" of each other within  
the meaning of the 1940 Act; (e) tax-exempt organizations enumerated in  
Section 501(c)(3) or (13) of the Code; or (f) any other organized group of  
persons, provided that the organization has been in existence for at least six  
months and was organized for a purpose other than the purchase of investment  
company securities at a discount.  Purchasers who wish to combine purchase  
orders to take advantage of volume discounts should contact a Smith Barney  
Financial Consultant. 
Combined Right of Accumulation 
Reduced sales charges, in accordance with the schedules in the Prospectuses,  
apply to any purchase of shares of a Fund by any "purchaser" (as defined  
above).  The reduced sales charge is subject to confirmation of the  
shareholder's holdings through a check of appropriate records.  The Trust  
reserves the right to terminate or amend the combined right of accumulation at  
any time after written notice to shareholders.  For further information  
regarding the right of accumulation, shareholders should contact a Smith  
Barney Financial Consultant. 
Determination of Public Offering Price 
The Funds offer their shares to the public on a continuous basis.  The public  
offering price for a Class A and Class Y share of a Fund is equal to the net  
asset value per share at the time of purchase, plus for Class A shares an  
initial sales charge based on the aggregate amount of the investment.  The  
public offering price for a Class C share (and Class A share purchases,  
including applicable rights of accumulation, equaling or exceeding $500,000)  
is equal to the net asset value per share at the time of purchase and no sales  
charge is imposed at the time of purchase.  A contingent deferred sales charge  
("CDSC"), however, is imposed on certain redemptions of Class C shares, and  
Class A shares when purchased in amounts exceeding $500,000.  The method of  
computation of the public offering price is shown in each Fund's financial  
statements, incorporated by reference in their entirety into this Statement of  
Additional Information. 
 
REDEMPTION OF SHARES 
Detailed information on how to redeem shares of the Funds is included in the  
Prospectuses.  The right of redemption of shares of each Fund may be suspended  
or the date of payment postponed (a) for any periods during which the New York  
Stock Exchange, Inc.  (the "NYSE") is closed (other than for customary weekend  
and holiday closings), (b) when trading in the markets the Fund normally  
utilizes is restricted, or an emergency exists, as determined by the SEC, so  
that disposal of the Fund's investments or determination of its net asset  
value is not reasonably practicable or (c) for any other periods as the SEC by  
order may permit for the protection of the Fund's shareholders. 
Distribution in Kind 
If the Board of Trustees of the Trust determines that it would be detrimental  
to the best interests of the remaining shareholders to make a redemption  
payment wholly in cash, a Fund may pay, in accordance with SEC rules, any  
portion of a redemption in excess of the lesser of $250,000 or 1.00% of the  
Fund's net assets by a distribution in kind of portfolio securities in lieu of  
cash.  Securities issued as a distribution in kind may incur brokerage  
commissions when shareholders subsequently sell those securities. 
Automatic Cash Withdrawal Plan 
An automatic cash withdrawal plan (the "Withdrawal Plan") is available to  
shareholders of any Fund who own shares of the Fund with a value of at least  
$10,000 and who wish to receive specific amounts of cash monthly or 
quarterly.   
Withdrawals of at least $50 may be made under the Withdrawal Plan by redeeming  
as many shares of the Fund as may be necessary to cover the stipulated  
withdrawal payment.  Any applicable CDSC will not be waived on amounts  
withdrawn by shareholders that exceed 1.00% per month of the value of a  
shareholder's shares at the time the Withdrawal Plan commences.  (With respect  
to Withdrawal Plans in effect prior to November 7, 1994, any applicable CDSC  
will be waived on amounts withdrawn that do not exceed 2.00% per month of the  
value of a shareholder's shares at the time the Withdrawal Plan commences).   
To the extent that withdrawals exceed dividends, distributions and  
appreciation of a shareholder's investment in a Fund, continued withdrawal  
payments will reduce the shareholder's investment, and may ultimately exhaust  
it.  Withdrawal payments should not be considered as income from investment in  
a Fund.  Furthermore, as it generally would not be advantageous to a  
shareholder to make additional investments in the Fund at the same time he or  
she is participating in the Withdrawal Plan, purchases by such shareholders in  
amounts of less than $5,000 ordinarily will not be permitted. 
Shareholders of a Fund who wish to participate in the Withdrawal Plan and who  
hold their shares of the Fund in certificate form must deposit their share  
certificates with the Transfer Agent as agent for Withdrawal Plan members.   
All dividends and distributions on shares in the Withdrawal Plan are  
reinvested automatically at net asset value in additional shares of the Fund  
involved.  A shareholder who purchases shares directly through the Transfer  
Agent may continue to do so and applications for participation in the  
Withdrawal Plan must be received by the Transfer Agent no later than the  
eighth day of the month to be eligible for participation beginning with that  
month's withdrawal.  For additional information, shareholders should contact a  
Smith Barney Financial Consultant. 
 
DISTRIBUTOR 
Smith Barney serves as the Trust's distributor on a best efforts basis  
pursuant to a written agreement dated July 30, 1993 (the Distribution  
Agreement"), which was most recently approved by the Trust's Board of Trustees  
on July 17, 1996.   
For the fiscal years ended November 30, 1994, 1995, and 1996, Smith Barney or  
its predecessor Shearson Lehman Brothers received the following in sales  
charges for the sale of each Fund's Class A shares, and did not reallow any  
portion thereof to dealers:  
 
<TABLE> 
<CAPTION> 
 
                                               Year                         Year                          Year 
                                              Ended                       Ended                       Ended 
Fund                                    11/30/96                    11/30/95                   11/30/94   
 
<S>                                      <C>                          <C>                           <C>  
California Fund                    $39,000                     $22,000                     $ 69,353 
 
New York Fund                     48,000                       32,000                       132,427 
 
Large Capitalization  
Growth Fund                            N/A                          N/A                             N/A 
</TABLE> 
 
For the fiscal years ended November 30, 1994, 1995, and 1996, Smith Barney or  
Shearson Lehman Brothers received the following representing CDSC on  
redemption of each Fund's Class A shares:  
 
<TABLE> 
<CAPTION> 
 
                                               Year                         Year                          Year 
                                              Ended                       Ended                       Ended 
Fund                                    11/30/96                    11/30/95                   11/30/94   
 
<S>                                      <C>                          <C>                           <C>  
California Fund                                                  $3,800                       $18,705 
 
New York Fund                     2,000                          8,000                         22,791 
 
Large Capitalization  
Growth Fund                           N/A                            N/A                           N/A 
</TABLE> 
 
 
 
For the fiscal years ended November 30, 1994, 1995, and 1996, Smith Barney or  
Shearson Lehman Brothers received the following representing CDSC on  
redemption of each Fund's Class C shares:  
 
<TABLE> 
<CAPTION> 
                               Year                  Year       Year 
                               Ended                Ended                       Ended 
Fund                                    11/30/96                    11/30/95                   11/30/94   
 
<S>                                      <C>                          <C>                           <C>  
California Fund                                                  $200                          $0 
 
New York Fund                     -                  -                 - 
 
Large Capitalization  
Growth Fund                         N/A                             N/A                         N/A 
</TABLE> 
 
 
 
 
 
* The inception dates for Class C shares of California Fund and New York Fund  
are November 8, 1994 and December 5, 1994, respectively  
When payment is made by the investor before the settlement date, unless  
otherwise requested in writing by the investor, the funds will be held as a  
free credit balance in the investor's brokerage account and Smith Barney may  
benefit from the temporary use of the funds.  The investor may designate  
another use for the funds prior to settlement date, such as an investment in a  
money market fund (other than Smith Barney Exchange Reserve Fund) of the Smith  
Barney Mutual Funds.  If the investor instructs Smith Barney to invest the  
funds in a Smith Barney money market fund, the amount of the investment will  
be included as part of the average daily net assets of both the Fund and the  
money market fund, and affiliates of Smith Barney that serve the funds in an  
investment advisory or administrative capacity will benefit from the fact that  
they are receiving fees from both such investment companies for managing these  
assets, computed on the basis of their average daily net assets.  The Trust's  
Board of Trustees has been advised of the benefits to Smith Barney resulting  
from these settlement procedures and will take such benefits into  
consideration when reviewing the Advisory, Administration and Distribution  
Agreements for continuance. 
For the fiscal year ended November 30, 1996, Smith Barney incurred  
distribution expenses totaling approximately $125,118 consisting of  
approximately $15,452 for advertising, $20,504 for printing and mailing of  
prospectuses, $27,433 for support services, $60,587 to Smith Barney Financial  
Consultants, and $1,142 in accruals for interest on the excess of Smith Barney  
expenses incurred in distribution of the Funds' shares over the sum of the  
distribution fees and CDSC received by Smith Barney from the Fund. 
Distribution Arrangements for the New York and California Fund 
To compensate Smith Barney for the services it provides and for the expense it  
bears under the Distribution Agreement, the Trust has adopted a services and  
distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act.   
Under the Plan, both the New York and California Fund pays Smith Barney a  
service fee, accrued daily and paid monthly, calculated at the annual rate of  
0.15% of the value of the Fund's average daily net assets attributable to the  
Fund's Class A and Class C shares.  In addition, each Fund pays Smith Barney a  
distribution fee with respect to the Class C shares primarily intended to  
compensate Smith Barney for its initial expense of paying its Financial  
Consultants a commission upon sales of those shares.  The Class C distribution  
fee is calculated at the annual rate of 0.20% of the value of each Fund's  
average net assets attributable to the shares of the Class. 
 
 
The following service and distribution fees were incurred during the periods  
indicated:  
 
SERVICE FEES 
 
California Fund: 
 
<TABLE> 
<CAPTION> 
 
                                               Year                         Year                          Year 
                                              Ended                       Ended                       Ended 
Fund                                    11/30/96                    11/30/95                   11/30/94*   
 
<S>                                      <C>                          <C>                           <C>  
Class A                                 $37,644                     $36,511                     $47,722  
 
Class C*                                   3,583                         1,017                               2 
</TABLE> 
 
 
 
 
 
New York Fund: 
 
 
<TABLE> 
<CAPTION> 
 
                                               Year                         Year                          Year 
                                              Ended                       Ended                       Ended 
Fund                                    11/30/96                    11/30/95                   11/30/94*   
 
<S>                                      <C>                          <C>                           <C>  
Class A                                 76,380                       $84,263                     $103,579  
 
Class C*                                  1,171                             203                  - 
</TABLE> 
 
*The inception dates for Class C of California Fund and New York Fund are  
November 8, 1994 and December 5, 1994, respectively. 
DISTRIBUTION FEES 
 
California Fund: 
 
<TABLE> 
<CAPTION> 
 
                                               Year                         Year                          Year 
                                              Ended                       Ended                       Ended 
Fund                                    11/30/96                    11/30/95                   11/30/94*   
 
<S>                                      <C>                          <C>                           <C>  
Class C                                 4,778                          $1,356                      $3 
</TABLE> 
 
 
New York Fund:  
 
<TABLE> 
<CAPTION> 
 
                                               Year                         Year 
                                              Ended                       Ended 
Fund                                    11/30/96                    11/30/95* 
 
<S>                                      <C>                          <C>          
Cass C                                 1,562                          $271 
</TABLE> 
 
* The inception dates for Class C shares of California Fund and New York Fund  
are November 8, 1994 and December 5, 1994, respectively. 
For the fiscal years ended November 30, 1994, 1995 and 1996 Smith Barney  
and/or its predecessor, Shearson Lehman Brothers, received $291,639, $123,621,  
and $125,117 respectively, in the aggregate from the Plan. 
Under its terms, the Plan continues from year to year, provided such  
continuance is approved annually by vote of the Board of Trustees, including a  
majority of the Trustees who are not interested persons of the Trust and who  
have no direct or indirect financial interest in the operation of the Plan or  
in the Distribution Agreement (the "Independent Trustees").  The Plan may not  
be amended to increase the amount of the service and distribution fees without  
shareholder approval, and all amendments of the Plan also must be approved by  
the Trustees including all of the Independent Trustees in the manner described  
above.  The Plan may be terminated with respect to a Class at any time,  
without penalty, by vote of a majority of the Independent Trustees or, with  
respect to any Fund, by vote of a majority of the outstanding voting  
securities of a Fund (as defined in the 1940 Act).  Pursuant to the Plan,  
Smith Barney will provide the Board of Trustees with periodic reports of  
amounts expended under the Plan and the purpose for which such expenditures  
were made. 
Distribution Arrangements for the Large Capitalization Growth Fund 
To compensate Smith Barney for the services it provides and for the expense it  
bears under the Distribution Agreement, the Fund has adopted a services and  
distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act.   
Under the Plan, the Fund pays Smith Barney a service fee, accrued daily and  
paid monthly, calculated at the annual rate of 0.25% of the value of the  
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 Financial Consultants a  
commission upon sales of those shares. The Class B and Class C distribution  
fee is calculated at the annual rate of 0.75% of the value of the Fund's  
average daily net assets attributable to the shares of the respective Class. 
 
VALUATION OF SHARES 
The net asset value per share of each Fund's Classes is calculated on each  
day, Monday through Friday, except days on which the NYSE is closed.  The NYSE  
currently is scheduled to be closed on New Year's Day, Presidents' Day, Good  
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas,  
and on the preceding Friday or subsequent Monday when one of these holidays  
falls on a Saturday or Sunday, respectively.  Because of the differences in  
distribution fees and Class-specific expenses, the per share net asset value  
of each Class may differ.  The following is a description of the procedures  
used by the Trust in valuing its assets. 
In carrying out valuation policies adopted by the Trust's Board of Trustees  
for the New York and California Fund SBMFM, as administrator, may consult with  
an independent pricing service (the "Pricing Service") retained by the Trust.   
Debt securities of domestic issuers (other than U.S. government securities and  
short-term investments), including Municipal Obligations, are valued by SBMFM  
after consultation with the Pricing Service.  U.S. government securities will  
be valued at the mean between the closing bid and asked prices on each day,  
or, if market quotations for those securities are not readily available, at  
fair value, as determined in good faith by the Trust's Board of Trustees.   
With respect to other securities held by the Fund, when, in the judgment of  
the Pricing Service, quoted bid prices for investments are readily available  
and are representative of the bid side of the market, these investments are  
valued at the mean between the quoted bid prices and asked prices.   
Investments for which no readily obtainable market quotations are available,  
in the judgment of the Pricing Service, are carried at fair value as  
determined by the Pricing Service.  The procedures of the Pricing Service are  
reviewed periodically by the officers of the Trust under the general  
supervision and responsibility of the Board of Trustees. 
Regarding the Large Capitalization Growth Fund, securities listed on a  
national securities exchange will be valued on the basis of the last sale on  
the date on which the valuation is made or, in the absence of sales, at the  
mean between the closing bid and asked prices.  Over-the-counter securities  
will be valued at the mean between the closing bid and asked prices on each  
day, or, if market quotations for those securities are not readily available,  
at fair value, as determined in good faith by the Fund's Board of Trustees.   
Short-term obligations with maturities of 60 days or less are valued at  
amortized cost, which constitutes fair value as determined by the Fund's Board  
of Trustees.  Amortized cost involves valuing an instrument at its original  
cost to the Fund and thereafter assuming a constant amortization to maturity  
of any discount or premium, regardless of the effect of fluctuating interest  
rates on the market value of the instrument.  All other securities and other  
assets of the Fund will be valued at fair value as determined in good faith by  
the Fund's Board of Trustees. 
 
EXCHANGE PRIVILEGE 
Except as noted below, shareholders of any of the Smith Barney Mutual Funds  
may exchange all or part of their shares for shares of the same Class of other  
Smith Barney Mutual Funds, on the basis of relative net asset value per share  
at the time of exchange as follows:  
A. Class A shares of the Fund may be exchanged without a sales charge  
for Class A shares of any of the Smith Barney Mutual Funds. 
B. Class C shares of any fund may be exchanged without a sales charge.   
For purposes of CDSC applicability, Class C shares of the Fund exchanged  
for Class C shares of another Smith Barney Mutual Fund will be deemed to  
have been owned since the date the shares being exchanged were deemed to  
be purchased. 
Dealers other than Smith Barney must notify the Transfer Agent of the  
investor's prior ownership of Class A shares of Smith Barney High Income Fund  
and the account number in order to accomplish an exchange of shares of Smith  
Barney High Income Fund under paragraph B above. 
The exchange privilege enables shareholders in any Smith Barney Mutual Fund to  
acquire shares of the same Class in a fund with different investment  
objectives when they believe a shift between funds is an appropriate  
investment decision.  This privilege is available to shareholders residing in  
any state in which the fund shares being acquired may legally be sold.  Prior  
to any exchange, the shareholder should obtain and review a copy of the  
current prospectus of each fund into which an exchange is being considered.   
Prospectuses may be obtained from a Smith Barney Financial Consultant. 
Upon receipt of proper instructions and all necessary supporting documents,  
shares submitted for exchange are redeemed at the then-current net asset value  
and, subject to any applicable CDSC, the proceeds are immediately invested, at  
a price as described above, in shares of the fund being acquired.  Smith  
Barney reserves the right to reject any exchange request.  The exchange  
privilege may be modified or terminated at any time after written notice to  
shareholders. 
 
PERFORMANCE DATA 
From time to time, the Trust may quote a Fund's yield or total return in  
advertisements or in reports and other communications to shareholders.  The  
Trust may include comparative performance information in advertising or  
marketing each Fund's shares.  Such performance information may include the  
following industry and financial publications- Barron's, Business Week, CDA  
Investment Technologies, Inc., Changing Times, Forbes, 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 any  
Class it will also disclose such information for the other Classes. 
 
Yield and Equivalent Taxable Yield 
A Fund's 30-day yield described in the Prospectuses is calculated according to  
a formula prescribed by the SEC, expressed as follows:  
 
 
Where:	a  =  Dividends and interest earned during the  
period 
b  =  Expenses accrued for the period (net of  
reimbursements) 
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 that were purchased by a Fund at a discount or  
premium, the formula generally calls for amortization of the discount or  
premium; the amortization schedule will be adjusted monthly to reflect changes  
in the market values of the debt obligations. 
A Fund's "equivalent taxable 30-day yield" for a Class is computed by dividing  
that portion of the Class' 30-day yield which is tax-exempt by one minus a  
stated income tax rate and adding the product to that portion, if any, of the  
Class' yield that is not tax-exempt. 
The yield on municipal securities is dependent upon a variety of factors,  
including general economic and monetary conditions, conditions of the  
municipal securities market, size of a particular offering, maturity of the  
obligation offered and rating of the issue.  Investors should recognize that,  
in periods of declining interest rates, a Fund's yield for each Class of  
shares will tend to be somewhat higher than prevailing market rates, and in  
periods of rising interest rates a Fund's yield for each Class of shares will  
tend to be somewhat lower.  In addition, when interest rates are falling, the  
inflow of net new money to a Fund from the continuous sale of its shares will  
likely be invested in portfolio instruments producing lower yields than the  
balance of the Fund's portfolio, thereby reducing the current yield of the  
Fund.  In periods of rising interest rates, the opposite can be expected to  
occur. 
The yields for the 30-day period ended November 30, 1996 for California Fund's  
Class A, Class C and Class Y shares were 4.28, 4.15% and 4.55%, respectively.   
The yields for the 30-day period ended November 30, 1996 for New York Fund's  
Class A and Class C shares were 4.35% and 4.21%, respectively. 
The equivalent taxable yields for the 30-day period ended November 30, 1996  
assuming payment of Federal income taxes at the rate of 31.0%; California  
income taxes at the rate of 9.3% for the California Fund shareholders; and New  
York State and City income taxes at a rate of 10.5% for the New York Fund  
shareholders would have been as follows: California Fund's Class A, Class C  
and Class Y shares: 6.84%, 6.63% and 7.27%, respectively, and New York Fund's  
Class A and Class C shares: 7.05% and 6.82%, respectively. 
 
 
 
Average Annual Total Return  
A Fund's "average annual total return," as described below, is computed  
according to a formula prescribed by the SEC.  The formula can be expressed as  
follows:  
P(1 + T)n = ERV 
Where: P  	= 	a hypothetical initial payment of $1,000.  
	T  	= 	average annual total return. 
	n  	= 	number of years. 
	ERV =	Ending Redeemable Value of a hypothetical $1,000  
investment made at the 			beginning of a 1-, 5- or  
10-year period at the end of a 1-, 5- or 10-year period 	 
	(or fractional portion thereof), assuming reinvestment of  
all dividends and 			distributions. 
The ERV assumes complete redemption of the hypothetical investment at the end  
of the measuring period.  A Fund's net investment income changes in response  
to fluctuations in interest rates and the expenses of the Fund. 
The following total returns assume that the maximum Class A 2.00% sales charge  
has been deducted from the investment at the time of purchase and have been  
restated to show the change in the maximum sales charge.  The Funds' average  
annual total return for Class A shares were as follows:  
 
ONE YEAR PERIOD 
 
ENDED NOVEMBER 30, 1996 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                               3.00% 
 
New York Fund                               2.79% 
 
Large Capitalization  
Growth Fund                                     N/A         
</TABLE> 
 
 
 
PER ANNUM FOR THE PERIOD FROM 
COMMENCEMENT OF OPERATIONS 
(DECEMBER 31, l991)THROUGH NOVEMBER 30, 1996 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                              6.15% 
 
New York Fund                              6.20% 
 
Large Capitalization  
Growth Fund                                    N/A           
</TABLE> 
 
 
The Funds' average annual total return for Class C shares were as follows:  
 
ONE YEAR PERIOD 
 
ENDED NOVEMBER 30, 1996** 
 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                               3.84% 
 
New York Fund*                             3.64% 
 
Large Capitalization  
Growth Fund                                   N/A             
</TABLE> 
 
 
* For the period from December 5, 1994 (inception date) to November 30, 1995  
 
PER ANNUM FOR THE PERIOD FROM 
COMMENCEMENT OF OPERATIONS 
(NOVEMBER 8, 1994) THROUGH NOVEMBER 30, 1996 
 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                               9.57% 
 
New York Fund                               8.76% 
 
Large Capitalization  
Growth Fund                                     N/A              
</TABLE> 
 
The Funds' average annual total return for Class Y shares were as follows: 
 
ONE YEAR PERIOD 
 
ENDED NOVEMBER 30, 1996** 
 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund*                            5.22% 
 
Large Capitalization  
Growth Fund                                   N/A          
</TABLE> 
 
 
 
* 	For the period from September 8, 1995 (inception date) to November 30,  
1996.  
**	As of November 30, 1996, no Class Y shares of New York Fund had been sold. 
 
 
Aggregate Total Return 
A Fund's "aggregate total return," as described below, represents the  
cumulative change in the value of an investment in the Fund for the specified  
period and is computed by the following formula:  
ERV - P 
P 
Where: P 		=	a hypothetical initial payment of $10,000. 
ERV 	=	Ending Redeemable Value of a hypothetical  
$10,000 investment  
made at the beginning of the 1-, 5- or 10-year period at the  
end of the  
1-, 5- or 10-year period (or fractional portion thereof),  
assuming  
reinvestment of all dividends and distributions. 
The ERV assumes complete redemption of the hypothetical investment at the end  
of the measuring period. 
The Funds' aggregate total return for Class A shares were as follows:  
 
ONE YEAR PERIOD 
 
ENDED NOVEMBER 30, 1996 
 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                               5.05% 
 
New York Fund                               4.85% 
 
Large Capitalization  
Growth Fund                                    N/A         
</TABLE> 
 
PER ANNUM FOR THE PERIOD FROM 
COMMENCEMENT OF OPERATIONS 
(DECEMBER 31, l991)THROUGH NOVEMBER 30, 1996 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                               6.58% 
 
New York Fund                               6.64% 
 
Large Capitalization  
Growth Fund                                      N/A      
</TABLE> 
 
 
The Funds' aggregate total return for Class C shares were as follows:  
 
ONE YEAR PERIOD 
 
ENDED NOVEMBER 30, 1996** 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                               4.84% 
 
New York Fund*                             4.64% 
 
Large Capitalization  
Growth Fund                                     N/A             
</TABLE> 
 
 
 
* For the period from December 5, 1994 (inception date) to November 30, l996  
 
PER ANNUM FOR THE PERIOD FROM 
COMMENCEMENT OF OPERATIONS 
(NOVEMBER 8, 1994) THROUGH NOVEMBER 30, 1996 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                               20.76% 
 
New York Fund                               18.26% 
 
Large Capitalization  
Growth Fund                                    N/A              
</TABLE> 
 
The Funds' aggregate total return for Class Y shares were as follows:  
 
ONE YEAR PERIOD 
 
ENDED NOVEMBER 30, 1996** 
 
<TABLE> 
<CAPTION> 
                                                      Total Return 
Fund                                              (With Fee Waivers) 
 
<S>                                                <C> 
California Fund                              5.22% 
</TABLE> 
 
 
*	For the period from September 8, 1995 (inception date) to November 30,  
l996.  
**	As of November 30, 1996, no Class Y shares of New York Fund had been sold. 
It is important to note that the total return figures set forth above are  
based on historical earnings and are not intended to indicate future  
performance.  Each Class' net investment income changes in response to  
fluctuations in interest rates and the expenses of the Fund.  Performance will  
vary from time to time depends upon market conditions, the composition of the  
Fund's portfolio and operating expenses and the expenses exclusively  
attributable to the Class.  Consequently, any given performance quotation  
should not be considered representative of the Class' performance for any  
specified period in the future.  Because performance will vary, it may not  
provide a basis for comparing an investment in the Class with certain bank  
deposits or other investments that pay a fixed yield for a stated period of  
time.  Investors comparing a Class' performance with that of other mutual  
funds should give consideration to the quality and maturity of the respective  
investment companies' portfolio securities. 
TAXES - New York and California Fund 
The following is a summary of selected Federal income tax considerations that  
may affect the Trust and its shareholders.  The summary is not intended as a  
substitute for individual tax advice and investors are urged to consult their  
own tax advisors as to the tax consequences of an investment in the Trust. 
As described above and in the Prospectuses, each Fund is designed to provide  
investors with current income which is excluded from gross income for Federal  
income tax purposes, and the California Fund and the New York Fund are  
designed to provide investors with current income exempt from otherwise  
applicable state and/or local personal income taxes.  The Trust is not  
intended to be a balanced investment program and is not designed for investors  
seeking capital gains or maximum tax-exempt income irrespective of  
fluctuations in principal.  Investment in the Trust would not be suitable for  
tax-exempt institutions, qualified retirement plans, H.R. 10 plans and  
individual retirement accounts because those investors would not gain any  
additional tax benefit from the receipt of tax-exempt income. 
The Trust has qualified and intends that each Fund continue to qualify each  
year as a "regulated investment company" under the Code.  Provided that a Fund  
(a) is a regulated investment company and (b) distributes to its shareholders  
at least 90% of its taxable net investment income (including, for this  
purpose, its net realized short-term capital gains) and 90% of its tax-exempt  
interest income (reduced by certain expenses), the Fund will not be liable for  
Federal income taxes to the extent its taxable net investment income and its  
net realized long-term and short-term capital gains, if any, are distributed  
to its shareholders.  Any such taxes paid by a Fund would reduce the amount of  
income and gains available for distribution to shareholders. 
Because the Fund may distribute exempt-interest dividends, interest on  
indebtedness incurred by a shareholder to purchase or carry shares of a Fund  
is not deductible for Federal income tax purposes.  In addition, the  
indebtedness is not deductible by a shareholder of the California Fund for  
California State personal income tax purposes, nor by a New York Fund  
shareholder for New York State and New York City personal income tax 
purposes. If a shareholder receives exempt-interest dividends with respect 
to any share of a Fund and if the share is held by the shareholder for 
six months or less, then any loss on the sale or exchange of the 
share may, to the extent of the  
exempt-interest dividends, be disallowed.  In addition, the Code may require a  
shareholder that receives exempt-interest dividends to treat as taxable income  
a portion of certain otherwise non-taxable social security and railroad  
retirement benefit payments.  Furthermore, the portion of any exempt-interest  
dividend paid by a Fund that represents income derived from private activity  
bonds held by the Fund may not retain its tax-exempt status in the hands of a  
shareholder who is a "substantial user" of a facility financed by the bonds,  
or a "related person" of the substantial user.  Moreover, as noted in the  
Prospectuses (a) some or all of a Fund's exempt-interest dividends may be a  
specific preference item, or a component of an adjustment item, for purposes  
of the Federal individual and corporate alternative minimum taxes and (b) the  
receipt of a Fund's dividends and distributions may affect a corporate  
shareholder's Federal "environmental" tax liability.  In addition, the receipt  
of a Fund's dividends and distributions may affect a foreign corporate  
shareholder's Federal "branch profits" tax liability and the Federal and  
California "excess net passive income" tax liability of a Subchapter S  
corporation.  Shareholders should consult their own tax advisors to determine  
whether they are (a) "substantial users" with respect to a facility or  
"related" to those users within the meaning of the Code or (b) subject to a  
Federal alternative minimum tax, the Federal "environmental" tax, the Federal  
"branch profits" tax, or the Federal or California "excess net passive income"  
tax.  As a general rule, a Fund's gain or loss on a sale or exchange of an  
investment will be a long-term capital gain or loss if the Fund has held the  
investment for more than one year and will be a short-term capital gain or  
loss if it has held the investment for one year or less.  Furthermore, as a  
general rule, a shareholder's gain or loss on a sale or redemption of shares  
of a Fund will be a long-term capital gain or loss if the shareholder has held  
his or her Fund shares for more than one year and will be a short-term capital  
gain or loss if he or she has held the Fund shares for one year or less.   
Shareholders of each Fund will receive, as more fully described in the  
Prospectuses, an annual statement as to the income tax status of his or her  
dividends and distributions for the prior calendar year.  Each shareholder  
will also receive, if appropriate, various written notices after the close of  
a Fund's prior taxable year as to the Federal income tax status of certain  
dividends or distributions which were received from the Fund during the Fund's  
prior taxable year. 
The dollar amount of dividends paid by a Fund that is excluded from Federal  
income taxation and the dollar amount of dividends paid by a Fund that is  
subject to federal income taxation, if any, will vary for each shareholder  
depending upon the size and duration of each shareholder's investment in a  
Fund. 
Investors considering buying shares of a Fund on or just prior to the record  
date for a capital gain distribution should be aware that the amount of the  
forthcoming distribution payment will be a taxable distribution payment.  If a  
shareholder fails to furnish a correct taxpayer identification number, fails  
to report fully dividend or interest income or fails to certify that he or she  
has provided a correct taxpayer identification number and that he or she is  
not subject to "backup withholding," then the shareholder may be subject to a  
31% "backup withholding" tax with respect to (a) taxable dividends and  
distributions and (b) the proceeds of any redemptions of shares of a Fund.  An  
individual's taxpayer identification number is his or her social security  
number.  The backup withholding tax is not an additional tax and may be  
credited against a taxpayer's regular Federal income tax liability. 
The discussion above is only a summary of certain tax considerations generally  
affecting a Fund and its shareholders, and is not intended as a substitute for  
careful tax planning.  Shareholders are urged to consult their tax advisors  
with specific reference to their own tax situations, including their state and  
local tax liabilities. 
TAXES - Large Capitalization Growth Fund 
The following is a summary of certain Federal income tax considerations that  
may affect the Fund and its shareholders.  The summary is not intended as a  
substitute for individual tax advice and investors are urged to consult their  
own tax advisors as to the tax consequences of an investment in the Fund. 
The Fund has qualified and intends to continue to qualify each year as a  
regulated investment company under the Code.  To so qualify, the Fund must,  
among other things, derive less than 30% of its gross income in each taxable  
year from the sale or disposition of stocks, securities, and certain financial  
instruments held for less than three months.  This requirement may limit the  
extent to which the Fund is able to sell stocks, securities or financial  
instruments held for less than three months.  If the Fund (a) qualifies as a  
regulated investment company and (b) distributes to its shareholders at least  
90% of its net investment income (including, for this purpose, its net  
realized short-term capital gains), the Fund will not be liable for Federal  
income taxes to the extent that its net investment income and its net realized  
long- and short-term capital gains, if any, are distributed to its  
shareholders. 
Gains or losses on the sales of stock or securities by the Fund generally will  
be long-term capital gains or losses if the Fund has held the stock or  
securities for more than one year.  Gains or losses on sales of stock or  
securities held for not more than one year generally will be short-term  
capital gains or losses. 
Any net long-term capital gains realized by the Fund will be distributed  
annually as described in the Prospectus.  Such distributions ("capital gain  
dividends") will be taxable to shareholders as long-term capital gains,  
regardless of how long a shareholder has held Fund shares, and will be  
designated as capital gain dividends in a written notice mailed by the Fund to  
shareholders after the close of the Fund's prior taxable year.  If a  
shareholder receives a capital gain dividend with respect to any share and if  
the share has been held by the shareholder for six months or less, then any  
loss on the sale or exchange of such share will be treated as a long-term  
capital loss to the extent of the capital gain dividend. 
 
The portion of the dividends received from the Fund that qualifies for the  
dividends-received deduction for corporations will be reduced to the extent  
that the Fund holds dividend-paying stock for less than 46 days (91 for  
certain preferred stocks).  The Fund's holding period will not include any  
period during which the Fund has reduced its risk of loss from holding the  
stock by purchasing an option to sell or entering into a short sale of  
substantially identical stock or securities convertible into the stock.  The  
holding period for stock may also be reduced if the Fund diminishes its risk  
of loss by holding one or more other positions with respect to substantially  
similar or related properties.  Dividends-received deductions will be allowed  
only with respect to shares that a corporate shareholder has held for at least  
46 days within the meaning of the same holding period rules applicable to the  
Fund. 
If the Fund is the holder of record of any stock on the record date for any  
dividends payable with respect to such stock, such dividends shall be included  
in the Fund's gross income as of the later of (a) the date that such stock  
became ex-dividend with respect to such dividends (that is, the date on which  
a buyer of the stock would not be entitled to receive the declared but unpaid,  
dividends) or (b) the date that the Fund acquired such stock.  Accordingly, in  
order to satisfy its income distribution requirements, the Fund may be  
required to pay dividends based on anticipated earnings and shareholders may  
receive dividends in an earlier year than would otherwise be the case. 
If a shareholder incurs a sales charge in acquiring shares of the Fund,  
disposes of those shares within 90 days and then acquires shares in a mutual  
fund for which the otherwise applicable sales charge is reduced by reason of a  
reinvestment right (that is exchange privilege), the original sales charge  
will not be taken into account in computing gain/loss on the original shares  
to the extent the subsequent sales charge is reduced.  Instead, it will he  
added to the tax basis in the newly acquired shares.  Furthermore, the same  
rule also applies to a disposition of the newly acquired or redeemed shares  
made within 90 days of the second acquisition.  This provision prevents a  
shareholder from immediately deducting the sales charge by shifting his or her  
investment in a family of mutual funds. 
Investors considering buying shares of the Fund on or just prior to a record  
date for a taxable dividend or capital gain distribution should be aware that,  
regardless of whether the price of the Fund shares to be purchased reflects  
the amount of the forthcoming dividend or distribution payment, any such  
payment will be a taxable dividend or distribution payment. 
If a shareholder fails to furnish a correct taxpayer identification number,  
fails fully to report dividend and interest income, or fails to certify that  
he or she has provided a correct taxpayer identification number and that he or  
she is not subject to "backup withholding," then the shareholder may be  
subject to a 31% backup withholding tax with respect to (a) any taxable  
dividends and distributions and (b) the proceeds of any redemptions of Fund  
shares.  An individual's taxpayer identification number is his or her social  
security number.  The backup withholding tax is not an additional tax and may  
be credited against a shareholder's regular Federal income tax liability. 
The foregoing is only a summary of certain tax considerations generally  
affecting the Fund and its shareholders and is not intended as a substitute  
for careful tax planning.  Shareholders are urged to consult their tax  
advisors with specific reference to their own tax situations, including their  
state and local tax liabilities. 
 
ADDITIONAL INFORMATION 
The Trust was organized as an unincorporated business trust on October 17,  
1991 under the name Shearson Lehman Brothers Intermediate-Term Trust.  On  
November 20, 1991, July 30, 1993, October 14, 1994 and August 16, 1995, the  
Trust's name was changed to Shearson Lehman Brothers Income Trust, Smith  
Barney Shearson Income Trust, Smith Barney Income Trust and Smith Barney  
Investment Trust, respectively. 
PNC, located at 17th and Chestnut Streets, Philadelphia, Pennsylvania, 19103,  
serves as the custodian of the Fund.  Under its custody agreement with the  
Fund, PNC holds the Fund's securities and keeps all necessary accounts and  
records. For its services, PNC receives a monthly fee based upon the month-end  
market value of securities held in custody and also receives securities  
transactions charges.  The assets of the Fund are held under bank  
custodianship in compliance with the 1940 Act. 
First Data, is located at Exchange Place, Boston, Massachusetts 02109, and  
serves as the Trust's transfer agent.  Under the transfer agency agreement,  
the Transfer Agent maintains the shareholder account records for the Trust,  
handles certain communications between shareholders and the Trust and  
distributes dividends and distributions payable by the Trust.  For these  
services, the Transfer Agent receives a monthly fee computed on the basis of  
the number of shareholder accounts it maintains for the Trust during the  
month, and is reimbursed for out-of-pocket expenses. 
 
FINANCIAL STATEMENTS 
The Funds' Annual Reports for the New York and California Fund for the fiscal  
year ended November 30, 1996 accompany this Statement of Additional  
Information. 
 
 
 
APPENDIX 
DESCRIPTION OF MOODY'S, S&P AND FITCH RATINGS 
Description of Moody's Municipal Bond Ratings:  
Aaa -- Bonds rated Aaa are judged to be of the best quality.  They carry the  
smallest degree of investment risk and are generally referred to as "gilt  
edge." Interest payments are protected by a large or by an exceptionally  
stable margin and principal is secure.  While the various protective elements  
are likely to change, such changes as can be visualized are most unlikely to  
impair the fundamentally strong position of such issues. 
Aa -- Bonds rated Aa are judged to be of high quality by all standards.   
Together with the Aaa group they comprise what are generally known as high- 
grade bonds.  They are rated lower than the best bonds because margins of  
protection may not be as large as in Aaa securities, or fluctuation of  
protective elements may be of greater amplitude, or there may be other  
elements present that make the long term risks appear somewhat larger than in  
Aaa securities. 
A -- Bonds which are rated A possess many favorable investment attributes and  
are to be considered as upper medium-grade obligations.  Factors giving  
security to principal and interest are considered adequate, but elements may  
be present which suggest a susceptibility to impairment sometime in the  
future. 
Baa -- Bonds rated Baa are considered as medium grade obligations, that is,  
they are neither highly protected nor poorly secured.  Interest payments and  
principal security appear adequate for the present but certain protective  
elements may be lacking or may be characteristically unreliable over any great  
length of time.  Such bonds lack outstanding investment characteristics and in  
fact have speculative characteristics as well. 
Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating  
classification below Aaa.  The modifier 1 indicates that the security ranks in  
the higher end of its generic rating category; the modifier 2 indicates a mid- 
range ranking; and the modifier 3 indicates that the issue ranks in the lower  
end of its generic rating category. 
Description of Moody's Municipal Note Ratings: 
Moody's ratings for state and municipal notes and other short-term loans are  
designated Moody's Investment Grade ("MIG") and for variable demand  
obligations are designated Variable Moody's Investment Grade ("VMIG").  This  
distinction is in recognition of the differences between short-term credit  
risk and long-term risk.  Loans bearing the designation MIG 1 or VMIG 1 are of  
the best quality, enjoying strong protection by established cash flows of  
funds for their servicing, superior liquidity support or from established and  
broad-based access to the market for refinancing or both.  Loans bearing the  
designation MIG 2 or VMIG 2 are of high quality, with ample margins of  
protection, although not as large as the preceding group.  Loans bearing the  
designation MIG 3 or VMIG 3 are of favorable quality, with all security  
elements accounted for, but lacking the undeniable strength of the preceding  
grades.  Liquidity and cash flow may be narrow, and market access for  
refinancing is likely to be less well established. 
Description of Moody's Commercial Paper Ratings: 
The rating Prime-l is the highest commercial paper rating assigned by 
Moody's. Issuers rated Prime-l (or related supporting institutions) are 
considered to have a superior capacity for repayment of short term 
promissory obligations.   
Issuers rated Prime-2 (or related supporting institutions) are considered to  
have a strong capacity for repayment of short term promissory obligations.   
This will normally be evidenced by many of the characteristics of issuers  
rated Prime-l but to a lesser degree.  Earnings trends and coverage ratios,  
while sound, will be more subject to variation.  Capitalization  
characteristics, while still appropriate, may be more affected by external  
conditions.  Ample alternative liquidity is maintained. 
Description of S&P Municipal Bond Ratings: 
AAA -- These are the obligations of the highest quality.  They have the  
strongest capacity for timely payment of debt service.  General Obligation  
Bonds rated AAA-In a period of economic stress, the issuers will suffer the  
smallest declines in income and will be least susceptible to autonomous  
decline.  Debt burden is moderate.  A strong revenue structure appears more  
than adequate to meet future expenditure requirements.  Quality of management  
appears superior.  Revenue Bonds rated AAA- Debt service coverage has been, 
and is expected to remain, substantial.  Stability of the pledged revenues 
is also exceptionally strong due to the competitive position of the municipal  
enterprise or to the nature of the revenues.  Basic security provisions  
(including rate covenant, earnings test for issuance of additional bonds and  
debt service reserve requirements) are rigorous.  There is evidence of  
superior management. 
AA -- The investment characteristics of bonds in this group are only slightly  
less marked than those of the prime quality issues.  Bonds rated AA have the  
second strongest capacity for payment of debt service. 
A -- Principal and interest payments on bonds in this category are regarded as  
safe, although the bonds are somewhat more susceptible to the adverse effects  
of changes in circumstances and economic conditions than bonds in higher rated  
categories.  This rating describes the third strongest capacity for payment of  
debt service.  General Obligation Bonds rated A-There is some weakness, either  
in the local economic base, in debt burden, in the balance between revenues  
and expenditures or in quality of management.  Under certain adverse  
circumstances, any one such weakness might impair the ability of the issuer to  
meet debt obligations at some future date.  Revenue Bonds rated A- Debt 
service  
coverage is good, but not exceptional.  Stability of the pledged revenues  
could show some variations because of increased competition or economic  
influences on revenues.  Basic security provisions, while satisfactory, are  
less stringent.  Management performance appears adequate. 
BBB -- The bonds in this group are regarded as having an adequate capacity to  
pay interest and repay principal.  Whereas bonds in this group normally  
exhibit adequate protection parameters, adverse economic conditions or  
changing circumstances are more likely to lead to a weakened capacity to pay  
interest and repay principal for debt in this category than in higher rated  
categories.  Bonds rated BBB have the fourth strongest capacity for payment of  
debt service.  S&P's letter ratings may be modified by the addition of a plus  
or a minus sign, which is used to show relative standing within the major  
rating categories, except in the AAA category. 
Description of S&P Municipal Note Ratings: 
Municipal notes with maturities of three years or less are usually given note  
ratings (designated SP-1, -2 or -3) to distinguish more clearly the credit  
quality of notes as compared to bonds.  Notes rated SP-1 have a very strong or  
strong capacity to pay principal and interest.  Those issues determined to  
possess overwhelming safety characteristics are given the designation of SP- 
1+.  Notes rated SP-2 have a satisfactory capacity to pay principal and  
interest. 
Description of S&P Commercial Paper Ratings: 
Commercial paper rated A-1 by S&P indicates that the degree of safety  
regarding timely payment is either overwhelming or very strong.  Those issues  
determined to possess overwhelming safety characteristics are denoted A-l+.   
Capacity for timely payment on commercial paper rated A-2 is strong, but the  
relative degree of safety is not as high as for issues designated A-1. 
Description of Fitch Municipal Bond Ratings: 
AAA -- Bonds rated AAA are considered to be investment grade and of the  
highest credit quality.  The obligor has an exceptionally strong ability to  
pay interest and repay principal, which is unlikely to be affected by  
reasonably foreseeable events. 
AA -- Bonds rated AA are considered to be investment grade and of very high  
credit quality.  The obligor's ability to pay interest and repay principal is  
very strong, although not quite as strong as bonds rated AAA.  Because bonds  
rated in the AAA and AA categories are not significantly vulnerable to  
foreseeable future developments, short term debt of these issues is generally  
rated F-1+ by Fitch. 
A -- Bonds rated A are considered to be investment grade and of high credit  
quality.  The obligor's ability to pay interest and repay principal is  
considered to be strong, but may be more vulnerable to adverse changes in  
economic conditions and circumstances than bonds with higher ratings. 
BBB -- Bonds rated BBB are considered to be investment grade and of  
satisfactory credit quality.  The obligor's ability to pay interest and repay  
principal is considered to be adequate.  Adverse changes in economic  
conditions and circumstances, however, are more likely to have adverse impact  
on these bonds, and therefore impair timely payment.  The likelihood that the  
ratings of these bonds will fall below investment grade is higher than for  
bonds with higher ratings.  Plus and minus signs are used by Fitch with a  
rating symbol to indicate the relative position of a credit within the rating  
category.  Plus and minus signs, however, are not used in the AAA category. 
Description of Fitch Short Term Ratings: 
Fitch's short term ratings apply to debt obligations that are payable on  
demand or have original maturities of generally up to three years, including  
commercial paper, certificates of deposit, medium term notes, and municipal  
and investment notes. 
The short term rating places greater emphasis than a long term rating on the  
existence of liquidity necessary to meet the issuer's obligations in a timely  
manner. 
Fitch's short term ratings are as follows: F-1+1/N Issues assigned this rating  
are regarded as having the strongest degree of assurance for timely payment. 
F-1 -- Issues assigned this rating reflect an assurance of timely payment only  
slightly less in degree than issues rated F-1+. 
F-2 -- Issues assigned this rating have a satisfactory degree of assurance for  
timely payment but the margin of safety is not as great as for issues assigned  
F-1+ and F-1 ratings. 
F-3 -- Issues assigned this rating have characteristics suggesting that the  
degree of assurance for timely payment is adequate; however, near term adverse  
changes could cause these securities to be rated below investment grade. 
LOC -- The symbol LOC indicates that a Fitch rating is based on a letter of  
credit issued by a commercial bank. 
 
 
	Smith Barney 
	Investment  
	Trust  
 
Statement of 
Additional Information 
 
SB Intermediate Maturity 
New York Municipals Fund 
 
SB Intermediate Maturity 
California Municipals Fund 
 
SB Large Capitalization 
Growth Fund 
 
March 25, 1997 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SMITH BARNEY 
INVESTMENT TRUST 
388 Greenwich Street 
New York, NY 10013 
 
	SMITH BARNEY 
	A Member of Travelers Group 
g:boards/wed/1997/misc./invtrus1.doc  
63 
 



PART  C

OTHER INFORMATION

Item 24.	Financial Statements and Exhibits

(a)  Financial Statements

	Included in Part A:

      Financial Highlights

	Included in Part B:

   		Smith Barney Intermediate Maturity New York Municipals Fund Annual 
Report for the fiscal year ended November 30, 1996 and the Reports of 
Independent Accountants dated January 9, 1997, together with Smith Barney 
Intermediate Maturity California Municipals Fund Annual Report for the fiscal 
year ended November 30, 1996 and the Reports of Independent Accountants dated 
January 13, 1997, are incorporated by reference to the Rule 30(b)2-1 filings 
made on January 31, 1997 as Accession No. 91155-97-000060.     

	Included in Part C:

		Consent of Independent Accountants

(b)	Exhibits

	Unless otherwise noted, all references are to the Registrants 
Registration Statement on Form N-1A (the Registration Statement") as filed 
with the     Securities and Exchange Commission ("SEC")      on October 21, 
1991 (File Nos. 33-43446 and 811-6444).

	(1)(a) Registrants Master Trust Agreement dated October 17, 1991 and 
Amendments to the Master Trust Agreement dated November 21, 1991 and July 30, 
1993, respectively, are incorporated by reference to Post-Effective Amendment 
No. 4 to the Registration Statement filed on January 28, 1994 (Post-Effective 
Amendment No. 4").

	(b)  Amendments to the Master Trust Agreement dated October 14, 1994 and 
November 7, 1994, respectively, are incorporated by reference to a 
Registration Statement filed on Form N-14 on January 6, 1995 (the N-14").

	(c)  Amendments to the Master Trust Agreement dated July 20, 1995 and 
August 10, 1995 are incorporated by reference to Post-Effective Amendment No. 
9 to the Registration Statement filed on August 29, 1995 ("Post-Effective 
Amendment No. 9").

	(2)  Registrants By-Laws are incorporated by reference to the 
Registration Statement.

	(3)  Not Applicable.

	(4)  Registrants form of stock certificate is incorporated by reference 
to Pre-Effective Amendment No. 1 to the Registration Statement filed on 
December 6, 1991 (Pre-Effective Amendment No. 1").

	(5)(a)  Investment Advisory Agreement between the Registrant and 
Greenwich Street Advisors dated July 30, 1993 is incorporated by reference to 
Post-Effective Amendment No. 3 to the Registration Statement filed on December 
1, 1993 (Post-Effective Amendment No. 3").

	(b)  Transfer of Investment Advisory Agreement dated November 7, 1994 
between the Registrant on behalf of Smith Barney Intermediate Maturity 
California Municipals Fund,  Greenwich Street Advisors and Smith Barney Mutual 
Funds Management Inc. is incorporated by reference to the N-14.

	(c)  Form of Transfer of Investment Advisory Agreement for Smith Barney 
Limited Maturity Municipals Fund, Smith Barney Intermediate Maturity New York 
Municipals Fund and Smith Barney Limited Maturity Treasury Fund is 
incorporated by reference to Post-Effective Amendment No. 6 to the 
Registration Statement filed on January 27, 1995 (Post-Effective Amendment No. 
6").

	(d)  Form of Investment Advisory Agreement between the Registrant on 
behalf of Smith Barney S&P 500 Advantage Fund and Travelers Investment 
Management Company is  incorporated by reference to Post-Effective 
Amendment No. 10 to the Registration Statement filed on November 13, 1995 
("Post-Effective Amendment No. 10").

   	(e)  Form of Investment Advisory Agreement between the Registrant on 
behalf of  Large Capitalization Growth Fund and Smith Barney Mutual Funds
Management Inc. is to be filed by Amendment.    

	(6)(a)  Distribution Agreement between Registrant and Smith Barney 
Shearson Inc. dated July 30, 1993 is incorporated by reference to Post-
Effective Amendment No. 3.

	(b)  Form of Distribution Agreement between the Registrant on behalf of 
Smith Barney S&P 500 Advantage Fund and PFS Distributors is     incorporated 
by reference to Post-Effective Amendment No. 10.

	(7)  Not Applicable.

	(8)  Form of Custody Agreement with PNC Bank, National Association, is 
incorporated by reference to Post-Effective Amendment No. 9.

	(9)(a)  Administration Agreement between the Registrant on behalf of 
Smith Barney Intermediate Maturity California Municipals Fund and Smith, 
Barney Advisers, Inc. (SBA") is incorporated by reference to the N-14.

	(b)   Form of Administration Agreement between the Registrant on behalf 
of Smith Barney Limited Maturity Municipals Fund and Smith Barney Intermediate 
Maturity New York Municipals Fund and SBA is incorporated by reference to 
Post-Effective Amendment No. 6.

	 (c)  Form of Administration Agreement between the Registrant on behalf 
of Smith Barney S&P 500 Advantage Fund and Smith Barney Mutual Funds 
Management Inc. is incorporated by reference to Post-Effective Amendment 
No. 10. 

	(d)  Transfer Agency Agreement with The Shareholder Services Group, Inc. 
is incorporated by reference to Post-Effective Amendment No. 3.

	(e)  Form of Sub-Transfer Agency Agreement between the Registrant on 
behalf of Smith Barney S&P 500 Advantage Fund and PFS Shareholder Services is 
 incorporated by reference to Post-Effective Amendment No. 10.


	(10) Opinion of counsel regarding legality of shares being 
registered is incorporated by reference to Pre-Effective Amendment No. 1 to 
the Registration Statement filed on December 6, 1991.

	(11) 
    
     Consent of Independent Accountants is to be filed by Amendment.     

	(12)  Not Applicable.

	(13)  Purchase Agreement between the Registrant and Shearson Lehman 
Brothers Inc. is incorporated by reference to Pre-Effective Amendment No. 1.

	(14)  Not Applicable.

	(15)(a)  Amended Service and Distribution Plan pursuant to Rule 12b-1 
between  the Registrant on behalf of Smith Barney Intermediate Maturity 
California Municipals Fund and Smith Barney Inc. is incorporated by reference 
to the N-14.

	(b) Form of Amended Service and Distribution Plan pursuant to Rule 12b-1 
between the Registrant on behalf of Smith Barney Limited Maturity Municipals 
Fund and Smith Barney Intermediate Maturity New York Municipals Fund and Smith 
Barney Inc. is incorporated by reference to Post-Effective Amendment No. 6.

	(c)  Form of Shareholder Services and Distribution Plan pursuant to Rule 
12b-1 between the Registrant on behalf of Smith Barney S&P 500 Advantage Fund 
and Smith Barney Inc. is incorporated by reference to Post-Effective 
Amendment No. 10.

   	(d) Form of  Service and Distribution Plan pursuant to Rule 12b-1 
between the Registrant on behalf of Fund and 
Large Capitalization Growth Fund is to be filed by Amendment.
    
	(16)  Performance Data is incorporated by reference to Post-Effective 
Amendment No. 2 to the Registration Statement as filed on April 1, 1993.

   
	(17)  Not Aplicable.
    

	(18) Plan adopted pursuant to Rule 18f-3(d) of the Investment Company 
Act of 1940, as amended, is incorporated by reference to Post-Effective 
Amendment No. 10.

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

		None



Item 26.	Number of Holders of Securities

		(1)						(2)
	Title of Class					
	Beneficial Interest par value	Number of Record Holders
	$0.001 per share			 as of  February 28, 1997 

	    
	Intermediate Maturity California 	
		Municipals Fund	  601
	Intermediate Maturity New York	
		Municipals Fund	 1,268
	Smith Barney S&P 500
		Advantage Fund	None

	Large Capitalization Growth Fund  None
	    

Item 27.	Indemnification

	The response to this item is incorporated by reference to Pre-Effective 
Amendment No. 1.

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

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

The list required by this Item 28 of the officers and directors of SBMFM 
together with information as to any other business, profession, vocation or 
employment of a substantial nature engaged in by such officers and directors 
during the past two fiscal years, is incorporated by reference to Schedules A 
and D of FORM ADV filed by SBMFM pursuant to the Advisers Act (SEC File No. 
801-8314).

   
Prior to the close of business on November 7, 1994, Greenwich Street Advisors 
served as investment adviser. Greenwich Street Advisors, through its 
predecessors, has been in the investment counseling business since 1934 and 
was a division of Mutual Management Corp. ("MMC"). MMC was incorporated in 
1978 and is a wholly owned subsidiary  of Smith Barney Holdings Inc. 
("Holdings"), which in turn is a wholly owned subsidiary of  Travelers. The 
list required by this Item 28 of officers and directors  of MMC and Greenwich 
Street Advisors, together with information as to any other business, 
profession, vocation or employment of a substantial nature engaged in by such 
officers and directors during the past two fiscal years, is incorporated by 
reference to Schedules A and D of Form ADV filed by MMC on behalf of Greenwich 
Street Advisors pursuant to the Advisers Act (SEC File No. 801-14437).
    

        

Item 29.	Principal Underwriters
   
Smith Barney Inc. (Smith Barney") currently acts as distributor for Smith 
Barney Managed Municipals Fund Inc., Smith Barney California Municipals Fund 
Inc., Smith Barney Massachusetts Municipals Fund,
Smith Barney Aggressive Growth Fund Inc., Smith Barney 
Appreciation Fund Inc., Smith Barney Principal Return Fund, Smith Barney 
Managed Governments  Fund Inc., Smith Barney Income Funds, Smith Barney Equity 
Funds, Smith Barney Investment Funds Inc., Smith Barney Natural Resources Fund 
Inc., Smith Barney Telecommunications Trust, Smith Barney Arizona Municipals 
Fund Inc., Smith Barney New Jersey Municipals Fund Inc., 
Smith Barney Fundamental Value Fund Inc., 
Smith Barney Series Fund, Consulting Group Capital Markets Funds, 
Smith Barney Adjustable Rate Government Income Fund, Smith Barney Oregon 
Municipals Fund, Smith Barney Funds, Inc., Smith Barney Muni Funds, Smith 
Barney World Funds, Inc., Smith Barney Money Funds, Inc., Smith Barney Municipal
Money Market Fund, Inc., Smith Barney Variable Accounts Funds, 
Smith Barney U.S. Dollar Reserve Fund (Cayman), 
Worldwide Special Fund, N.V., Worldwide Securities Limited (Bermuda), 
Smith Barney International Fund (Luxembourg), 
Smith Barney Institutional Cash Management Fund, Inc., Smith Barney Concert 
Allocation Series Inc. and various series of unit investment trusts.
    

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

Item 30.	Location of Accounts and Records

	(1)	Smith Barney Investment Trust
		388 Greenwich Street
		New York, New York  10013

	(2)	Smith Barney Mutual Funds Management Inc.
		388 Greenwich Street
		New York, New York  10013
	(Records relating to its function as investment adviser to certain 
of the Funds and administrator to all of the Funds)

	(3)	Travelers Investment Management Company
		One Tower Square
		Hartford, CT  06183-2030
	(Records relating to its function as investment adviser to Smith 
Barney S&P 500 Advantage Fund)

	(4)	PNC Bank, National Association
		17th and Chestnut Streets
		Philadelphia, PA  19103
		(Records relating to its function as custodian)

	(5)	First Data Investor Services Group, Inc.
		One Exchange Place
		Boston, Massachusetts 02109
		(Records relating to its function as Transfer Agent and Dividend 
Paying Agent)

Item 31.	Management Services

		Not Applicable

Item 32.	Undertakings

	(a)  Registrant undertakes to call a meeting of its shareholders of the 
Series for the purpose of voting upon the question of removal of a trustee or 
trustees of Registrant when requested in writing to do so by the holders of at 
least 10% of Registrants outstanding shares.  Registrant undertakes further, 
in connection with the meeting, to comply with the provisions of Section 16(c) 
of the Investment Company Act of 1940, as amended, relating to communications 
with the shareholders of certain common-law trusts.

   
	485(a) Certification

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

SIGNATURES

	Pursuant to the requirements of the Securities Act of 1933, and the 
Investment Company Act of 1940, the Registrant, SMITH BARNEY INVESTMENT TRUST, 
has duly caused this registration statement to be signed on its behalf by the 
undersigned, thereto duly authorized in the City of New York, in the State of 
New York on the     18th day of  April, 1997.    

								SMITH BARNEY
								INVESTMENT TRUST

								/s/Heath B. McLendon
								Heath B. McLendon, Chief
								Executive Officer

	Pursuant to the requirements of the Securities Act of 1933, this 
registration statement has been signed below by the following persons in the 
capacities and on the date indicated.



Signature
Title
Date


/s/Heath B. McLendon
Heath B. McLendon

Chairman of the Board
(Chief Executive 
Officer)

   April 18, 1997    





/s/Lewis E. Daidone
Lewis E. Daidone

Treasurer
(Chief Financial and 
Accounting Officer)

   April 18, 1997    






/s/Herbert Barg
Herbert Barg

   Trustee    

   April 18, 1997    





/s/Alfred J. 
Bianchetti
Alfred J. Bianchetti

   Trustee    

   April 18, 1997    





/s/Martin Brody
Martin Brody

   Trustee    

   April  18, 1997    


/s/Dwight B. Crane
Dwight B. Crane

   Trustee    

   April 18, 1997    





/s/Burt N. Dorsett
Burt N. Dorsett

   Trustee    

   April 18, 1997    






/s/Elliot S. Jaffe
Elliot S. Jaffe

   Trustee    

   April 18, 1997    





/s/Stephen E. Kaufman
Stephen E. Kaufman

   Trustee    

   April 18, 1997    





/s/Joseph J. McCann
Joseph J. McCann

   Trustee    

   April 18, 1997    





/s/Cornelius C. Rose, 
Jr.
Cornelius C. Rose, Jr.

   Trustee    

    April 18, 1997