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       PROSPECTUS                       




       APPRECIATION 
       FUND
       
       Class A, B, L and Y Shares
       --------------------------------------------------------------
       April 30, 1999          



                          



       The Securities and Exchange Commission has not approved or disapproved
       these securities or determined whether this prospectus is accurate or
       complete. Any statement to the contrary is a crime.
<PAGE>
 
Appreciation Fund
 
                   Contents
 
<TABLE>
<S>                                                                          <C>
Fund goal and main strategies...............................................   2
 
Risks, performance and expenses.............................................   4
 
More on the fund's investments..............................................   7
 
Management..................................................................   8
 
Choosing a class of shares to buy...........................................   9
 
Comparing the fund's classes................................................  10
 
Sales charges...............................................................  11
 
More about deferred sales charges...........................................  13
 
Buying shares...............................................................  14
 
Exchanging shares...........................................................  16
 
Redeeming shares............................................................  18
 
Other things to know
about share transactions....................................................  20
 
Smith Barney 401(k) and
ExecChoice(TM) programs.....................................................  22
 
Dividends, distributions and taxes..........................................  23
 
Share price.................................................................  24
 
Financial highlights........................................................  25
</TABLE>
You should know: An investment in the fund is not a bank deposit and is not
insured or guaranteed by the FDIC or any other government agency.
 
                                                       Smith Barney Mutual Funds
 
                                                                               1
<PAGE>
 
 
 Fund goal and main strategies 
 
Investment objective
The fund seeks long-term appreciation of shareholders' capital.
 
Key investments
The fund invests primarily in equity securities of U.S. companies. The fund
typically invests in medium and large capitalization companies but may also
invest in small capitalization companies. Equity securities include exchange
traded and over-the-counter common stocks and preferred stocks, debt securities
convertible into equity securities, and warrants and rights relating to equity
securities.
 
Selection process
The manager's investment strategy consists of individual company selection and
management of cash reserves. The manager looks for investments among a strong
core of growth stocks, consisting primarily of blue chip companies dominant in
their industries. The fund may also invest in companies with prospects for sus-
tained earnings growth and/or a cyclical earnings record.
 
In selecting individual companies for the fund's portfolio, the manager looks
for the following:
 
 . Strong or rapidly improving balance sheets
 . Recognized industry leadership
 . Effective management teams that exhibit a desire to earn consistent returns
  for shareholders
 
In addition, the manager considers the following characteristics:
 
 . Past growth records
 . Future earnings prospects
 . Technological innovation
 . General market and economic factors
 . Current yield or potential for dividend growth
 
Appreciation Fund
 
2
<PAGE>
 
 
Generally, companies in the fund's portfolio fall into one of the following
categories:

 . Undervalued companies: companies with assets or earning power that are either
  unrecognized or undervalued. The manager generally looks for a catalyst that
  will unlock these values. The manager also looks for companies that are
  expected to have unusual earnings growth or whose stocks appear likely to go
  up in value because of marked changes in the way they do business (for exam-
  ple, a corporate restructuring). 
 
 . Growth at a reasonable price: companies with superior demonstrated and
  expected growth characteristics whose stocks are available at a reasonable
  price. Typically, there is strong recurring demand for these companies' prod-
  ucts.

  The manager adjusts the amount held in cash reserves depending on the manag-
  er's outlook for the stock market. The manager will increase the fund's allo-
  cation to cash when, in the manager's opinion, market valuation levels become
  excessive. The manager may sometimes hold a significant portion of the fund's
  assets in cash while waiting for buying opportunities or to provide a hedge
  against stock market declines. 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                       Smith Barney Mutual Funds
 
                                                                               3
<PAGE>
 
 Risks, performance and expenses
 
Principal risks of investing in the fund
Investing in equity securities can bring added benefits, but it may also
involve additional risks. Investors could lose money on their investment in the
fund, or the fund may not perform as well as other investments, if:
 
 . The U.S. stock market declines
 . Large and medium capitalization stocks or growth stocks are temporarily out
  of favor
 . An adverse event depresses the value of a company's stock
 . The manager's judgment about the attractiveness, value or potential apprecia-
  tion of a particular stock or about the amount to hold in cash reserves
  proves to be incorrect
 
Who may want to invest
The fund may be an appropriate investment if you:
 
 . Are seeking to participate in the long term capital appreciation potential of
  the stock market
 . Are willing to accept the risks of investing in the stock market
 . Are planning for a long term goal and can tolerate periods of market volatil-
  ity
 
Appreciation Fund
 
4
<PAGE>
 
 
Total return
The bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. Past performance does not neces-
sarily indicate how the fund will perform in the future.
 
 
                        Total Return for Class A Shares
 
 
 
                       Calendar years ended December 31
 
  89      90       91      92      93      94      95      96      97      98
------  ------   ------   -----   -----  ------  ------  ------  ------  ------
29.55%  -0.27%   26.94%   6.29%   8.13%  -0.77%  29.26%  19.25%  26.29%  20.45%
 
 
 
The bar chart shows the performance of the fund's Class A shares for each of
the past 10 calendar years. Class B, L and Y shares would have different per-
formance because of their different expenses. The performance information in
the chart does not reflect sales charges, which would reduce your return.
 
Quarterly returns:

Highest: 17.89% in 4th quarter 1998; Lowest: -10.90% in 3rd quarter 1990 
 
Comparative performance
The table indicates the risks of investing in the fund by comparing the average
annual total return of each class for the periods shown with that of the Stan-
dard & Poor's 500 Index (S&P 500 Index), a broad-based unmanaged index of
widely held stocks traded on the New York Stock Exchange. This table assumes
imposition of the maximum sales charge applicable to the class, redemption of
shares at the end of the period, and reinvestment of distributions and divi-
dends.
 
                          Average Annual Total Returns
                     Calendar Years Ended December 31, 1998
<TABLE>
<CAPTION>
Class    1 year  5 years 10 years Since Inception Inception Date
<S>      <C>     <C>     <C>      <C>             <C>
 A       14.45%   17.19%  15.34%       12.63%        03/10/70
 B       14.52%   17.38%    n/a        15.92%        11/06/92
 L       17.32%   17.29%    n/a        15.23%        02/04/93
 Y       20.93%     n/a     n/a        22.35%        01/30/96
 S&P 500 28.60%   24.05%  19.19%       13.68%*         n/a
</TABLE>

*Index comparison begins on 03/30/70. 
 
                                                       Smith Barney Mutual Funds
 
                                                                               5
<PAGE>
 
Fees and expenses
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
 
                                Shareholder fees
<TABLE>
<CAPTION>
(paid directly from your investment)           Class A Class B Class L Class Y
<S>                                            <C>     <C>     <C>     <C>
Maximum sales charge (load) imposed
on purchases
(as a % of offering price)                      5.00%    None   1.00%   None
Maximum deferred sales charge (load) on
redemptions (as a % of the lower of net asset
value at purchase or redemption)                None*   5.00%   1.00%   None
</TABLE>
 
                         Annual fund operating expenses
<TABLE>
<CAPTION>
(expenses deducted from fund assets)   Class A Class B Class L Class Y
<S>                                    <C>     <C>     <C>     <C>
Management fees                         0.57%   0.57%   0.57%   0.57%
Distribution and service (12b-1) fees   0.25%   1.00%   1.00%    None
Other expenses                          0.13%   0.16%   0.16%   0.02%
                                        -----   -----   -----   -----
Total annual fund operating expenses    0.95%   1.73%   1.73%   0.59%
</TABLE>
 
*You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial charge) but if you redeem those shares within 12 months of
their purchase, you will pay a deferred sales charge of 1.00%.
 
Example
This example helps you compare the costs of investing in the fund with the
costs of investing in other mutual funds. Your actual costs may be higher or
lower. The example assumes:
 . You invest $10,000 in the fund for the period shown
 . Your investment has a 5% return each year
 . You reinvest all distributions and dividends without a sales charge
 . The fund's operating expenses remain the same
 
                      Number of years you own your shares
<TABLE>
<CAPTION>
                                       1 year 3 years 5 years 10 years
<S>                                    <C>    <C>     <C>     <C>
Class A (with or without redemption)    $592   $788   $  999   $1,608
Class B (redemption at end of period)   $676   $845   $1,039   $1,834
Class B (no redemption)                 $176   $545   $  939   $1,834
Class L (redemption at end of period)   $374   $639   $1,029   $2,121
Class L (no redemption)                 $274   $639   $1,029   $2,121
Class Y (with or without redemption)    $ 60   $189   $  329   $  738
</TABLE>
 
Appreciation Fund
 
6
<PAGE>
 
 More on the fund's investments
 
Derivatives and hedging techniques The fund may, but need not, use derivative
contracts, such as futures and options on securities and securities indices and
options on these futures for any of the following purposes:
 
 . To hedge against the economic impact of adverse changes in the market value
  of its securities, because of changes in stock market prices
 . As a substitute for buying or selling securities
 
A derivative contract will obligate or entitle the fund to deliver or receive
an asset or cash payment based on the change in value of one or more securities
or indices. Even a small investment in derivative contracts can have a big
impact on the fund's stock market exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains when
stock prices are changing. The fund may not fully benefit from or may lose
money on derivatives if changes in their value do not correspond accurately to
changes in the value of the fund's holdings. The other parties to certain
derivative contracts present the same types of credit risk as issuers of fixed
income securities. Derivatives can also make the fund less liquid and harder to
value, especially in declining markets.

Foreign securities The fund may invest up to 10% of its assets (at the time of
investment) in foreign securities. The fund may invest directly in foreign
issuers or invest in depositary receipts. The value of the fund's foreign secu-
rities may go down because of unfavorable government actions, political insta-
bility or the more limited availability of accurate information about foreign
issuers. 
 
Defensive investing The fund may depart from its principal investment strate-
gies in response to adverse market, economic or political conditions by taking
temporary defensive positions in all types of money market and short-term debt
securities. If the fund takes a temporary defensive position, it may be unable
to achieve its investment goal.
 
                                                       Smith Barney Mutual Funds
 
                                                                               7
<PAGE>
 
 Management

Manager The fund's investment adviser and administrator is SSBC Fund Management
Inc., an affiliate of Salomon Smith Barney Inc. The manager's address is 388
Greenwich Street, New York, New York 10013. The manager selects the fund's
investments and oversees its operations. The manager and Salomon Smith Barney
are subsidiaries of Citigroup Inc. Citigroup businesses produce a broad range
of financial services--asset management, banking and consumer finance, credit
and charge cards, insurance, investments, investment banking and trading--and
use diverse channels to make them available to consumer and corporate customers
around the world. 

Harry D. Cohen, investment officer of the manager and managing director of Sal-
omon Smith Barney, has been responsible for the day-to-day management of the
fund's portfolio since 1979. 

Management fees For its services, the manager received an advisory fee and an
administration fee during the fund's last fiscal year equal to 0.42% and 0.15%,
respectively, of the fund's average daily net assets. 
 
Distributor The fund has entered into an agreement with CFBDS, Inc. to distrib-
ute the fund's shares. A selling group consisting of Salomon Smith Barney and
other broker-dealers sells fund shares to the public.
 
Distribution plans The fund has adopted Rule 12b-1 distribution plans for its
Class A, B and L shares. Under each plan, the fund pays distribution and serv-
ice fees. These fees are an ongoing expense and, over time, may cost you more
than other types of sales charges.

Year 2000 issue Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if sub-
stantial, could adversely affect companies and governments that issue securi-
ties held by the funds. The manager and Salomon Smith Barney are addressing the
Year 2000 issue for their systems. The fund has been informed by its other
service providers that they are taking similar measures. Although the fund does
not expect the Year 2000 issue to adversely affect it, the fund cannot guaran-
tee that the efforts of the fund, which are limited to requesting and receiving
reports from its service providers or the efforts of its service providers to
correct the problem will be successful. 
 
Appreciation Fund
 
8
<PAGE>
 
 Choosing a class of shares to buy
 
You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of investment.
 
 . If you plan to invest regularly or in large amounts, buying Class A shares
  may help you reduce sales charges and ongoing expenses.

 . For Class B shares, all of your purchase amount and, for Class L shares, more
  of your purchase amount (compared to Class A shares) will be immediately
  invested. This may help offset the higher expenses of Class B and Class L
  shares, but only if the fund performs well. 
 . Class L shares have a shorter deferred sales charge period than Class B
  shares. However, because Class B shares convert to Class A shares, and Class
  L shares do not, Class B shares may be more attractive to long-term invest-
  ors.
 
You may buy shares from:
 
 . A Salomon Smith Barney Financial Consultant
 . An investment dealer in the selling group or a broker that clears through
  Salomon Smith Barney--a dealer representative
 . The fund, but only if you are investing through certain qualified plans or
  certain dealer representatives
 
Investment minimums Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.
 
<TABLE>
<CAPTION>
                                                 Initial           Additional
                                       Classes A, B, L   Class Y   All Classes
<S>                                    <C>             <C>         <C>
General                                    $1,000      $15 million     $50
IRAs, Self Employed Retirement Plans,
Uniform Gift to Minor Accounts              $250       $15 million     $50
Qualified Retirement Plans*                  $25       $15 million     $25
Simple IRAs                                  $1            n/a         $1
Monthly Systematic Investment Plans          $25           n/a         $25
Quarterly Systematic Investment Plans        $50           n/a         $50
</TABLE>
 
* Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k)
plans
 
                                                       Smith Barney Mutual Funds
 
                                                                               9
<PAGE>
 
 Comparing the fund's classes
 
Your Salomon Smith Barney Financial Consultant or dealer representative can
help you decide which class meets your goals. They may receive different com-
pensation depending upon which class you choose.
 
<TABLE>
<CAPTION>
                           Class A     Class B     Class L     Class Y
<S>                      <C>         <C>         <C>         <C>
Key features              .Initial    .No ini-    .The ini-   .No ini-
                           sales       tial sales  tial sales  tial or
                           charge      charge      charge is   deferred
                          .You may    .Deferred    lower than  sales
                           qualify     sales       Class A     charge
                           for reduc-  charge     .Deferred   .Must
                           tion or     declines    sales       invest at
                           waiver of   over time   charge for  least $15
                           initial    .Converts    only 1      million
                           sales       to Class A  year       .Lower
                           charge      after 8    .Does not    annual
                          .Lower       years       convert to  expenses
                           annual     .Higher      Class A     than the
                           expenses    annual     .Higher      other
                           than        expenses    annual      classes
                           Class B     than        expenses
                           and         Class A     than
                           Class L                 Class A
-----------------------------------------------------------------------
Initial sales charge     Up to       None        1.00%       None
                         5.00%;
                         reduced for
                         large pur-
                         chases and
                         waived for
                         certain
                         investors.
                         No charge
                         for pur-
                         chases of
                         $500,000 or
                         more
-----------------------------------------------------------------------
Deferred sales charge    1% on pur-  Up to 5%    1% if you   None
                         chases of   charged     redeem
                         $500,000 or when you    within 1
                         more if you redeem      year of
                         redeem      shares. The purchase
                         within 1    charge is
                         year of     reduced
                         purchase    over time
                                     and there
                                     is no
                                     deferred
                                     sales
                                     charge
                                     after 6
                                     years
-----------------------------------------------------------------------
Annual distribution and  0.25% of    1% of aver- 1% of aver- None
service fees             average     age daily   age daily
                         daily net   net assets  net assets
                         assets
-----------------------------------------------------------------------
Exchange Privilege*      Class A     Class B     Class L     Class Y
                         shares of   shares of   shares of   shares of
                         most Smith  most Smith  most Smith  most Smith
                         Barney      Barney      Barney      Barney
                         funds       funds       funds       funds
-----------------------------------------------------------------------
</TABLE>
* Ask your Salomon Smith Barney Financial Consultant or dealer representative
or visit the web site for the Smith Barney funds available for exchange.
 
Appreciation Fund
 
10
<PAGE>
 
 
 Sales charges 
 
Class A shares
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge
on the fund's distributions or dividends you reinvest in additional Class A
shares.
 
<TABLE>
<CAPTION>
                                 Sales Charge as a % of
                                 Offering  Net amount
Amount of purchase               price (%) invested (%)
<S>                              <C>       <C>
Less than $25,000                  5.00        5.26
$25,000 but less than $50,000      4.00        4.17
$50,000 but less than $100,000     3.50        3.63
$100,000 but less than $250,000    3.00        3.09
$250,000 but less than $500,000    2.00        2.04
$500,000 or more                   0.00        0.00
</TABLE>
 
Investments of $500,000 or more You do not pay an initial sales charge when you
buy $500,000 or more of Class A shares. However, if you redeem these Class A
shares within one year of purchase, you will pay a deferred sales charge of 1%.
 
Qualifying for a reduced Class A sales charge There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.
 
 . Accumulation privilege - lets you combine the current value of Class A shares
  owned
 
 . by you, or 
 
 . by members of your immediate family 
 
 and for which a sales charge was paid, with the amount of your next purchase
 of Class A shares for purposes of calculating the initial sales charge. Cer-
 tain trustees and fiduciaries may be entitled to combine accounts in deter-
 mining their sales charge.
 
 . Letter of intent - lets you purchase Class A shares of the fund and other
  Smith Barney funds over a 13-month period and pay the same sales charge, if
  any, as if all shares had been purchased at once. You may
 
                                                       Smith Barney Mutual Funds
 
                                                                              11
<PAGE>
 
  include purchases on which you paid a sales charge within 90 days before you
  sign the letter.
 
Waivers for certain Class A investors Class A initial sales charges are waived
for certain types of investors, including:

 . Employees of members of the NASD 
 . 403(b) or 401(k) retirement plans, if certain conditions are met
 . Clients of newly employed Salomon Smith Barney Financial Consultants, if cer-
  tain conditions are met
 . Investors who redeemed Class A shares of a Smith Barney fund in the past 60
  days, if the investor's Salomon Smith Barney Financial Consultant or dealer
  representative is notified
    
If you want to learn about additional waivers of Class A initial sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer
representative or consult the Statement of Additional Information ("SAI").
     
Class B shares
You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of pur-
chase, you will pay a deferred sales charge. The deferred sales charge
decreases as the number of years since your purchase increases.
 
<TABLE>
<CAPTION>
                                           6th
                                           through
Year after purchase    1st 2nd 3rd 4th 5th 8th
<S>                    <C> <C> <C> <C> <C> <C>
Deferred sales charge   5%  4%  3%  2%  1%    0%
</TABLE>
 
Class B conversion After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:
 
<TABLE>
<CAPTION>
Shares issued:                          Shares issued:     Shares issued:
At initial purchase                     On reinvestment of Upon exchange from
                                        dividends and      another Smith Barney
                                        distributions      fund
<S>                                     <C>                <C>
Eight years after the date of purchase  In same proportion On the date the
                                        as the number of   shares originally
                                        Class B shares     acquired would
                                        converting is to   have converted
                                        total Class B      into Class A
                                        shares you own     shares
</TABLE>
 
Appreciation Fund
 
12
<PAGE>
 
 
Class L shares
You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund on June 12, 1998,
you will not pay an initial sales charge on Class L shares you buy before June
22, 2001.
 
Class Y shares
You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 13-month period. To qualify, you
must initially invest $5,000,000.
 
 More about deferred sales charges
 
The deferred sales charge is based on the net asset value at the time of pur-
chase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.
 
In addition, you do not pay a deferred sales charge on:
 
 . Shares exchanged for shares of another Smith Barney fund
 . Shares representing reinvested distributions and dividends
 . Shares no longer subject to the deferred sales charge
 
If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Salomon Smith Barney Financial Consultant or dealer representative.
 
Salomon Smith Barney receives deferred sales charges as partial compensation
for its expenses in selling shares, including the payment of compensation to
your Salomon Smith Barney Financial Consultant or dealer representative.
 
                                                       Smith Barney Mutual Funds
 
                                                                              13
<PAGE>
 
 
Deferred sales charge waivers
The deferred sales charge for each share class will generally be waived:

 . On payments made through certain systematic withdrawal plans 
 . On certain distributions from a retirement plan
 . For involuntary redemptions of small account balances
 . For 12 months following the death or disability of a shareholder
 
If you want to learn more about additional waivers of deferred sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the SAI.
 
 Buying shares
 
     Through a   You should contact your Salomon Smith Barney Financial Con-
 Salomon Smith   sultant or dealer representative to open a brokerage account
        Barney   and make arrangements to buy shares.
     Financial
 Consultant or   
        dealer   If you do not provide the following information, your order
representative   will be rejected: 
 
                 . Class of shares being bought
                 . Dollar amount or number of shares being bought
 
                 You should pay for your shares through your brokerage account
                 no later than the third business day after you place your
                 order. Salomon Smith Barney or your dealer representative may
                 charge an annual account maintenance fee.
--------------------------------------------------------------------------------
   Through the   Qualified retirement plans and certain other investors who
        fund's   are clients of the selling group are eligible to buy shares
      transfer   directly from the fund.
         agent
                 . Write the transfer agent at the following address:
                      
                      Smith Barney Appreciation Fund Inc. 
                      (Specify class of shares)
                      c/o First Data Investor Services Group, Inc.
                      P.O. Box 5128
                      Westborough, Massachusetts 01581-5128
                 . Enclose a check to pay for the shares. For initial pur-
                   chases, complete and send an account application.
                 . For more information, call the transfer agent at 1-800-451-
                   2010.
 
Appreciation Fund
 
14
<PAGE>
 
     Through a   You may authorize Salomon Smith Barney, your dealer represen-
    systematic   tative or the transfer agent to transfer funds automatically
    investment   from a regular bank account, cash held in a Salomon Smith
          plan   Barney brokerage account or Smith Barney money market fund to
                 buy shares on a regular basis.
 
                 . Amounts transferred should be at least: $25 monthly or $50
                   quarterly
                 . If you do not have sufficient funds in your account on a
                   transfer date, Salomon Smith Barney, your dealer represen-
                   tative or the transfer agent may charge you a fee
 
                 For more information, contact your Salomon Smith Barney
                 Financial Consultant, dealer representative or the transfer
                 agent or consult the SAI.
 
                                                       Smith Barney Mutual Funds
 
                                                                              15
<PAGE>
 
 Exchanging shares
 
  Smith Barney   You should contact your Salomon Smith Barney Financial Con-
      offers a   sultant or dealer representative to exchange into other Smith
   distinctive   Barney funds. Be sure to read the prospectus of the Smith
     family of   Barney fund you are exchanging into. An exchange is a taxable
         funds   transaction.
   tailored to
 help meet the   . You may exchange shares only for shares of the same class
 varying needs     of another Smith Barney fund. Not all Smith Barney funds
 of both large     offer all classes.
     and small   
    investors.   . Not all Smith Barney funds may be offered in your state of
                   residence. Contact your Salomon Smith Barney Financial Con-
                   sultant, dealer representative or the transfer agent. 
                 . You must meet the minimum investment amount for each fund
                 . If you hold share certificates, the transfer agent must
                   receive the certificates endorsed for transfer or with
                   signed stock powers (documents transferring ownership of
                   certificates) before the exchange is effective.
                 . The fund may suspend or terminate your exchange privilege
                   if you engage in an excessive pattern of exchanges.
 
     Waiver of   Your shares will not be subject to an initial sales charge at
    additional   the time of the exchange.
 sales charges
                 Your deferred sales charge (if any) will continue to be mea-
                 sured from the date of your original purchase. If the fund
                 you exchange into has a higher deferred sales charge, you
                 will be subject to that charge. If you exchange at any time
                 into a fund with a lower charge, the sales charge will not be
                 reduced.
                                                                   
Appreciation Fund
 
16
<PAGE>
 
  By telephone   
                 If you do not have a brokerage account, you may be eligible
                 to exchange shares through the transfer agent. You must com-
                 plete an authorization form to authorize telephone transfers.
                 If eligible, you may make telephone exchanges on any day the
                 New York Stock Exchange is open. Call the transfer agent at
                 1-800-451-2010 between 9:00 a.m. and 5:00 p.m. (Eastern
                 time). Requests received after the close of regular trading
                 on the Exchange are priced at the net asset value next deter-
                 mined. 
 
                 You can make telephone exchanges only between accounts that
                 have identical registrations.
--------------------------------------------------------------------------------
       By mail   If you do not have a Salomon Smith Barney brokerage account,
                 contact your dealer representative or write to the transfer
                 agent at the address on the opposite page.
 
                                                       Smith Barney Mutual Funds
 
                                                                              17
<PAGE>
 
 Redeeming shares
 
     Generally   Contact your Salomon Smith Barney Financial Consultant or
                 dealer representative to redeem shares of the fund.
 
                 If you hold share certificates, the transfer agent must
                 receive the certificates endorsed for transfer or with signed
                 stock powers before the redemption is effective.
 
                 If the shares are held by a fiduciary or corporation, other
                 documents may be required.
 
                 Your redemption proceeds will be sent within three business
                 days after your request is received in good order. However,
                 if you recently purchased your shares by check, your redemp-
                 tion proceeds will not be sent to you until your original
                 check clears, which may take up to 15 days.
 
                 If you have a Salomon Smith Barney brokerage account, your
                 redemption proceeds will be placed in your account and not
                 reinvested without your specific instruction. In other cases,
                 unless you direct otherwise, your redemption proceeds will be
                 paid by check mailed to your address of record.
--------------------------------------------------------------------------------
       By mail   For accounts held directly at the fund, send written requests
                 to the transfer agent at the following address:
                   
                   Smith Barney Appreciation Fund Inc. 
                   (Specify class of shares)
                   c/o First Data Investor Services Group, Inc.
                   P.O. Box 5128
                   Westborough, Massachusetts 01581-5128
 
                 Your written request must provide the following:
 
                 . Your account number
                 . The class of shares and the dollar amount or number of
                   shares to be redeemed
                 . Signatures of each owner exactly as the account is regis-
                   tered
 
Appreciation Fund
 
18
<PAGE>
 
  By telephone   
                 If you do not have a brokerage account, you may be eligible
                 to redeem shares (except those held in retirement plans) in
                 amounts up to $10,000 per day through the transfer agent. You
                 must complete an authorization form to authorize telephone
                 redemptions. If eligible, you may request redemptions by tel-
                 ephone on any day the New York Stock Exchange is open. Call
                 the transfer agent at 1-800-451-2010 between 9:00 a.m. and
                 5:00 p.m. (Eastern time). Requests received after the close
                 of regular trading on the exchange are priced at the net
                 asset value next determined. 
 
                 Your redemption proceeds can be sent by check to your address
                 of record or by wire transfer to a bank account designated on
           your authorization form. You must submit a new authorization
           form to change the bank account designated to receive wire
     transfers and you may be asked to provide certain other
     documents. 
--------------------------------------------------------------------------------
       
	 Automatic   
          cash   You can arrange for the automatic redemption of a portion of
    withdrawal   your shares on a monthly or quarterly basis. To qualify you
         plans   must own shares of the fund with a value of at least $10,000
                 ($5,000 for retirement plan accounts)and each automatic 		
	     redemption must be at least $50. If your shares are subject to 		
     a deferred sales charge, the sales charge will be waived if
                 your automatic payments do not exceed 1% per month of the
                 value of your shares subject to a deferred sales charge. 
     
                 The following conditions apply:
 
                 . Your shares must not be represented by certificates
                 . All dividends and distributions must be reinvested
 
                 For more information, contact your Salomon Smith Barney
                 Financial Consultant or dealer representative or consult the
                 SAI.
 
                                                       Smith Barney Mutual Funds
 
                                                                              19
<PAGE>
 
 Other things to know about share transactions

When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed: 
 
 . Name of the fund
 . Account number
 . Class of shares being bought, exchanged or redeemed
 . Dollar amount or number of shares being bought, exchanged or redeemed
 . Signature of each owner exactly as the account is registered
 
The transfer agent will try to confirm that any telephone exchange or redemp-
tion request is genuine by recording calls, asking the caller to provide a per-
sonal identification number for the account, sending you a written confirmation
or requiring other confirmation procedures from time to time.
 
Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:

 . Are redeeming over $10,000 of shares 
 . Are sending signed share certificates or stock powers to the transfer agent
 . Instruct the transfer agent to mail the check to an address different from
  the one on your account
 . Changed your account registration
 . Want the check paid to someone other than the account owner(s)
 . Are transferring the redemption proceeds to an account with a different reg-
  istration
 
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
 
The fund has the right to:
 
 . Suspend the offering of shares
 . Waive or change minimum and additional investment amounts
 . Reject any purchase or exchange order
 . Change, revoke or suspend the exchange privilege
 . Suspend telephone transactions
 
Appreciation Fund
 
20
<PAGE>
 
 . Suspend or postpone redemptions of shares on any day when trading on the New
  York Stock Exchange is restricted, or as otherwise permitted by the Securi-
  ties and Exchange Commission
 . Pay redemption proceeds by giving you securities. You may pay transaction
  costs to dispose of the securities
 
Small account balances If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
 
Excessive exchange transactions The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other share-
holders. If so, the fund may limit additional purchases and/or exchanges by the
shareholder.

Share certificates The fund does not issue share certificates unless a written
request signed by all registered owners is made to the transfer agent. If you
hold share certificates it will take longer to exchange or redeem shares. 
 
                                                       Smith Barney Mutual Funds
 
                                                                              21
<PAGE>
 
 Smith Barney 401(k) and ExecChoiceTM programs

You may be eligible to participate in the Smith Barney 401(k) program or the
Smith Barney ExecChoiceTM program. The fund offers Class A and Class L shares
to participating plans as investment alternatives under the programs. You can
meet minimum investment and exchange amounts by combining the plan's invest-
ments in any of the Smith Barney funds. 
 
There are no sales charges when you buy or sell shares and the class of shares
you may purchase depends on the amount of your initial investment. Once a class
of shares is chosen, all additional purchases must be of the same class.
 
 . Class A shares may be purchased by plans investing at least $1 million.
 
 . Class L shares may be purchased by plans investing less than $1 million.
  Class L shares are eligible for exchange into Class A shares not later than 8
  years after the plan joined the program. They are eligible for exchange
  sooner in the following circumstances:
  
  If the account was opened on or after June 21, 1996 and a total of $1 mil-
  lion is invested in Smith Barney Funds, and Class L shares (other than
  money market funds), all Class L shares are eligible for exchange after
  the plan is in the program 5 years. 
  
  If the account was opened before June 21, 1996 and a total of $500,000 is
  invested in Smith Barney Funds, and Class L shares (other than money mar-
  ket funds) on December 31 in any year, all Class L shares are eligible for
  exchange on or about March 31 of the following year. 
 
For more information, call your Salomon Smith Barney Financial Consultant or
the transfer agent, or consult the SAI.
 
Appreciation Fund
 
22
<PAGE>
 
 
 Dividends, distributions and taxes 
 
Dividends The fund generally makes capital gain distributions and pays divi-
dends, if any, once a year, typically in December. The fund may pay additional
distributions and dividends at other times if necessary for the fund to avoid a
federal tax. Capital gain distributions and dividends are reinvested in addi-
tional fund shares of the same class you hold. The fund expects distributions
to be primarily from capital gains. You do not pay a sales charge on reinvested
distributions or dividends. Alternatively, you can instruct your Salomon Smith
Barney Financial Consultant, dealer representative or the transfer agent to
have your distributions and/or dividends paid in cash. You can change your
choice at any time to be effective as of the next distribution or dividend,
except that any change given to the transfer agent less than five days before
the payment date will not be effective until the next distribution or dividend
is paid.
 
Taxes In general, redeeming shares, exchanging shares and receiving distribu-
tions (whether in cash or additional shares) are all taxable events.
 
<TABLE>
<CAPTION>
 Transaction                           Federal tax status
<S>                                    <C>
Redemption or exchange of shares       Usually capital gain or
                                       loss; long-term only if
                                       shares owned more than
                                       one year
 
Long-term capital gain distributions   Long-term capital gain
 
Short-term capital gain distributions  Ordinary income
 
Dividends                              Ordinary income
</TABLE>
 
Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the fund is about to declare a long-term capital gain dis-
tribution or a dividend, because it will be taxable to you even though it may
actually be a return of a portion of your investment.
 
After the end of each year, the fund will provide you with information about
the distributions and dividends you received and any redemptions of shares dur-
ing the previous year. If you do not provide the fund with your correct tax-
payer identification number and any required certifications, you may be subject
to back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult your tax adviser about your investment
in the fund.
 
                                                       Smith Barney Mutual Funds
 
                                                                              23
<PAGE>
 
 Share price
 
You may buy, exchange or redeem shares at their net asset value, plus any
applicable sales charge, next determined after receipt of your request in good
order. The fund's net asset value is the value of its assets minus its liabili-
ties. Net asset value is calculated separately for each class of shares. The
fund calculates its net asset value every day the New York Stock Exchange is
open. The Exchange is closed on certain holidays listed in the SAI. This calcu-
lation is done when regular trading closes on the Exchange (normally 4:00 p.m.,
Eastern time).

The fund generally values its fund securities based on market prices or quota-
tions. When reliable market prices or quotations are not readily available, or
when the value of a security has been materially affected by events occurring
after a foreign exchange closes, the fund may price those securities at fair
value. Fair value is determined in accordance with procedures approved by the
fund's board. 
 
A fund that uses fair value to price securities may value those securities
higher or lower than another fund using market quotations to price the same
securities.

In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer repre-
sentative before the New York Stock Exchange closes. If the Exchange closes
early, you must place your order prior to the actual closing time. Otherwise,
you will receive the next business day's price. 
 
Salomon Smith Barney or members of the selling group must transmit all orders
to buy, exchange or redeem shares to the fund's agent before the agent's close
of business.
 
Appreciation Fund
 
24
<PAGE>
 
 Financial highlights

The financial highlights tables are intended to help you understand the perfor-
mance of each class for the past 5 years (or since inception if less than 5
years). Certain information reflects financial results for a single share.
Total return represents the rate that a shareholder would have earned (or lost)
on a fund share assuming reinvestment of all dividends and distributions. The
information in the following tables was audited by KPMG LLP, independent
accountants, whose report, along with the fund's financial statements, is
included in the annual report (available upon request). The information for the
fiscal year ended December 31, 1994 has been audited by other auditors. 
 
 For a Class A share of capital stock outstanding throughout each year ended
 December 31:
<TABLE>
<CAPTION>
                                    1998(/1/)   1997    1996  1995(/1/)   1994
--------------------------------------------------------------------------------
 <S>                                <C>       <C>     <C>     <C>       <C>
 Net asset value, beginning of
 year                                $13.92   $12.85  $11.90   $10.15   $11.01
--------------------------------------------------------------------------------
 Income (loss) from operations:
 Net investment income                 0.18     0.19    0.19     0.20     0.16
 Net realized and unrealized gain
 (loss)                                2.62     3.17    2.09     2.75    (0.24)
--------------------------------------------------------------------------------
 Total income (loss) from
 operations                            2.80     3.36    2.28     2.95    (0.08)
--------------------------------------------------------------------------------
 Less distributions from:
 Net investment income                (0.18)   (0.20)  (0.19)   (0.20)   (0.18)
 Net realized gains                   (1.23)   (2.09)  (1.14)   (1.00)   (0.60)
--------------------------------------------------------------------------------
 Total distributions                  (1.41)   (2.29)  (1.33)   (1.20)   (0.78)
--------------------------------------------------------------------------------
 Net asset value, end of year        $15.31   $13.92  $12.85   $11.90   $10.15
--------------------------------------------------------------------------------
 Total return(/2/)                    20.45%   26.29%  19.25%   29.26%   (0.77)%
--------------------------------------------------------------------------------
 Net assets, end of year
 (millions)                           $2,959   $2,526  $2,100   $1,933   $1,690
--------------------------------------------------------------------------------
 Ratios to average net assets:
 Expenses                              0.95%    0.95%   1.00%    1.02%    1.02%
 Net investment income                 1.23     1.47    1.52     1.71     1.61
--------------------------------------------------------------------------------
 Portfolio turnover rate                 63%      57%     62%      57%      52%
--------------------------------------------------------------------------------
</TABLE>
(/1/) Per share amounts calculated using the monthly average shares method.
(/2/) Total return does not take into account any applicable sales charges.


                                                       Smith Barney Mutual Funds
 
                                                                              25
<PAGE>
 
 For a Class B share of capital stock outstanding throughout each year ended
 December 31:
<TABLE>
<CAPTION>
                                    1998(/1/)   1997    1996  1995(/1/)   1994
--------------------------------------------------------------------------------
 <S>                                <C>       <C>     <C>     <C>       <C>
 Net asset value, beginning of
 year                                $13.88   $12.81  $11.88   $10.14   $11.00
--------------------------------------------------------------------------------
 Income (loss) from operations:
 Net investment income                 0.06     0.07    0.08     0.11     0.13
 Net realized and unrealized gain
 (loss)                                2.61     3.15    2.08     2.74    (0.29)
--------------------------------------------------------------------------------
 Total income (loss) from
 operations                            2.67     3.22    2.16     2.85    (0.16)
--------------------------------------------------------------------------------
 Less distributions from:
 Net investment income                (0.06)   (0.06)  (0.09)   (0.11)   (0.10)
 Net realized gains                   (1.23)   (2.09)  (1.14)   (1.00)   (0.60)
--------------------------------------------------------------------------------
 Total distributions                  (1.29)   (2.15)  (1.23)   (1.11)   (0.70)
--------------------------------------------------------------------------------
 Net asset value, end of year        $15.26   $13.88  $12.81   $11.88   $10.14
--------------------------------------------------------------------------------
 Total return(/2/)                    19.52%   25.31%  18.29%   28.29%   (1.53)%
--------------------------------------------------------------------------------
 Net assets, end of year
 (millions)                           $1,553   $1,410  $1,134     $988     $761
--------------------------------------------------------------------------------
 Ratios to average net assets:
 Expenses                              1.73%    1.73%   1.78%    1.77%    1.80%
 Net investment income                 0.44     0.68    0.74     0.96     0.83
--------------------------------------------------------------------------------
 Portfolio turnover rate                 63%      57%     62%      57%      52%
--------------------------------------------------------------------------------
</TABLE>
(/1/) Per share amounts calculated using the monthly average shares method.
(/2/) Total return does not take into account any applicable sales charges.
Appreciation Fund
 
26
<PAGE>
 
 
 For a Class L(/1/) share of capital stock outstanding throughout each year
 ended December 31: 
<TABLE>
<CAPTION>
                                 1998(/2/)    1997     1996  1995(/2/)   1994
-------------------------------------------------------------------------------
 <S>                             <C>       <C>      <C>      <C>       <C>
 Net asset value, beginning of
 year                              $13.88   $12.81   $11.88    $10.14  $11.00
-------------------------------------------------------------------------------
 Income (loss) from operations:
 Net investment income               0.06     0.09     0.09      0.11    0.10
 Net realized and unrealized
 gain (loss)                         2.61     3.13     2.08      2.74   (0.25)
-------------------------------------------------------------------------------
 Total income (loss) from
 operations                          2.67     3.22     2.17      2.85   (0.15)
-------------------------------------------------------------------------------
 Less distributions from:
 Net investment income              (0.06)   (0.06)   (0.10)    (0.11)  (0.11)
 Net realized gains                 (1.23)   (2.09)   (1.14)    (1.00)  (0.60)
-------------------------------------------------------------------------------
 Total distributions                (1.29)   (2.15)   (1.24)    (1.11)  (0.71)
-------------------------------------------------------------------------------
 Net asset value, end of year      $15.26   $13.88   $12.81    $11.88  $10.14
-------------------------------------------------------------------------------
 Total return(/3/)                  19.52%   25.31%   18.34%    28.29%  (1.41)%
-------------------------------------------------------------------------------
 Net assets, end of year
 (000)'s                          $83,215  $47,872  $25,505   $14,653  $5,040
-------------------------------------------------------------------------------
 Ratios to average net assets:
 Expenses                            1.73%    1.73%    1.77%     1.77%   1.66%
 Net investment income               0.44     0.68     0.75      0.96    0.98
-------------------------------------------------------------------------------
 Portfolio turnover rate               63%      57%      62%       57%     52%
-------------------------------------------------------------------------------
</TABLE>

(/1/) On June 12, 1998, Class C shares were renamed Class L shares. 

(/2/) Per share amounts calculated using the monthly average shares method.
(/3/) Total return does not take into account any applicable sales charges.

      
                                                       Smith Barney Mutual Funds
 
                                                                              27
<PAGE>
 
 For a Class Y share of capital stock outstanding throughout each year ended
 December 31:
<TABLE>
<CAPTION>
                                     1998(/1/) 1997(/1/) 1996(/1/)(/2/)
-------------------------------------------------------------------------
 <S>                                 <C>       <C>       <C>
 Net asset value, beginning of year    $13.93    $12.86      $12.10
-------------------------------------------------------------------------
 Income from operations:
 Net investment income                   0.24      0.27        0.23
 Net realized and unrealized gain        2.63      3.14        1.89
-------------------------------------------------------------------------
 Total income from operations            2.87      3.41        2.12
-------------------------------------------------------------------------
 Less distributions from:
 Net investment income                  (0.29)    (0.25)      (0.22)
 Net realized gains                     (1.23)    (2.09)      (1.14)
-------------------------------------------------------------------------
 Total distributions                    (1.52)    (2.34)      (1.36)
-------------------------------------------------------------------------
 Net asset value, end of year          $15.28    $13.93      $12.86
-------------------------------------------------------------------------
 Total return(/5/)                      20.93%    26.70%      17.65%(/3/)
-------------------------------------------------------------------------
 Net assets, end of year (000)'s      $87,041   $56,302     $73,196
-------------------------------------------------------------------------
 Ratios to average net assets:
 Expenses                                0.59%     0.59%       0.66%(/4/)
 Net investment income                   1.59      1.79        2.06(/4/)
-------------------------------------------------------------------------
 Portfolio turnover rate                   63%       57%         24%
-------------------------------------------------------------------------
</TABLE>
(/1/) Per share amounts calculated using the monthly average shares method.
(/2/) For the period from January 31, 1996 (inception date) to December 31,
      1996.
(/3/) Not annualized.
(/4/) Annualized.
(/5/) Total return does not take into account any applicable sales charges.

Appreciation Fund
 
28
<PAGE>
 
                                                              SalomonSmithBarney
                                                    ----------------------------
                                                    A member of citigroup [LOGO]
 
Appreciation Fund
 
Shareholder reports Annual and semiannual reports to shareholders provide addi-
tional information about the fund's investments. These reports discuss the mar-
ket conditions and investment strategies that affected the fund's performance.
 
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.
 
Statement of additional information The statement of additional information
provides more detailed information about the fund and is incorporated by refer-
ence into (is legally a part of) this prospectus.
 
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.
 
Visit our web site. Our web site is located at www.smithbarney.com

You can also review and copy the fund's shareholder reports, prospectus and
statement of additional information at the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. You can get copies of these materials
for a duplicating fee by writing to the Public Reference Section of the Commis-
sion, Washington, D.C. 20549-6009. Information about the public reference room
may be obtained by calling 1-800-SEC-0330. You can get the same information
free from the Commission's Internet web site at http:www.sec.gov 
 
If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not law-
fully sell its shares.
 
SM Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
 
(Investment Company Act
file no. 811-01940)
FD0202 4/99 




   
April 30, 1999

STATEMENT OF ADDITIONAL INFORMATION

SMITH BARNEY APPRECIATION FUND INC.
388 Greenwich Street
New York, New York  10013
(800) 451-2010

This Statement of Additional Information ("SAI") is not a 
prospectus and is meant to be read in conjunction with the 
prospectus of the Smith Barney Appreciation Fund Inc. (the 
"fund") dated April 30, 1999, as amended or supplemented 
from time to time (the "prospectus"), and is incorporated 
by reference in its entirety into the prospectus. 
Additional 
information about the fund's investments is available in 
the 
fund's annual and semi-annual reports to shareholders that 
are incorporated herein by reference. The prospectus and 
copies of the reports may be obtained free of charge by 
contacting a Salomon Smith Barney Financial Consultant, or 
by writing or calling Salomon Smith Barney Inc. at the 
address or telephone number above.  

TABLE OF CONTENTS

 Investment Objective and Management 
Policies............................................	  2
 Investment Restrictions... .........................   13
 Directors and Executive Officers of the 
Fund.............................................   15
 Investment Management and Other Services......    19 
 Portfolio Transactions.........................   23
 Portfolio Turnover.............................   24
 Purchase of Shares............................25
 Redemption of Shares..........................32
 Valuation of Shares..........................36
 Exchange Privilege......................37
 Performance Data.....................................38
 Dividends, Distributions and Taxes...................42
 Additional Information...............................48
 Financial Statements.................................49



INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The fund is an open-end, diversified, management investment 
company.  The prospectus discusses the 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 the fund may utilize and certain risks 
attendant to such investments, policies and strategies.

Common Stock.  The fund may invest in common stocks. Common 
stocks are shares of a corporation or other entity 
entitling 
the holder to a pro rata share of the profits of the 
corporation, if any, without preference over any other 
shareholder or class of shareholders, including holders of 
the entity's preferred stock and other senior equity.  
Common stock usually carries with it the right to vote and 
frequently an exclusive right to do so.

Preferred Stock.  Preferred stocks, like debt obligations, 
are generally fixed-income securities. Shareholders of 
preferred stocks normally have the right to receive 
dividends at a fixed rate when and as declared by the 
issuer's board of directors, but do not participate in 
other 
amounts available for distribution by the issuing 
corporation. Preferred stock dividends must be paid before 
common stock dividends and, for that reason, preferred 
stocks generally entail less risk than common stocks. Upon 
liquidation, preferred stocks are entitled to a specified 
liquidation preference, which is generally the same as the 
par or stated value, and are senior in right of payment to 
common stock. Preferred stocks are, however, equity 
securities in the sense they do not represent a liability 
of 
the issuer and, therefore, do not offer as great a degree 
of 
protection of capital or assurance of continued income as 
investments in corporate debt securities.  In addition, 
preferred stocks are subordinated in right of payment to 
all 
debt obligations and creditors of the issuer, and 
convertible preferred stocks may be subordinated to other 
preferred stock of the same issuer.

Warrants.  The fund may invest up to 5% of its assets in 
warrants.  Warrants acquired entitle the fund to buy common 
stock from the issuer at a specified price and time.  
Warrants are subject to the same market risks as stocks, 
but 
may be more volatile in price.  The fund's investment in 
warrants will not entitle it to receive dividends or 
exercise voting rights and will become worthless if the 
warrants cannot be profitably exercised before the 
expiration dates.


Convertible Securities. Convertible securities in which the 
fund may invest, including both convertible debt and 
convertible preferred stock, may be converted at either a 
stated price or stated rate into underlying shares of 
common 
stock.  Because of this feature, convertible securities 
enable an investor to benefit from increases in the market 
price of the underlying common stock. Convertible 
securities 
provide higher yields than the underlying equity 
securities, 
but generally offer lower yields than non-convertible 
securities of similar quality.  Like bonds, the value of 
convertible securities fluctuates in relation to changes in 
interest rates and, in addition, also fluctuates in 
relation 
to the underlying common stock.

Foreign Securities.  The fund may invest up to 10% of its 
assets (at the time of investment) in foreign securities.  
The fund may invest directly in foreign issuers or invest 
in 
depositary receipts. (securities of foreign 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). 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.

Money Market Instruments. The fund may invest for temporary 
defensive purposes in corporate and government bonds and 
notes and money market instruments.  Money market 
instruments 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.  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. The fund may invest in cash and 
in short-term instruments, and it may hold cash and short-
term instruments without limitation when the manager 
determines that it is appropriate to maintain a temporary 
defensive posture. Short-term instruments in which the fund 
may invest include: (a) obligations issued or guaranteed as 
to principal and interest by the United States government, 
its agencies or instrumentalities (including repurchase 
agreements with respect to such securities); (b) bank 
obligations (including certificates of deposit, time 
deposits and bankers' acceptances of domestic or foreign 
banks, domestic savings and loan associations and similar 
institutions); (c) floating rate securities and other 
instruments denominated in U.S. dollars issued by 
international development agencies, banks and other 
financial institutions, governments and their agencies or 
instrumentalities and corporations located in countries 
that 
are members of the Organization for Foreign Cooperation and 
Development; and (d) commercial paper rated no lower than 
A-
2 by Standard & Poor's Ratings Group ("S&P") or Prime-2 by 
Moody's Investors Service, Inc. ("Moody's") or the 
equivalent from another major rating service or, if 
unrated, 
of an issuer having an outstanding, unsecured debt issue 
then rated within the three highest rating categories. 
INVESTMENT PRACTICES

In attempting to achieve its investment objective, the fund 
may employ, among others, the following portfolio 
strategies.

Repurchase Agreements.  The fund may agree to purchase 
securities from a bank or recognized securities dealer and 
simultaneously commit to resell the securities to the bank 
or dealer at an agreed-upon date and price reflecting a 
market rate of interest unrelated to the coupon rate or 
maturity of the purchased securities ("repurchase 
agreements").  The fund would maintain custody of the 
underlying securities prior to their repurchase; thus, the 
obligation of the bank or dealer to pay the repurchase 
price 
on the date agreed to would be, in effect, secured by such 
securities.  If the value of such securities were less than 
the repurchase price, plus interest, the other party to the 
agreement would be required to provide additional 
collateral 
so at all times the collateral is at least 102% of the 
repurchase price plus accrued interest.  Default by or 
bankruptcy of a seller would expose the fund to possible 
loss because of adverse market action, expenses and/or 
delays in connection with the disposition of the underlying 
obligations.  The financial institutions with which the 
fund 
may enter into repurchase agreements will be banks and non-
bank dealers of U.S. Government securities on the Federal 
Reserve Bank of New York's list of reporting dealers, if 
such banks and non-bank dealers are deemed creditworthy by 
the fund's manager.  The manager will continue to monitor 
creditworthiness of the seller under a repurchase 
agreement, 
and will require the seller to maintain during the term of 
the agreement the value of the securities subject to the 
agreement to equal at least 102% of the repurchase price 
(including accrued interest).  In addition, the manager 
will 
require the value of this collateral, after transaction 
costs (including loss of interest) reasonably expected to 
be 
incurred on a default, be equal to 102% or greater than the 
repurchase price (including accrued premium) provided in 
the 
repurchase agreement or the daily amortization of the 
difference between the purchase price and the repurchase 
price specified in the repurchase agreement.  The manager 
will mark-to-market daily the value of the securities.  
Repurchase agreements are considered to be loans by the 
fund 
under the Investment Company Act of 1940, as amended (the 
"1940 Act").
Lending of Portfolio Securities.  Consistent with 
applicable 
regulatory requirements, the fund may lend portfolio 
securities to brokers, dealers and other financial 
organizations meeting capital and other credit requirements 
or other criteria established by the Board.  The fund will 
not lend portfolio securities to affiliates of the manager 
unless they have applied for and received specific 
authority 
to do so from the Securities Exchange Commission.  Loans of 
portfolio securities will be collateralized by cash, 
letters 
of credit or U.S. Government Securities, which are 
maintained at all times in an amount equal to at least 102% 
of the current market value of the loaned securities.  Any 
gain or loss in the market price of the securities loaned 
occurring during the term of the loan would be for the 
account of the fund.  From time to time, the fund may 
return 
a part of the interest earned from the investment of 
collateral received for securities loaned to the borrower 
and/or a third party unaffiliated with the fund and acting 
as a "finder."
By lending its securities, the fund can increase its income 
by continuing to receive interest and any dividends on the 
loaned securities as well as by either investing the 
collateral received for securities loaned in short-term 
instruments or obtaining yield in the form of interest paid 
by the borrower when U.S. Government Securities are used as 
collateral.  Although the generation of income is not the 
primary investment goal of the fund, income received could 
be used to pay the fund's expenses and would increase an 
investor's total return.  The fund will adhere to the 
following conditions whenever its portfolio securities are 
loaned:  (i) the fund must receive at least 102% cash 
collateral or equivalent securities of the type discussed 
in 
the preceding paragraph from the borrower; (ii) the 
borrower 
must increase such collateral whenever the market value of 
the securities rises above the level of such collateral; 
(iii) the fund must be able to terminate the loan at any 
time; (iv) the fund must receive reasonable interest on the 
loan, as well as any dividends, interest or other 
distributions on the loaned securities and any increase in 
market value; (v) the fund may pay only reasonable 
custodian 
fees in connection with the loan; and (vi) voting rights on 
the loaned securities may pass to the borrower, provided, 
however, that if a material event adversely affecting the 
investment occurs, the Board must terminate the loan and 
regain the right to vote the securities.  Loan agreements 
involve certain risks in the event of default or insolvency 
of the other party including possible delays or 
restrictions 
upon a fund's ability to recover the loaned securities or 
dispose of the collateral for the loan.
DERIVATIVES TRANSACTIONS

Options on Securities.  The fund may write (sell) covered 
put and call options on securities ("options") and 
purchase put and call options traded on foreign or U.S. 
securities exchanges and over the counter. The fund will 
write such options for the purpose of increasing its return 
and/or protecting the value of its portfolio. In 
particular, 
where the fund writes an option expiring unexercised or is 
closed out by the fund at a profit, it will retain the 
premium paid for the option, which will increase its gross 
income and will offset in part the reduced value of a 
portfolio security in connection with which the option may 
have been written or the increased cost of portfolio 
securities to be acquired.  However, the writing of options 
constitutes only a partial hedge, up to the amount of the 
premium, less any transaction costs.  In contrast, if the 
price of the security underlying the option moves adversely 
to the fund's position, the option may be exercised and the 
fund will be required to purchase or sell the security at a 
disadvantageous price, resulting in losses that may only be 
partially offset by the amount of the premium.  The fund 
may 
also write combinations of put and call options on the same 
security, known as "straddles."  Such transactions 
generate additional premium income but also present 
increased risk.  

The fund may purchase put and call options in anticipation 
of declines in the value of portfolio securities or 
increases in the value of securities to be acquired.  If 
the 
expected changes occur, the fund may be able to offset the 
resulting adverse effect on its portfolio, in whole or in 
part, through the options purchased.  The risk assumed 4by 
the fund in connection with such transactions is limited to 
the amount of the premium and related transaction costs 
associated with the option, although the fund may be lose 
such amounts in the event the prices of securities 
underlying the options do not move in the direction or to 
the extent anticipated.  The fund can invest up to 5% of 
its 
total assets in put and call options on securities.

Stock Index Options.  As described generally above, the 
fund 
may purchase put and call options and write call options on 
domestic stock indexes listed on domestic exchanges in 
order 
to realize its investment objective of capital appreciation 
or for the purpose of hedging its portfolio. A stock index 
fluctuates with changes in the market values of the stocks 
included in the index. Some stock index options are based 
on 
a broad market index such as the New York Stock Exchange 
Composite Index or the Canadian Market Portfolio Index, or 
a 
narrower market index such as the Standard & Poor's 100. 
Indexes also are based on an industry or market segment 
such 
as the American Stock Exchange Oil and Gas Index or the 
Computer and Business Equipment Index.
 
Options on stock indexes are generally similar to options 
on 
stock except that the delivery requirements are different. 
Instead of giving the right to take or make delivery of 
stock at a specified price, an option on a stock index 
gives 
the holder the right to receive a cash "exercise settlement 
amount" equal to (a) the amount, if any, by which the fixed 
exercise price of the option exceeds (in the case of a put) 
or is less than (in the case of a call) the closing value 
of 
the underlying index on the date of exercise, multiplied by 
(b) a fixed "index multiplier." Receipt of this cash amount 
will depend upon the closing level of the stock index upon 
which the option is based being greater than, in the case 
of 
a call, or less than, in the case of a put, the exercise 
price of the option. The amount of cash received will be 
equal to such difference between the closing price of the 
index and the exercise price of the option expressed in 
dollars or a foreign currency, as the case may be, times a 
specified multiple. The writer of the option is obligated, 
in return for the premium received, to make delivery of 
this 
amount. The writer may offset its position in stock index 
options prior to expiration by entering into a closing 
transaction on an exchange or it may let the option expire 
unexercised.
 
The effectiveness of purchasing or writing stock index 
options as a hedging technique will depend upon the extent 
to which price movements in the portion of the securities 
portfolio of the fund correlate with price movements of the 
stock index selected. Because the value of an index option 
depends upon movements in the level of the index rather 
than 
the price of a particular stock, whether the fund will 
realize a gain or loss from the purchase or writing of 
options on an index depends upon movements in the level of 
stock prices in the stock market generally or, in the case 
of certain indexes, in an industry or market segment, 
rather 
than movements in the price of a particular stock. 
Accordingly, successful use by the fund of options on stock 
indexes will be subject to the manager's ability to predict 
correctly movements in the direction of the stock market 
generally or of a particular industry. This requires 
different skills and techniques than predicting changes in 
the price of individual stocks.

The fund will engage in stock index options transactions 
only when determined by SSBC to be consistent with the 
fund's efforts to control risk.  There can be no assurance 
that such judgment will be accurate or that the use of 
these 
portfolio strategies will be successful.  The fund can 
invest up to 5% of its total assets in put and call options 
on domestic and foreign stock indexes.

Options, Futures and Currency Strategies.  The fund may use 
forward currency contracts and certain options and futures 
strategies to attempt to hedge its portfolio, i.e., reduce 
the overall level of investment risk normally associated 
with the fund.  There can be no assurance that such efforts 
will succeed. 
 
In order to assure that the fund will not be deemed to be a 
"commodity pool" for purposes of the Commodity Exchange 
Act, 
regulations of the Commodity Futures Trading Commission 
("CFTC") require that the fund enter into transactions in 
futures contracts and options on futures only (i) for bona 
fide hedging purposes (as defined in CFTC regulations), or 
(ii) for non-hedging purposes, provided the aggregate 
initial margin and premiums on such non-hedging positions 
do 
not exceed 5% of the liquidation value of the fund's 
assets. 
 To attempt to hedge against adverse movements in exchange 
rates between currencies, the fund may enter into forward 
currency contracts for the purchase or sale of a specified 
currency at a specified future date.  Such contracts may 
involve the purchase or sale of a foreign currency against 
the U.S. dollar or may involve two foreign currencies. The 
fund may enter into forward currency contracts either with 
respect to specific transactions or with respect to its 
portfolio positions.  For example, when the manager 
anticipates making a purchase or sale of a security, it may 
enter into a forward currency contract in order to set the 
rate (either relative to the U.S. dollar or another 
currency) at which the currency exchange transaction 
related 
to the purchase or sale will be made ("transaction 
hedging").  Further, when the manager believes that a 
particular currency may decline compared to the U.S. dollar 
or another currency, the fund may enter into a forward 
contract to sell the currency the manager expects to 
decline 
in an amount approximating the value of some or all of the 
fund's securities denominated in that currency, or when the 
manager believes that one currency may decline against a 
currency in which some or all of the portfolio securities 
held by the fund are denominated, it may enter into a 
forward contract to buy the currency expected to decline 
for 
a fixed amount ("position hedging"). In this situation, the 
fund may, in the alternative, enter into a forward contract 
to sell a different currency for a fixed amount of the 
currency expected to decline where the investment manager 
believes that the value of the currency to be sold pursuant 
to the forward contract will fall whenever there is a 
decline in the value of the currency in which portfolio 
securities of the fund are denominated ("cross hedging"). 
The fund will maintain on it's books (i) cash, (ii) U.S. 
Government securities or (iii) equity securities or debt 
securities (of any grade) in certain currencies provided 
such assets are liquid, unencumbered and marked to market 
daily, or other high-quality debt securities denominated in 
certain currencies in a separate account of the fund having 
a value equal to the aggregate account of the fund's 
commitments under forward contracts entered into with 
respect to position hedges and cross-hedges. If the value 
of 
the securities placed in a separate account declines, 
additional cash or securities are placed in the account on 
a 
daily basis so that the value of the account will equal the 
amount of the fund's commitments with respect to such 
contracts. 
 
For hedging purposes, the fund may write covered call 
options and purchase put and call options on currencies to 
hedge against movements in exchange rates and on debt 
securities to hedge against the risk of fluctuations in the 
prices of securities held by the fund or which the manager 
intends to include in its portfolio.  The fund also may use 
interest rate futures contracts and options thereon to 
hedge 
against changes in the general level in interest rates.
 
The fund may write call options on securities and 
currencies 
only if they are covered, and such options must remain 
covered so long as the fund is obligated as a writer.  A 
call option written by the fund is "covered" if the fund 
owns the securities or currency underlying the option or 
has 
an absolute and immediate right to acquire that security or 
currency without additional cash consideration (or for 
additional cash consideration held in a segregated account 
on the fund's books) upon conversion or exchange of other 
securities or currencies held in its portfolio.  A call 
option is also covered if the fund holds on a share-for-
share basis a call on the same security or holds a call on 
the same currency as the call written where the exercise 
price of the call held is equal to or less than the 
exercise 
price of the call written or greater than the exercise 
price 
of the call written if the difference is maintained by the 
fund in cash, Treasury bills or other high-grade, short-
term 
obligations in a segregated account on the fund's books.

The fund may purchase put and call options in anticipation 
of declines in the value of portfolio securities or 
increases in the value of securities to be acquired.  If 
the 
expected changes occur, the fund may be able to offset the 
resulting adverse effect on its portfolio, in whole or in 
part, through the options purchased.  The risk assumed by 
the fund in connection with such transactions is limited to 
the amount of the premium and related transaction costs 
associated with the option, although the fund may lose to 
forfeit such amounts in the event the prices of securities 
underlying the options do not move in the direction or to 
the extent anticipated.
 
Although the portfolio might not employ the use of forward 
currency contracts, options and futures, the use of any of 
these strategies would involve certain investment risks and 
transaction costs to which it might not otherwise be 
subject.  These risks include: dependence on the manager's 
ability to predict movements in the prices of individual 
debt securities, fluctuations in the general fixed-income 
markets and movements in interest rates and currency 
markets, imperfect correlation between movements in the 
price of currency, options, futures contracts or options 
thereon and movements in the price of the currency or 
security hedged or used for cover; the fact that skills and 
techniques needed to trade options, futures contracts and 
options thereon or to use forward currency contracts are 
different from those needed to select the securities in 
which the fund invests; lack of assurance that a liquid 
market will exist for any particular option, futures 
contract or options thereon at any particular time and 
possible need to defer or accelerate closing out certain 
options, futures contracts and options thereon in order to 
continue to qualify for the beneficial tax treatment 
afforded "regulated investment companies" under the 
Internal 
Revenue Code of 1986, as amended (the "Code"). 

Over-the-counter options in which the fund may invest 
differ 
from exchange traded options in that they are two-party 
contracts, with price and other terms negotiated between 
buyer and seller, and generally do not have as much market 
liquidity as exchange-traded options.  The fund may be 
required to treat as illiquid over-the-counter options 
purchased and securities being used to cover certain 
written 
over-the-counter options. 

Options on Securities.  As discussed more generally above, 
the fund may engage in the writing of covered call options. 
The fund may also purchase put options and enter into 
closing transactions.
 
The principal reason for writing covered call options on 
securities is to attempt to realize, through the receipt of 
premiums, a greater return than would be realized on the 
securities alone. In return for a premium, the writer of a 
covered call option foregoes the right to any appreciation 
in the value of the underlying security above the strike 
price for the life of the option (or until a closing 
purchase transaction can be effected). Nevertheless, the 
call writer retains the risk of a decline in the price of 
the underlying security. Similarly, the principal reason 
for 
writing covered put options is to realize income in the 
form 
of premiums. The writer of a covered put option accepts the 
risk of a decline in the price of the underlying security. 
The size of the premiums the fund may receive may be 
adversely affected as new or existing institutions, 
including other investment companies, engage in or increase 
their option-writing activities.
 
Options written by the fund will normally have expiration 
dates between one and six months from the date written. The 
exercise price of the options may be below, equal to or 
above the current market values of the underlying 
securities 
when the options are written. In the case of call options, 
these exercise prices are referred to as "in-the-money," 
"at-the-money" and "out-of-the-money," respectively.
 
The fund may write (a) in-the-money call options when the 
manager expects the price of the underlying security to 
remain flat or decline moderately during the option period, 
(b) at-the-money call options when the manager expects the 
price of the underlying security to remain flat or advance 
moderately during the option period and (c) out-of-the-
money 
call options when the manager expects that the price of the 
security may increase but not above a price equal to the 
sum 
of the exercise price plus the premiums received from 
writing the call option. In any of the preceding 
situations, 
if the market price of the underlying security declines and 
the security is sold at this lower price, the amount of any 
realized loss will be offset wholly or in part by the 
premium received. Out-of-the-money, at-the-money and in-
the-
money put options (the reverse of call options as to the 
relation of exercise price to market price) may be utilized 
in the same market environments as such call options are 
used in equivalent transactions.

So long as the obligation of the fund as the writer of an 
option continues, the fund may be assigned an exercise 
notice by the broker-dealer through which the option was 
sold, requiring it to deliver, in the case of a call, or 
take delivery of, in the case of a put, the underlying 
security against payment of the exercise price. This 
obligation terminates when the option expires or the fund 
effects a closing purchase transaction. The fund can no 
longer effect a closing purchase transaction with respect 
to 
an option once it has been assigned an exercise notice. To 
secure its obligation to deliver the underlying security 
when it writes a call option, or to pay for the underlying 
security when it writes a put option, the fund will be 
required to deposit in escrow the underlying security or 
other assets in accordance with the rules of the Options 
Clearing Corporation ("Clearing Corporation") or similar 
clearing corporation and the securities exchange on which 
the option is written.
 
An option position may be closed out only where there 
exists 
a secondary market for an option of the same series on a 
recognized securities exchange or in the over-the-counter 
market.  The fund expects to write options only on national 
securities exchanges or in the over-the-counter market.  
The 
fund may purchase put options issued by the Clearing 
Corporation or in the over-the-counter market.
 The fund may realize a profit or loss upon entering into a 
closing transaction. In cases in which the fund has written 
an option, it will realize a profit if the cost of the 
closing purchase transaction is less than the premium 
received upon writing the option and will incur a loss if 
the cost of the closing purchase transaction exceeds the 
premium received upon writing the option. Similarly, when 
the fund has purchased an option and engages in a closing 
sale transaction, whether it recognizes a profit or loss 
will depend upon whether the amount received in the closing 
sale transaction is more or less than the premium the fund 
initially paid for the original option plus the related 
transaction costs.
 
Although the fund generally will purchase or write only 
those options for which the manager believes there is an 
active secondary market so as to facilitate closing 
transactions, there is no assurance that sufficient trading 
interest to create a liquid secondary market on a 
securities 
exchange will exist for any particular option or at any 
particular time, and for some options no such secondary 
market may exist. A liquid secondary market in an option 
may 
cease to exist for a variety of reasons. In the past, for 
example, higher than anticipated trading activity or order 
flow, or other unforeseen events, have at times rendered 
certain of the facilities of the Clearing Corporation and 
national securities exchanges inadequate and resulted in 
the 
institution of special procedures, such as trading 
rotations, restrictions on certain types of orders or 
trading halts or suspensions in one or more options. There 
can be no assurance that similar events, or events that may 
otherwise interfere with the timely execution of customers' 
orders, will not recur. In such event, it might not be 
possible to effect closing transactions in particular 
options. If, as a covered call option writer, the fund is 
unable to effect a closing purchase transaction in a 
secondary market, it will not be able to sell the 
underlying 
security until the option expires or it delivers the 
underlying security upon exercise.
 
Securities exchanges generally have established limitations 
governing the maximum number of calls and puts of each 
class 
which may be held or written, or exercised within certain 
periods, by an investor or group of investors acting in 
concert (regardless of whether the options are written on 
the same or different securities exchanges or are held, 
written or exercised in one or more accounts or through one 
or more brokers).  It is possible that the fund and other 
clients of the manager and certain of their affiliates may 
be considered to be such a group.  A securities exchange 
may 
order the liquidation of positions found to be in violation 
of these limits, and it may impose certain other sanctions.
 
In the case of options written by the fund that are deemed 
covered by virtue of the fund's holding convertible or 
exchangeable preferred stock or debt securities, the time 
required to convert or exchange and obtain physical 
delivery 
of the underlying common stocks with respect to which the 
fund has written options may exceed the time within which 
the fund must make delivery in accordance with an exercise 
notice. In these instances, the fund may purchase or 
temporarily borrow the underlying securities for purposes 
of 
physical delivery. By so doing, the fund will not bear any 
market risk because the fund will have the absolute right 
to 
receive from the issuer of the underlying security an equal 
number of shares to replace the borrowed stock, but the 
fund 
may incur additional transaction costs or interest expenses 
in connection with any such purchase or borrowing.
 
Although the manager will attempt to take appropriate 
measures to minimize the risks relating to the fund's 
writing of call options and purchasing of put and call 
options, there can be no assurance the fund will succeed in 
its option-writing program.
 
Futures Contracts and Options on Futures Contracts.  As 
described generally above, the fund may enter into futures 
contracts and purchase and write (sell) options on these 
contracts, including but not limited to interest rate, 
securities index and foreign currency contracts and put and 
call options on these futures contracts. Futures contracts 
provide for the future sale by one party and purchase by 
another party of a specified amount of a specific security 
at a specified future time and at a specified price.  The 
primary purpose of entering into a futures contract by the 
fund is to protect the fund from fluctuations in the value 
of securities without actually buying or selling the 
securities.  The fund may enter into futures contracts and 
options on futures to seek higher investment returns when a 
futures contract is priced more attractively than stocks 
comprising a benchmark index, to facilitate trading or to 
reduce transaction costs.  The fund will only enter into 
futures contracts and options on futures contracts that are 
traded on a domestic exchange and board of trade.  Assets 
committed to futures contracts will be segregated on the 
fund's books to the extent required by law.

The purpose of entering into a futures contract by the fund 
is to protect the fund from fluctuations in the value of 
securities without actually buying or selling the 
securities. For example, in the case of stock index futures 
contracts, if the fund anticipates an increase in the price 
of stocks it intends to purchase at a later time, the fund 
could enter into contracts to purchase the stock index 
(known as taking a "long" position) as a temporary 
substitute for the purchase of stocks. If an increase in 
the 
market influences the stock index as anticipated, the value 
of the futures contracts increases and thereby serves as a 
hedge against the fund's not participating in a market 
advance. The fund then may close out the futures contracts 
by entering into offsetting futures contracts to sell the 
stock index (known as taking a "short" position) as it 
purchases individual stocks. The fund can accomplish 
similar 
results by buying securities with long maturities and 
selling securities with short maturities. But by using 
futures contracts as an investment tool to reduce risk, 
given the greater liquidity in the futures market, it may 
be 
possible to accomplish the same result more easily and more 
quickly.
 
No consideration will be paid or received by the fund upon 
the purchase or sale of a futures contract. Initially, the 
fund will be required to deposit with the broker an amount 
of cash or cash equivalents equal to approximately 1% to 
10% 
of the contract amount (this amount is subject to change by 
the exchange or board of trade on which the contract is 
traded and brokers or members of such board of trade may 
charge a higher amount). This amount is known as "initial 
margin" and is in the nature of a performance bond or good 
faith deposit on the contract which is returned to the 
fund, 
upon termination of the futures contract, assuming all 
contractual obligations have been satisfied. Subsequent 
payments, known as "variation margin," to and from the 
broker, will be made daily as the price of the index or 
securities underlying the futures contract fluctuates, 
making the long and short positions in the futures contract 
more or less valuable, a process known as "marking-to-
market." In addition, when the fund enters into a long 
position in a futures contract or an option on a futures 
contract, it must deposit into a segregated account on the 
fund's books an amount of cash or cash equivalents equal to 
the total market value of the underlying futures contract, 
less amounts held in the fund's commodity brokerage account 
at its broker. At any time prior to the expiration of a 
futures contract, the fund may elect to close the position 
by taking an opposite position, which will operate to 
terminate the fund's existing position in the contract.

The fund will not enter into futures contracts and related 
options for which the aggregate initial margin and premiums 
exceed 5% of the fair market value of the fund's assets 
after taking into account unrealized profits and unrealized 
losses on any contracts it has entered into.  All futures 
and options on futures positions will be covered by owning 
the underlying security or segregation of assets.  With 
respect to long positions in a futures contract or option 
(e.g., futures contracts to purchase the underlying 
instrument and call options purchased or put options 
written 
on these futures contracts or instruments), the underlying 
value of the futures contract at all times will not exceed 
the sum of cash, short-term U.S. debt obligations or other 
high quality obligations set aside for this purpose.

RISK FACTORS

General.  There can be no assurance that the fund's 
investment objective will be achieved.  The value of the 
fund's investments 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. 

Foreign Investments.  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.

Futures Contracts and Related Options. There are several 
risks in connection with the use of futures contracts as a 
hedging device. Successful use of futures contracts by the 
fund is subject to the ability of the manager to predict 
correctly movements in the stock market or in the direction 
of interest rates. These predictions involve skills and 
techniques that may be different from those involved in the 
management of investments in securities. In addition, there 
can be no assurance that there will be a perfect 
correlation 
between movements in the price of the securities underlying 
the futures contract and movements in the price of the 
securities that are the subject of the hedge. A decision of 
whether, when and how to hedge involves the exercise of 
skill and judgment, and even a well-conceived hedge may be 
unsuccessful to some degree because of market behavior or 
unexpected trends in market behavior or interest rates.
 
Positions in futures contracts may be closed out only on 
the 
exchange on which they were entered into (or through a 
linked exchange) and no secondary market exists for those 
contracts. In addition, although the fund intends to enter 
into futures contracts only if there is an active market 
for 
the contracts, there is no assurance that an active market 
will exist for the contracts at any particular time. Most 
futures exchanges and boards of trade limit the amount of 
fluctuation permitted in futures contract prices during a 
single trading day. Once the daily limit has been reached 
in 
a particular contract, no trades may be made that day at a 
price beyond that limit. It is possible that futures 
contract prices could move to the daily limit for several 
consecutive trading days with little or no trading, thereby 
preventing prompt liquidation of futures positions and 
subjecting some futures traders to substantial losses. In 
such event, and in the event of adverse price movements, 
the 
fund would be required to make daily cash payments of 
variation margin; in such circumstances, an increase in the 
value of the portion of the portfolio being hedged, if any, 
may partially or completely offset losses on the futures 
contract. As described above, however, no assurance can be 
given that the price of the securities being hedged will 
correlate with the price movements in a futures contract 
and 
thus provide an offset to losses on the futures contract.

Stock Index Options.  As described generally above, the 
fund 
may purchase put and call options and write call options on 
domestic stock indexes listed on domestic exchanges in 
order 
to realize its investment objective of capital appreciation 
or for the purpose of hedging its portfolio. 

The effectiveness of purchasing or writing stock index 
options as a hedging technique will depend upon the extent 
to which price movements in the portion of the securities 
portfolio of the fund correlate with price movements of the 
stock index selected. Because the value of an index option 
depends upon movements in the level of the index rather 
than 
the price of a particular stock, whether the fund will 
realize a gain or loss from the purchase or writing of 
options on an index depends upon movements in the level of 
stock prices in the stock market generally or, in the case 
of certain indexes, in an industry or market segment, 
rather 
than movements in the price of a particular stock. 
Accordingly, successful use by the fund of options on stock 
indexes will be subject to the manager's ability to predict 
correctly movements in the direction of the stock market 
generally or of a particular industry. This requires 
different skills and techniques than predicting changes in 
the price of individual stocks.

	INVESTMENT RESTRICTIONS

The fund has adopted the following fundamental investment 
restrictions for the protection of shareholders.  These 
restrictions cannot be changed without approval by the 
holders of a majority of the outstanding shares of the 
fund, 
defined as the lesser of (a) 67% or more of the fund's 
shares present at a meeting, if the holders of more than 
50% 
of the outstanding shares are present in person or by proxy 
or (b) more than 50% of the fund's outstanding shares.  In 
accordance with these restrictions, the fund will not:

1.	Invest in a manner that would cause it to fail to be 
a 
"diversified company" under the 1940 Act and the 
rules, regulations and orders thereunder.

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

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

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

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

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


7.	Purchase or sell real estate, real estate mortgages, 
commodities or commodity contracts, but this 
restriction shall not prevent the fund from (a) 
investing in securities of issuers engaged in the real 
estate business or the business of investing in real 
estate (including interests in limited partnerships 
owning or otherwise engaging in the real estate 
business or the business of investing in real estate) 
and securities which are secured by real estate or 
interests therein; (b) holding or selling real estate 
received in connection with securities it holds or 
held; (c) trading in futures contracts and options on 
futures contracts (including options on currencies to 
the extent consistent with the fund's investment 
objective and policies); or (d) investing in real 
estate investment trust securities.

While the fund is authorized to borrow money for purposes 
of 
investment (leveraging) and to invest in securities of 
foreign issuers, it has no current intention of engaging in 
these investment activities and will do so only when the 
fund's board of directors determines that either or both of 
these activities are in the best interests of shareholders.

The fund has also adopted certain nonfundamental investment 
restrictions that may be changed by the fund's Board of 
Directors at any time.  Accordingly, the fund may not: 

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

2.	Invest more than 5% of the value of its net assets in 
warrants. Included within that amount, but not to 
exceed 2% of the value of the fund's net assets, may 
be warrants that are not listed on the New York Stock 
Exchange, Inc. (the "NYSE") or the American Stock 
Exchange.  Warrants acquired by the fund in units or 
attached to securities may be deemed to be without 
value.

3.	Invest in mineral-type programs or leases.

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

5.	Invest for the purpose of exercising control of 
management.

6.	Purchase securities of any company with a record of 
less than three years' continuous operation if such 
purchase would cause its investments in such companies 
to exceed 5% of the value of its total assets.  (For 
purposes of this limitation, issuers include 
predecessors, sponsors, controlling persons, general 
partners, guarantors and originators of underlying 
assets.)

If any percentage restriction described above is complied 
with at the time of an investment, a later increase or 
decrease in percentage resulting from a change in values or 
assets will not constitute a violation of such restriction.

DIRECTORS AND EXECUTIVE OFFICERS OF THE FUND

Overall responsibility for management and supervision of 
the 
fund rests with the fund's board of directors. The 
directors 
approve all significant agreements between the fund and the 
companies that furnish services to the fund, including 
agreements with the fund's distributor, investment adviser, 
custodian and transfer agent. The day-to-day operations of 
the fund are delegated to the fund's investment adviser and 
administrator, SSBC Fund Management Inc. ("SSBC" or the 
"Manager"). .  
The directors and executive officers of the fund, together 
with information as to their principal business occupations 
during the past five years, are shown below. The executive 
officers of the fund are employees of organizations that 
provide services to the fund.  Each director who is an 
"interested person" of the fund, as defined in the 1940 
Act, 
is indicated by an asterisk.  The address of the "non-
interested" directors and executive officers of the fund is 
388 Greenwich Street, New York, New York 10013.

Herbert Barg  (Age 75).  Director
Private Investor.  Director or trustee of 18 investment 
companies associated with Citigroup Inc. ("Citigroup"). 
His address is 273 Montgomery Avenue, Bala Cynwyd, 
Pennsylvania, 19004. 

*Alfred J. Bianchetti (Age 76). Director 
Retired; formerly Senior Consultant to Dean Witter Reynolds 
Inc. Director or trustee of 13 investment companies 
associated with Citigroup His address is 19 Circle End 
Drive, Ramsey, New Jersey 07466. 

Martin Brody (Age 77). Director 
Consultant, HMK Associates.  Retired Vice Chairman of the 
Board of Restaurant Associates Corp. Director or trustee of 
22 investment companies associated with Citigroup. His 
address is c/o HMK Associates, 30 Columbia Turnpike, 
Florham 
Park, New Jersey 07932.

Dwight B. Crane (Age 61). Director 
Professor, Harvard Business School. Director or trustee of 
25 investment companies associated with Citigroup. His 
address is c/o Harvard Business School, Soldiers Field 
Road, 
Boston, Massachusetts 02163. 

Burt N. Dorsett (Age 68). Director 
Managing Partner of the investment counseling firm Dorsett 
McCabe Management, Inc.  Director of Research Corporation 
Technologies, Inc., a nonprofit patent clearing and 
licensing firm. Director or trustee of 13 investment 
companies associated with Citigroup. His address is 201 
East 
62nd Street, New York, New York 10021.

Elliot S. Jaffe (Age 72). Director 
Chairman of the Board and President of The Dress Barn, Inc. 
Director or trustee of 13 investment companies associated 
with Citigroup. His address is 30 Dunnigan Drive, Suffern, 
New York 10021. 

Stephen E. Kaufman (Age 67). Director 
Attorney. Director or trustee of 15 investment companies 
associated with Citigroup. His address is 277 Park Avenue, 
New York, New York 10172. 

Joseph J. McCann (Age 68). Director 
Financial Consultant.  Retired Financial Executive, Ryan 
Homes, Inc. Director or trustee of 13 investment companies 
associated with Citigroup. His address is 200 Oak Park 
Place, Pittsburgh, Pennsylvania 15243.

*Heath B. McLendon (Age 65). Chairman of the Board and 
Investment Officer 
Managing Director of Salomon Smith Barney Inc. ("Salomon 
Smith Barney"); President of SSBC and Travelers Investment 
Adviser, Inc. ("TIA"); Chairman or Co-Chairman of the Board 
and Director or trustee of 64 investment companies 
associated with Citigroup.

Cornelius C. Rose, Jr. (Age 65). Director 
President, Cornelius C. Rose Associates, Inc., financial 
consultants, and Chairman and Director of Performance 
Learning Systems, an educational consultant. Director or 
trustee of 13 investment companies associated with 
Citigroup. His address is Meadowbrook Village, Building 4, 
Apt. 6, West Lebanon, New Hampshire 03784. 

Lewis E. Daidone (Age 41).  Senior Vice President and 
Treasurer 
Managing Director of Salomon Smith Barney; Chief Financial 
Officer of the Smith Barney Mutual Funds; Director and 
Senior Vice President of SSBC and TIA. Senior Vice 
President 
and Treasurer of 59 investment companies associated with 
Citigroup.

Harry D. Cohen (Age 56).  Vice President and Investment 
Officer 
Managing Director of Salomon Smith Barney; Investment 
Officer of SSBC. Vice President of 2 investment companies 
associated with Citigroup.

Scott Glasser (Age 32).  Vice President and Investment 
Officer 
Director of Salomon Smith Barney; Investment Officer of 
SSBC. Vice President of 2 investment companies associated 
with Citigroup.

Paul Brook (Age 45). Controller 
Director, Salomon Smith Barney;  Managing Director of AMT 
Capital Services Inc. from 1997-1998; Prior to 1997, 
Partner, Ernst & Young LLP.  Controller or Assistant 
Treasurer of 43 investment companies associated with 
Citigroup.

Christina T. Sydor (Age 48). Secretary 
Managing Director of Salomon Smith Barney; General Counsel 
and Secretary of SSBC and TIA. Secretary of 59 investment 
companies associated with Citigroup.

As of April 9, 1999, the directors and officers of the 
fund, 
as a group, owned less than 1% of the outstanding shares of 
beneficial interest of the fund.  

To the best knowledge of the directors, as of April 9, 
1999, 
the following shareholders or "groups" (as such term is 
defined in Section 13(d) of the Securities Exchange Act of 
1934, as amended) owned beneficially or of record more than 
5% of the shares of the following classes:
 

Shareholder

Class

Shares Held

State Street Bank & Trust Cust
The Travelers Group 401(k) Savings Plan
Attn: Rick Vest 
225 Franklin Street
Boston, MA  02101

Class Z

Owned 15,884,054.186
99.94% of shares 




Smith Barney Concert Series Inc.
Balanced Portfolio
PNC Bank NA
Attn: Beverly Timson
200 Stevens Drive, Suite 440
Lester, PA  19113-1522

Class Y

Owned 3,546,963.036
58.96% of shares




Smith Barney Concert Series Inc.
Conservative Portfolio
PNC Bank NA
Attn: Beverly Timson
200 Stevens Drive, Suite 440
Lester, PA  19113-1522

Class Y

Owned 950,953.460
15.80% of shares


Smith Barney Concert Series Inc.
Select Balanced Portfolio
PNC Bank NA
Attn: Beverly Timson
200 Stevens Drive
Lester, PA  19113-1522


Class Y

Owned 923,023.084
15.34% of shares

The following table shows the compensation paid by the fund 
and other Smith Barney mutual funds to each director during 
the fund's last fiscal year.  None of the officers of the 
fund received any compensation from the fund for such 
period.  The fund does not pay retirement benefits to its 
directors and officers.  Officers and interested directors 
of the fund are compensated by Salomon Smith Barney

For the calendar year ended December 31, 1998, the 
directors 
of the fund were paid the following compensation.





Name of Person



Aggregate
Compensat
ion
from 
Fund+

Total Pension 
or
Retirement
Benefits 
Accrued
as part of
Fund Expenses

Compensation
from Fund
and Fund 
Complex
Paid to 
Directors

Number of 
Funds for Which  DirecD    
     Director Serves Within
Fund Complex


Herbert Barg**
Alfred 
Bianchetti* ** 
     
Martin Brody**
Dwight B. 
Crane**
Burt N. 
Dorsett**
Elliot S. 
Jaffe**
Stephen E. 
Kaufman**
Joseph J. 
McCann**
Heath B. 
McLendon*
Cornelius C. 
Rose, Jr.**


$7,100
7,100
6,600
7,100
6,600
7,100
0
7,100



$0
0
0
0
0
0
0
0
0
0


$105,425
    51,200
  132,500
  139,975
     47,550
    96,400 
    51,200
    51,200



18
13
22
25
13
13
15
13
64
13


*	Designates an "interested" Director.
**	Designates member of Audit Committee.
+	Upon attainment of age 80, fund Directors are 
required 
to change to emeritus status.  Directors emeritus are 
entitled to serve in emeritus status for a maximum of 
10 years.  Directors emeritus may attend meetings but 
have no voting rights.  During the fund's last fiscal 
year, aggregate compensation paid by the fund to 
directors emeritus was $2,500.


INVESTMENT MANAGEMENT AND OTHER SERVICES

Investment Adviser and Administrator

SSBC (formerly Mutual Management Corp) serves as investment 
adviser to the Fund pursuant to a written agreement (the 
"Advisory Agreement"), which was approved by the Fund's 
Board of directors, including a majority of the directors 
who are not interested persons of the Fund or Smith Barney 
(the "independent directors"). Subject to the supervision 
and direction of the fund's board of directors, the manager 
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.  The manager pays the salary of any officer and 
employee who is employed by both it and the trust.  The 
manager bears all expenses in connection with the 
performance of its services.  SSBC is a wholly owned 
subsidiary of Salomon Smith Barney Holdings Inc. 
("Holdings"), which in turn is a wholly owned subsidiary of 
Citigroup Inc. ("Citigroup"). SSBC (through predecessor 
entities) has been in the investment counseling business 
since 1968 and renders investment advice to a wide variety 
of individual, institutional and investment company clients 
that had aggregate assets under management as of March 31, 
1999 in excess of $114 billion.

As compensation for SSBC's investment advisory services 
rendered to the Fund, the Fund pays a fee computed daily 
and 
paid monthly at the following annual rates of the Fund's 
average daily net assets: 0.55%, up to $250 million; 0.513% 
of the next $250 million; 0.476% of the next $500 million; 
0.439% of the next $1 billion, 0.402% of the next $l 
billion; and 0.365% of the average daily net assets in 
excess of $3 billion.  For the fiscal years ended December 
31, 1998, 1997 and 1996, the Fund paid $18,906,581, 
$16,921,518 and 14,352,911, respectively, in investment 
advisory fees.

SSBC also serves as administrator to the Fund pursuant to a 
written agreement (the "Administration Agreement"), which 
was most recently approved by the Fund's Board of 
Directors, 
including a majority of the independent directors of the 
Fund. SSBC pays the salary of any officer and employee who 
is employed by both it and the Fund and bears all expenses 
in connection with the performance of its services.

As administrator SSBC will: (a) assist in supervising all 
aspects of the Fund's operations except those performed by 
the fund's investment manager under its investment advisory 
agreement; b) supply the fund with office facilities (which 
may be in SSBC's own offices), statistical and research 
data, data processing services, clerical, accounting and 
bookkeeping services, including, but not limited to, the 
calculation of (i) the net asset value of shares of the 
fund, (ii) applicable contingent deferred sales charges and 
similar fees and charges and (iii) distribution fees, 
internal auditing and legal services, internal executive 
and 
administrative services, and stationary and office 
supplies; 
and (c) prepare reports to shareholders of the fund, tax 
returns and reports to and filings with the SEC and state 
blue sky authorities.

As compensation for administrative services rendered to the 
Fund, SSBC receives a fee computed daily and paid monthly 
at 
the following annual rates: 0.20%, of the value of the 
Fund's average daily net assets up to $250 million; 0.187% 
of the next $250 million; 0.174% of the next $500 million; 
0.161% of the next $1 billion; 0.148% of the next $1 
billion 
and 0.135% of the net assets in excess of $3 billion.  For 
the fiscal years ended December 31, 1998, 1997 and 1996, 
the 
Fund paid $6,946,684, $6,212,415, and $5,262,374 in 
administration fees. 

The Fund bears expenses incurred in its operation 
including: 
taxes, interest, brokerage fees and commissions, if any; 
fees of Directors who are not officers, directors, 
shareholders or employees of Salomon Smith Barney or SSBC; 
Securities and Exchange Commission ("SEC") fees and state 
Blue Sky qualification fees; charges of custodians; 
transfer 
and dividend disbursing agent's fees; certain insurance 
premiums; outside auditing and legal expenses; costs of 
maintaining corporate existence; investor services 
(including allocated telephone and personnel expenses); 
costs of preparation and printing of prospectuses and 
statements of additional information for regulatory purposs 
and for distribution to existing shareholders; costs of 
shareholders' reports and shareholder meetings; and 
meetings 
of the officers or Board of Directors of the Fund.

Auditors

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

Custodian and Transfer Agent. 

PNC Bank, National Association ("PNC" or "custodian"), 
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 Investors Services Group, Inc. ("First Data" or 
"transfer agent"), located at Exchange Place, Boston, 
Massachusetts 02109, serves as the fund's transfer agent.  
Under the transfer agency agreement, the transfer agent 
maintains the shareholder account records for the 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. The 
Fund has engaged the services of PFS Shareholder Services 
as 
the sub-transfer agent for PFS Accounts ("sub-transfer 
agent").  The sub-transfer agent is located at 3100 
Breckinridge Blvd, Bldg 200, Duluth, Georgia 30099-0062.

DISTRIBUTOR

CFBDS, Inc., located at 20 Milk Street, Boston, 
Massachusetts 02109-5408 serves as the fund's distributor 
pursuant to a written agreement dated October 8, 1998 (the 
"Distribution Agreement") which was approved by the fund's 
Board of Trustees, including a majority of the independent 
trustees on July 15, 1998.  Prior to the merger of 
Travelers 
Group, Inc. and Citicorp Inc. on October 8, 1998, Salomon 
Smith Barney and PFS Distributors, Inc. served as the 
fund's 
distributors. 

For the year ended December 31, 1997, the aggregate dollar 
amount of commissions on Class A shares was $2,000,000, all 
of which was paid to Salomon Smith Barney. For the period 
January 1, 1998 through October 7, 1998 the aggregate 
dollar 
amount of commissions on Class A shares was $1,754,000, all 
of which was paid to Salomon Smith Barney.  For the period 
October 8, 1998 through December 31, 1998 the aggregate 
dollar amount of commissions on Class A shares was 
$261,000, 
 $234,900 of which was paid to Salomon Smith Barney. 

For the period June 12, 1998 through October 7, 1998 the 
aggregate dollar amount of commissions on Class L shares 
was 
$126,000, all of which was paid to Salomon Smith Barney. 
For 
the period October 8, 1998 through December 31, 1998 the 
aggregate dollar amount of commissions on Class L shares 
was 
$48,000, $43,200 of which was paid to Salomon Smith Barney.

For the years ended December 31, 1996, December 31, 1997 
and 
December 31, 1998, Salomon Smith Barney or its predecessor 
received from shareholders $11,000, $45,000 and $16,000, 
respectively, in deferred sales charges on the redemption 
of 
Class A shares.

For the years ended December 31, 1996, December 31, 1997 
and 
December 31, 1998, Salomon Smith Barney or its predecessor 
received from shareholders $1,512,000, $1,305,000 and 
$1,091,000, respectively, in deferred sales charges on the 
redemption of Class B shares.

For the years ended December 31, 1996, December 31, 1997 
and 
December 31, 1998, Salomon Smith Barney or its predecessor 
received from shareholders $6,000, $9,000 and $9,000, 
respectively, in deferred sales charges on the redemption 
of 
Class L shares.

When payment is made by the investor before the settlement 
date, unless otherwise noted by the investor, the funds 
will 
be held as a free credit balance in the investor's 
brokerage 
account and Salomon Smith Barney may benefit from the 
temporary use of the funds.  The fund's Board of Directors 
has been advised of the benefits to Salomon Smith Barney 
resulting from these settlement procedures and will take 
such benefits into consideration when reviewing the 
Investment Advisory and Distribution Agreements for 
continuance.

Distribution Arrangements.  To compensate Salomon Smith 
Barney for the services it provides and for the expense it 
bears, 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 Salomon 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 L shares.  In addition, the fund pays Salomon Smith 
Barney a distribution fee with respect to the Class B and 
Class L shares primarily intended to compensate Salomon 
Smith Barney for its initial expense of paying financial 
consultants a commission upon sales of those shares.  The 
Class B and Class L 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.

The only classes of shares being offered for sale through 
PFS Distributors is Class A shares and Class B shares. 
Pursuant to the Plan (described above), PFS Distributors is 
paid an annual service fee with respect to Class A and 
Class 
B shares of the fund sold through PFS Distributors at the 
annual rate of 0.25% of the average daily net assets of the 
respective class.  PFS Distributors is also paid an annual 
distribution fee with respect to Class B shares at the 
annual rate of 0.75% of the average daily net assets 
attributable to that Class.  Class B shares that 
automatically convert to Class A shares eight years after 
the date of original purchase will no longer be subject to 
a 
distribution fee. The fees are paid to PFS Distributors, 
which in turn, pays PFS Investments Inc. ("PFS 
Investments") 
to pay its PFS Investment Registered Representatives for 
servicing shareholder accounts and, in the case of Class B 
shares, to cover expenses primarily intended to result in 
the sale of those shares.  These expenses include: 
advertising expenses; the cost of printing and mailing 
prospectuses to potential investors; payments to and 
expenses of PFS Investments Registered Representatives 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 PFS Investments 
associated with the sale of fund shares, including lease, 
utility, communications and sales promotion expenses.

The payments to PFS Investments Registered Representatives 
for selling shares of a class include a commission or fee 
paid by the investor or PFS at the time of sale and, with 
respect to Class A and Class B shares, a continuing fee for 
servicing shareholder accounts for as long as a shareholder 
remains a holder of that class.  PFS Investments Registered 
Representatives may receive different levels of 
compensation 
for selling different classes of shares.

PFS Investments may be deemed to be an underwriter for 
purposes of the Securities Act of 1933. From time to time, 
PFS or its affiliates may also pay for certain non-cash 
sales incentives provided to PFS Investments Registered 
Representatives.  Such incentives do not have any effect on 
the net amount invested.  In addition to the reallowances 
from the applicable public offering price described above, 
PFS may from time to time, pay or allow additional 
reallowances or promotional incentives, in the form of cash 
or other compensation to PFS Investments Registered 
Representatives who sell shares of the fund.

The following service and distribution fees were incurred 
during the periods indicated:




	DISTRIBUTION PLAN FEES





Year
Ended 12/31/98

Year
Ended 12/31/97

Year
Ended 12/31/96

Class A

$   6,774,230

$  5,849,540

$  5,002,144

Class B

   14,393,673

  12,927,331

  10,505,436

Class L

        604,868


       360,602

       203,764
For the year ended December 31, 1998, Salomon Smith Barney 
and/or PFS Distributors incurred distribution expenses 
totaling $19,579,186, consisting of $838,391 for 
advertising, $95,542 for printing and mailing of 
Prospectuses, $325,814 for interest expense, $7,837,454 
branch expenses, $10,481,985 for total compensation to 
Salomon Smith Barney Financial Consultants,  and in 
accruals 
for interest on the excess of Salomon Smith Barney expenses 
incurred in distribution of the Fund's shares over the sum 
of the distribution fees and deferred sales charges 
received 
by Salomon Smith Barney and/or PFS Distributors from the 
Fund.

Under its terms, the Plan continues from year to year, 
provided such continuance is approved annually by vote of 
the fund's Board of Directors, including a majority of the 
independent directors. 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 directors and independent 
directors in the manner described above.  The Plan may be 
terminated with respect to a class of the fund at any time, 
without penalty, by vote of a majority of the independent 
directors or by vote of a majority (as defined in the 1940 
Act) of the outstanding voting securities of the class. 
Pursuant to the Plan, Salomon Smith Barney and PFS 
Distributors will provide the fund's Board of Directors 
with 
periodic reports of amounts expended under the Plan and the 
purpose for which such expenditures were made.

PORTFOLIO TRANSACTIONS 

Decisions to buy and sell securities for the fund are made 
by the manager, subject to the overall review of the fund's 
board of directors. Although investment decisions for the 
fund are made independently from those of the other 
accounts 
managed by the manager, investments of the type the fund 
may 
make also may be made by those other accounts.  When the 
fund and one or more other accounts managed by the manager 
are prepared to invest in, or desire to dispose of, the 
same 
security, available investments or opportunities for sales 
will be allocated in a manner believed by the manager to be 
equitable to each.  In some cases, this procedure may 
adversely affect the price paid or received by the fund or 
the size of the position obtained or disposed of by the 
fund. 

Allocation of transactions on behalf of the fund, including 
their frequency, to various dealers is determined by the 
manager in its best judgment and in a manner deemed fair 
and 
reasonable to the fund's shareholders. The primary 
considerations of the manager 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 the manager may receive 
orders for portfolio transactions by the fund.  Information 
so received is in addition to, and not in lieu of, services 
required to be performed by the manager, and the fees of 
the 
manager are not reduced as a consequence of their receipt 
of 
the supplemental information.  The information may be 
useful 
to the manager in serving both the fund and other clients, 
and conversely, supplemental information obtained by the 
placement of business of other clients may be useful to the 
manager in carrying out its obligations to the fund.

The fund will not purchase securities during the existence 
of any underwriting or selling group relating to the 
securities, of which the manager is a member, except to the 
extent permitted by the SEC.  Under certain circumstances, 
the fund may be at a disadvantage because of this 
limitation 
in comparison with other funds that have similar investment 
objectives but that are not subject to a similar 
limitation.

The fund has paid the following in brokerage commissions 
for 
portfolio transactions:

					Fiscal Year 	 
	Fiscal 
Year 		Fiscal Year
					Ended	12/31/98	Ended
	12/31/97	Ended 12/31/96


Total Brokerage Commissions	$4,793,789		$4,113,439
	
	$4,357,932

Total Brokerage Commissions	$   334,520		$    
557,460
		$   685,248
paid to Salomon Smith Barney	

% of Total Brokerage Commissions  	           6.98%	
	 
       13.55%		        15.70%
paid to Salomon Smith Barney	     			     

% of Total Transactions involving                6.47%
	
	        14.18%		        15.69%
Commissions paid to Salomon
Smith Barney				 		            
     

Portfolio securities transactions on behalf of the fund are 
placed by the manager with a number of brokers and dealers, 
including Salomon Smith Barney.  Salomon Smith Barney has 
advised the fund that in transactions with  the fund, 
Salomon Smith Barney charges a commission rate at least as 
favorable as the rate Salomon Smith Barney charges its 
comparable unaffiliated customers in similar transactions.

PORTFOLIO TURNOVER

The fund generally does not engage in short-term trading 
but 
intends to purchase securities for long-term capital 
appreciation.  The fund's annual portfolio turnover rate is 
not expected to exceed 100%.  A portfolio turnover rate of 
100% would occur if all of the securities in the fund's 
portfolio were replaced once during a period of one year.  
The portfolio turnover rate is calculated by dividing the 
lesser of purchases or sales of portfolio securities for 
the 
year by the monthly average value of portfolio securities.  
Securities with remaining maturities of one year or less at 
the date of acquisition are excluded from the calculation.  
For the fiscal years ended December 31, 1998 and 1997, the 
fund's portfolio turnover rate was 63% and 57%, 
respectively.

Future portfolio turnover rates may vary greatly from year 
to year as well as within a particular year and may be 
affected by cash requirements for redemptions of the fund's 
shares.  Portfolio turnover rates will largely depend on 
the 
level of purchases and redemptions of fund shares.  Higher 
portfolio turnover rates can result in corresponding 
increases in brokerage commissions.  In addition, to the 
extent the fund realizes net short-term capital gains as 
the 
result of more portfolio transactions, distributions of 
such 
gains would be taxable to shareholders as ordinary income.

PURCHASE OF SHARES

Sales Charge Alternatives

The following classes of shares are available for purchase. 
 See the Prospectus for a discussion of factors to consider 
in selecting which Class of shares to purchase. 

Class A Shares.  Class A shares are sold to investors at 
the 
public offering price, which is the net asset value plus an 
initial sales charge as follows: 



Amount of 
Investment

Sales Charge as a 
% 
of Transaction

Sales Charge as a 
% 
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 deferred sales charge 
of 1.00% on redemptions made within 12 months of 
purchase. The deferred sales charge on Class A shares 
is payable to Salomon Smith Barney, which compensates 
Salomon Smith Barney Financial Consultants and other 
dealers whose clients make purchases of $500,000 or 
more. The deferred sales charge is waived in the same 
circumstances in which the deferred sales charge 
applicable to Class B and Class L shares is waived. 
See "Deferred Sales Charge Alternatives" and 
"Waivers of deferred sales charge." 

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 1933 Act.  The reduced sales charges 
shown above apply to the aggregate of purchases of Class A 
shares of the fund made at one time by "any person," which 
includes an individual and his or her immediate family, or 
a 
trustee or other fiduciary of a single trust estate or 
single fiduciary account.

Class B Shares.  Class B shares are sold without an initial 
sales charge but are subject to a Deferred Sales Charge 
payable upon certain redemptions.  See "Deferred Sales 
Charge Provisions" below.

Class L Shares.  Class L shares are sold with an initial 
sales charge of 1.00% (which is equal to 1.01% of the 
amount 
invested) and are subject to a deferred sales charge 
payable 
upon certain redemptions.  See "Deferred Sales Charge 
Provisions" below.  Until June 22, 2001 purchases of Class 
L 
shares by investors who were holders of Class C shares of 
the fund on June 12, 1998 will not be subject to the 1% 
initial sales charge.

Class Y Shares.  Class Y shares are sold without an initial 
sales charge or deferred sales charge and are available 
only 
to investors investing a minimum of $15,000,000 (except 
purchases of Class Y shares by Smith Barney Concert 
Allocation Series Inc., for which there is no minimum 
purchase amount).  

Class Z Shares.  Class Z Shares are sold without an initial 
sales charge or deferred sales charge and are currently 
offered exclusively for sale to tax-exempt employee benefit 
and retirement plans of Salomon Smith Barney or any of its 
affiliates ("Qualified Plans") and to certain unit 
investment trusts ("UIT) sponsored by Salomon Smith Barney 
or any of its affiliates.

General 

Investors may purchase shares from a Salomon Smith Barney 
Financial Consultant or a broker that clears through 
Salomon 
Smith Barney ("Dealer Representative").  In addition, 
certain investors, including qualified retirement plans 
purchasing through certain Dealer Representatives, may 
purchase shares directly from the fund.  When purchasing 
shares of the fund, investors must specify whether the 
purchase is for Class A, Class B, Class L or Class Y 
shares. 
 Salomon Smith Barney and Dealer Representatives 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.

Purchases of the Fund's Class Z shares must be made in 
accordance with the terms of a Qualified Plan or a Salomon 
Smith Barney UIT.  There are no minimum investment 
requirements for Class Z shares; however the Fund reserves 
the right to vary this policy at any time.  Shareholders 
acquiring Class Z shares through a Qualified Plan or a 
Salomon Smith Barney UIT should consult the terms of their 
respective plans for redemption provisions. 

Investors in Class A, Class B and Class L shares may open 
an 
account in the fund by making an initial investment of at 
least $1,000 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 $15,000,000. 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(c) 
of 
the Code, the minimum initial investment required for Class 
A, Class B and Class L 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 L shares and subsequent investment requirement for 
all 
Classes is $25.  For shareholders purchasing shares of the 
fund through the Systematic Investment Plan on a quarterly 
basis, the minimum initial investment required for Class A, 
Class B and Class L shares and the subsequent investment 
requirement for all Classes is $50.  There are no minimum 
investment requirements for Class A shares for employees of 
Citigroup and its subsidiaries, including Salomon Smith 
Barney, unitholders who invest distributions from a UIT 
sponsored by Salomon Smith Barney, and Directors/Trustees 
of 
any of the Smith Barney Mutual Funds, and their spouses and 
children. The fund reserves the right to waive or change 
minimums, to decline any order to purchase its shares and 
to 
suspend the offering of shares from time to time. Shares 
purchased will be held in the shareholder's account by 
First 
Data. Share certificates are issued only upon a 
shareholder's written request to First Data. 

Purchase orders received by the fund or a Salomon Smith 
Barney Financial Consultant 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 a Dealer Representative 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 the fund's agent prior to its close of 
business. For shares purchased through Salomon Smith Barney 
or a Dealer Representative purchasing through Salomon Smith 
Barney, payment for shares of the fund is due on the third 
business day after the trade date. In all other cases, 
payment must be made with the purchase order. 

Systematic Investment Plan.  Shareholders may make 
additions 
to their accounts at any time by purchasing shares through 
a 
service known as the Systematic Investment Plan.  Under the 
Systematic Investment Plan, Salomon 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 shareholder's account held with a bank 
or other financial institution on a monthly or quarterly 
basis as indicated by the shareholder, to provide for 
systematic additions to the shareholder's fund account.  A 
shareholder who has insufficient funds to complete the 
transfer will be charged a fee of up to $25 by Salomon 
Smith 
Barney or First Data.  The Systematic Investment Plan also 
authorizes Salomon Smith Barney to apply cash held in the 
shareholder's Salomon 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 Salomon Smith 
Barney Financial Consultant or a Dealer Representative. 

Sales Charge Waivers and Reductions

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 Citigroup and its subsidiaries and any 
Citigroup affiliated funds including the Smith Barney 
Mutual 
Funds (including retired Board Members and employees); the 
immediate families of such persons (including the surviving 
spouse of a deceased Board Member or employee); and to a 
pension, profit-sharing or other benefit plan for such 
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 to effect the combination of such 
company 
with the fund by merger, acquisition of assets or 
otherwise; 
(c) purchases of Class A shares by any client of a newly 
employed Salomon Smith Barney Financial Consultant (for a 
period up to 90 days from the commencement of the Financial 
Consultant's employment with Salomon Smith Barney), on the 
condition the purchase of Class A shares is made with the 
proceeds of the redemption of shares of a mutual fund which 
(i) was sponsored by the Financial Consultant's prior 
employer, (ii) was sold to the client by the Financial 
Consultant and (iii) was subject to a sales charge; (d) 
purchases by shareholders who have redeemed Class A shares 
in the fund (or Class A shares of another Smith Barney 
Mutual Fund that is 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 Citigroup; 
(f) direct rollovers by plan participants of distributions 
from a 401(k) plan offered to employees of Citigroup 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 a 
separate 
account used to fund certain unregistered variable annuity 
contracts; (h) investments of distributions from or 
proceeds 
from a sale of a UIT sponsored by Salomon Smith Barney; 
(i) purchases by investors participating in a Salomon Smith 
Barney fee-based arrangement; and (j)  purchases of Class A 
shares by Section 403(b) or Section 401(a) or (k) accounts 
associated with Copeland Retirement Programs. In order to 
obtain such discounts, the purchaser must provide 
sufficient 
information at the time of purchase to permit verification 
that the purchase would qualify for the elimination of the 
sales charge. 

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

Letter of Intent - Class A Shares.  A Letter of Intent for 
an amount of $50,000 or more provides an opportunity for an 
investor to obtain a reduced sales charge by aggregating 
investments over a 13 month period, provided 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 (i) all 
Class A shares of the fund and other Smith Barney Mutual 
Funds offered with a sales charge acquired during the term 
of the letter plus (ii) the value of all Class A shares 
previously purchased and still owned.  Each investment made 
during the period receives the reduced sales charge 
applicable to the total amount of the investment goal.  If 
the goal is not achieved within the period, the investor 
must pay the difference between the sales charges 
applicable 
to the purchases made and the charges previously paid, or 
an 
appropriate number of escrowed shares will be redeemed.  
The 
term of the Letter will commence upon the date the Letter 
is 
signed, or at the options of the investor, up to 90 days 
before such date.  Please contact a Salomon Smith Barney 
Financial Consultant or First Data to obtain a Letter of 
Intent application. 

Letter of Intent - Class Y Shares.  A Letter of Intent may 
also be used as a way for investors to meet the minimum 
investment requirement for Class Y shares (except purchases 
of Class Y shares by Smith Barney Concert Allocation Series 
Inc., for which there is no minimum purchase amount).  Such 
investors must make an initial minimum purchase of 
$5,000,000 in Class Y shares of the fund and agree to 
purchase a total of $15,000,000 of Class Y shares of the 
fund within 13 months from the date of the Letter. If a 
total investment of $15,000,000 is not made within the 13-
month period, all Class Y shares purchased to date will be 
transferred to Class A shares, where they will be subject 
to 
all fees (including a service fee of 0.25%) and expenses 
applicable to the fund's Class A shares, which may include 
a 
Deferred Sales Charge of 1.00%. Please contact a Salomon 
Smith Barney Financial Consultant or First Data for further 
information. 

Deferred Sales Charge Provisions

''Deferred Sales Charge Shares'' are: (a) Class B shares; 
(b) Class L shares; and (c) Class A shares that were 
purchased without an initial sales charge but are subject 
to 
a Deferred Sales Charge.  A Deferred Sales Charge may be 
imposed on certain redemptions of these shares.

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

Class L shares and Class A shares that are Deferred Sales 
Charge Shares are subject to a 1.00% Deferred Sales Charge 
if redeemed within 12 months of purchase. In circumstances 
in which the Deferred Sales Charge 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 Salomon 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 ''Smith Barney 401(k) and 
ExecChoiceTM Programs.'' 


Year Since Purchase Payment Was 
Made

Deferred Sales Charge

First

5.00%

Second

4.00   

Third

3.00   

Fourth

2.00   

Fifth

1.00   

Sixth through eight

0.00   

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

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

To provide an example, assume an investor purchased 100 
Class B shares of the fund at $10 per share for a cost of 
$1,000.  Subsequently, the investor acquired 5 additional 
shares of the fund 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 Deferred Sales 
Charge 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 Deferred Sales Charge  

The Deferred Sales Charge will be waived on: (a) exchanges 
(see ''Exchange Privilege''); (b) automatic cash 
withdrawals 
in amounts equal to or less than 1.00% per month of the 
value of the shareholder's shares at the time the 
withdrawal 
plan commences (see ''Automatic Cash Withdrawal Plan'') 
(but, 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 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 591/2; (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 Deferred Sales Charge imposed on the prior 
redemption. 

Deferred Sales Charge waivers will be granted subject to 
confirmation (by Salomon Smith Barney in the case of 
shareholders who are also Salomon Smith Barney clients or 
by 
First Data in the case of all other shareholders) of the 
shareholder's status or holdings, as the case may be. 

Smith Barney 401(k) and ExecChoiceTM Programs

Investors may be eligible to participate in the Smith 
Barney 
401(k) Program or the Smith Barney ExecChoiceTM 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. 
The fund offers to Participating Plans Class A and Class L 
shares as investment alternatives under the Smith Barney 
401(k) and ExecChoiceTM Programs. Class A and Class L 
shares 
acquired through the Participating Plans are subject to the 
same service and/or distribution fees as the Class A and 
Class L shares acquired by other investors; however, they 
are not subject to any initial sales charge or Deferred 
Sales Charge. Once a Participating Plan has made an initial 
investment in the fund, all of its subsequent investments 
in 
the fund must be in the same Class of shares, except as 
otherwise described below. 

Class A Shares.  Class A shares of the fund are offered 
without any sales charge or Deferred Sales Charge 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 L Shares.  Class L shares of the fund are offered 
without any sales charge or Deferred Sales Charge to any 
Participating Plan that purchases less than $1,000,000 of 
Class L shares of one or more funds of the Smith Barney 
Mutual Funds. 

401(k) and ExecChoiceTM Plans Opened On or After June 21, 
1996.  If, 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 ExecChoiceTM Program, a 
Participating Plan's total Class L holdings in all non-
money 
market Smith Barney Mutual Funds equal at least $1,000,000, 
the Participating Plan will be offered the opportunity to 
exchange all of its Class L shares for Class A shares of 
the 
fund. For Participating Plans that were originally 
established through a Salomon 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 a Participating Plan's total 
Class 
L 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 L shares for Class A shares of 
the 
fund. Such Plans will be notified in writing within 30 days 
after the last business day of the calendar year and, 
unless 
the exchange offer has been rejected in writing, the 
exchange will occur on or about the last business day of 
the 
following March. 

Any Participating Plan in the Smith Barney 401(k) or the 
Smith Barney ExecChoiceTM Programs, whether opened before 
or 
after June 21, 1996, that has not previously qualified for 
an exchange into Class A shares will be offered the 
opportunity to exchange all of its Class L shares for Class 
A shares of the 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 L shares of the 
fund, but instead may acquire Class A shares of the fund. 
Any Class L shares not converted will continue to be 
subject 
to the distribution fee. 

Participating Plans wishing to acquire shares of the fund 
through the Smith Barney 401(k) Program or the Smith Barney 
ExecChoiceTM Program must purchase such shares directly 
from 
the transfer agent. For further information regarding these 
Programs, investors should contact a Salomon Smith Barney 
Financial Consultant.

Determination of Public Offering Price

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

REDEMPTION OF SHARES

The right of redemption of shares of the fund may be 
suspended or the date of payment postponed (a) for any 
periods during which 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.

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 
$10,000 must be guaranteed by an eligible guarantor 
institution such as a domestic bank, savings and loan 
institution, domestic credit union, member bank of the 
Federal Reserve System or member firm of a national 
securities exchange.  Written redemption requests of 
$10,000 
or less do not require a signature guarantee unless more 
than one such redemption request is made in any 10-day 
period 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, directors or 
guardians.  A redemption request will not be deemed 
properly 
received until First Data receives all required documents 
in 
proper form.

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 Salomon 
Smith Barney, or if the shareholder's account is not with 
Salomon 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 1940 Act, in extraordinary circumstances.  Generally, 
if 
the redemption proceeds are remitted to a Salomon Smith 
Barney brokerage account, these funds will not be invested 
for the shareholder's benefit without specific instruction 
and Salomon 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. 

Qualified Plans may redeem Class Z shares on any day the 
Fund calculates its net asset value. 

Distribution in Kind

If the board of directors 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, 
the 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. Shareholders may 
incur 
brokerage commissions when they subsequently sell those 
securities.



Automatic Cash Withdrawal Plan

An automatic cash withdrawal plan (the "Withdrawal Plan") 
is 
available to shareholders of the 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 Deferred Sales Charge 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 
Deferred Sales Charge will be waived on amounts withdrawn 
that do not exceed 2.00% per month of the value of a 
shareholder's shares at the time the Withdrawal Plan 
commences).  To the extent withdrawals exceed dividends, 
distributions and appreciation of a shareholder's 
investment 
in 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 
Salomon Smith Barney Financial Consultant.

Waivers of Deferred Sales Charge

The Deferred Sales Charge will be waived on: (a) exchanges 
(see "Exchange Privilege" in the prospectus); (b) automatic 
cash withdrawals in amounts equal to or less than 1.00% per 
month of the value of the shareholder's shares at the time 
the withdrawal plan commences (see "Automatic Cash 
Withdrawal Plan in the prospectus") (but, 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 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 591/2 ; 
(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 Deferred Sales 
Charge imposed on the prior redemption.  Deferred Sales 
Charge waivers will be granted subject to confirmation (by 
Salomon Smith Barney in the case of shareholders who are 
also Salomon 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.

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.

PFS ACCOUNTS

Initial purchase of shares of the fund must be made through 
a PFS Investments Registered Representative by completing 
the appropriate application found in this prospectus. The 
completed application should be forwarded to the sub-
transfer agent, 3100 Breckinridge Blvd., Bldg. 200, Duluth, 
Georgia 30099-0062. Checks drawn on foreign banks must be 
payable in U.S. dollars and have the routing number of the 
U.S. bank encoded on the check. Subsequent investments may 
be sent directly to the sub-transfer agent.  In processing 
applications and investments, the transfer agent acts as 
agent for the investor and for PFS Investments and also as 
agent for the distributor, in accordance with the terms of 
the prospectus.  If the transfer agent ceases to act as 
such, a successor company named by the fund will act in the 
same capacity so long as the account remains open.

Shares purchased will be held in the shareholder's account 
by the sub-transfer agent. Share certificates are issued 
only upon a shareholder's written request to the sub-
transfer agent. A shareholder that has insufficient funds 
to 
complete any purchase will be charged a fee of $25 per 
returned purchase by PFS.

A shareholder, enrolled in the Systematic Investment Plan, 
who has insufficient funds to complete a transfer will be 
charged a fee of up to $27.50.

Investors in Class A and Class B shares may open an account 
by making an initial investment of at least $1,000 for each 
account in each Class (except for Systematic Investment 
Plan 
accounts), or $250 for an IRA or a Self-Employed Retirement 
Plan in a Fund. Subsequent investments of at least $50 may 
be made for each Class. 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 
and Class B shares and the subsequent investment 
requirement 
for each Class in the Fund is $25. For the fund's 
Systematic 
Investment Plan, the minimum initial investment requirement 
for Class A and Class B shares and the subsequent 
investment 
requirement for each Class is $25. There are no minimum 
investment requirements in Class A shares for employees of 
Citigroup and its subsidiaries, including Salomon 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.  Purchase orders received by 
the transfer agent or sub-transfer agent 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. 

Upon completion of certain automated systems, initial 
purchases of fund shares may be made by wire.  The minimum 
investment that can be made by wire is $10,000. Before 
sending the wire, the PFS Investments Registered 
Representative must contact the sub-transfer agent at (800) 
665-8677 to obtain proper wire instructions.  Once an 
account is open, a shareholder may make additional 
investments by wire.  The shareholder should contact the 
sub-transfer agent at (800) 544-5445 to obtain proper wire 
instructions.

Upon completion of certain automated systems, shareholders 
who establish telephone transaction authority on their 
account and supply bank account information may make 
additions to their accounts at any time.  Shareholders 
should contact the sub-transfer agent at (800) 544-5445 
between 8:00 a.m. and 8:00 p.m. eastern time any day that 
the NYSE is open.  If a shareholder does not wish to allow 
telephone subsequent investments by any person in his 
account, he should decline the telephone transaction option 
on the account application.  The minimum telephone 
subsequent investment is $250 and can be up to a maximum of 
$10,000.  By requesting a subsequent purchase by telephone, 
you authorize the sub-transfer agent to transfer funds from 
the bank account provided for the amount of the purchase.  
A 
shareholder that has insufficient funds to complete the 
transfer will be charged a fee of up to $25 by PFS or the 
sub-transfer agent.  A shareholder who places a stop 
payment 
on a transfer or the transfer is returned because the 
account has been closed, will also be charged a fee of up 
to 
$25 by PFS or the sub-transfer agent.  Subsequent 
investments by telephone may not be available if the 
shareholder cannot reach the sub-transfer agent whether 
because all telephone lines are busy or for any other 
reason; in such case, a shareholder would have to use the 
fund's regular subsequent investment procedure described 
above.	

Redemption proceeds can be sent by check to the address of 
record or by wire transfer to a bank account designated on 
the application.  A shareholder will be charged a $25 
service fee for wire transfers and a nominal service fee 
for 
transfers made directly to the shareholder's bank by the 
Automated Clearing House.

Additional information regarding the sub-transfer agent's 
services may be obtained by contacting the Client Services 
Department at (800) 544-5445. 

VALUATION OF SHARES

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

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 directors.  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 directors.  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 directors.

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 fund's board of directors.  Short-term 
investments that mature in 60 days or less are valued at 
amortized cost whenever the fund's board of directors 
determines that amortized cost is the fair value of those 
instruments.

EXCHANGE PRIVILEGE

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 and Class Y shares of the fund may be 
exchanged without a sales charge for the respective 
shares of any of the Smith Barney Mutual funds.

B. Class B shares of any fund may be exchanged without 
a sales charge.  Class B shares of the Fund exchanged 
for Class B shares of another Smith Barney Mutual Fund 
will be subject to the higher applicable Deferred 
Sales Charge of the two funds and, for purposes of 
calculating Deferred Sales Charge rates and conversion 
periods, will be deemed to have been held since the 
date the shares being exchanged were deemed to be 
purchased.

C. Class L shares of any fund may be exchanged without 
a sales charge.  For purposes of Deferred Sales Charge 
applicability, Class L 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.

D. Holders of Class Z shares should consult their 
Qualified Plans for information about available 
exchange options. 

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 Salomon 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 Deferred Sales Charge, the proceeds are 
immediately invested, at a price as described above, in 
shares of the fund being acquired.  Salomon 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.

Additional Information Regarding the Exchange Privilege.  
Although the exchange privilege is an important benefit, 
excessive exchange transactions can be detrimental to the 
fund's performance and its shareholders.  The manager 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.

PERFORMANCE DATA

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 L, Class Y and 
Class Z 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 the 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.

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 the fund's shares.  Such performance information 
may include the following industry and financial 
publications- Barron's, Business Week, CDA Investment 
Technologies, Inc., Changing Times, Forbes, Fortune, 
Institutional Investor, Investors Daily, Money, Morningstar 
Mutual Fund Values, The New York Times, USA Today and The 
Wall Street Journal. To the extent any advertisement or 
sales literature of the fund describes the expenses or 
performance of any Class it will also disclose such 
information for the other Classes.

Average Annual Total Return 

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.

Class A's average annual total return was as follows for 
the 
periods indicated:

14.45% for the one-year period ended December 31, 1998
17.19% per annum during the five-year period ended December 
31, 1998
15.34% per annum during the ten-year period ended December 
31, 1998

The average annual total return figures assume that the 
maximum 5.00% sales charge has been deducted from the 
investment at the time of purchase.  If the maximum sales 
charge had not been deducted, Class A's average annual 
total 
return for those same periods would have been 20.45%, 
18.40%, 15.93% and 12.83% respectively.

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

14.52% for the one-year period ended December 31, 1998
17.38% per annum during the five-year period ended December 
31, 1998
15.92% for the period from inception (November 6, 1992) 
through December 31, 1998

The average annual total return figures assume that the 
maximum applicable deferred sales charge has been deducted 
from the investment at the time of redemption.  If the 
maximum deferred sales charge had not been deducted, Class 
B's average annual total return for those same periods 
would 
have been 19.52%, 17.48% and 15.92%, respectively.
Class L's average annual total return was as follows for 
the 
periods indicated:

17.32% for the one-year period ended December 31, 1998
17.29% per annum during the five-year period ended December 
31, 1998
15.23% for the period from inception (February 4, 1993) 
through December 31, 1998

The average annual total return figures assume that the 
maximum applicable deferred sales charge has been deducted 
from the investment at the time of redemption.  If the 
maximum initial and deferred sales charge had not been 
deducted, Class L's average annual total return for those 
same periods would have been 19.52%, 17.52%  and 15.42%, 
respectively.

Class Y's average annual total return was as follows for 
the 
period indicated:

20.93% for the one-year period ended December 31,1998
22.35% for the period from inception (January 30, 1996) 
through December 31,1998

Class Y shares do not incur initial sales charges nor 
deferred sales charges.

Class Z's average annual total return was as follows for 
the 
periods indicated:

20.91% for the one-year period ended December 31,1998
18.79% per annum during the five-year period ended December 
31, 1998
17.18% for the period from inception (November 6, 1992) 
through December 31, 1998

Class Z shares do not incur initial sales charges or 
deferred sales charges.



Aggregate Total Return

The 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.

Class A's aggregate total return was as follows for the 
periods indicated:

  14.45% for the one-year period ended December 31, 1998
121.02% for the five-year period ended December 31, 1998
316.68% for the ten-year period ended December 31, 1998

These aggregate total return figures assume the maximum 
5.00% sales charge has been deducted from the investment at 
the time of purchase.  If the maximum sales charge had not 
been deducted, Class A's aggregate total return for those 
same periods would have been 20.45%, 132.66% and 338.58%, 
respectively.

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

  14.52% for the one-year period ended December 31, 1998
122.79% for the five-year period ended December 31, 1998
148.19% for the period from inception (November 6, 1992) 
through December 31, 1998.

These aggregate total return figures assume that the 
maximum 
applicable deferred sales charge has been deducted from the 
investment at the time of redemption.  If the maximum 
applicable deferred sales charge had not been deducted, 
Class B's aggregate total return for those same periods 
would have been 19.52%, 123.79% and 148.19%, respectively.

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

  17.32% for the one-year period ended December 31, 1998
121.95% for the five-year period ended December 31, 1998
131.02% for the period from inception (February 4, 1993) 
through December 31, 1998

These aggregate total return figures assume that the 
maximum 
applicable deferred sales charge has been deducted from the 
investment at the time of redemption If the maximum 
applicable deferrec sales charge had not been deducted, 
Class L's aggregate total return for those same periods 
would have been 19.52%, 124.17% and 133.33%, respectively.

Class Y's aggregate total return was as follows for the 
period indicated:

20.93% for the one-year period ended December 31, 1998
80.26% for the period from inception (January 30, 1996) 
through December 31,1998


Class Y shares do not incur sales charges or deferred sales 
charges.
Class Z's aggregate total return was as follows for the 
periods indicated:

  20.91% for the one-year period ended December 31, 1998
136.49% for the five-year period ended December 31, 1998
165.20 % for the period from inception (November 6, 1992) 
through December 31, 1997

Class Z shares do not incur sales charges or deferred sales 
charges.

Performance will vary from time to time depending upon 
market conditions, the composition of the fund's portfolio 
and operating expenses and the expenses exclusively 
attributable to the Class.  Consequently, any given 
performance quotation should not be considered 
representative of the Class's 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's performance with that of other mutual 
funds should give consideration to the quality and maturity 
of the respective investment companies' portfolio 
securities.

DIVIDENDS, DISTRIBUTIONS AND TAXES 

Dividends and Distributions  

The fund's policy is to distribute its net investment 
income 
and net realized capital gains, if any, annually.  The fund 
may also pay additional dividends shortly before December 
31 
from certain amounts of undistributed ordinary and capital 
gains realized, in order to avoid a Federal excise tax 
liability.   

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 deferred sales charge.   A 
shareholder may change the option at any time by notifying 
his Salomon Smith Barney Financial Consultant or Dealer 
Representative.  Shareholders whose account are held 
directly at First Data should notify First Data in writing, 
requesting a change to this reinvest option

The per share dividends on Class B and Class L 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 L 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 L and Class Y shares. 

Taxes

The following is a summary of the material United States 
federal income tax considerations regarding the purchase, 
ownership and disposition of shares of a fund.  Each 
prospective shareholder is urged to consult his own tax 
adviser with respect to the specific federal, state, local 
and foreign tax consequences of investing in a fund.  The 
summary is based on the laws in effect on the date of this 
SAI, which are subject to change.

The Fund and Its Investments

The fund intends to continue to qualify to be treated as a 
regulated investment company each taxable year under the 
Internal Revenue Code of 1986, as amended (the "Code").  To 
so qualify, the fund must, among other things: (a) derive 
at 
least 90% of its gross income in each taxable year from 
dividends, interest, payments with respect to securities, 
loans and gains from the sale or other disposition of stock 
or securities or foreign currencies, or other income 
(including, but not limited to, gains from options, futures 
or forward contracts) derived with respect to its business 
of investing in such stock, securities or currencies; and 
(b) diversify its holdings so that, at the end of each 
quarter of the fund's taxable year, (i) at least 50% of the 
market value of the fund's assets is represented by cash, 
securities of other regulated investment companies, United 
States government securities and other securities, with 
such 
other securities limited, in respect of any one issuer, to 
an amount not greater than 5% of the fund's assets and not 
greater than 10% of the outstanding voting securities of 
such issuer and (ii) not more than 25% of the value of its 
assets is invested in the securities (other than United 
States government securities or securities of other 
regulated investment companies) of any one issuer or any 
two 
or more issuers that the fund controls and are determined 
to 
be engaged in the same or similar trades or businesses or 
related trades or businesses.  The fund expects that all of 
its foreign currency gains will be directly related to its 
principal business of investing in stocks and securities.

As a regulated investment company, the fund will not be 
subject to United States federal income tax on its net 
investment income (i.e., income other than its net realized 
long- and short-term capital gains) and its net realized 
long- and short-term capital gains, if any, it distributes 
to its shareholders, provided an amount equal to at least 
90% of the sum of its investment company taxable income 
(i.e., 90% of its taxable income minus the excess, if any, 
of its net realized long-term capital gains over its net 
realized short-term capital losses (including any capital 
loss carryovers), plus or minus certain other adjustments 
as 
specified in the Code) and its net tax-exempt income for 
the 
taxable year is distributed in compliance with the Code's 
timing and other requirements but will be subject to tax at 
regular corporate rates on any taxable income or gains it 
does not distribute. Furthermore, the fund will be subject 
to a United States corporate income tax with respect to 
such 
distributed amounts in any year it fails to qualify as a 
regulated investment company or fails to meet this 
distribution requirement.

The Code imposes a 4% nondeductible excise tax on the fund 
to the extent it does not distribute by the end of any 
calendar year at least 98% of its net investment income for 
that year and 98% of the net amount of its capital gains 
(both long-and short-term) for the one-year period ending, 
as a general rule, on October 31 of that year.  For this 
purpose, however, any income or gain retained by the fund 
that is subject to corporate income tax will be considered 
to have been distributed by year-end.  In addition, the 
minimum amounts that must be distributed in any year to 
avoid the excise tax will be increased or decreased to 
reflect any underdistribution or overdistribution, as the 
case may be, from the previous year. The fund anticipates 
it 
will pay such dividends and will make such distributions as 
are necessary in order to avoid the application of this 
tax.

If, in any taxable year, the fund fails to qualify as a 
regulated investment company under the Code or fails to 
meet 
the distribution requirement, it would be taxed in the same 
manner as an ordinary corporation and distributions to its 
shareholders would not be deductible by the fund in 
computing its taxable income.  In addition, in the event of 
a failure to qualify, the fund's distributions, to the 
extent derived from the fund's current or accumulated 
earnings and profits would constitute dividends (eligible 
for the corporate dividends-received deduction) which are 
taxable to shareholders as ordinary income, even though 
those distributions might otherwise (at least in part) have 
been treated in the shareholders' hands as long-term 
capital 
gains.  If the fund fails to qualify as a regulated 
investment company in any year, it must pay out its 
earnings 
and profits accumulated in that year in order to qualify 
again as a regulated investment company.  In addition, if 
the fund failed to qualify as a regulated investment 
company 
for a period greater than one taxable year, the fund may be 
required to recognize any net built-in gains (the excess of 
the aggregate gains, including items of income, over 
aggregate losses that would have been realized if it had 
been liquidated) in order to qualify as a regulated 
investment company in a subsequent year.

The fund's transactions in foreign currencies, forward 
contracts, options and futures contracts (including options 
and futures contracts on foreign currencies) will be 
subject 
to special provisions of the Code (including provisions 
relating to "hedging transactions" and "straddles") that, 
among other things, may affect the character of gains and 
losses realized by the fund (i.e., may affect whether gains 
or losses are ordinary or capital), accelerate recognition 
of income to the fund and defer fund losses.  These rules 
could therefore affect the character, amount and timing of 
distributions to shareholders.  These provisions also (a) 
will require the fund to mark-to-market certain types of 
positions in its portfolio (i.e., treat them as if they 
were 
closed out) and (b) may cause the fund to recognize income 
without receiving cash with which to pay dividends or make 
distributions in amounts necessary to satisfy the 
distribution requirements for avoiding income and excise 
taxes.  The fund will monitor its transactions, will make 
the appropriate tax elections and will make the appropriate 
entries in its books and records when it acquires any 
foreign currency, forward contract, option, futures 
contract 
or hedged investment in order to mitigate the effect of 
these rules and prevent disqualification of the fund as a 
regulated investment company.

The fund's investment in Section 1256 contracts, such as 
regulated futures contracts, most forward currency forward 
contracts traded in the interbank market and options on 
most 
stock indices, are subject to special tax rules.  All 
section 1256 contracts held by the fund at the end of its 
taxable year are required to be marked to their market 
value, and any unrealized gain or loss on those positions 
will be included in the fund's income as if each position 
had been sold for its fair market value at the end of the 
taxable year. The resulting gain or loss will be combined 
with any gain or loss realized by the fund from positions 
in 
section 1256 contracts closed during the taxable year.  
Provided such positions were held as capital assets and 
were 
not part of a "hedging transaction" nor part of a 
"straddle," 60% of the resulting net gain or loss will be 
treated as long-term capital gain or loss, and 40% of such 
net gain or loss will be treated as short-term capital gain 
or loss, regardless of the period of time the positions 
were 
actually held by the fund.

Foreign Investments.  Dividends or other income (including, 
in some cases, capital gains) received by the fund from 
investments in foreign securities may be  subject to 
withholding and other taxes imposed by foreign countries.  
Tax conventions between certain countries and the United 
States may reduce or eliminate such taxes in some cases.  
The fund will not be eligible to elect to treat any foreign 
taxes paid by it as paid by its shareholders, who therefore 
will not be entitled to credits for such taxes on their own 
tax returns.  Foreign taxes paid by the fund will reduce 
the 
return from the fund's investments.  

Passive Foreign Investment Companies.  If the fund 
purchases 
shares in certain foreign investment entities, called 
"passive foreign investment companies" (a "PFIC"), it may 
be 
subject to United States federal income tax on a portion of 
any "excess distribution" or gain from the disposition of 
such shares even if such income is distributed as a taxable 
dividend by the fund to its shareholders. Additional 
charges 
in the nature of interest may be imposed on the fund in 
respect of deferred taxes arising from such distributions 
or 
gains.  If the fund were to invest in a PFIC and elected to 
treat the PFIC as a "qualified electing fund" under the 
Code, in lieu of the foregoing requirements, the fund might 
be required to include in income each year a portion of the 
ordinary earnings and net capital gains of the qualified 
electing fund, even if not distributed to the fund, and 
such 
amounts would be subject to the 90% and excise tax 
distribution requirements described above.  In order to 
make 
this election, the fund would be required to obtain certain 
annual information from the passive foreign investment 
companies in which it invests, which may be difficult or 
not 
possible to obtain.

Recently, legislation was enacted that provides a mark-to-
market election for regulated investment companies 
effective 
for taxable years beginning after December 31, 1997.  This 
election would result in the fund being treated as if it 
had 
sold and repurchased all of the PFIC stock at the end of 
each year.  In this case, the fund would report gains as 
ordinary income and would deduct losses as ordinary losses 
to the extent of previously recognized gains.  The 
election, 
once made, would be effective for all subsequent taxable 
years of the fund, unless revoked with the consent of the 
IRS. By making the election, the fund could potentially 
ameliorate the adverse tax consequences with respect to its 
ownership of shares in a PFIC, but in any particular year 
may be required to recognize income in excess of the 
distributions it receives from PFICs and its proceeds from 
dispositions of PFIC company stock.  The fund may have to 
distribute this "phantom" income and gain to satisfy its 
distribution requirement and to avoid imposition of the 4% 
excise tax.  The fund will make the appropriate tax 
elections, if possible, and take any additional steps 
necessary to mitigate the effect of these rules.

Taxation of United States Shareholders

Dividends and Distributions.  Any dividend declared by the 
fund in October, November or December of any calendar year 
and payable to shareholders of record on a specified date 
in 
such a month shall be deemed to have been received by each 
shareholder on December 31 of such calendar year and to 
have 
been paid by the fund not later than such December 31, 
provided such dividend is actually paid by the fund during 
January of the following calendar year.  The fund intends 
to 
distribute annually to its shareholders substantially all 
of 
its investment company taxable income, and any net realized 
long-term capital gains in excess of net realized short-
term 
capital losses (including any capital loss carryovers).  
The 
fund currently expects to distribute any excess annually to 
its shareholders.  However, if the fund retains for 
investment an amount equal to all or a portion of its net 
long-term capital gains in excess of its net short-term 
capital losses and capital loss carryovers, it will be 
subject to a corporate tax (currently at a rate of 35%) on 
the amount retained. In that event, the fund will designate 
such retained amounts as undistributed capital gains in a 
notice to its shareholders who (a) will be required to 
include in income for United Stares federal income tax 
purposes, as long-term capital gains, their proportionate 
shares of the undistributed amount, (b) will be entitled to 
credit their proportionate shares of the 35% tax paid by 
the 
fund on the undistributed amount against their United 
States 
federal income tax liabilities, if any, and to claim 
refunds 
to the extent their credits exceed their liabilities, if 
any, and (c) will be entitled to increase their tax basis, 
for United States federal income tax purposes, in their 
shares by an amount equal to 65% of the amount of 
undistributed capital gains included in the shareholder's 
income.  Organizations or persons not subject to federal 
income tax on such capital gains will be entitled to a 
refund of their pro rata share of such taxes paid by the 
fund upon filing appropriate returns or claims for refund 
with the Internal Revenue Service (the "IRS").

Dividends of net investment income and distributions of net 
realized short-term capital gains are taxable to a United 
States shareholder as ordinary income, whether paid in cash 
or in shares.  Distributions of net-long-term capital 
gains, 
if any, that the fund designates as capital gains dividends 
are taxable as long-term capital gains, whether paid in 
cash 
or in shares and regardless of how long a shareholder has 
held shares of the fund.  Dividends and distributions paid 
by the fund attributable to dividends on stock of U.S. 
corporations received by the fund, with respect to which 
the 
fund meets certain holding period requirements, will be 
eligible for the deduction for dividends received by 
corporations.  Distributions in excess of the fund's 
current 
and accumulated earnings and profits will, as to each 
shareholder, be treated as a tax-free return of capital to 
the extent of a shareholder's basis in his shares of the 
fund, and as a capital gain thereafter (if the shareholder 
holds his shares of the fund as capital assets).

Shareholders receiving dividends or distributions in the 
form of additional shares should be treated for United 
States federal income tax purposes as receiving a 
distribution in the amount equal to the amount of money 
that 
the shareholders receiving cash dividends or distributions 
will receive, and should have a cost basis in the shares 
received equal to such amount.

Investors considering buying shares just prior to a 
dividend 
or capital gain distribution should be aware that, although 
the price of shares just purchased at that time may reflect 
the amount of the forthcoming distribution, such dividend 
or 
distribution may nevertheless be taxable to them.

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 are included in the fund's gross 
income not as of the date received but as of the later of 
(a) the date such stock became ex-dividend with respect to 
such dividends (i.e., the date on which a buyer of the 
stock 
would not be entitled to receive the declared, but unpaid, 
dividends) or (b) the date 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.

Sales of Shares.  Upon the sale or exchange of his shares, 
a 
shareholder will realize a taxable gain or loss equal to 
the 
difference between the amount realized and his basis in his 
shares.  Such gain or loss will be treated as capital gain 
or loss, if the shares are capital assets in the 
shareholder's hands, and will be long-term capital gain or 
loss if the shares are held for more than one year and 
short-term capital gain or loss if the shares are held for 
one year or less.  Any loss realized on a sale or exchange 
will be disallowed to the extent the shares disposed of are 
replaced, including replacement through the reinvesting of 
dividends and capital gains distributions in the fund, 
within a 61-day period beginning 30 days before and ending 
30 days after the disposition of the shares.  In such a 
case, the basis of the shares acquired will be increased to 
reflect the disallowed loss.  Any loss realized by a 
shareholder on the sale of a fund share held by the 
shareholder for six months or less will be treated for 
United States federal income tax purposes as a long-term 
capital loss to the extent of any distributions or deemed 
distributions of long-term capital gains received by the 
shareholder with respect to such share.

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 (e.g., an 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, the 
disregarded portion of the original sales charge will be 
added to the tax basis in the newly acquired shares.  
Furthermore, the same rule also applies to a disposition of 
the newly acquired shares made within 90 days of the second 
acquisition.  This provision prevents a shareholder from 
immediately deducting the sales charge by shifting his or 
her investment in a family of mutual funds. 

Backup Withholding.  The fund may be required to withhold, 
for United States federal income tax purposes, 31% of the 
dividends, distributions and redemption proceeds payable to 
shareholders who fail to provide the fund with their 
correct 
taxpayer identification number or to make required 
certifications, or who have been notified by the IRS that 
they are subject to backup withholding.  Certain 
shareholders are exempt from backup withholding.  Backup 
withholding is not an additional tax and any amount 
withheld 
may be credited against a shareholder's United States 
federal income tax liabilities.

Notices.  Shareholders will be notified annually by the 
fund 
as to the United States federal income tax status of the 
dividends, distributions and deemed distributions 
attributable to undistributed capital gains (discussed 
above 
in "Dividends and Distributions") made by the fund to its 
shareholders.  Furthermore, shareholders will also receive, 
if appropriate, various written notices after the close of 
the fund's taxable year regarding the United States federal 
income tax status of certain dividends, distributions and 
deemed distributions that were paid (or that are treated as 
having been paid) by the fund to its shareholders during 
the 
preceding taxable year.

Class Z 

Qualified plan participants should consult their plan 
document or tax advisors about the tax consequences of 
participating in a Qualified Plan. In addition to the 
considerations described below, there may be other federal, 
state, local, and/or foreign tax applications to consider.  
Provided a Qualified Plan has not borrowed to finance its 
investment in the Fund, it will not be taxable on the 
receipt of dividends and distributions from the Fund. 
Qualified plan participants should consult their plan 
document or tax advisors about the tax consequences of 
participating in a Qualified Plan. 

Other Taxation

Distributions also may be subject to additional state, 
local 
and foreign taxes depending on each shareholder's 
particular 
situation.

The foregoing is only a summary of certain material tax 
consequences affecting the fund and its shareholders.  
Shareholders are advised to consult their own tax advisers 
with respect to the particular tax consequences to them of 
an investment in the fund.

ADDITIONAL INFORMATION

Fund History.  The fund was incorporated on September 2, 
1969 under the name The Shearson Appreciation Fund, Inc.  
On 
November 5, 1995 and October 14, 1994, the fund changed its 
name to Shearson Lehman Brothers Appreciation Fund Inc. and 
Smith Barney Appreciation Fund Inc., respectively.
Minimum Account Size.  The fund reserves the right to 
liquidate involuntarily 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.


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

Annual and semi-annual reports.  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 period covered. 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 Salomon Smith Barney 
Financial Consultant or the transfer agent.

FINANCIAL STATEMENTS

The fund's annual report for the fiscal year ended December 
31, 1998 is incorporated herein by reference in its 
entirety.  The annual report was filed on March 15, 1999, 
Accession Number 91155-99-000150.

		




























SMITH BARNEY
APPRECIATION 
FUND INC.




















March 30, 1999

SMITH BARNEYAPPRECIATION FUND INC.
388 Greenwich Street
New York, NY 10013


						SALOMON SMITH BARNEY
						A Member of Citigroup 
[Symbol]





-1-
    

<PAGE>
 
 
 
 
 
[BACKGROUND COVER LOGO APPEARS HERE]
 
[LOGO] Smith Barney Mutual Funds
       Investing for your future.
       Every day./(R)/
 
 
PROSPECTUS
 
 
Appreciation Fund
 
Class A and B Shares
 
___________________________________________________________
_____________________
 
April 30, 1999
 
 
 
The Securities and Exchange Commission has not approved or 
disapproved these
securities or determined whether this prospectus is 
accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
 
Appreciation Fund
 
Contents
 
<TABLE>   
<S>                                                                          
<C>
Fund goal and main 
strategies...............................................   
2
 
Risks, performance and 
expenses.............................................   4
 
More on the fund's 
investments..............................................   
7
 
Management.................................................
 .................   8
 
Choosing a class of shares to 
buy...........................................   9
 
Comparing the fund's 
classes................................................  10
 
Sales 
charges....................................................
 ...........  11
 
More about deferred sales 
charges...........................................  13
 
Buying 
shares.....................................................
 ..........  13
 
Exchanging 
shares.....................................................
 ......  16
 
Redeeming 
shares.....................................................
 .......  18
 
Other things to know
about share 
transactions...............................................
 .....  21
 
Dividends, distributions and 
taxes..........................................  22
 
Share 
price......................................................
 ...........  23
 
Financial 
highlights.................................................
 .......  24
</TABLE>    
You should know: An investment in the fund is not a bank 
deposit and is not
insured or guaranteed by the FDIC or any other government 
agency.
 
                                                       
Smith Barney Mutual Funds
 
                                                                              
1
<PAGE>
 
    
 Fund goal and main strategies     
 
Investment objective
The fund seeks long-term appreciation of shareholders' 
capital.
 
Key investments
The fund invests primarily in equity securities of U.S. 
companies. The fund
typically invests in medium and large capitalization 
companies but may also
invest in small capitalization companies. Equity securities 
include exchange
traded and over-the-counter common stocks and preferred 
stocks, debt securities
convertible into equity securities, and warrants and rights 
relating to equity
securities.
 
Selection process
The manager's investment strategy consists of individual 
company selection and
management of cash reserves. The manager looks for 
investments among a strong
core of growth stocks, consisting primarily of blue chip 
companies dominant in
their industries. The fund may also invest in companies 
with prospects for sus-
tained earnings growth and/or a cyclical earnings record.
 
In selecting individual companies for the fund's portfolio, 
the manager looks
for the following:
 
 .Strong or rapidly improving balance sheets
 .Recognized industry leadership
 .Effective management teams that exhibit a desire to earn 
consistent returns
  for shareholders
 
In addition, the manager considers the following 
characteristics:
 
 .Past growth records
 .Future earnings prospects
 .Technological innovation
 .General market and economic factors
 .Current yield or potential for dividend growth
 
Generally, companies in the fund's portfolio fall into one 
of the following
categories:
 
 .Undervalued companies: companies with assets or earning 
power that are either
  unrecognized or undervalued. The manager generally looks 
for a catalyst that
  will unlock these values. The manager also looks for 
companies that are
  expected to have unusual earnings growth or whose stocks 
appear likely to go
  up in value because of marked changes in the way they do 
business (for exam-
  ple, a corporate restructuring).
 
Appreciation Fund
 
 2
<PAGE>
 
 
 .Growth at a reasonable price: companies with superior 
demonstrated and
  expected growth characteristics whose stocks are 
available at a reasonable
  price. Typically, there is strong recurring demand for 
these companies' prod-
  ucts.
 
 The manager adjusts the amount held in cash reserves 
depending on the manag-
 er's outlook for the stock market. The manager will 
increase the fund's
 allocation to cash when, in the manager's opinion, market 
valuation levels
 become excessive. The manager may sometimes hold a 
significant portion of
 the fund's assets in cash while waiting for buying 
opportunities or to pro-
 vide a hedge against stock market declines.
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                       
Smith Barney Mutual Funds
 
                                                                              
3
<PAGE>
 
 Risks, performance and expenses
 
Principal risks of investing in the fund
Investing in equity securities can bring added benefits, 
but it may also
involve additional risks. Investors could lose money on 
their investment in the
fund, or the fund may not perform as well as other 
investments, if:
 
 .The U.S. stock market declines
 .Large and medium capitalization stocks or growth stocks 
are temporarily out of
  favor
 .An adverse event depresses the value of a company's stock
 .The manager's judgment about the attractiveness, value or 
potential apprecia-
  tion of a particular stock or about the amount to hold in 
cash reserves
  proves to be incorrect
 
Who may want to invest
The fund may be an appropriate investment if you:
 
 .Are seeking to participate in the long term capital 
appreciation potential of
  the stock market
 .Are willing to accept the risks of investing in the stock 
market
 .Are planning for a long term goal and can tolerate periods 
of market volatil-
  ity
 
Appreciation Fund
 
 4
<PAGE>
 
 
Total return
The bar chart indicates the risks of investing in the fund 
by showing changes
in the fund's performance from year to year. Past 
performance does not neces-
sarily indicate how the fund will perform in the future.
 
 
                        Total Return for Class A Shares

                           [BAR CHART APPEARS HERE]

 1989    1990    1991    1992    1993    1994    1995    
1996    1997    1998
 ----    ----    ----    ----    ----    ----    ----    --
--    ----    ----
29.55%  -0.27%  26.94%   6.29%   8.13%  -0.77%  29.26%  
19.25%  26.29%  20.45%

                       Calendar years ended December 31
   
The bar chart shows the performance of the fund's Class A 
shares for each of
the past 10 calendar years. Class B shares would have 
different performance
because of different expenses. The performance information 
in the chart does
not reflect sales charges, which would reduce your return. 
    
   
Quarterly returns:     
   
Highest: 17.89% in 4th quarter 1998; Lowest: -10.90% in 3rd 
quarter 1990     
   
Comparative performance     
   
The table indicates the risks of investing in the fund by 
comparing the average
annual total return of each class for the periods shown 
with that of the Stan-
dard & Poor's 500 Index (S&P 500 Index), a broad-based 
unmanaged index of
widely held stocks traded on the New York Stock Exchange. 
This table assumes
imposition of the maximum sales charge applicable to the 
class, redemption of
shares at the end of the period, and reinvestment of 
distributions and divi-
dends.     
                          
                       Average Annual Total Returns     
                     
                  Calendar Years Ended December 31, 1998 
    
<TABLE>   
<CAPTION>
Class    1 year  5 years 10 years Since Inception Inception 
Date
<S>      <C>     <C>     <C>      <C>             <C>
 A       14.45%   17.19%  15.34%       12.63%        
03/10/70
 B       14.52%   17.38%    n/a        15.92%        
11/06/92
 S&P 500 28.60%   24.05%  19.19%       13.68%*         n/a
</TABLE>    
   
*Index comparison begins on 03/30/70.     
       
                                                       
Smith Barney Mutual Funds
 
                                                                              
5
<PAGE>
 
Fees and expenses
This table sets forth the fees and expenses you will pay if 
you invest in fund
shares.
 
                                Shareholder fees
<TABLE>   
<CAPTION>
(fees paid directly from your investment)            Class 
A Class B
<S>                                                  <C>     
<C>     
Maximum sales charge (load) imposed on purchases
(as a % of offering price)                            5.00%    
None
Maximum deferred sales charge (load) (as a % of the
lower of net asset value at purchase or redemption)   None*   
5.00%
 
                         Annual fund operating expenses
<CAPTION>
(expenses deducted from fund assets)                 Class 
A Class B
<S>                                                  <C>     
<C>     
Management fees                                       0.57%   
0.57%
Distribution and service (12b-1) fees                 0.25%   
1.00%
Other expenses                                        0.13%   
0.16%
                                                      -----   
-----  
Total annual fund operating expenses                  0.95%   
1.73%
</TABLE>    
 
*You may buy Class A shares in amounts of $500,000 or more 
at net asset value
(without an initial charge) but if you redeem those shares 
within 12 months of
their purchase, you will pay a deferred sales charge of 
1.00%.
 
Example
This example helps you compare the costs of investing in 
the fund with the
costs of investing in other mutual funds. Your actual costs 
may be higher or
lower. The example assumes:
 .You invest $10,000 in the fund for the period shown
 .Your investment has a 5% return each year
 .You reinvest all distributions and dividends without a 
sales charge
 .The fund's operating expenses remain the same
 
                      Number of years you own your shares
<TABLE>   
<CAPTION>
                                       1 year 3 years 5 
years 10 years
<S>                                    <C>    <C>     <C>     
<C>
Class A (with or without redemption)    $592   $788   $  
999   $1,608
Class B (redemption at end of period)   $676   $845   
$1,039   $1,834
Class B (no redemption)                 $176   $545   $  
939   $1,834
</TABLE>    
 
Appreciation Fund
 
6
<PAGE>
 
 More on the fund's investments
 
Derivatives and hedging techniques The fund may, but need 
not, use derivative
contracts, such as futures and options on securities and 
securities indices and
options on these futures for any of the following purposes:
 
 .To hedge against the economic impact of adverse changes in 
the market value of
  its securities, because of changes in stock market prices
 .As a substitute for buying or selling securities
 
A derivative contract will obligate or entitle the fund to 
deliver or receive
an asset or cash payment based on the change in value of 
one or more securities
or indices. Even a small investment in derivative contracts 
can have a big
impact on the fund's stock market exposure. Therefore, 
using derivatives can
disproportionately increase losses and reduce opportunities 
for gains when
stock prices are changing. The fund may not fully benefit 
from or may lose
money on derivatives if changes in their value do not 
correspond accurately to
changes in the value of the fund's holdings. The other 
parties to certain
derivative contracts present the same types of credit risk 
as issuers of fixed
income securities. Derivatives can also make the fund less 
liquid and harder to
value, especially in declining markets.
   
Foreign securities The fund may invest up to 10% of its 
assets (at the time of
investment) in foreign securities. The fund may invest 
directly in foreign
issuers or invest in depositary receipts. The value of the 
fund's foreign secu-
rities may go down because of unfavorable government 
actions, political insta-
bility or the more limited availability of accurate 
information about foreign
issuers.     
 
Defensive investing The fund may depart from its principal 
investment strate-
gies in response to adverse market, economic or political 
conditions by taking
temporary defensive positions in all types of money market 
and short-term debt
securities. If the fund takes a temporary defensive 
position, it may be unable
to achieve its investment goal.
 
                                                       
Smith Barney Mutual Funds
 
                                                                               
7
<PAGE>
 
 Management
   
Manager The fund's investment adviser and administrator is 
SSBC Fund Management
Inc., an affiliate of Salomon Smith Barney Inc. The 
manager's address is 388
Greenwich Street, New York, New York 10013. The manager 
selects the fund's
investments and oversees its operations. The manager and 
Salomon Smith Barney
are subsidiaries of Citigroup Inc. Citigroup businesses 
produce a broad range
of financial services--asset management, banking and 
consumer finance, credit
and charge cards, insurance, investments, investment 
banking and trading--and
use diverse channels to make them available to consumer and 
corporate customers
around the world.     
 
Harry D. Cohen, investment officer of the manager and 
managing director of Sal-
omon Smith Barney, has been responsible for the day-to-day 
management of the
fund's portfolio since 1979.
   
Management fees For its services, the manager received an 
advisory fee and an
administration fee during the fund's last fiscal year equal 
to 0.42% and 0.15%,
respectively, of the fund's average daily net assets.     
   
Distributor The fund has entered into an agreement with 
CFBDS, Inc. to distrib-
ute the fund's shares. Through a selling agreement, PFS 
Investments Inc. sells
fund shares to the public.     
 
Distribution plans The fund has adopted Rule 12b-1 
distribution plans for its
Class A and B shares. Under each plan, the fund pays 
distribution and service
fees. These fees are an ongoing expense and, over time, may 
cost you more than
other types of sales charges.
 
Year 2000 issue Information technology experts are 
concerned about computer
systems' ability to process date-related information on and 
after January 1,
2000. This situation, commonly known as the "Year 2000" 
issue, could have an
adverse impact on the fund. The cost of addressing the Year 
2000 issue, if sub-
stantial, could adversely affect companies and governments 
that issue securi-
ties held by the funds. The manager and Salomon Smith 
Barney are addressing the
Year 2000 issue for their systems. The fund has been 
informed by its other
service providers that they are taking similar measures. 
Although the fund does
not expect the Year 2000 issue to adversely affect it, the 
fund cannot guaran-
tee that the efforts of the fund, which are limited to 
requesting and receiving
reports from its service providers or the efforts of its 
service providers to
correct the problem will be successful.
 
Appreciation Fund
 
8
<PAGE>
 
 Choosing a class of shares to buy
   
You can choose between two classes of shares: Classes A and 
B. Each class has
different sales charges and expenses, allowing you to 
choose the class that
best meets your needs. Which class is more beneficial to an 
investor depends on
the amount and intended length of investment.     
 
 .If you plan to invest regularly or in large amounts, 
buying Class A shares may
  help you reduce sales charges and ongoing expenses.
 .For Class B shares, all of your purchase amount will be 
immediately invested.
  This may help offset the higher expenses of Class B 
shares, but only if the
  fund performs well.
 .
 
You may buy shares from:
 
 .Initial purchases of shares of the fund must be made 
through a PFS Investments
  Registered Representative.
 
Investment minimums Minimum initial and additional 
investment amounts vary
depending on the class of shares you buy and the nature of 
your investment
account.
 
<TABLE>
<CAPTION>
                                                         
Initial    Additional
                                                       
Classes A, B All Classes
<S>                                                    <C>          
<C>
General                                                   
$1,000        $50
IRAs, Self Employed Retirement Plans, Uniform Gift to
Minor Accounts                                             
$250         $50
Qualified Retirement Plans*                                
$25          $25
Systematic Investment Plans                                
$25          $25
</TABLE>
 
* Qualified Retirement Plans are retirement plans qualified 
under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, 
including 401(k)
plans
 
                                                       
Smith Barney Mutual Funds
 
                                                                               
9
<PAGE>
 
 Comparing the fund's classes
 
Your PFS Investments Registered Representative can help you 
decide which class
meets your goals. They may receive different compensation 
depending upon which
class you choose.
 
<TABLE>   
<CAPTION>
                                             Class A               
Class B
<S>                                   <C>                   
<C>
Key features                           .Initial sales        
 .No initial sales
                                       charge                
charge .Deferred
                                       .You may qualify      
sales charge
                                       for reduction or      
declines over time
                                       waiver of initial     
 .Converts to Class
                                       sales charge          
A after 8 years
                                       .Lower annual         
 .Higher annual
                                       expenses than Class   
expenses than Class
                                       B                     
A
-----------------------------------------------------------
---------------------
Initial sales charge                  Up to 5.00% reduced   
None
                                      for large purchases
                                      and waived for cer-
                                      tain investors. No
                                      charge for purchases
                                      of $500,000 or more
-----------------------------------------------------------
---------------------
Deferred sales charge                 1% on purchases of    
Up to 5% charged
                                      $500,000 or more if   
when you redeem
                                      you redeem within 1   
shares. The charge
                                      year of purchase      
is reduced over time
                                                            
and there is no
                                                            
deferred sales
                                                            
charge after 6 years
-----------------------------------------------------------
---------------------
Annual distribution and service fees  0.25% of average      
1% of average daily
                                      daily net assets      
net assets
-----------------------------------------------------------
---------------------
Exchange Privilege*                   Class A shares of     
Class B shares of
                                      certain Smith Barney  
certain Smith Barney
                                      funds                 
funds
-----------------------------------------------------------
---------------------
</TABLE>    
* Ask your PFS Investments Registered Representative for 
the Smith Barney funds
available for exchange.
 
Appreciation Fund
 
10
<PAGE>
 
    
 Sales charges     
 
Class A shares
You buy Class A shares at the offering price, which is the 
net asset value plus
a sales charge. You pay a lower sales charge as the size of 
your investment
increases to certain levels called breakpoints. You do not 
pay a sales charge
on the fund's distributions or dividends you reinvest in 
additional Class A
shares.
 
<TABLE>
<CAPTION>
                                 Sales Charge as a % of
                                 Offering  Net amount
Amount of purchase               price (%) invested (%)
<S>                              <C>       <C>
Less than $25,000                  5.00        5.26
$25,000 but less than $50,000      4.00        4.17
$50,000 but less than $100,000     3.50        3.63
$100,000 but less than $250,000    3.00        3.09
$250,000 but less than $500,000    2.00        2.04
$500,000 or more                   0.00        0.00
</TABLE>
 
Investments of $500,000 or more You do not pay an initial 
sales charge when you
buy $500,000 or more of Class A shares. However, if you 
redeem these Class A
shares within one year of purchase, you will pay a deferred 
sales charge of 1%.
 
Qualifying for a reduced Class A sales charge There are 
several ways you can
combine multiple purchases of Class A shares of Smith 
Barney funds to take
advantage of the breakpoints in the sales charge schedule.
 
 . Accumulation privilege - lets you combine the current 
value of Class A shares
  owned
    
 .by you, or     
    
 .by members of your immediate family,     
 
 and for which a sales charge was paid, with the amount of 
your next purchase
 of Class A shares for purposes of calculating the initial 
sales charge. Cer-
 tain trustees and fiduciaries may be entitled to combine 
accounts in deter-
 mining their sales charge.
 
 . Letter of intent - lets you purchase Class A shares of 
the fund and certain
  other Smith Barney funds over a 13-month period and pay 
the same sales
  charge, if any, as if all shares had been purchased at 
once. You
 
                                                       
Smith Barney Mutual Funds
 
                                                                              
11
<PAGE>
 
  may include purchases on which you paid a sales charge 
within 90 days before
  you sign the letter.
 
Waivers for certain Class A investors Class A initial sales 
charges are waived
for certain types of investors, including:
 
 .Employees of members of the NASD
 .403(b) or 401(k) retirement plans, if certain conditions 
are met
 .Investors who redeemed Class A shares of a Smith Barney 
fund in the past 60
  days, if your PFS Investments Registered Representative 
is notified
 .Participants in the Primerca Corporation Savings and 
Retirement Plan
 .Investors who purchase through a PFS Investments 
Registered Representatives
  with proceeds from a prior mutual fund redemption if 
certain conditions are
  met
   
If you want to learn about additional waivers of Class A 
initial sales charges,
contact your PFS Investments Registered Representative or 
consult the Statement
of Additional Information ("SAI").     
 
Class B shares
You buy Class B shares at net asset value without paying an 
initial sales
charge. However, if you redeem your Class B shares within 
six years of pur-
chase, you will pay a deferred sales charge. The deferred 
sales charge
decreases as the number of years since your purchase 
increases.
 
<TABLE>
<CAPTION>
Year after purchase    1st 2nd 3rd 4th 5th 6th through 8th
<S>                    <C> <C> <C> <C> <C> <C>
Deferred sales charge   5%  4%  3%  2%  1%        0%
</TABLE>
 
Class B conversion After 8 years, Class B shares 
automatically convert into
Class A shares. This helps you because Class A shares have 
lower annual
expenses. Your Class B shares will convert to Class A 
shares as follows:
 
<TABLE>
<CAPTION>
Shares issued:                          Shares issued:     
Shares issued:
At initial purchase                     On reinvestment of 
Upon exchange from
                                        dividends and      
another Smith Barney
                                        distributions      
fund
<S>                                     <C>                
<C>
Eight years after the date of purchase  In same proportion 
On the date the
                                        as the number of   
shares originally
                                        Class B shares     
acquired would
                                        converting is to   
have converted
                                        total Class B      
into Class A
                                        shares you own     
shares
</TABLE>
 
Appreciation Fund
 
12
<PAGE>
 
 
 More about deferred sales charges
 
The deferred sales charge is based on the net asset value 
at the time of pur-
chase or redemption, whichever is less, and therefore you 
do not pay a sales
charge on amounts representing appreciation or 
depreciation.
 
In addition, you do not pay a deferred sales charge on:
 
 .Shares exchanged for shares of another Smith Barney fund
 .Shares representing reinvested distributions and dividends
 .Shares no longer subject to the deferred sales charge
 
If you redeemed shares of a Smith Barney fund in the past 
60 days and paid a
deferred sales charge, you may buy shares of the fund at 
the current net asset
value and be credited with the amount of the deferred sales 
charge, if you
notify your PFS Investments Registered Representative.
   
PFS Distributors Inc., an affiliate of PFS Investments 
Inc., receives deferred
sales charges as partial compensation for its expenses in 
connection with the
sale of shares, including the payment of compensation to 
your PFS Investments
Registered Representative.     
 
Deferred sales charge waivers
The deferred sales charge for each share class will 
generally be waived:
 
 .On payments made through certain systematic withdrawal 
plans
 .On certain distributions from a retirement plan
 .For involuntary redemptions of small account balances
 .For 12 months following the death or disability of a 
shareholder
 
If you want to learn more about additional waivers of 
deferred sales charges,
contact your PFS Investments Registered Representative or 
consult the SAI.
 
 
                                                       
Smith Barney Mutual Funds
 
                                                                              
13
<PAGE>
 
    
 Buying shares     
 
                 .Initial purchases of shares of each fund 
must be made
 Buying shares     through a PFS Investments Registered 
Representative by com-
  by mail          pleting the appropriate application. The 
completed applica-
                   tion should be forwarded to PFS 
Shareholder Services.
                    
                 .Subsequent investments may be sent by 
mail directly to PFS
                   Shareholder Services, or, if you elect 
telephone transac-
                   tions on your account application you 
may call PFS Share-
                   holder Services and request a purchase 
through a transfer
                   from your bank account. Telephone 
purchases can be made
                   between 8:00 a.m. and 8:00 p.m. eastern 
time on any day the
                   New York Stock Exchange is open. 
Purchase orders received
                   after the close of regular trading on 
the Exchange are
                   priced at the net asset value next 
determined. The minimum
                   telephone investment is $250 and the 
maximum is $10,000.
                   You will be charged a fee if you have 
insufficient funds to
                   complete the investment.     
                    
                 .The address and telephone number of PFS 
Shareholder Services
                   is: 3100 Breckinridge Blvd., Bldg. 200, 
Duluth, Georgia
                   30099-0062; (800) 544-5445.     
 
                 .You may also reach PFS Shareholder 
Services by calling (800)
                   544-7278 for Spanish speaking 
representatives or (800) 824-
                   1721 for the TDD Line for the Hearing 
Impaired.
 
                 .Checks drawn on foreign banks must be 
payable in U.S. dol-
                   lars and have the routing number of the 
U.S. bank encoded
                   on the check.
 
-----------------------------------------------------------
---------------------
                
 Buying shares   Initial purchases of shares for $10,000 
may be made by wire
  by wire        order from your bank account. Contact PFS 
Shareholder Serv-
                 ices for details. In addition, once an 
account is open, you
                 may make additional wire orders through 
your PFS Investments
                 Registered Representative.     
 
-----------------------------------------------------------
---------------------
     Through a   You may authorize PFS Shareholder Services 
to transfer funds
    systematic   automatically from a regular bank account 
or other financial
    investment   institution to buy shares of a fund.
          plan
 
 
Appreciation Fund
 
14
<PAGE>
 
 
                 .Amounts transferred should be at least: 
$25 monthly
                 .If you do not have sufficient funds in 
your account on a
                   transfer date, PFS Shareholder Services 
may charge you a
                   fee
 
                 For more information, contact your PFS 
Investments Registered
                 Representative or consult the SAI.
 
                                                       
Smith Barney Mutual Funds
 
                                                                              
15
<PAGE>
 
 
 Exchanging shares
 
                 You should contact your PFS Investments 
Registered Represen-
  Smith Barney   tative to exchange into other eligible 
Smith Barney funds. Be
      offers a   sure to read the prospectus of the Smith 
Barney fund you are
   distinctive   exchanging into. An exchange is a taxable 
transaction.
     family of
         funds
   tailored to
 help meet the
 varying needs
 of both large
     and small
     investors
              
                 .You may exchange shares only for shares 
of the same class of
                   certain Smith Barney funds. Not all 
Smith Barney funds
                   offer all classes.
                 .Not all Smith Barney funds may be offered 
in your state of
                   residence. Contact your PFS Investments 
Registered Repre-
                   sentative
                 .You must meet the minimum investment 
amount for each fund
                 .If you hold share certificates, the 
transfer agent must
                   receive the certificates endorsed for 
transfer or with
                   signed stock powers (documents 
transferring ownership of
                   certificates) before the exchange is 
effective.
                 .The fund may suspend or terminate your 
exchange privilege if
                   you engage in an excessive pattern of 
exchanges.
     Waiver of   Your shares will not be subject to an 
initial sales charge at
    additional   the time of the exchange.
 sales charges
 
                 Your deferred sales charge (if any) will 
continue to be mea-
                 sured from the date of your original 
purchase. If the fund
                 you exchange into has a higher deferred 
sales charge, you
                 will be subject to that charge. If you 
exchange at any time
                 into a fund with a lower charge, the sales 
charge will not be
                 reduced.
-----------------------------------------------------------
---------------------
 
Appreciation Fund
 
16
<PAGE>
 
  By telephone      
                 You may exchange shares by telephone if 
you elect telephone
                 transactions on your account application. 
Telephone exchanges
                 are subject to the same limitations as 
telephone redemptions.
                     
                 To learn more about the exchange privilege 
and Smith Barney
                 mutual funds you may be eligible to 
exchange into, contact
                 your PFS Investments Registered 
Representative or consult the
                 SAI.
                                                                   
       
                                                       
Smith Barney Mutual Funds
 
                                                                              
17
<PAGE>
 
    
 Redeeming shares     
 
                Generally, a properly completed Redemption 
Form with any
  Redemptions   required signature guarantee is all that is 
required for a
 by mail        redemption. In some cases, however, other 
documents may be
                necessary.
 
                You may redeem some or all of your shares 
by sending a Redemp-
                tion Form or other written request in 
proper form to PFS
                Shareholder Services, 3100 Breckinridge 
Blvd., Bldg. 200,
                Duluth, Georgia 30099-0062. You may also 
reach PFS Shareholder
                Services by calling (800) 544-5445 or (800) 
544-7278 for Span-
                ish speaking representatives or (800) 824-
1721 for the TDD
                Line for the Hearing Impaired. The written 
request for redemp-
                tion must be in good order. This means that 
you have provided
                the following information. Your request 
will not be processed
                without this information.
 
                .Name of the fund
                .Account number
                .Dollar amount or number of shares to 
redeem
                .Signature of each owner exactly as account 
is registered
                .Other documentation required by PFS 
Shareholder Services
 
                To be in good order, your request must 
include a signature
                guarantee if:
 
                .The proceeds of the redemption exceed 
$50,000
                .The proceeds are not paid to the record 
owner(s) at the rec-
                  ord address
                .The shareholder(s) has had an address 
change in the past 45
                  days
                .The shareholder(s) is a corporation, sole 
proprietor, part-
                  nership, trust or fiduciary
 
                You can obtain a signature guarantee from 
most banks, dealers,
                brokers, credit unions and federal savings 
and loans, but not
                from a notary public.
-----------------------------------------------------------
---------------------
   
Appreciation Fund     
 
18
<PAGE>
 
 
-----------------------------------------------------------
---------------------
                   
                In all cases, your redemption price is the 
net asset value
                next determined after your request is 
received in good order.
                Redemption proceeds normally will be sent 
within three days.
                However, if you recently purchased your 
shares by check, your
                redemption proceeds will not be sent to you 
until your origi-
                nal check clears, which may take up to 15 
days.   Any request that your 
redemption proceeds be
                sent to a destination other than your bank 
account or address
                of record must be in writing and must 
include signature
                guarantees.     
-----------------------------------------------------------
---------------------
  Redemptions   You may redeem shares by fax as long as a 
signature guarantee
       by fax   or other documentary evidence is not 
required. Redemption
                requests should be properly signed by all 
owners of the
                account and faxed to PFS Shareholder 
Services at (800) 554-
                2374. If fax redemptions are not available 
for any reason, you
                may use the Fund's regular redemption 
procedure described
                above.
-----------------------------------------------------------
---------------------
  Redemptions      
 by telephone   You may redeem shares by telephone if you 
elect the telephone
                transactions option on your account 
application. This is
                available only for redemptions of $50,000 
or less, and the
                proceeds must be mailed to your address of 
record. In addi-
                tion, you must be able to provide proper 
identification infor-
                mation. You may not redeem by telephone if 
your address has
                changed within the past 45 days or if your 
shares are in cer-
                tificate form. Telephone redemption 
requests may be made by
                calling PFS Shareholder Services at (800) 
544-5445 between
                8:00 a.m. and 8:00 p.m. eastern time on any 
day the New York
                Stock Exchange is open. Requests received 
after the close of
                regular trading on the Exchange are priced 
at the net asset
                value next computed. If telephone 
redemptions are not avail-
                able for any reason, you may use the Fund's 
regular redemption
                procedure described above.     
-----------------------------------------------------------
---------------------
Payment of 
Redemption proceeds       Whether you
                redeem by mail, fax or telephone your 
redemption proceeds can
                be sent by check to your address of record 
or by wire transfer
                to a bank account designated on your 
application. You will be
                charged a service fee for wire transfers 
and a service fee for
                transfers made directly to your bank by the 
Automated Clear-
                inghouse (ACH)
                                           
    
   
                                                  Smith 
Barney Mutual Funds     
 
                                                                              
19
<PAGE>
 
 
-----------------------------------------------------------
---------------------
    Automatic      
   cash with-   You can arrange for the automatic 
redemption of a portion of
  drawal plan   your shares on a monthly or quarterly 
basis. To qualify you
                must own shares of the fund with a value of 
at least $10,000
                ($5,000 for retirement plan accounts) and 
each automatic
                redemption must be at least $50. If your 
shares are subject to
                a deferred sales charge, the sales charge 
will be waived if
                your automatic payments are equal to or 
less than 1% per month
                of the value of your shares subject to a 
deferred sales
                charge. The following conditions apply: 
    
 
                .Shares may not be represented by 
certificates
 
                .All dividends and distributions must be 
reinvested
 
                .You can establish a withdrawal plan for a 
retirement account
                  only if you are eligible to receive 
distributions from the
                  account
                          
Appreciation Fund     
 
20
<PAGE>
 
 Other things to know about share transactions
 
The fund has the right to:
 
 .Suspend the offering of shares
 .Waive or change minimum and additional investment amounts
 .Reject any purchase or exchange order
 .Change, revoke or suspend the exchange privilege
 .Suspend telephone transactions
 .Suspend or postpone redemptions of shares on any day when 
trading on the New
  York Stock Exchange is restricted, or as otherwise 
permitted by the Securi-
  ties and Exchange Commission
 .Pay redemption proceeds by giving you securities. You may 
pay transaction
  costs to dispose of the securities
 
Small account balances If your account falls below $500 
because of a redemption
of fund shares, the fund may ask you to bring your account 
up to $500. If your
account is still below $500 after 60 days, the fund may 
close your account and
send you the redemption proceeds.
 
Excessive exchange transactions The manager may determine 
that a pattern of
frequent exchanges is detrimental to the fund's performance 
and other share-
holders. If so, the fund may limit additional purchases 
and/or exchanges by the
shareholder.
   
Share certificates The fund does not issue share 
certificates unless a written
request signed by all registered owners is made to the 
transfer agent. If you
hold share certificates it will take longer to exchange or 
redeem shares.     
                                                     
                                                  Smith 
Barney Mutual Funds     
 
                                                                              
21
<PAGE>
 
    
 Dividends, distributions and taxes     
 
Dividends The fund generally makes capital gain 
distributions and pays divi-
dends, if any, once a year, typically in December. The fund 
may pay additional
distributions and dividends at other times if necessary for 
the fund to avoid a
federal tax. Capital gain distributions and dividends are 
reinvested in addi-
tional fund shares of the same class you hold. The fund 
expects distributions
to be primarily from capital gains. You do not pay a sales 
charge on reinvested
distributions or dividends. Alternatively, you can instruct 
your PFS Invest-
ments Registered Representative to have your distributions 
and/or dividends
paid in cash. You can change your choice at any time to be 
effective as of the
next distribution or dividend, except that any change given 
to the transfer
agent less than five days before the payment date will not 
be effective until
the next distribution or dividend is paid.
 
Taxes In general, redeeming shares, exchanging shares and 
receiving distribu-
tions (whether in cash or additional shares) are all 
taxable events.
 
<TABLE>
<CAPTION>
 Transaction                           Federal tax status
<S>                                    <C>
Redemption or exchange of shares       Usually capital gain 
or
                                       loss; long-term only 
if
                                       shares owned more 
than
                                       one year
Long-term capital gain distributions   Long-term capital 
gain
Short-term capital gain distributions  Ordinary income
Dividends                              Ordinary income
</TABLE>
 
Long-term capital gain distributions are taxable to you as 
long-term capital
gain regardless of how long you have owned your shares. You 
may want to avoid
buying shares when the fund is about to declare a long-term 
capital gain dis-
tribution or a dividend, because it will be taxable to you 
even though it may
actually be a return of a portion of your investment.
 
After the end of each year, the fund will provide you with 
information about
the distributions and dividends you received and any 
redemptions of shares dur-
ing the previous year. If you do not provide the fund with 
your correct tax-
payer identification number and any required 
certifications, you may be subject
to back-up withholding of 31% of your distributions, 
dividends, and redemption
proceeds. Because each shareholder's circumstances are 
different and special
tax rules may apply, you should consult your tax adviser 
about your investment
in the fund.
   
Appreciation Fund     
 
22
<PAGE>
 
 Share price
 
You may buy, exchange or redeem shares at their net asset 
value, plus any
applicable sales charge, next determined after receipt of 
your request in good
order. The fund's net asset value is the value of its 
assets minus its liabili-
ties. Net asset value is calculated separately for each 
class of shares. The
fund calculates its net asset value every day the New York 
Stock Exchange is
open. The Exchange is closed on certain holidays listed in 
the SAI. This calcu-
lation is done when regular trading closes on the Exchange 
(normally 4:00 p.m.,
Eastern time).
   
The fund generally values its fund securities based on 
market prices or quota-
tions. When reliable market prices or quotations are not 
readily available, or
when the value of a security has been materially affected 
by events occurring
after a foreign exchange closes, the fund may price those 
securities at fair
value. Fair value is determined in accordance with 
procedures approved by the
fund's board.     
 
A fund that uses fair value to price securities may value 
those securities
higher or lower than another fund using market quotations 
to price the same
securities.
   
In order to buy, redeem or exchange shares at that day's 
price, you must place
your order with PFS Shareholder Services before the New 
York Stock Exchange
closes. If the Exchange closes early, you must place your 
order prior to the
actual closing time. Otherwise, you will receive the next 
business day's price.
    
Salomon Smith Barney or members of the selling group must 
transmit all orders
to buy, exchange or redeem shares to the fund's agent 
before the agent's close
of business.
                                                     
                                                  Smith 
Barney Mutual Funds     
 
                                                                              
23
<PAGE>
 
 Financial highlights
   
The financial highlights tables are intended to help you 
understand the perfor-
mance of each class for the past 5 years (or since 
inception if less than 5
years). Certain information reflects financial results for 
a single share.
Total return represents the rate that a shareholder would 
have earned (or lost)
on a fund share assuming reinvestment of all dividends and 
distributions. The
information in the following tables was audited by KPMG 
LLP, independent
accountants, whose report, along with the fund's financial 
statements, is
included in the annual report (available upon request). The 
information for the
fiscal year ended December 31, 1994 has been audited by 
other auditors.     
 
 For a Class A share of capital stock outstanding 
throughout each year ended
 December 31:
<TABLE>   
<CAPTION>
                                    1998(/1/)   1997    
1996  1995(/1/)   1994
-----------------------------------------------------------
---------------------
 <S>                                <C>       <C>     <C>     
<C>       <C>
 Net asset value, beginning of
 year                                $13.92   $12.85  
$11.90   $10.15   $11.01
-----------------------------------------------------------
---------------------
 Income (loss) from operations:
 Net investment income                 0.18     0.19    
0.19     0.20     0.16
 Net realized and unrealized gain
 (loss)                                2.62     3.17    
2.09     2.75    (0.24)
-----------------------------------------------------------
---------------------
 Total income (loss) from
 operations                            2.80     3.36    
2.28     2.95    (0.08)
-----------------------------------------------------------
---------------------
 Less distributions from:
 Net investment income                (0.18)   (0.20)  
(0.19)   (0.20)   (0.18)
 Net realized gains                   (1.23)   (2.09)  
(1.14)   (1.00)   (0.60)
-----------------------------------------------------------
---------------------
 Total distributions                  (1.41)   (2.29)  
(1.33)   (1.20)   (0.78)
-----------------------------------------------------------
---------------------
 Net asset value, end of year        $15.31   $13.92  
$12.85   $11.90   $10.15
-----------------------------------------------------------
---------------------
 Total return/2/                      20.45%   26.29%  
19.25%   29.26%   (0.77)%
-----------------------------------------------------------
---------------------
 Net assets, end of year
 (millions)                          $2,959   $2,526  
$2,100   $1,933   $1,690
-----------------------------------------------------------
---------------------
 Ratios to average net assets:
 Expenses                              0.95%    0.95%   
1.00%    1.02%    1.02%
 Net investment income                 1.23     1.47    
1.52     1.71     1.61
-----------------------------------------------------------
---------------------
 Portfolio turnover rate                 63%      57%     
62%      57%      52%
-----------------------------------------------------------
---------------------
</TABLE>    
(/1/)Per share amounts calculated using the monthly average 
shares method.
   
(/2/)Total return does not take into account any applicable 
sales charges.     
   
Appreciation Fund     
 
24
<PAGE>
 
 For a Class B share of capital stock outstanding 
throughout each year ended
 December 31:
<TABLE>   
<CAPTION>
                                    1998(/1/)   1997    
1996  1995(/1/)   1994
-----------------------------------------------------------
---------------------
 <S>                                <C>       <C>     <C>     
<C>       <C>
 Net asset value, beginning of
 year                                $13.88   $12.81  
$11.88   $10.14   $11.00
-----------------------------------------------------------
---------------------
 Income (loss) from operations:
 Net investment income                 0.06     0.07    
0.08     0.11     0.13
 Net realized and unrealized gain
 (loss)                                2.61     3.15    
2.08     2.74    (0.29)
-----------------------------------------------------------
---------------------
 Total income (loss) from
 operations                            2.67     3.22    
2.16     2.85    (0.16)
-----------------------------------------------------------
---------------------
 Less distributions from:
 Net investment income                (0.06)   (0.06)  
(0.09)   (0.11)   (0.10)
 Net realized gains                   (1.23)   (2.09)  
(1.14)   (1.00)   (0.60)
-----------------------------------------------------------
---------------------
 Total distributions                  (1.29)   (2.15)  
(1.23)   (1.11)   (0.70)
-----------------------------------------------------------
---------------------
 Net asset value, end of year        $15.26   $13.88  
$12.81   $11.88   $10.14
-----------------------------------------------------------
---------------------
 Total return(/2/)                    19.52%   25.31%  
18.29%   28.29%   (1.53)%
-----------------------------------------------------------
---------------------
 Net assets, end of year
 (millions)                          $1,553   $1,410  
$1,134     $988     $761
-----------------------------------------------------------
---------------------
 Ratios to average net assets:
 Expenses                              1.73%    1.73%   
1.78%    1.77%    1.80%
 Net investment income                 0.44     0.68    
0.74     0.96     0.83
-----------------------------------------------------------
---------------------
 Portfolio turnover rate                 63%      57%     
62%      57%      52%
-----------------------------------------------------------
---------------------
</TABLE>    
(/1/)Per share amounts calculated using the monthly average 
shares method.
   
(/2/)Total return does not take into account any applicable 
sales charges.     
                                                     
                                                  Smith 
Barney Mutual Funds     
 
                                                                              
25
<PAGE>
 
                    
                 (This page is intentionally left blank.) 
    
<PAGE>
                                                    
Securities offered through
                                                    PFS 
INVESTMENTS INC.
                                                    
============================
                                                    A 
member of citigroup [LOGO]
 
Appreciation Fund
 
Shareholder reports Annual and semiannual reports to 
shareholders provide addi-
tional information about the fund's investments. These 
reports discuss the mar-
ket conditions and investment strategies that affected the 
fund's performance.
 
Statement of additional information The statement of 
additional information
provides more detailed information about the fund and is 
incorporated by refer-
ence into (is legally a part of) this prospectus.
   
You can make inquiries about the fund or obtain shareholder 
reports or the
statement of additional information (without charge) by 
contacting your PFS
Investments Registered Representative, by calling PFS 
Shareholder Services at
1-800-544-5445, or by writing to the fund at 3100 
Breckinridge Blvd, Bldg. 200,
Duluth, Georgia, 30099-0062.     
 
   
You can also review and copy the fund's shareholder 
reports, prospectus and
statement of additional information at the Securities and 
Exchange Commission's
Public Reference Room in Washington, D.C. You can get 
copies of these materials
for a duplicating fee by writing to the Public Reference 
Section of the Commis-
sion, Washington, D.C. 20549-6009. Information about the 
public reference room
may be obtained by calling 1-800-SEC-0330. You can get the 
same information
free from the Commission's Internet web site at 
http:www.sec.gov     
 
If someone makes a statement about the fund that is not in 
this prospectus, you
should not rely upon that information. Neither the fund nor 
the distributor is
offering to sell shares of the fund to any person to whom 
the fund may not law-
fully sell its shares.
 
/SM/Salomon Smith Barney is a service mark of Salomon Smith 
Barney Inc.
   
(Investment Company Act file     
   
no. 811-01940     
   
SB-1B     
   
PFS Investments Inc.