Registration No. 33-40823
                 811-6318

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM N-1A


REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No. _______

Post-Effective Amendment No.         31        	    X

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940

Amendment No.           31                  X

CONSULTING GROUP CAPITAL MARKETS FUNDS
(Exact name of Registrant as Specified in Charter)

222 Delaware Avenue, Wilmington, Delaware  19801
(Address of Principal Executive Offices)     (Zip Code)

Registrant's Telephone Number, including Area Code:
(302) 888-4104

Christina T. Sydor
Consulting Group Capital Markets Funds
7 World Trade Center, 39th Floor
New York, New York 10048
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: Continuous


It is proposed that this filing will become effective:

	immediately upon filing pursuant to paragraph (b) of Rule 485

XXX	on December 29, 2000 pursuant to paragraph (b) of Rule 485

	60 days after filing pursuant to paragraph (a)(1)

	on (date) pursuant to paragraph (a)(1)

	75 days after filing pursuant to paragraph (a)(2)

	on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

	this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of Securities Being Registered:  Shares of Beneficial Interest, par
value $0.001 per share.

PART A

<PAGE>

                               Consulting Group
                                  Since 1973

                               Consulting Group
                             Capital Markets Funds

                           S&P 500 Index Investments




INVESTMENT PRODUCTS: NOT FDIC INSURED . NO BANK GUARANTEE . MAY LOSE VALUE

Prospectus                                                             TRAK/R/
December 29, 2000                     ----------------------------------------
                                      Personalized Investment Advisory Service


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>

Table of Contents
<TABLE>
<S>                                   <C>
Investments, Risks and Performance      2
-----------------------------------------
 Investment objective                   2
-----------------------------------------
 Principal investment strategies        2
-----------------------------------------
 Fee table                              3
-----------------------------------------

More on the Portfolio's Investments     4
-----------------------------------------

The Manager                             6
-----------------------------------------
Asset Allocation Programs               8
-----------------------------------------

Investment and Account Information      9
-----------------------------------------
 Account transactions                   9
-----------------------------------------
 Valuation of shares                   10
-----------------------------------------
 Dividends and distributions           10
-----------------------------------------
 Taxes                                 10
-----------------------------------------
 Financial highlights                  11
-----------------------------------------
Appendix A                            A-1
-----------------------------------------
Appendix B                            B-1
-----------------------------------------
</TABLE>
"S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. and has been li-
censed for use by SSB Citi Fund Management LLC. The Portfolio is not sponsored,
endorsed, sold or promoted by Standard & Poor's (S&P), a division of The Mc-
Graw-Hill Companies, Inc. S&P makes no representation or warranty, express or
implied, to the shareholders of the Portfolio or any member of the public re-
garding the advisability of investing in securities generally or in the Portfo-
lio.

                                        1

 S&P 500 Index Investments
<PAGE>

Investments, Risks and Performance
Investment objective

The S&P 500 Index Investments (the "Portfolio") seeks to provide investment re-
sults that, before expenses, correspond to the price and yield performance of
the S&P 500 Index. The Portfolio will hold a broadly diversified portfolio of
common stocks that is comparable to the S&P 500 Index in terms of economic sec-
tor weightings, market capitalization and liquidity.

Principal investment strategies

The Portfolio invests at least 80% of its assets in common stocks included in
the S&P 500 Index. The Portfolio holds stocks of substantially all of the com-
panies which comprise the S&P 500 Index, including those companies which are
headquartered outside the U.S. The Portfolio also enters into repurchase agree-
ments, lends portfolio securities and uses certain types of derivative instru-
ments to help implement its objective.

How the subadviser selects the Portfolio's investments

The manager has selected a subadviser to manage the Portfolio. The subadviser
manages the portfolio as a "pure" index fund. This means that the subadviser
does not evaluate individual companies to identify attractive investment candi-
dates. Instead, the subadviser attempts to mirror the composition of the S&P
500 Index as closely as possible by adjusting the Portfolio's holdings daily to
reflect the companies included in the index and their weightings. The Portfolio
does not mirror the index exactly because, unlike the index, the Portfolio must
maintain a portion of its assets in cash and liquid securities to meet redemp-
tion requests and pay the Portfolio's expenses.

The S&P 500 Index is one of the most widely used benchmarks of U.S. equity per-
formance. The index consists of 500 stocks chosen for market capitalization,
liquidity and industry group representation. The index is market-value-weight-
ed, so the larger of the 500 companies have a bigger impact on the performance
of the index. The index is unmanaged and does not have to maintain liquidity to
meet redemption requests or pay expenses.

Principal risks of investing in the Portfolio

An investment in the Portfolio involves specific risks relating to the nature
of its investment strategies. You should invest in the Portfolio only if you
are capable of bearing the risks described below.

 . You could lose money on your investment in a portfolio, or the portfolio may
  not perform as well as other investments

 . The S&P 500 Index may go down, or perform poorly relative to other U.S. eq-
  uity indices or individual stocks

 . An adverse company specific event, such as an unfavorable earnings report,
  may negatively affect the stock price of one of the larger companies in the
  S&P 500 Index

 . The stocks of companies which comprise the S&P 500 Index may fall out of fa-
  vor with investors

 . The Portfolio 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 underlying securities

Because the Portfolio is managed as an index fund, it will not ordinarily sell
a portfolio security because of the security's poor performance. The Portfolio
normally buys or sells a portfolio security only to reflect additions or dele-
tions of stocks that comprise the S&P 500 Index or to adjust their relative
weightings. Although the subadviser seeks to replicate the performance of the
S&P 500 Index, the Portfolio may underperform the index even before deducting
expenses because the Portfolio must maintain a portion of its assets in liquid
short-term debt securities which historically have generated significantly
lower returns than common stocks.

Who may want to invest

The Portfolio may be an appropriate investment if you:

 . Are seeking to participate in the long term growth potential of U.S. large
  capitalization stocks

 . Are seeking an investment which tracks the performance of the S&P 500 Index

 . Are looking for an investment with potentially greater return but higher risk
  than a fund investing primarily in fixed income securities

 . Are willing to accept the risks of the stock market


                                       2

 S&P 500 Index Investments
<PAGE>


                          Investments, Risks and Performance, continued

Performance

Because this Portfolio commenced operations on October 1, 1999, the Portfolio
does not yet have a sufficient operating history to generate the performance
information which other portfolios of the Consulting Group Capital Markets
Funds show in bar and table form in this location of a prospectus.

Year to date: (2.19)% (through 3rd Quarter/2000)

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses for the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                  <C>
  Shareholder fees                        None
  (fees paid directly from your
   investment)
  Maximum annual TRAK(R) fee*            1.50%
  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fee                        0.12%
   Other expenses                        0.70%
                                       -------
  Total annual Portfolio operating
   expenses                              0.82%
  Management and Administration Fee
   Waivers and expense
   reimbursements**                    (0.52)%
                                       -------
  Net annual Portfolio operating
   expenses                              0.30%
                                       =======
</TABLE>

* Fee payable under the TRAK(R) Personalized Investment Advisory Service for
  asset allocation services. See "Asset Allocation Programs."

** Management has agreed to waive a portion of management and administration
   fees and reimburse certain expenses because it has voluntarily agreed to
   limit total annual portfolio operating expenses to 0.30% of average net as-
   sets. The manager may change or eliminate this expense limitation at any
   time.


Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
   $235                    $724                             $1,240                             $2,656
</TABLE>

                                        3

 S&P 500 Index Investments
<PAGE>


More on the Portfolio's Investments

The section entitled "Investments, Risks and Performance" describes the Portfo-
lio's investment objective and its principal investment strategies and risks.
This section provides some additional information about the Portfolio's invest-
ments and certain investment management techniques the Portfolio may use. More
information about the Portfolio's investments and portfolio management tech-
niques, some of which entail risk, is included in the Statement of Additional
Information (SAI). To find out how to obtain an SAI, please turn to the back
cover of this prospectus.


                               Percentage Limits

 Some Portfolio policies in this
 section are stated as a percent-
 age of assets. These percentages
 are applied at the time of pur-
 chase of a security and subse-
 quently may be exceeded because
 of changes in the value of the
 Portfolio's investments.


Equity Investments. Equity securities include exchange-traded and over-the-
counter common and preferred stocks, warrants, rights, convertible securities,
depositary receipts and shares, trust certificates, limited partnership inter-
ests, shares of other investment companies and real estate investment trusts
and equity participations.


Derivatives. The Portfolio may, but is not required to, use futures and options
on securities and securities indices, and options on these futures, for any of
the following purposes:

 . to simulate full investment in the S&P 500 Index while maintaining sufficient
  liquidity to satisfy daily redemption requests and operating expenses

 . to facilitate trading in the securities of companies that comprise the index

 . to reduce transaction costs

 . to seek higher investment returns when a contract is priced more attractively
  than the stocks comprising the index

The Portfolio may not invest more than 20% of its assets in derivative con-
tracts or more than 5% of its assets in open purchased put options.

A derivative contract will obligate or entitle the Portfolio to deliver or re-
ceive an asset or cash payment based on the change in value of one or more se-
curities or indices. Even a small investment in derivative contracts can have a
big impact on the Portfolio's stock market exposure. Therefore, using deriva-
tives can disproportionately increase losses and reduce opportunities for gains
when stock prices are changing. The Portfolio may not fully benefit from or may
lose money on derivatives if changes in their value do not correspond accu-
rately to changes in the value of the Portfolio's holdings. Derivatives can
also make the Portfolio less liquid and harder to value, especially in declin-
ing markets.

Money market instruments. The Portfolio may temporarily maintain up to 10% of
its assets in money market instruments. The Portfolio invests in money market
instruments under the following circumstances:

 . pending investment of proceeds of the sale of shares of the Portfolio

 . pending settlement of purchases of securities by the Portfolio

 . to maintain liquidity to meet anticipated redemptions

Foreign investments. The Portfolio may purchase common stocks and American De-
positary Receipts (ADRs) of the foreign companies included in the S&P 500 In-
dex. These securities are publicly traded on U.S. securities exchanges or over-
the-counter markets. ADRs are U.S. dollar denominated securities which repre-
sent an interest in an underlying foreign security.

Foreign countries generally have markets that are less liquid and more volatile
than markets in the U.S. In some foreign countries, there is also less informa-
tion available about foreign issuers and markets because of less rigorous ac-
counting and regulatory standards than in the U.S. Currency fluctuations could
erase investment gains or add to investment losses. Because the value of an ADR
is dependent upon the market price of an underlying foreign security, ADRs are
subject to most of the risks associated with foreign investing.

Impact of high portfolio turnover. The Portfolio may engage in active and fre-
quent trading to achieve its principal investment strategies. This may lead to
the realization and distribution to shareholders of higher capital gains, which
would increase their tax liability. Frequent trading also increases transaction
costs, which could detract from the Portfolio's performance.

More information about investment styles. The subadviser follows a passive
style, in which the principal objective is to mirror the return of a benchmark
index. The subadviser may seek to achieve that goal by investing in all of the
securities in the index. However, in those

                                        4

 S&P 500 Index Investments
<PAGE>

instances where the subadviser is unable to replicate the exact index
weightings for a particular company in the index, it will allocate a pro rata
portion to the other companies in the index.

Order of Exemption. The Trust is subject to an Order of Exemption from the De-
partment of Labor requiring, among other things, that the Portfolio limit its
investments in the securities of affiliates of Salomon Smith Barney, including
Citigroup Inc., to one percent of the Portfolio's net assets. However, this
percentage limitation may be exceeded where the amount held by the subadviser
is used to replicate an established third party index such as
the S&P 500 Index.

Defensive Investing. The Portfolio may depart from its principal investment
strategies 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.  The Portfolio's investments in these
assets are managed by SSB Citi Fund Management LLC ("SSB Citi").

Investment Policies. The Portfolio's non-fundamental investment policies
generally may be changed by the Board of Trustees without shareholder
approval.

Potential Conversion. The Portfolio reserves the right, if approved by the
Board of Trustees, to convert in the future to a "Master/Feeder" fund that
would invest all of its assets in a Master/Feeder fund having substantially the
same investment objective, policies and restrictions. At least 30 days written
notice of any action would be given to all shareholders if, and when, such a
proposal is approved.

                                        5

 S&P 500 Index Investments
<PAGE>

The Manager
The manager. The Consulting Group, a division of SSB Citi,
serves as the manager for the Portfolio. SSB Citi is a wholly-
owned subsidiary of Salomon Smith Barney Holdings Inc., which in turn is a
wholly-owned subsidiary 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 trad-
ing--and use diverse channels to make them available to consumer and corporate
customers around the world. As manager, the Consulting Group selects and
oversees professional money managers who are responsible for investing the as-
sets of the Portfolio. The Consulting Group was established to match the in-
vestment needs of institutional investors and substantial individual investors
with appropriate and well-qualified investment advisers. Since 1973, the Con-
sulting Group has grown to become one of the nation's foremost organizations
providing portfolio evaluation, asset allocation, market analysis and invest-
ment adviser selection services.

The Portfolio is part of a series of portfolios which comprise the Consulting
Group Capital Markets Funds (the "Trust"). The Trust is a series company that
consists of the Portfolio and the following additional portfolios which are of-
fered in separate prospectuses, copies which can be obtained from any Salo-
mon Smith Barney Financial Consultant:

 . Government Money Investments

 . Intermediate Fixed Income Investments

 . Long-Term Bond Investments

 . Municipal Bond Investments

 . Mortgage Backed Investments

 . High Yield Investments

 . Balanced Investments

 . Large Capitalization Value Equity Investments

 . Large Capitalization Growth Investments

 . Small Capitalization Value Equity Investments

 . Small Capitalization Growth Investments

 . International Equity Investments

 . International Fixed Income Investments

 . Emerging Markets Equity Investments

 . Multi-Strategy Market Neutral Investments

 . Multi-Sector Fixed Income Investments

 . Global Sciences and Technology Investments

The subadviser. Barclays Global Fund Advisors, as subadviser, is responsible
for the day-to-day investment operations of the Portfolio in accordance with
the Portfolio's investment objectives and policies. The name and address of the
subadviser is included below.


 SUBADVISER

 BARCLAYS GLOBAL FUND ADVISORS
 45 Fremont Street
 5th Floor
 San Francisco, CA 94105

  PORTFOLIO MANAGERS
  Domestic Equity Team of
  Barclays Global Fund Advisors


The subadviser selection process. Subject to the review and approval of the
Portfolio's Trustees, the Consulting Group is responsible for selecting,
supervising and evaluating subadvisers who manage the Portfolio's assets. The
Consulting Group employs a rigorous evaluation process to select those
subadvisers that have distinguished themselves through consistent and superior
performance. The Consulting Group is also responsible for communicating
performance expectations and evaluations to the subadviser and ultimately
recommending to the Board of Trustees whether the subadviser's contract should
be renewed. The Consulting Group provides written reports to the Trustees
regarding the results of its evaluation and monitoring functions.


                             The Evaluation Process

 The Consulting Group screens
 more than 3,000 registered in-
 vestment advisory firms, tracks
 the performance of more than 700
 firms on its comprehensive data-
 base and evaluates the strength
 and performance of advisory
 firms in Consulting Group pro-
 grams each year. Throughout the
 evaluation, the Consulting Group
 focuses on a number of key is-
 sues:

 . level of expertise

 . relative performance and
   consistency of performance

 . strict adherence to investment
   discipline or philosophy

 . personnel, facility and finan-
   cial strength

 . quality of service and commu-
   nication.


                                        6

 S&P 500 Index Investments
<PAGE>



Generally, shareholders must approve any change in subadvisers. However, the
Portfolio relies upon an exemptive order from the Securities and Exchange Com-
mission which permits the manager to select new subadvisers or replace existing
subadvisers without first obtaining shareholder approval for the change. The
Trustees, including a majority of the "non-interested" Trustees, must approve
each new subadvisory contract. This allows the manager to act more quickly to
change subadvisers when it determines that a change is beneficial to sharehold-
ers by avoiding the delay of calling and holding shareholder meetings to ap-
prove each change. In accordance with the exemptive order, the Portfolio will
provide investors with information about each new subadviser and its
subadvisory contract within 90 days of the engagement of a new subadviser.

Management Fees. The Consulting Group receives fees from the Portfolio for its
services at an annual rate of 0.02%% of its average daily net assets, which, in
turn, it pays to the subadviser for its services. For the most recent fiscal
year, the Consulting Group received 0.02% of the Portfolio's average daily net
assets for its services. In addition, the Portfolio pays SSB Citi a fee at an
annual rate of 0.10% of the Portfolio's average daily net assets for adminis-
tration services. For the most recent fiscal year, SSB Citi waived all of its
administration fees.

Possible Conflict of Interest. The advisory fee paid by each portfolio in the
Trust to the manager and the portion of that advisory fee paid by the manager
to each subadviser varies depending upon the portfolio of the Trust selected.
For this reason, the manager could retain a larger portion of the advisory fee
by recommending to clients in its asset allocation program certain portfolios
in the Trust over other portfolios for asset allocation. You should consider
this possible conflict of interest when evaluating the manager's asset alloca-
tion recommendation. The manager intends to comply with standards of fiduciary
duty that require it to act solely in the best interest of a participant when
making investment recommendations.

                                        7

 S&P 500 Index Investments
<PAGE>

Asset Allocation Programs
Shares of the Trust's portfolios are available to participants in advisory pro-
grams or asset based fee programs Salomon Smith Barney Inc., including the
TRAK(R) Personal-ized Investment Advisory Service, or other qualified
investment
advisers ap-proved by the Consulting Group. The advisory services provide
investors with asset allocation recommendations, which are implemented through
the portfolios.

Advisory services generally include:

 . evaluating the investor's investment objectives and time horizon

 . analyzing the investor's risk tolerance

 . recommending an allocation of assets among the portfolios in the Trust

 . providing monitoring reports containing an analysis and evaluation of an in-
  vestor's account and recommending any changes

While an advisory service makes a recommendation, the ultimate investment deci-
sion is up to the investor and not the provider of the advisory service.

Under an advisory service, an investor typically pays an advisory fee that may
vary based on a number of factors. The maximum fee for assets invested in the
Trust under a Salomon Smith Barney advisory service is 1.50% of average quar-
ter-end net assets. This fee may be reduced in certain circumstances. The fee
under a Salomon Smith Barney advisory program may be paid either by redemption
of shares of the Trust or by separate payment.

                                        8

 S&P 500 Index Investments
<PAGE>

Investment and Account Information
Account transactions

Purchase of Shares. You may purchase shares of the Portfolio if you are a par-
ticipant in an advisory program or asset based fee program sponsored by
Salomon Smith Barney, including
TRAK(R), or by qualified investment advisers not affiliated with Salomon Smith
Barney. Purchases of shares of the Portfolio must be made through a brokerage
account maintained with Salomon Smith Barney or through a broker that clears
securities transactions through Salomon Smith Barney (an introducing broker).
You may establish a brokerage account with Salomon Smith Barney free of charge
in order to purchase shares of the Portfolio.

 . The minimum initial aggregate investment in the TRAK program is $10,000. The
  minimum investment in a Portfolio is $100.

 . There is no minimum on additional investments.

 . The minimum initial aggregate investment in the TRAK program for employees of
  Salomon Smith Barney and members of their immediate families, and retirement
  accounts or plans for those persons, is $5,000.

 . The Portfolio and the TRAK program may vary or waive the investment minimums
  at any time.

 . You may establish a Systematic Withdrawal/Investment Schedule. For more in-
  formation, contact your Investment Professional or consult the SAI.

Shares of the Portfolio are sold at net asset value per share without imposi-
tion of a sales charge but will be subject to any applicable advisory program
fee. All orders to purchase accepted by Salomon Smith Barney or the introducing
broker before 4:00 p.m., Eastern time, will receive that day's share price. Or-
ders accepted after 4:00 p.m. will receive the next day's share price. All pur-
chase orders must be in good order to be accepted. This means you have provided
the following information:

 . Name of the portfolio

 . Account Number

 . Dollar amount or number of shares to be purchased

 . Signatures of each owner exactly as the account is registered

The Portfolio reserves the right to reject purchase orders or to stop offering
its shares without notice. No order will be accepted unless Salomon Smith Bar-
ney has received and accepted an advisory agreement signed by the investor par-
ticipating in the TRAK(R) program or other advisory program or asset based fee
program sponsored by Salo-
mon Smith Barney. With respect to investors participating in advisory programs
sponsored by entities other than Salomon Smith Barney, Salomon Smith Barney
must have received and accepted the appropriate documents before the order will
be accepted. Payment for shares must be received by Salomon Smith Barney or the
introducing broker within three business days after the order is placed in good
order.

Redemption of Shares. You may sell shares of the Portfolio at net asset value
on any day the New York Stock Exchange is open by contacting your broker. All
redemption requests accepted by Salomon Smith Barney or an introducing broker
before 4:00 p.m. Eastern time on any day will be executed at that day's share
price. Orders accepted after 4:00 p.m. will be executed at the next day's
price. All redemption orders must be in good form, which may require a signa-
ture guarantee (available from most banks, dealers, brokers, credit unions and
federal savings and loan associations, but not from a notary public) to assure
the safety of your account. If you discontinue your Salomon Smith Barney advi-
sory service, you must redeem your shares in the Portfolio.

The Portfolio has the right to suspend redemptions of shares and to postpone
the transmission of redemption proceeds to a shareholder's account at Salomon
Smith Barney or at an introducing broker for up to seven days, as permitted by
law. Redemption proceeds held in an investor's brokerage account generally will
not earn any income and Salomon Smith Barney or the introducing broker may ben-
efit from the use of temporarily uninvested funds. A shareholder who pays for
shares of the Portfolio by personal check will be credited with the proceeds of
a redemption of those shares after the purchaser's check has cleared, which may
take up to 15 days.

Exchange of Shares. An investor that participates in an advisory program may
exchange shares in the Portfolio for shares in any other portfolio in the Trust
at net asset value without payment of an exchange fee. Be sure to consider the
investment objectives and policies of any portfolio into which you make an ex-
change. An exchange is a taxable transaction except for exchanges within a re-
tirement account.

The Consulting Group may limit additional exchanges and/or purchases by a
shareholder if it determines that the shareholder is pursuing a pattern of fre-
quent exchanges. Excessive exchange transactions can adversely affect the Port-
folio's performance, hurting the Portfolio's other shareholders. If the Con-
sulting Group discovers a pattern of frequent exchanges, it will provide notice
in writing or by telephone to the shareholder at least 15 days before sus-
pending his or her exchange privilege. During the 15-day period the shareholder
will be required either to redeem his or her shares in the Portfolio or estab-
lish an allocation which the shareholder expects to maintain for a significant
period of time.

                                        9

 S&P 500 Index Investments
<PAGE>


                          Investment and Account Information, continued

Accounts with Low Balances. If your account falls below $7,500 as a result of
redemptions (and not because of performance or payment of the Salomon Smith
Barney Advisory Service fees), Salomon Smith Barney or the introducing broker
may ask you to increase the size of your account to $7,500 within thirty days.
If you do not increase the account to $7,500, Salomon Smith Barney may redeem
the shares in your account at net asset value and remit the proceeds to you.
The proceeds will be deposited in your brokerage account unless you instruct
otherwise.

Valuation of shares

The Portfolio offers its shares at their net asset value per share. The Portfo-
lio calculates net asset value once daily as of the close of regular trading on
the New York Stock Exchange (generally at 4:00 p.m., New York time) on each day
the exchange is open. The exchange is closed on certain holidays listed in the
SAI. If the exchange closes early, the Portfolio accelerates calculation of net
asset value and transaction deadlines to the actual closing time.

The Portfolio generally values its fund securities based on market prices or
quotations. The Portfolio's currency conversions, if any, are done when the
London stock exchange closes. When reliable market prices or quotations
are not available, or when the
Consulting Group believes they are unreliable or that the value of the security
has been materially affected by events occurring after the securities or cur-
rency exchanges close, the Portfolio may price those securities at fair value.
Fair value is determined in accordance with procedures approved by the Portfo-
lio's Board of Trustees. A mutual fund that uses fair value to price securities
may value those securities higher or lower than another fund using market quo-
tations to price the same securities.

International markets may be open, and trading may take place, on days when
U.S. markets are closed. For this reason, the values of foreign securities
owned by the Portfolio could change on days when shares of the Portfolio cannot
be bought or redeemed.

Dividends and distributions

The Portfolio intends to distribute all or substantially all of its net invest-
ment income and realized capital gains, if any, for each taxable year. The
Portfolio declares and pays dividends, if any, from net investment income annu-
ally. The Portfolio declares and distributes realized net capital gains, if
any, annually. All dividends and capital gains are reinvested in shares of the
Portfolio unless the shareholder elects to receive them in cash.

The Portfolio expects distributions to be primarily from capital gains, a sub-
stantial portion of which may be short-term.

Taxes
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Transactions                                              Federal Tax Status
------------------------------------------------------------------------------
<S>                                                       <C>
Sales or exchange of shares                               Usually capital gain
                                                          or loss; long-term
                                                          only if shares owned
                                                          more than one year
------------------------------------------------------------------------------
Distributions of long term                                Long-term capital
 capital gain                                             gain
------------------------------------------------------------------------------
Distributions of short term                               Ordinary income
 capital gain
------------------------------------------------------------------------------
Dividends from net                                        Ordinary income
 investment income
------------------------------------------------------------------------------
Any of the above received by                              Not a taxable event
 a retirement account
------------------------------------------------------------------------------
</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 Portfolio is about to declare a capital gain distribu-
tion or a taxable 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, you will receive a Form 1099 indicating your divi-
dends and distributions for the prior year, which are taxable as described
above even if reinvested, and your redemptions during that year. If you do not
provide the Portfolio with your correct taxpayer identification number and any
required certifications, you may be subject to backup withholding of 31% of the
Portfolio's 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 Portfolio.

As noted above, investors, out of their own assets, will pay an advisory serv-
ice fee. For most investors who are individuals, this fee will be treated as a
"miscellaneous itemized deduction" for federal income tax purposes. Under cur-
rent federal income tax law, an individual's miscellaneous itemized deductions
for any taxable year will be allowed as a deduction only to the extent the ag-
gregate of these deductions exceeds 2% of adjusted gross income. Such deduc-
tions are also subject to the general limitation on itemized deductions for in-
dividuals having, in 2000, adjusted gross income in excess of $128,950 ($64,475
for married individuals filing separately).

                                       10

 S&P 500 Index Investments
<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the perfor-
mance of the Portfolio for the past five years (or since inception if less than
5 years). The information in the following tables was audited by KPMG LLP, in-
dependent auditors, whose report, along with the portfolio's financial state-
ments, are included in the annual report (available upon request). Certain in-
formation reflects financial results for a single share. Total return repre-
sents the rate that a shareholder would have earned (or lost) on a share of a
fund assuming reinvestment of all dividends and distributions.

                  For a share of beneficial interest
                  outstanding throughout each year ended August
                  31:

                  -------------------------------------------------------------
<TABLE>
<CAPTION>
                                                   2000(1)(2)
                  -------------------------------------------
               <S>                                 <C>
               Net Asset Value, Beginning of Year     $8.00
                  -------------------------------------------
               Income From Operations:
                Net investment income(3)               0.11
                Net realized and unrealized gain       1.35
                  -------------------------------------------
               Total Income From Operations            1.46
                  -------------------------------------------
               Less Distributions From:
                Net investment income                (0.05)
                  -------------------------------------------
               Total Distributions                   (0.05)
                  -------------------------------------------
               Net Asset Value, End of Year           $9.41
                  -------------------------------------------
               Total Return++                        18.24%
                  -------------------------------------------
               Net Assets, End of Year (000s)       $35,365
                  -------------------------------------------
               Ratios to Average Net Assets+:
                Expenses(3)(4)                        0.30%
                Net investment income                  1.31
                  -------------------------------------------
               Portfolio Turnover Rate                  54%
                  -------------------------------------------
</TABLE>

                  (1) For the period from October 1, 1999 (commencement of
                      operations) to August 31, 2000.
                  (2) Per share amounts have been calculated using the monthly
                      average share method.
                  (3) Expense ratios and the per share decrease in net
                      investment income before fee waivers and/or expense
                      reimbursements were as follows:

<TABLE>
<CAPTION>
                                    Expense Ratio
                     Net Investment    Without
                       Income Per   Waiver and/or
                     Share Decrease Reimbursements
                          2000           2000
                    ------------------------------
                <S>  <C>            <C>
                         $0.04          0.82%+
</TABLE>

                  (4) As a result of a voluntary expense limitation, expense
                      ratios will not exceed 0.30%.
                  ++Total return is not annualized, as it may not be
                    representative of the total return for the year.
                  + Annualized.

                                       11

 S&P 500 Index Investments
<PAGE>

                                   APPENDIX A

                               Investment Indices

Following are definitions of indices that are utilized in the Client's Recom-
mendation and Review.

Lehman Brothers Government/Corporate Bond Index
Composed of publicly issued, fixed rate, non-convertible domestic debt in three
major classifications: industrial, utility, financial as well as the domestic
debt of the U.S. Government or any agency thereof. All issues have at least one
year to maturity, or an outstanding par value of at least $100 million for U.S.
Government issues and $50 million for corporate issues. All corporate issues
have a minimum rating of Baa by Moody's or BBB by Standard & Poor's.

Lehman Brothers Aggregate Bond Index
Composed of the Lehman Intermediate Government/ Corporate Bond Index and the
Mortgage-Backed Securities Index and also includes treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.

Lehman Brothers Long Term Government/Corporate Bond Index
Includes all bonds covered by the Lehman Brothers Government/Corporate Bond
Index, with maturities of 10 years or longer. Total return includes income and
appreciation/depreciation as a percentage of original investment.

Lehman Brothers Intermediate Government/Corporate Bond Index
A subset of the Lehman Brothers Government/Corporate Bond Index covering issues
with maturities up to ten years.

Lehman Brothers Mortgage Backed Securities Bond Index
Contains all fixed securities issued and backed by mortgage pools of GNMA's,
FHLMC's, FNMA's, Graduated Payment Mortgage (GPM's), but not Graduated Equity
Mortgages (GEM).

Lehman Brothers Municipal Bond Index
A composite measure of the total return performance of the municipal bond
market, which includes more than two million different bond issues. For
simplicity, the market is divided into seven major sectors, with the
performance of each sector weighted according to issue volume (adjusted
annually).

Lipper Balanced Funds Average
An average of the reinvested performance of funds whose primary objective is to
conserve principal by maintaining at all times a balanced portfolio of both
stocks and bonds. Typically, the stock/bond ratio ranges around 60 percent/40
percent, respectively.

Lipper Corporate Debt Funds A Rated Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in corporate debt issues rated "A" or better or government issues.

Lipper Corporate Debt Funds A Rated Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper Emerging Markets Funds Average
An average of the reinvested performance of funds that investing at least 65%
of total assets in emerging market equity securities, where emerging market is
defined by a country's gross national product per capita or other economic
measures.

Lipper General Municipal Debt Funds Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in municipal debt issues in the top four credit ratings.

Lipper General Municipal Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.


Lipper General World Funds Average
An average of the reinvested performance of the following twelve Lipper
investment objectives: Gold Oriented, Global, Global Small Company,
International, International Small Company, European Region, Pacific Ex Japan,
Pacific Region, Emerging Markets, Japanese, Latin American and Canadian Funds.

Lipper Growth Funds Average
An average of the reinvested performance of funds that normally invest in
companies whose long-term earnings are expected to grow significantly faster
than the earnings of the stocks represented in the major unmanaged stock
indices.

Lipper Growth Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper International Funds Average
An average of the reinvested performance of funds that invest their assets in
securities whose primary trading markets are outside of the United States.

Lipper International Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper International Income Funds Average
An average of the reinvested performance of funds that invest primarily in U.S.
dollar and non-U.S. dollar debt securities located in at least three countries
excluding the United States, except in periods of market weakness.

Lipper Large-Cap Growth Funds Average
An average of the reinvested performance of funds that normally invest in
companies with long-term earnings expected to grow significantly faster than
the earnings of the stocks represented in a major unmanaged stock index. These
funds will normally have an above-average price-to-earnings ratio, price-to-
book ratio and three-year earnings

                                      A-1
<PAGE>

                                   APPENDIX A

                        Investment Indices--(Continued)

growth figure, compared to the U.S. diversified large-cap
funds universe average. Large-cap funds will generally invest at least 75% of
their assets in companies with market capitalizations (on a three-year weighted
basis) greater than 300% of the dollar-weighted median market capitalization of
the S&P Mid-Cap 400 Index.

Lipper Multi-Cap Value Funds Average
An average of the reinvested performance of funds that normally invest in
companies considered to be undervalued relative to a major unmanaged stock
index based on price-to-current earnings, book value, asset value or other
factors. These funds will normally have a below-average price-to-earnings
ratio, price-to-book ratio and three-year earnings growth figure, compared to
the U.S. diversified multi-cap funds universe average. Multi-cap funds will
generally have between 25% to 75% of their assets invested in companies with
market capitalizations (on a three-year weighted basis) greater than 300% of
the dollar-weighted median market capitalization of the S&P Mid-Cap 400 Index.

Lipper Small-Cap Growth Funds Average
An average of the reinvested performance of funds that normally invest in
companies with long-term earnings expected to grow significantly faster than
the earnings of the stocks represented in a major unmanaged stock index. These
funds will normally have an above-average price-to-earnings ratio, price-to-
book ratio and three-year earnings growth figure, compared to the U.S.
diversified small-cap funds universe average. Small-cap funds will generally
invest at least 75% of their assets in companies with market capitalizations
(on a three-year weighted basis) of less than 250% of the dollar-weighted
median market capitalization of the S&P Small-Cap 600 Index.

Lipper Small-Cap Value Funds Average
An average of the reinvested performance of funds that normally invest in
companies considered to be undervalued relative to a major unmanaged stock
index based on price-to-current earnings, book value, asset value or other
factors. These funds will normally have a below-average price-to-earnings
ratio, price-to-book ratio and three-year earnings growth figure, compared to
the U.S. diversified small-cap funds universe average. Small-cap funds will
generally invest at least 75% of their assets in companies with market
capitalizations (on a three-year weighted basis) of less than 250% of the
dollar-weighted median market capitalization of the S&P Small-Cap 600 Index.

Lipper Small Company Funds Average
An average of the reinvested performance of funds that by their prospectus or
portfolio practice, limit investments to companies on the basis of the size of
the company.

Lipper Small Company Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper U.S. Government Money Market Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper U.S. Mortgage Funds Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in mortgages/securities issued or guaranteed as to principal and
interest by the U.S. Government and certain federal agencies.

Morgan Stanley EAFE (Capitalization Weighted)
A composite portfolio of equity (stock market) total returns for the countries
of Europe, Australia, New Zealand and the Far East. The return for each country
is weighted on the basis of its market capitalization.

Morgan Stanley Emerging Equity Markets Free Gross Dividend Index
A composite portfolio consisting of equity total returns for countries with low
to middle per capita income, as determined by the World Bank. Some of these
countries include: Argentina, Greece, India, Malaysia and Turkey. The return
for each country is weighted on the basis of its total market capitalization.

90-Day Treasury Bill Index
Unweighted average of weekly auction offering rates of 90-Day Treasury Bills.
Treasury Bills are backed by the full faith and credit of the U.S. Government.

Russell 1000 Index
The 1,000 largest U.S. companies by market capitalization, the smallest of
which has about $1.6 billion in market capitalization. The average market
capitalization for a company in this index is $14.10 billion.

Russell 1000 Value Index
Contains those Russell 1000 securities with less-than-average growth
orientation. Companies in this index generally have low price-to-book and
earnings ratios and lower forecasted growth values than stocks in the Russell
1000 Growth Index.

Russell 1000 Growth Index
Contains those Russell 1000 securities with greater-than-average growth
orientation. Companies in this index tend to exhibit high price-to-book and
earnings ratios and higher forecasted growth values than stocks in the Russell
1000 Value Index.

Russell 2000 Index
Composed of the 2,000 smallest U.S. securities as determined by total market
capitalization, representing approximately 8.0% of the Russell 3000 Index. The
average market capitalization for a company in this index is $580 million,
with the largest being $1.50 billion.


                                      A-2
<PAGE>

                                   APPENDIX A

                        Investment Indices--(Continued)

Russell 2000 Value Index
Contains those Russell 2000 securities with less-than-average growth
orientation. Companies in this index generally have low price-to-book and
earnings ratios and lower forecasted growth values than stocks in the Russell
2000 Growth Index.

Russell 2000 Growth Index
Contains those Russell 2000 securities with greater-than-average growth
orientation. Companies in this index tend to exhibit high price-to-book and
earnings ratios and higher forecasted growth values than stocks in the Russell
2000 Value Index.

Standard & Poor's 500 Index
As of November 30, 2000, the index tracks the total return of 500 of the
largest stocks (378 industrial, 38 utility, 10 transportation and 74 financial
companies) in the United States, which represent about 86% of the New York
Stock Exchange's total market capitalization. The return of each stock is
weighted on the basis of the stock's capitalization.

Salomon Smith Barney Non-U.S. Government Bond Index
A market capitalization-weighted index consisting of government bond markets of
Austria, France, Spain, Australia, Germany, Sweden, Belgium, Italy, United
Kingdom, Canada, Japan, Denmark and the Netherlands.

Wilshire Large Company Growth Equity Index
Focuses on the top 750 companies of the Wilshire 5000 in terms of market
capitalization. The index excludes companies meeting one or more of the
following criteria: less than 5 years of operating history, high dividend
payout, low price-to-book or low return on equity.

Wilshire Large Company Value Equity Index
Focuses on the top 750 companies of the Wilshire 5000 in terms of market
capitalization. The index excludes companies that do not rank favorably on a
relative basis due to their high P/E and price-to-book ratios, or low yield.

Wilshire Small Company Growth Equity Index
Focuses on companies that rank between 751-1,750 of the Wilshire 5000 in terms
of market capitalization. The index excludes companies meeting one or more of
the following criteria: less than two years operating history, high yield,
little or no earnings growth or low beta.

Wilshire Small Company Value Equity Index
Focuses on companies that rank between 751-1,750 of the Wilshire 5000 in terms
of market capitalization. The index excludes companies that do not rank
favorably on a relative basis because of their high price-to-earnings and
price-to-book ratios, or low yield.

                                      A-3
<PAGE>

                                   APPENDIX B

The following are copies of the proposed and final exemption and a technical
amendment to the final exemption from the Department of Labor from certain
provisions of the Employee Retirement Income Security Act of 1974 relating to
the purchase of shares and participation in TRAK by certain retirement plans
and individual retirement accounts.

--------------------------------------------------------------------------------
PENSION AND WELFARE BENEFITS ADMINISTRATION

[Application Nos. D-10809 and D-10865]

Notice of Proposed Individual Exemption to Amend and Replace Prohibited
Transaction Exemption (PTE) 99-15, Involving Salomon Smith Barney Inc., Located
in New York, NY

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of Labor.

ACTION: Notice of proposed individual exemption to modify and replace PTE 99-
15.
--------------------------------------------------------------------------------
SUMMARY: This document contains a notice of pendency before the Department of
Labor (the Department) of a proposed and replacement individual exemption
which, if granted, would amend PTE 99-15 (64 FR 1648, April 5, 1999), an
exemption granted to Salomon Smith Barney. PTE 99-15 relates to the operation
of the TRAK Personalized Investment Advisory Service product (the TRAK Program)
and the Trust for Consulting Group Capital Markets Funds (the Trust). If
granted, the proposed exemption would affect participants and beneficiaries of
and fiduciaries with respect to employee benefit plans (the Plans)
participating in the TRAK Program.

EFFECTIVE DATE: If granted, the proposed amendment will be effective as of
April 1, 2000.

DATES: Written comments and requests for a public hearing should be received by
the Department on or before July 17, 2000.

ADDRESSES: All written comments and requests for a public hearing (preferably,
three copies) should be sent to the Office of Exemption Determinations, Pension
and Welfare Benefits Administration, Room N-5649, U.S. Department of Labor, 200
Constitution Avenue, NW, Washington, DC 20210, Attention: Application Nos. D-
10809 and D-10865. The applications pertaining to the proposed exemption and
the comments received will be available for public inspection in the Public
Documents Room of the Pension and Welfare Benefits Administration, U.S.
Department of Labor, Room N-5507, 200 Constitution Avenue, NW, Washington, DC
20210.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption
Determinations, Pension and Welfare Benefits Administration, U.S. Department of
Labor, telephone (202) 219-8881. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency before the
Department of a proposed exemption that would amend and replace PTE 99-15. PTE
99-15, provides an exemption from certain prohibited transaction restrictions
of section 406 of the Employee Retirement Income Security Act of 1974 (the Act)
and from the sanctions resulting from the application of section 4975 of the
Internal Revenue Code of 1986 (the Code), as amended, by reason of section
4975(c)(1) of the Code. Specifically, PTE 99-15 provides exemptive relief from
the restrictions of section 406(a) of the Act and the sanctions resulting from
the application of section 4975 of the Code, by reason of section 4975(c)(1)(A)
through (D) of the Code, for the purchase or redemption of shares in the Trust
by an employee benefit plan, an individual retirement account (the IRA), a
retirement plan for a self-employed individual (the Keogh Plan), or an
individual account pension plan that is subject to the provisions of Title I of
the Act and established under section 403(b) of the Code (the Section 403(b)
Plan). PTE 99-15 also provides exemptive relief from the restrictions of
section 406(b) of the Act and the sanctions resulting from the application of
section 4975 of the Code, by reason of section 4975(c)(1)(E) and (F) of the
Code, with respect to the provision, by the Consulting Group of Salomon Smith
Barney (the Consulting Group), of (1) investment advisory services or (2) an
automatic reallocation option to an independent fiduciary of a participating
Plan (the Independent Plan Fiduciary) which may result in such fiduciary's
selection of a portfolio (the Portfolio) in the TRAK Program for the investment
of Plan assets./1/
-------
 /1/ PTE 99-15 also (a) described a series of corporate mergers which changed
the names of the parties identified in two prior TRAK exemptions which it
superseded [i.e., PTE 94-50 (59 FR 32024, June 21, 1994) and PTE 92-77 (55 FR
45833, October 5, 1992)] and which would permit broader distribution of TRAK-
related products; (b) implemented a recordkeeping reimbursement offset
procedure under the TRAK Program; (c) adopted an automated reallocation option
under the TRAK Program that would reduce the asset allocation (or "outside")
fee paid to Salomon Smith Barney by a Plan investor; and (d) expanded the scope
of the exemption to include Section 403(b) Plans. PTE 94-50 permitted Smith,
Barney Inc. (Smith Barney), Salomon Smith Barney's predecessor, to add a daily-
traded collective investment fund (the GIC Fund) to the existing Fund
portfolios and to describe the various entities operating the GIC Fund. PTE 94-
50 also replaced references to Shearson Lehman Brothers, Inc. (Shearson Lehman)
with Smith Barney and amended and replaced PTE 92-77. Finally, PTE 92-77
permitted Shearson Lehman to make the TRAK Program available to Plans that
acquired shares in the former Trust for TRAK Investments and allowed the
Consulting Group to provide investment advisory services to an Independent Plan
Fiduciary which might result in such fiduciary's selection of a Portfolio in
the TRAK Program for the investment of Plan assets.

 As of December 31, 1998, the TRAK Program held assets that were in excess of
$9.6 billion. Of those assets, approximately $1.9 billion were held in 407 Plan
accounts having cash or deferred compensation arrangements and approximately
$4.2 billion were held in more than 59,000 employee benefit plan and IRA/Keogh-
type Plan accounts. At present, the Trust consists of 17 Portfolios that are
managed by the Consulting Group and advised by one or more unaffiliated sub-
advisers selected by Salomon Smith Barney.

 Salomon Smith Barney requests a modification of PTE 99-15 and a replacement of
that exemption with a new exemption for purposes of uniformity./2/
Specifically, Salomon Smith Barney requests that the term "affiliate," as set
forth in PTE 99-15, in Section II(h) of the General Conditions and in Section
III(b) of the Definitions, be amended and clarified to avoid possible
misinterpretation. In this regard, Salomon Smith Barney also requests that the
term "officer" be defined and incorporated into the proposed exemption, in new
Section III(d), to limit the affiliate definition to persons who have a
significant management role. Further, Salomon Smith Barney requests that
Section II(i) of PTE 99-15 be amended to permit an independent sub-adviser (the
Sub-Adviser), under certain circumstances, to exceed the current one percent
limitation on the acquisition of securities that are issued by Salomon Smith
Barney and/or its affiliates, notably in the Sub-Adviser's replication of a
third-party index. If granted, the proposed exemption would be effective as of
April 1, 2000.

 The proposed exemption has been requested in an application filed on behalf of
Salomon Smith Barney pursuant to section 408(a) of the Act and section
4975(c)(2) of the Code, and in accordance with the procedures set forth in 29
CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990). Effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October
17, 1978) transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor. Accordingly, the
proposed exemption is being issued solely by the Department.
-------
 /2/ The Department deems PTE 94-50 as having been effectively superseded by
PTE 99-15. Therefore, the proposed amendments described herein will not apply
to PTE 94-50.


                                      B-1
<PAGE>

I. Proposed Modification of the Term "Affiliate"

 Salomon Smith Barney represents that in early December 1999, Citigroup and
State Street Corporation announced an agreement to form a joint venture called
CitiStreet LLC, a Delaware limited liability company (the Joint Venture). The
Joint Venture, which was closed on April 1, 2000, is each 50 percent owned by
Keeper Holdings LLC (Citi), a wholly owned subsidiary of Citigroup, and by
State Street Bank and Trust Company (State Street), a wholly owned subsidiary
of State Street Corporation. Both Citigroup and State Street Corporation are
publicly-held corporations.

 Salomon Smith Barney explains that the formation of the Joint Venture may have
resulted in the disqualification of State Street Global Advisers (SSgA), a
division of State Street, from acting as a Sub-Adviser in the TRAK Program due
to certain ambiguities in the meaning of the word "affiliate." Salomon Smith
Barney represents that SSgA is currently a Sub-Adviser with respect to
approximately $800 million in assets in the International Equity Investments
Portfolio and the Emerging Markets Equity Investments Portfolio.

A. Sections II(h) and III(b)

 Section II(h) of PTE 99-15 provides that--

 Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.

 Although the term "independent" is not defined in the exemption, Salomon Smith
Barney notes that this condition was added to the original Shearson Lehman
exemption request when Shearson Lehman agreed not to use affiliated Sub-
Advisers. Therefore, Salomon Smith Barney presumes that the term "independent"
means "not an affiliate." Salomon Smith Barney represents that Section III(b)
of PTE 99-15 defines the term "affiliate" of Salomon Smith Barney to include:

 (1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney.
(For purposes of this subparagraph, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)

 (2) Any officer, director or partner in such person, and

 (3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.

 Salomon Smith Barney notes that problems of interpretation have arisen because
subparagraphs (2) and (3) of the affiliate definition use the term "such
person" rather than referring directly to Salomon Smith Barney. Salomon Smith
Barney explains that when defining an "affiliate" of Salomon Smith Barney, the
definition may be construed to encompass only relationships with Salomon Smith
Barney that involve shared control, influence or economic interests or it could
be interpreted to cover affiliates of Salomon Smith Barney's affiliates, where
there is no basis for common management or identical economic interests,
because subparagraphs (2) and (3) have no clear antecedents.

 Salomon Smith Barney asserts that State Street is not under common corporate
control with either it or any of its corporate affiliates. Instead, State
Street is a subsidiary of an independently-owned and managed public company.
Therefore, there is no control relationship, as contemplated in subparagraph
(1) of Section III(b), between Citigroup and State Street Corporation, the
respective parent companies of Salomon Smith Barney and of State Street.
Salomon Smith Barney also states that the Joint Venture is not necessarily its
affiliate under subparagraph (1) of the definition because Salomon Smith
Barney's indirect 50 percent ownership interest in the Joint Venture is not a
"controlling interest." Therefore, if the Joint Venture is not an affiliate,
Salomon Smith Barney believes that State Street is not a partner of Salomon
Smith Barney, nor an officer or director of Salomon Smith Barney, as
contemplated in subparagraph (2) of Section III(b). Further, Salomon Smith
Barney explains that State Street's exclusive ownership by State
Street Corporation does not trigger the ownership provisions of subparagraph
(3) of Section III(b).

 In addition to the above, Salomon Smith Barney states that it will not
exercise control or influence in the operation of the Joint Venture that will
inure to State Street. In addition, Salomon Smith Barney represents that Citi
will not exercise control of the Joint Venture because it has only a 50 percent
interest. Further, since all significant corporate actions of the Joint Venture
will require unanimity, Salomon Smith Barney explains that neither Citi nor
State Street will be able to exercise exclusive control over the Joint Venture.

B. Proposed Amendment

 Salomon Smith Barney submits that subparagraph (1) of Section III(b) does not
require any clarification. However, it proposes that subparagraphs (2) and (3)
of the affiliate definition be modified to cover only those persons and
entities that have a significant role in the decisions made by Salomon Smith
Barney or which are managed or influenced by Salomon Smith Barney. These
entities or persons include individual officers, directors and partners in
Salomon Smith Barney and its corporate affiliates, and corporations and
partnerships in which Salomon Smith Barney and its corporate affiliates have a
10 percent or greater interest. Salomon Smith Barney believes that this
tailoring of the affiliate definition will avoid future problems in determining
the independence of the Sub-Advisers, including SSgA.

 Thus, on the basis of the foregoing, Section III(b) of PTE 99-15 is hereby
modified in this notice of proposed exemption to read as follows:

 (b) An "affiliate" of Salomon Smith Barney includes--

 (1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney;
(For purposes of this subparagraph, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)

 (2) Any individual who is an officer, director or partner in Salomon Smith
Barney or a person who is described in subparagraph (b)(1);

 (3) Any corporation or partnership of which Salomon Smith Barney or an
affiliate described in subparagraph (b)(1), is a 10 percent or more partner or
owner; and

 (4) Any corporation or partnership of which any individual which is an officer
or director of Salomon Smith Barney, is a 10 percent or more partner or owner.

 In connection with the revised affiliate definition, Salomon Smith Barney
requests that the term "officer" be defined in new subparagraph (d) of Section
III to limit this portion of the affiliate definition to individuals who have a
significant management role. Salomon Smith Barney points out that there are job
titles at fairly modest levels of authority within it as well as in any
company, and it wishes to ensure that future factual inquiries into an

                                      B-2
<PAGE>

individual's status as an affiliate do not require that it contact virtually
every official in its corporate population in a due diligence effort.
Therefore, Salomon Smith Barney proposes that Section III(d) should read as
follows:

 The term "officer" means a president, any vice president in charge of a
principal business unit, division or function (such as sales, administration or
finance), or any other officer who performs a policy-making function for the
entity.

 Under the foregoing modifications, Salomon Smith Barney believes that Sections
II(h) and III(b) of the proposed exemption will no longer have conflicting
meanings.

II. Proposed Modification of the One Percent Limitation on Stock Issued by
Salomon Smith Barney and/or Its Affiliates

 Salomon Smith Barney represents that there are a number of established market
indexes that have been created by parties which are unaffiliated with
Citigroup, its indirect parent. For example, the S&P 500 Index is a widely-used
benchmark index of domestic equity performance. This index consists of 500
stocks that have been selected by the Standard & Poor's Company (S&P) for
market capitalization, liquidity and industry group representation. The index
is market-value weighted so the performance of the larger of the included
companies has a greater impact on the performance of the index as a whole.
Currently, the common stock (the Common Stock) of Citigroup represents 1.57
percent of the S&P 500 Index.

 In addition to the S&P 500 Index, Salomon Smith Barney explains that the
Russell 3000 Index is composed of the 3,000 largest United States companies,
based upon total market capitalization. Salomon Smith Barney also points out
that there are a number of Russell Indexes which are based on subsets of the
Russell 3000 Index. These Indexes include (a) the Russell 2000 Index, which
measures the performance of the smallest 2,000 United States companies in the
Russell 3000 Index and therefore, excludes Citigroup; and (b) the Russell 1000
Index, which measures the performance of the 1,000 largest United States
companies in the Russell 3000 Value Index and includes Citigroup. In addition,
Salomon Smith Barney represents that there are further subsets of the Russell
Indexes which are based upon Russell's characterization of stock as either
"Growth" or "Value." For example, Salomon Smith Barney explains that Citigroup
is included within these subsets. As of March 31, 2000, Citigroup Common Stock
represented 3.8981 percent of the Russell 1000 Value Index and 3.6343 percent
of the Russell 3000 Value Index.

A. Section II(i)

 Based upon the foregoing descriptions of the stock indexes, Salomon Smith
Barney requests that Section II(i) of PTE 99-15 be modified in order to permit
an independent Sub-Adviser which manages the assets in a Portfolio to exceed
the one percent investment limitation on securities issued by Salomon Smith
Barney and/or its affiliates under certain circumstances. As currently drafted,
Section II(i) states that--

 Immediately following the acquisition by a Portfolio of any securities that
are issued by Salomon Smith Barney and/or its affiliates, the percentage of
that Portfolio's net assets invested in such securities will not exceed one
percent.

 In other words, the exception will apply to "any higher percentage" which may
result from a Sub-Adviser's management of an index fund (the Index Fund)
Portfolio which includes Citigroup Common Stock. The index will be an
established third party index and the Sub-Adviser will track the index results
using the "passive full replication" trading method./3/

 Because the Sub-Adviser will purchase and sell Citigroup Common Stock to
approximate the performance of an index rather than reflect the Sub-Adviser's
evaluation of the Common Stock in its individual merits, Salomon Smith Barney
states that any additional investment by a Portfolio in Citigroup Common Stock
over the one percent threshold will result from the implementation of the
trading method and not from the Sub-Adviser's exercise of investment
discretion.

 Due to the one percent limitation of Section II(i), Salomon Smith Barney
states that active Sub-Advisers for the Consulting Group may not own or trade
Citigroup Common Stock and they will continue to be prohibited from trading in
Citigroup Common Stock. However, Salomon Smith Barney proposes that passive or
pure Index Fund Sub-Advisers be permitted to hold Citigroup Common Stock in
their portfolios which exceed the one percent limitation to the extent such
higher percentage is
-------
 /3/ According to Salomon Smith Barney, there are two forms of index trading--
passive full replication (wherein each stock in the same weightings as the in-
dex is owned by a mutual fund) and sampling (in which each sector, but not nec-
essarily all stocks in such sector, in the same weightings as the index is also
owned by a mutual fund). Salomon Smith Barney notes that sampling is used most
often when a portfolio is smaller and cannot efficiently replicate the entire
index.

necessary to replicate the underlying index./4/ Salomon Smith Barney points out
that pure index Sub-Advisers that are responsible for investing only a portion
of the assets in the Consulting Group Capital Markets Large Cap Value Fund and
the Large Cap Growth Consulting Group Capital Markets Fund, are currently in
compliance with the one percent limitation. These Portfolios, which consist of
both an actively-managed portion and a distinct, passively-managed portion,
held less than one percent of the their total assets in Citigroup Common Stock.

 If an index-based Sub-Adviser were to manage a greater portion or all of
either of the aforementioned Portfolios, Salomon Smith Barney explains that the
total Portfolio may include Citigroup Common Stock which breaches the one
percent threshold. Similarly, Salomon Smith Barney notes that if the entire
Portfolio, such as the Consulting Group Capital Markets S&P 500 Index
Investment Fund Portfolio, has the investment objective of providing results
that correspond to the price and yield performance of the S&P 500 Index, the
Sub-Adviser would be expected to approximate the cited percentage of 1.57
percent for Citigroup Common Stock in the S&P 500 Index. This would also
violate the one percent investment limitation.

 Salomon Smith Barney states that the present one percent limitation placed on
Citigroup Common Stock increases the likelihood that the performance of an
Index Fund Portfolio will not replicate the applicable index. Because Citigroup
is among the largest companies on the basis of capitalization in the S&P 500,
Salomon Smith Barney states that Citigroup's performance can have a significant
impact in index performance calculations. However, if Citigroup Common Stock is
not proportionately represented, Salomon Smith Barney explains that Index Fund
performance will deviate from the index whether Citigroup Common Stock does
well or underperforms.
-------
 /4/ In its management of a "pure" Index Fund, the Sub-Adviser does not
evaluate individual companies to identify attractive investment candidates or
to eliminate underperforming investments. Instead, the Sub-Adviser attempts to
mirror the composition of the relevant index as closely as possible by
adjusting the Portfolio holdings daily to reflect the companies included in the
index and their relative weightings. Because performance of the Index Fund is
tied to the performance of the index that it tracks, investors are advised that
this investment strategy may mean losses if the applicable index performs
poorly relative to other indexes or individual stocks.
 The performance of a pure Index Fund generally does not mirror the index
performance exactly. The index is merely a composite performance figure, based
upon an established selection of companies. It does not represent actual assets
being managed so there are no expenses deducted from its performance results.
In contrast, an Index Fund Portfolio represents actual assets under management
and has liquidity requirements associated with Fund operation. To meet
redemption requests and to pay expenses, the Index Fund must maintain a portion
of its assets in cash and cash equivalents.

                                      B-3
<PAGE>

 In any event, Salomon Smith Barney believes that the one percent limitation
has the effect of depriving a Plan of the opportunity to invest in a Fund
(available to non-Plan investors) that might otherwise track the applicable
index more exactly. Because many Plan sponsors are anxious to have an Index
Fund available through the TRAK Program, Salomon Smith Barney wishes to move
quickly to accommodate the Plan market's design preferences.

 For these reasons, Salomon Smith Barney requests that the current one percent
restriction be lifted and allowed to be exceeded with respect to Portfolio
investments that are made by passive Sub-Advisers in Citigroup Common Stock in
their replication of third-party indexes. In addition, Salomon Smith Barney
seeks the flexibility to have the Portfolios consist, in whole or in part, of
Index Funds that are managed by passive Sub-Advisers. However, the ownership by
a Portfolio of Citigroup Common Stock which is in excess of the one percent
limitation would result solely from the activities of the passive Sub-Adviser
in replicating an index.

B. Exemptive Safeguards

Section II(i) of the proposed exemption has been further expanded to include a
number of substantive safeguards for the protection of Plans investing under
the TRAK Program. In this regard, Section II(i) requires that the amount held
by the Sub-Adviser in managing an Index Fund Portfolio be held in order to
replicate an established third party index. In addition, Section II(i) states
that the index must represent the investment performance of a specific segment
of the public market for equity securities in the United States and/or foreign
countries. In this regard, the organization creating the index must be (a)
engaged in the business of providing financial information; (b) a publisher of
financial news information; or (c) a public stock exchange or association of
securities dealers. The index must also be created and maintained by an
organization independent of Salomon Smith Barney and its affiliates and must be
a generally-accepted standardized index of securities which is not specifically
tailored for use by Salomon Smith Barney and its affiliates.

 Moreover, Section II(i) requires that the acquisition or disposition of
Citigroup Common Stock must not include any agreement, arrangement or
understanding regarding the design or operation of the Portfolio acquiring the
Citigroup Common Stock, which is intended to benefit Salomon Smith Barney or
any party in which Salomon Smith Barney may have an interest.

 Finally, Section II(i) requires that an Independent Plan Fiduciary authorize
the investment of a Plan's assets in an Index Fund Portfolio which purchases
and/or holds Citigroup Common Stock while the Sub-Adviser will be responsible
for voting any shares of Citigroup Common Stock that are held by an Index Fund
on any matter in which shareholders of Citigroup Common Stock are required or
permitted to vote.

Notice to Interested Persons

 Notice of the proposed exemption will be mailed by first class mail to the
Independent Plan Fiduciary of each Plan currently participating in the TRAK
Program, or, in the case of a Section 404(c) Plan, to the recordholder of Trust
shares. Such notice will be given within 15 days of the publication of the
notice of pendency in the Federal Register. The notice will contain a copy of
the notice of proposed exemption as published in the Federal Register and a
supplemental statement, as required pursuant to 29 CFR 2570.43(b)(2). The
supplemental statement will inform interested persons of their right to comment
on and/or to request a hearing with respect to the pending exemption. Written
comments and hearing requests are due within 45 days of the publication of the
proposed exemption in the Federal Register.

General Information

 The attention of interested persons is directed to the following:

 (1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;

 (2) The proposed exemption, if granted, will extend to transactions prohibited
under section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;

 (3) Before an exemption can be granted under section 408(a) of the Act and
section 4975(c)(2) of the Code, the Department must find that the exemption is
administratively feasible, in the interest of the plan and of its participants
and beneficiaries and protective of the rights of participants and
beneficiaries of the plan;

 (4) This proposed exemption, if granted, will be supplemental to, and not in
derogation of, any other provisions of the Act and the Code, including
statutory or administrative exemptions. Furthermore, the fact that a
transaction is subject to an administrative or statutory exemption is not
dispositive of whether the transaction is in fact a prohibited transaction; and

 (5) This proposed exemption, if granted, is subject to the express condition
that the facts and representations set forth in the notice of proposed
exemption relating to PTE 99-15 and this notice, accurately describe, where
relevant, the material terms of the transactions to be consummated pursuant to
this exemption.

Written Comments and Hearing Requests

 All interested persons are invited to submit written comments or requests for
a hearing on the pending exemption to the address above, within the time frame
set forth above, after the publication of this proposed exemption in the
Federal Register. All comments will be made a part of the record. Comments
received will be available for public inspection with the referenced
applications at the address set forth above.

Proposed Exemption

 Based on the facts and representations set forth in the application, the
Department is considering granting the requested exemption under the authority
of section 408(a) of the Act and section 4975(c)(2) of the Code and in
accordance with the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR
32836, August 10, 1990).

Section I. Covered Transactions

 A. If the exemption is granted, the restrictions of section 406(a) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, shall not apply, to
the purchase or redemption of shares by an employee benefit

                                      B-4
<PAGE>

plan, an individual retirement account (the IRA), a retirement plan for self-
employed individuals (the Keogh Plan), or an individual account pension plan
that is subject to the provisions of Title I of the Act and established under
section 403(b) of the Code (the Section 403(b) Plan; collectively, the Plans)
in the Trust for Consulting Group Capital Market Funds (the Trust), established
by Salomon Smith Barney, in connection with such Plans' participation in the
TRAK Personalized Investment Advisory Service product (the TRAK Program).

 B. If the exemption is granted, the restrictions of section 406(b) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(E) and (F) of the Code, shall not apply, to the
provision, by the Consulting Group, of (1) investment advisory services or (2)
an automatic reallocation option (the Automatic Reallocation Option) to an
independent fiduciary of a participating Plan (the Independent Plan Fiduciary),
which may result in such fiduciary's selection of a portfolio (the Portfolio)
in the TRAK Program for the investment of Plan assets. This proposed exemption
is subject to the following conditions that are set forth below in Section II.

Section II. General Conditions

 (a) The participation of Plans in the TRAK Program will be approved by an
Independent Plan Fiduciary. For purposes of this requirement, an employee,
officer or director of Salomon Smith Barney and/or its affiliates covered by an
IRA not subject to Title I of the Act will be considered an Independent Plan
Fiduciary with respect to such IRA.

 (b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.

 (c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.

 (d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.
 (e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.

 (f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--

 (1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be automatically
reallocated whenever the Consulting Group modifies the particular asset
allocation recommendation which the Independent Plan Fiduciary has chosen. Such
Election shall continue in effect until revoked or terminated by the
Independent Plan Fiduciary in writing.

 (2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and redemption procedures may delay such processing through a
series of purchase and redemption transactions to shift assets among the
affected Portfolios.

 (3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
any time within the period of 30 calendar days prior to the proposed Effective
Date that such fiduciary does not wish to follow such revised asset allocation
recommendation, the Allocation Model will remain at the current level, or at
such other level as the Independent Plan Fiduciary then expressly designates,
in writing. If the Independent Plan Fiduciary does not affirmatively "opt out"
of the new Consulting Group recommendation, in writing, prior to the proposed
Effective Date, such new recommendation will be automatically effected by a
dollar-for-dollar liquidation and purchase of the required amounts in the
respective account.

 (4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations on the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper.

 (g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Plan providing for participant- directed investments
(the Section 404(c) Plan), the Consulting Group will provide investment advice
that is limited to the Portfolios made available under the Plan.

 (h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.

 (i) Immediately following the acquisition by a Portfolio of any securities
that are issued by Salomon Smith Barney and/or its affiliates, such as
Citigroup Inc. common stock (the Citigroup Common Stock), the percentage of
that Portfolio's net assets invested in such securities will not exceed one
percent. However, this percentage limitation may be exceeded if--

 (1) The amount held by a Sub-Adviser in managing a Portfolio is held in order
to replicate an established third party index.

 (2) The index represents the investment performance of a specific segment of
the public market for equity securities in the United States and/or foreign
countries. The organization creating the index must be--
 (i) Engaged in the business of providing financial information;
 (ii) A publisher of financial news information; or
 (iii) A public stock exchange or association of securities dealers. The index
is created and maintained by an organization independent of Salomon Smith
Barney and its affiliates and is a generally-accepted standardized index of
securities which is not specifically tailored for use by Salomon Smith Barney
and its affiliates.

 (3)  The acquisition or disposition of Citigroup Common Stock does not include

                                      B-5
<PAGE>

any agreement, arrangement or understanding regarding the design or operation
of the Portfolio acquiring the Citigroup Common Stock, which is intended to
benefit Salomon Smith Barney or any party in which Salomon Smith Barney may
have an interest.

 (4) The Independent Plan Fiduciary authorizes the investment of a Plan's
assets in an Index Fund which purchases and/or holds Citigroup Common Stock and
the Sub-Adviser is responsible for voting any shares of Citigroup Common Stock
that are held by an Index Fund on any matter in which shareholders of Citigroup
Common Stock are required or permitted to vote.

 (j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and the Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.

 (k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares,

 (1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:

 (A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, Salomon Smith Barney and its subsidiaries and the
compensation paid to such entities./5/

 (B) Upon written or oral request to Salomon Smith Barney, a Statement of
Additional Information supplementing the Prospectus which describes the types
of securities and other instruments in which the Portfolios may invest, the
investment policies and strategies that the Portfolios may utilize and certain
risks attendant to those investments, policies and strategies.
-------
 /5/ The fact that certain transactions and fee arrangements are the subject of
an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of the fees and expenses to be paid by the
Plan, including the fees paid directly to Salomon Smith Barney or to other
third parties.

 (C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program and, if applicable,
informing Plan investors of the Automatic Reallocation Option.

 (D) Upon written request of Salomon Smith Barney, a copy of the respective
investment advisory agreement between the Consulting Group and the Sub-
Advisers.

 (E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by a
Salomon Smith Barney Financial Consultant (the Financial Consultant) to
eligible participants in such Plan, of the services offered under the TRAK
Program and the operation and objectives of the Portfolios.

 (F) A copy of the proposed exemption and the final exemption, if granted,
pertaining to the exemptive relief described herein.

 (2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this Section.

 (3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to Salomon Smith Barney that such fiduciary is (a) independent of
Salomon Smith Barney and its affiliates and (b) knowledgeable with respect to
the Plan in administrative matters and funding matters related thereto, and
able to make an informed decision concerning participation in the TRAK Program.

 (4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Plan Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to Salomon Smith Barney that
such fiduciary is (a) independent of Salomon Smith Barney and its affiliates,
(b) capable of making an independent decision regarding the investment of Plan
assets and (c) knowledgeable with respect to the Plan in administrative matters
and funding matters related thereto, and able to make an informed decision
concerning participation in the TRAK Program.

 (l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:

 (1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.

 (2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.

 (3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocations, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of Section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.

 (4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.

 (5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to
Salomon Smith Barney and its affiliates and (b) the average brokerage
commission per share paid by each Portfolio to Salomon Smith Barney and its
affiliates, as compared to the average brokerage commission per share paid by
the Trust to brokers other than Salomon Smith Barney and its affiliates, both
expressed as cents per share.

                                      B-6
<PAGE>

 (m) Salomon Smith Barney shall maintain, for a period of six years, the
records necessary to enable the persons described in paragraph (n) of this
Section to determine whether the conditions of this exemption have been met,
except that (1) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Salomon Smith Barney
and/or its affiliates, the records are lost or destroyed prior to the end of
the six year period, and (2) no party in interest other than Salomon Smith
Barney shall be subject to the civil penalty that may be assessed under section
502(i) of the Act, or to the taxes imposed by section 4975(a) and (b) of the
Code, if the records are not maintained, or are not available for examination
as required by paragraph (n) below.

 (n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subparagraphs (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section II shall be
unconditionally available at their customary location during normal business
hours by:

 (A) Any duly authorized employee or representative of the Department or the
Service;

 (B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;

 (C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and

 (D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.

 (2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of Salomon Smith
Barney or commercial or financial information which is privileged or
confidential.

Section III. Definitions

 For purposes of this proposed exemption:

 (a) The term "Salomon Smith Barney" means Salomon Smith Barney Inc. and any
affiliate of Salomon Smith Barney, as defined in paragraph (b) of this Section
III.

 (b) An "affiliate" of Salomon Smith Barney includes--

 (1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney;
(For purposes of this subparagraph, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)

 (2) Any individual who is an officer (as defined in Section III(d) hereof),
director or partner in Salomon Smith Barney or a person described in
subparagraph (b)(1);

 (3) Any corporation or partnership of which Salomon Smith Barney or an
affiliate described in subparagraphs(b)(1), is a 10 percent or more partner or
owner; and

 (4) Any corporation or partnership of which any individual which is an officer
or director of Salomon Smith Barney, is a 10 percent or more partner or owner.

 (c) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of Salomon Smith Barney and its affiliates and is either--

 (1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares under a Section 404(c) Plan;

 (2) A participant in a Keogh Plan;

 (3) An individual covered under (i) a self-directed IRA or (ii) a Section
403(b) Plan, which invests in Trust shares;

 (4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by Section 404(c) of the Act; or

 (5) A participant in a Plan, such as a Section 404(c) Plan, who is permitted
under the terms of such Plan to direct, and who elects to direct the investment
of assets of his or her account in such Plan.

 (d) The term "officer" means a president, any vice president in charge of a
principal business unit, division or function (such as sales, administration or
finance), or any other officer who performs a policymaking function for the
entity.

Section IV. Effective Dates

 If granted, this proposed exemption will be effective as of April 1, 2000,
with respect to the amendments to Section II(i) and Section III(b) and the
inclusion of new Section III(d).

 The availability of this proposed exemption is subject to the express
condition that the material facts and representations contained in the
application for exemption are true and complete and accurately describe all
material terms of the transactions. In the case of continuing transactions, if
any of the material facts or representations described in the applications
change, the exemption will cease to apply as of the date of such change. In the
event of any such change, an application for a new exemption must be made to
the Department.

 For a more complete statement of the facts and representations supporting the
Department's decision to grant PTE 92-77, PTE 94-50 and PTE 99-15, refer to the
proposed exemptions and the grant notices which are cited above.

 Signed at Washington, D.C., this 25th day of May, 2000.

Ivan L. Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.

[FR Doc. 00-13643 Filed 5-31-00; 8:45 am]

                                      B-7
<PAGE>

--------------------------------------------------------------------------------
DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-45; Exemption Application Nos. D-10809
and D-10865]

Grant of Individual Exemption To Amend and Replace Prohibited Transaction
Exemption (PTE) 99-15, Involving Salomon Smith Barney Inc. (Salomon Smith
Barney), Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration, Department of Labor.

ACTION: Grant of individual exemption to modify and replace PTE 99-15.

--------------------------------------------------------------------------------
SUMMARY: This document contains a final exemption (the Final Exemption) by the
Department of Labor (the Department) which amends and replaces PTE 99-15 (64 FR
1648, April 5, 1999), an exemption granted to Salomon Smith Barney. PTE 99-15
relates to the operation of the TRAK Personalized Investment Advisory Service
product (the TRAK Program) and the Trust for Consulting Group Capital Markets
Funds (the Trust). These transactions are described in a notice of pendency
(the Proposed Exemption) that was published in the Federal Register on June 1,
2000 at 65 FR 35138.

EFFECTIVE DATES: This exemption is effective as of April 1, 2000 with respect
to the amendments to Section II(i) and Section III(b) of the grant notice. In
addition, this exemption is effective as of April 1, 2000 with respect to the
inclusion of new Section III(d) in the grant notice.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption
Determinations, Pension and Welfare Benefits Administration, U.S. Department of
Labor, telephone (202) 219-8881. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On June 1, 2000, the Department published, in the
Federal Register, the above referenced Proposed Exemption which would amend and
replace PTE 99-15. PTE 99-15, provides an exemption from certain prohibited
transaction restrictions of section 406 of the Employee Retirement Income
Security Act of 1974 (the Act) and from the sanctions resulting from the
application of section 4975 of the Internal Revenue Code of 1986 (the Code), as
amended, by reason of section 4975(c)(1) of the Code. Specifically, PTE 99-15
provides exemptive relief from the restrictions of section 406(a) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, for the purchase or
redemption of shares in the Trust by an employee benefit plan, an individual
retirement account (the IRA), a retirement plan for a self-employed individual,
or an individual account pension plan that is subject to the provisions of
Title I of the Act and established under section 403(b) of the Code (the
Section 403(b) Plan; collectively, the Plans).

 PTE 99-15 also provides exemptive relief from the restrictions of section
406(b) of the Act and the sanctions resulting from the application of section
4975 of the Code, by reason of section 4975(c)(1)(E) and (F) of the Code, with
respect to the provision, by the Consulting Group of Salomon Smith Barney (the
Consulting Group), of (1) investment advisory services or (2) an automatic
reallocation option to an independent fiduciary of a participating Plan (the
Independent Plan Fiduciary) which may result in such fiduciary's selection of a
portfolio (the Portfolio) in the TRAK Program for the investment of Plan
assets./1/

 In the Proposed Exemption, Salomon Smith Barney requested a modification of
PTE 99-15 and a replacement of that exemption with a new exemption for purposes
of uniformity./2/ Specifically, Salomon Smith Barney requested that the term
"affiliate," as set forth in PTE 99-15, in Section II(h) of the General
Conditions and in Section III(b) of the Definitions, be amended and clarified
to avoid possible misinterpretation. In this regard, Salomon Smith Barney also
requested that the term
-------
 /1/PTE 99-15 also (a) described a series of corporate mergers which changed
the names of the parties identified in two prior TRAK exemptions which it
superseded [i.e., PTE 94-50 (59 FR 32024, June 21, 1994) and PTE 92-77 (55 FR
45833, October 5, 1992)] and which would permit broader distribution of TRAK-
related products; (b) implemented a recordkeeping reimbursement offset
procedure under the TRAK Program; (c) adopted an automated reallocation option
under the TRAK Program that would reduce the reallocation option under the TRAK
Program that would reduce the Plan-level investment advisory fee (the Outside
Fee) paid to Salomon Smith Barney by a Plan investor; and (d) expanded the
scope of the exemption to include Section 403(b) Plans.
 PTE 94-50 permitted Smith, Barney Inc. (Smith Barney), Salomon Smith Barney's
predecessor, to add a daily-traded collective investment fund (the GIC Fund) to
the existing portfolios (the Portfolios) of mutual funds (the Funds) comprising
the Trust, and to describe the various entities operating the GIC Fund. PTE 94-
50 also replaced references to Shearson Lehman Brothers, Inc. (Shearson Lehman)
with Smith Barney and amended and replaced PTE 92-77.
 Finally, PTE 92-77 permitted Shearson Lehman to make the TRAK Program
available to Plans that acquired shares in the former Trust for TRAK
Investments and allowed the Consulting Group to provide investment advisory
services to an Independent Plan Fiduciary which might result in such
fiduciary's selection of a Portfolio in the TRAK Program for the investment of
Plan assets.
 /2/The Department deems PTE 94-50 as having been effectively superseded by PTE
99-15. Therefore, the amendments described herein do not apply to PTE 94-50.

"officer" be defined and incorporated into the Proposed Exemption, in new
Section III(d), to limit the affiliate definition to persons who have a
significant management role. Further, Salomon Smith Barney requested that
Section II(i) of PTE 99-15 be amended to permit an independent sub-adviser (the
Sub-Adviser), under certain circumstances, to exceed the current one percent
limitation on the acquisition of securities that are issued by Salomon Smith
Barney and/ or its affiliates, notably in the Sub-Adviser's replication of a
third- party index (the Index). The Final Exemption is effective as of April 1,
2000 with respect to the amendments to Sections II(i) and III(b) of the grant
notice, and is effective as of July 10, 2000 with respect to Section III(d) of
the grant notice.

The Proposed Exemption was requested in an application filed on behalf of
SalomonSmith Barney pursuant to section 408(a) of the Act and section
4975(c)(2) of the Code, and in accordance with the procedures (the Procedures)
set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978
(43 FR 47713, October 17, 1978) transferred the authority of the Secretary of
the Treasury to issue exemptions of the type requested to the Secretary of
Labor. Accordingly, this Final Exemption is being issued solely by the
Department.

 The Proposed Exemption gave interested persons an opportunity to comment and
to request a hearing. During the comment period, the Department received two
written comments and no requests for a hearing. One of the comments was
submitted by the holder of an IRA which participates in the TRAK Program. The
commenter said he concurred with the modifications proposed by Salomon Smith
Barney to amend and clarify the terms "affiliate" and "officer." The commenter
also stated that he supported the proposed modification of the one percent
limitation on the acquisition, by an independent Sub-Adviser, of securities
that are issued by Salomon Smith Barney and/or its affiliates in the Sub-
Adviser's replication of an Index. The commenter explained that he believed the
requested changes made sense and would be beneficial to all TRAK Program
participants. Therefore, the commenter urged the Department to approve the
Final Exemption.

 The second comment was submitted by Salomon Smith Barney. The comment is
intended to clarify and modify the preamble (the Preamble) of the Proposed
Exemption.

                                      B-8
<PAGE>

Following is a discussion of Salomon Smith Barney's comment letter and the
Department's responses with respect thereto.

 1. Modifications to the Proposed Exemption. On page 35139 of the Proposed
Exemption, the first paragraph of the Preamble states that "As of December 31,
1998, the TRAK Program held assets that were in excess of $9.6 billion." Also,
in that same paragraph, the last sentence states, in part, that "one or more
unaffiliated [S]ub-advisers [is] selected by Salomon Smith Barney." Salomon
Smith Barney notes that the December 31, 1998 valuation date at the beginning
of the paragraph should be changed to September 30, 1999 and the last words of
the paragraph should be changed from "Salomon Smith Barney" to "the Consulting
Group," which actually chooses the Sub-Advisers.

 In addition, on page 35140 of the Proposed Exemption, the last paragraph of
the Preamble states, in part, that--

 Due to the one percent limitation of Section II(i), Salomon Smith Barney
states that active Sub-Advisers for the Consulting Group may not own or trade
Citigroup Common Stock and they will continue to be prohibited from trading in
Citigroup Common Stock. Salomon Smith Barney wishes to clarify that active Sub-
Advisers also do not trade in Citigroup Common Stock because of restrictions
that apply under Rule 12d3-1(c) of the Investment Company Act of 1940 (the
ICA)./3/

 On page 35141 of the Proposed Exemption, the third sentence of the first
"carry-over" paragraph of the Preamble identifies two Funds which currently
comply with the one percent limitation on investments in Citigroup Common
Stock. These Funds are the "Consulting Group Capital Markets Large Cap Value
Fund" and the "Large Cap Growth Consulting Group Capital Markets Fund."
However, Salomon Smith Barney suggests, for the purpose of clarity, that the
formal names of the subject Funds be specified. Thus, Salomon Smith Barney
explains that the proper names for the Funds are the "Consulting Group Capital
Markets Funds Large Capitalization Value Equity Investments" and the
"Consulting Group Capital Markets Funds Large Capitalization Growth
Investments." Similarly, in the next paragraph of the Proposed Exemption on
page
-------
/3/Rule 12d3-1(c) of the ICA states that an acquiring company, such as a
registered investment company, may not acquire a general partnership interest
or a security issued by the acquiring company's investment adviser, promoter,
or principal underwriter, or by any affiliated person of such investment
adviser, promoter, or principal underwriter.

35141 of the Preamble, Salomon Smith Barney wishes to clarify that the formal
name for the S&P Fund designated as the "Consulting Group Capital Markets S&P
500 Index Investment Fund Portfolio" is the "Consulting Group Capital Markets
S&P Index Investment Fund Portfolio."

 In response to these comments, the Department acknowledges the foregoing
clarifications to the names for the Funds identified in the Preamble of the
Proposed Exemption.

 2. General Information. As a matter of general information, Salomon Smith
Barney states that beginning with the billing cycle commencing on January 1,
2001, the Outside Fee charged to 401(k) Plan clients will be calculated on the
average daily asset value for the quarter for which the fee is billed rather
than the asset value on the last day of the quarter. Salomon Smith Barney
explains that this change generally conforms to the billing procedure in the
industry generally and is believed to be more equitable since it reflects the
asset value over time rather than on a single day during a calendar quarter
which may not be representative of the account balance during the period.

 In response to this comment, the Department notes Salomon Smith Barney's
modification to the billing procedure in the calculation of the Outside Fee for
participants in the TRAK Program that are section 401(k) Plans.

 For further information regarding the comments or other matters discussed
herein, interested persons are encouraged to obtain copies of the exemption
application files (Exemption Application Nos. D-10809 and D-10865) the
Department is maintaining in this case. The complete application files, as well
as all supplemental submissions received by the Department, are made available
for public inspection in the Public Documents Room of the Pension and Welfare
Benefits Administration, Room N-5638, U.S. Department of Labor, 200
Constitution Avenue, N.W., Washington, D.C. 20210.

 Accordingly, after giving full consideration to the entire record, including
the written comments received, the Department has decided to grant the
exemption subject to the modifications and clarifications described above.

General Information

 The attention of interested persons is directed to the following:

 (1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;

 (2) The exemption will extend to transactions prohibited under section
406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;

 (3) In accordance with section 408(a) of the Act and section 4975(c)(2) of the
Code, and the Procedures cited above, and based upon the entire record, the
Department finds that the exemption is administratively feasible, in the
interest of the plan and of its participants and beneficiaries and protective
of the rights of participants and beneficiaries of the plan;

 (4) The exemption will be supplemental to, and not in derogation of, any other
provisions of the Act and the Code, including statutory or administrative
exemptions. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and

 (5) The exemption is subject to the express condition that the Summary of
Facts and Representations set forth in the notice of proposed exemption
relating to PTE 99-15, as amended by this Final Exemption, accurately describe,
where relevant, the material terms of the transactions to be consummated
pursuant to this exemption.

Exemption

 Under the authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the Procedures set forth above, the Department
hereby amends PTE 99-15 as follows:

Section I. Covered Transactions

 A. The restrictions of section 406(a) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by

                                      B-9
<PAGE>

reason of section 4975(c)(1)(A) through (D) of the Code, shall not apply, to
the purchase or redemption of shares by an employee benefit plan, an individual
retirement account (the IRA), a retirement plan for self-employed individuals
(the Keogh Plan), or an individual account pension plan that is subject to the
provisions of Title I of the Act and established under section 403(b) of the
Code (the Section 403(b) Plan; collectively, the Plans) in the Trust for
Consulting Group Capital Market Funds (the Trust), established by Salomon Smith
Barney, in connection with such Plans' participation in the TRAK Personalized
Investment Advisory Service product (the TRAK Program).

 B. The restrictions of section 406(b) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1)(E) and (F) of the Code, shall not apply, to the provision, by the
Consulting Group, of (1) investment advisory services or (2) an automatic
reallocation option (the Automatic Reallocation Option) to an independent
fiduciary of a participating Plan (the Independent Plan Fiduciary), which may
result in such fiduciary's selection of a portfolio (the Portfolio) in the TRAK
Program for the investment of Plan assets.

 This exemption is subject to the following conditions that are set forth below
in Section II.

Section II.General Conditions

 (a) The participation of Plans in the TRAK Program will be approved by an
Independent Plan Fiduciary. For purposes of this requirement, an employee,
officer or director of Salomon Smith Barney and/or its affiliates covered by an
IRA not subject to Title I of the Act will be considered an Independent Plan
Fiduciary with respect to such IRA.

 (b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.

 (c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.

 (d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.

 (e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.

 (f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--

 (1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be automatically
reallocated whenever the Consulting Group modifies the particular asset
allocation recommendation which the Independent Plan Fiduciary has chosen. Such
Election shall continue in effect until revoked or terminated by the
Independent Plan Fiduciary in writing.

 (2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and redemption procedures, may delay such processing through a
series of purchase and redemption transactions to shift assets among the
affected Portfolios.

 (3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
any time within the period of 30 calendar days prior to the proposed Effective
Date that such fiduciary does not wish to follow such revised asset allocation
recommendation, the Allocation Model will remain at the current level, or at
such other level as the Independent Plan Fiduciary then expressly designates,
in writing. If the Independent Plan Fiduciary does not affirmatively "opt out"
of the new Consulting Group recommendation, in writing, prior to the proposed
Effective Date, such new recommendation will be automatically effected by a
dollar-for-dollar liquidation and purchase of the required amounts in the
respective account.

 (4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations on the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper.

 (g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Plan providing for participant-directed investments
(the Section 404(c) Plan), the Consulting Group will provide investment advice
that is limited to the Portfolios made available under the Plan.

 (h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.

 (i) Immediately following the acquisition by a Portfolio of any securities
that are issued by Salomon Smith Barney and/or its affiliates, such as
Citigroup Inc. common stock (the Citigroup Common Stock), the percentage of
that Portfolio's net assets invested in such securities will not exceed one
percent. However, this percentage limitation may be exceeded if--

 (1) The amount held by a Sub-Adviser in managing a Portfolio is held in order
to replicate an established third party index (the Index).

 (2) The Index represents the investment performance of a specific segment of
the public market for equity securities in the United States and/or foreign
countries. The organization creating the Index must be--

 (i) Engaged in the business of providing financial information;

 (ii) A publisher of financial news information; or

 (iii) A public stock exchange or association of securities dealers.

 The Index is created and maintained by an organization independent of Salomon
Smith Barney and its affiliates and is a generally-accepted standardized Index
of

                                      B-10
<PAGE>

securities which is not specifically tailored for use by Salomon Smith Barney
and its affiliates.

 (3) The acquisition or disposition of Citigroup Common Stock does not include
any agreement, arrangement or understanding regarding the design or operation
of the Portfolio acquiring the Citigroup Common Stock, which is intended to
benefit Salomon Smith Barney or any party in which Salomon Smith Barney may
have an interest.

 (4) The Independent Plan Fiduciary authorizes the investment of a Plan's
assets in an Index Fund which purchases and/or holds Citigroup Common Stock and
the Sub-Adviser is responsible for voting any shares of Citigroup Common Stock
that are held by an Index Fund on any matter in which shareholders of Citigroup
Common Stock are required or permitted to vote.

 (j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and the Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.

 (k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares,

 (1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:

 (A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, Salomon Smith Barney and its subsidiaries and the
compensation paid to such entities./4/

 (B) Upon written or oral request to Salomon Smith Barney, a Statement of
Additional Information supplementing the Prospectus which describes the types
of securities and other instruments in which the Portfolios may invest, the
investment
-------
 /4/The fact that certain transactions and fee arrangements are the subject of
an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of the fees and expenses to be paid by the
Plan, including the fees paid directly to Salomon Smith Barney or to other
third parties.

policies and strategies that the Portfolios may utilize and certain risks
attendant to those investments, policies and strategies.

 (C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program and, if applicable,
informing Plan investors of the Automatic Reallocation Option.

 (D) Upon written request of Salomon Smith Barney, a copy of the respective
investment advisory agreement between the Consulting Group and the Sub-
Advisers.

 (E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by a
Salomon Smith Barney Financial Consultant (the Financial Consultant) to
eligible participants in such Plan, of the services offered under the TRAK
Program and the operation and objectives of the Portfolios.

 (F) A copy of the Proposed Exemption and the Final Exemption pertaining to the
exemptive relief described herein.

 (2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this Section.

 (3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to Salomon Smith Barney that such fiduciary is (a) independent of
Salomon Smith Barney and its affiliates and (b) knowledgeable with respect to
the Plan in administrative matters and funding matters related thereto, and
able to make an informed decision concerning participation in the TRAK Program.

 (4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Plan Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to Salomon Smith Barney that
such fiduciary is (a) independent of Salomon Smith Barney and its affiliates,
(b) capable of making an independent decision regarding the investment of Plan
assets and (c) knowledgeable with respect to the Plan in administrative matters
and funding matters related thereto, and able to make an informed decision
concerning participation in the TRAK Program.

 (l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:

 (1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.

 (2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.

 (3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing Plan level asset allocations, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of Section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.

 (4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.

 (5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to
Salomon Smith Barney and its affiliates and (b) the average brokerage
commission per share paid by each Portfolio to Salomon Smith Barney and its
affiliates, as compared to the average brokerage commission per share paid by
the

                                      B-11
<PAGE>

Trust to brokers other than Salomon Smith Barney and its affiliates, both
expressed as cents per share.

 (m) Salomon Smith Barney shall maintain, for a period of six years, the
records necessary to enable the persons described in paragraph (n) of this
Section to determine whether the conditions of this exemption have been met,
except that (1) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Salomon Smith Barney
and/or its affiliates, the records are lost or destroyed prior to the end of
the six year period, and (2) no party in interest other than Salomon Smith
Barney shall be subject to the civil penalty that may be assessed under section
502(i) of the Act, or to the taxes imposed by section 4975(a) and (b) of the
Code, if the records are not maintained, or are not available for examination
as required by paragraph (n) below.

 (n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subparagraphs (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section II shall be
unconditionally available at their customary location during normal business
hours by:

 (A) Any duly authorized employee or representative of the Department or the
Service;

 (B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;

 (C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and

 (D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.

 (2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of Salomon Smith
Barney or commercial or financial information which is privileged or
confidential.

Section III. Definitions

 For purposes of this exemption:

 (a) The term "Salomon Smith Barney" means Salomon Smith Barney Inc. and any
affiliate of Salomon Smith Barney, as defined in paragraph (b) of this Section
III.

 (b) An "affiliate" of Salomon Smith Barney includes--

 (1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney
(For purposes of this subparagraph, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual);

 (2) Any individual who is an officer (as defined in Section III(d) hereof),
director or partner in Salomon Smith Barney or a person described in
subparagraph (b)(1);

 (3) Any corporation or partnership of which Salomon Smith Barney, or an
affiliate described in subparagraphs(b)(1), is a 10 percent or more partner or
owner; and

 (4) Any corporation or partnership of which any individual which is an officer
or director of Salomon Smith Barney is a 10 percent or more partner or owner.

 (c) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of Salomon Smith Barney and its affiliates and is either--

 (1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares under a Section 404(c) Plan;

 (2) A participant in a Keogh Plan;

 (3) An individual covered under (i) a self-directed IRA or (ii) a Section
403(b) Plan, which invests in Trust shares;

 (4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by Section 404(c) of the Act; or

 (5) A participant in a Plan, such as a Section 404(c) Plan, who is permitted
under the terms of such Plan to direct, and who elects to direct, the
investment of assets of his or her account in such Plan.

 (d) The term "officer" means a president, any vice president in charge of a
principal business unit, division or function (such as sales, administration or
finance), or any other officer who performs a policymaking function for the
entity.

 Section IV. Effective Dates

 This exemption is effective as of April 1, 2000 with respect to the amendments
to Section II(i) and Section III(b) of this grant notice. In addition, this
exemption is effective as of April 1, 2000 with respect to the inclusion of new
Section III(d) in the grant notice.

 The availability of this exemption is subject to the express condition that
the material facts and representations contained in the application for
exemption are true and complete and accurately describe all material terms of
the transactions. In the case of continuing transactions, if any of the
material facts or representations described in the applications change, the
exemption will cease to apply as of the date of such change. In the event of
any such change, an application for a new exemption must be made to the
Department.

 For a more complete statement of the facts and representations supporting the
Department's decision to grant PTE 92-77, PTE 94-50 and PTE 99-15, refer to the
proposed exemptions and the grant notices which are cited above.

Signed at Washington, D.C., this 31st day of August, 2000.

Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits Administra-
tion, U.S. Department of Labor.

[FR Doc. 00-22853 Filed 9-6-00; 8:45 am]

                                     B-12
<PAGE>

--------------------------------------------------------------------------------
DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-45; Exemption Application Nos. D-10809
and D-10865]

Grant of Individual Exemption to Amend and Replace Prohibited Transaction
Exemption (PTE) 99-15, Involving Salomon Smith Barney Inc. (Salomon Smith
Barney), Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of Labor
(the Department).

ACTION: Notice of Technical Correction.
--------------------------------------------------------------------------------
 On September 7, 2000, the Department published in the Federal Register (65 FR
54315) a final exemption which amends and replaces PTE 99-15 (64 FR 1648, April
5,
1999), an exemption granted to Salomon Smith Barney. PTE 99-15 relates to the
operation of the TRAK Personalized Investment Advisory Service product (the
TRAK Program) and the Trust for Consulting Group Capital Markets Funds (the
Consulting Group).

 On page 54316 of the grant notice, the last sentence of the third paragraph of
the Supplementary Information, erroneously refers to an effective date of July
10, 2000 with respect to Section III(d) of the grant notice. Thus, the sentence
should be revised to read as follows:

 The Final Exemption is effective as of April 1, 2000 with respect to the
amendments to Sections II(i) and III(b) of the grant notice and the inclusion
of new Section III(d) of the grant notice.

 Also on page 54316 of the grant notice, clause (c) of Footnote 1, should be
revised as follows to describe more accurately the purpose of the automated
reallocation option:

 (c) adopted an automated reallocation option under the TRAK Program which
would afford an Independent Plan Fiduciary the option of having his or her
asset allocation adjusted automatically whenever the Consulting Group changes
an allocation model;

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department at (202)
219-8881. (This is not a toll-free number.)

Signed at Washington, DC, this 18th day of September, 2000.

Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.

[FR Doc. 00-24388 Filed 9-21-00; 8:45 am]

TK 2088S

                                      B-13
<PAGE>

For More Information

If you want more information about the Portfolio, the following resources are
available upon request.

Annual and Semiannual Reports

Additional information about the Portfolio's investments will be available in
the Portfolio's annual and semiannual reports to shareholders. The Portfolio's
annual report will contain a discussion of the market conditions and investment
strategies that significantly affected the Portfolio's performance during its
last fiscal year.

Statement of Additional Information

The Statement of Additional Information provides more detailed information about
the Portfolio and is incorporated into this prospectus by reference.

Investment Professional

The investor's Financial Consultant is available to answer questions about the
Portfolio or the investor's overall asset allocation program.

Investors can get free copies of reports and SAIs, request other information and
discuss their questions about the Portfolio by contacting their Financial
Consultant, or by writing to the Portfolio's sub-transfer agent, PFPC Global
Fund Services, at:

  Consulting Group Capital Markets Funds
  c/o PFPC Global Fund Services
  P.O. Box 9699
  Providence, RI 02940-9699

  or by calling the Portfolio's transfer agent at 800-451-2010

Information about the Portfolio (including the SAI) can be reviewed and copied
at the Securities and Exchange Commission's (the "Commission") Public Reference
Room in Washington, D.C. In addition, information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-202-942-8090.
Reports and other information about the Portfolio are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov. Copies of this
information may be obtained for a duplicating fee by electronic request at the
following E-mail address: publicinfo@sec.gov, or by writing the Commission's
Public Reference Section, Washington, D.C. 20549-0102.

If someone makes a statement about the Portfolio that is not in this prospectus,
you should not rely upon that information. Neither the Portfolio nor the
distributor is offering to sell shares of the Portfolio to any person to whom
the Portfolio may not lawfully sell its shares.

Investment Company Act File No. 811-06318

SALOMON SMITH BARNEY
---------------------------
A member of citigroup [LOGO]

Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.

Salomon Smith Barney, Inc. is a wholly-owned subsidiary of Citigroup Inc.
Citigroup businesses produce a broad range of financial services--asset
management, banking and consumer finance, credit and charge cards, insurance,
investments and investment banking and trading--and use diverse channels to make
them available to consumer and corporate customers around the world.

(R)2000 Salomon Smith Barney Inc.  TK2094  12/00


<PAGE>


                               [Consulting Group]
                                   Since 1973

                                Consulting Group
                              Capital Markets Funds

                     Large Capitalization Growth Investments
                  Large Capitalization Value Equity Investments
                     Small Capitalization Growth Investments
                        International Equity Investments
                       Emerging Markets Equity Investments
                              Balanced Investments
                      Intermediate Fixed Income Investments
                           Long-Term Bond Investments
                           Mortgage Backed Investments
                             High Yield Investments
                      Multi-Sector Fixed Income Investments
                     International Fixed Income Investments
                           Municipal Bond Investments
                          Government Money Investments


--------------------------------------------------------------------------------
INVESTMENT PRODUCTS: NOT FDIC INSURED  o  NO BANK GUARANTEE  o  MAY LOSE VALUE
--------------------------------------------------------------------------------


Prospectus                                                       [LOGO]TRAK(R)
December 29, 2000                         ------------------------------------
                                      Personalized Investment Advisory Service


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>

Table of Contents
<TABLE>
<CAPTION>
                                                Page
<S>                                             <C>
Investments, Risks and Performance                3
----------------------------------------------------
 Large Capitalization Growth Investments          4
----------------------------------------------------
 Large Capitalization Value Equity Investments    6
----------------------------------------------------
 Small Capitalization Growth Investments          8
----------------------------------------------------
 Small Capitalization Value Equity Investments   12
----------------------------------------------------
 International Equity Investments                16
----------------------------------------------------
 Emerging Markets Equity Investments             18
----------------------------------------------------
 Balanced Investments                            20
----------------------------------------------------
 Intermediate Fixed Income Investments           22
----------------------------------------------------
 Long-Term Bond Investments                      24
----------------------------------------------------
 Mortgage Backed Investments                     26
----------------------------------------------------
 High Yield Investments                          28
----------------------------------------------------
 Multi-Sector Fixed Income Investments           30
----------------------------------------------------
 International Fixed Income Investments          34
----------------------------------------------------
 Municipal Bond Investments                      36
----------------------------------------------------
 Government Money Investments                    38
----------------------------------------------------
More on the Portfolios' Investments              40
----------------------------------------------------

The Manager                                      44
----------------------------------------------------

Asset Allocation Programs                        51
----------------------------------------------------
Investment and Account Information               52
----------------------------------------------------
 Account Transactions                            52
----------------------------------------------------
 Valuation of Shares                             53
----------------------------------------------------
 Dividends and distributions                     53
----------------------------------------------------
 Taxes                                           53
----------------------------------------------------
Financial Highlights                             55
----------------------------------------------------
Appendix A                                      A-1
----------------------------------------------------
Appendix B                                      B-1
----------------------------------------------------
</TABLE>

                                        1

 Consulting Group Capital Markets Funds
<PAGE>




                       This page intentionally left blank

                                        2

 Consulting Group Capital Markets Funds
<PAGE>

Investments, Risks and Performance

About the portfolios

The manager selects and oversees professional money managers who are responsi-
ble for investing the assets of the portfolios comprising the Consulting Group
Capital Markets Funds (each a "Portfolio").

You should know:

 . You could lose money on your investment in a Portfolio, or the Portfolio may
  not perform as well as other investments

 . An investment in any of the Portfolios is not a bank deposit and is not in-
  sured or guaranteed by the FDIC or any other government agency

Principal risks of investing in fixed income securities and equity securities

The Portfolios invest in fixed income securities and equity securities. Risks
common to investments in fixed income securities and equity securities are set
forth below. Because each Portfolio has a different investment strategy, there
are also principal risks that are specific to an investment in a particular
Portfolio. These unique risks are described in the Portfolio summaries begin-
ning on the next page.

Fixed Income Securities:

 . When interest rates go up, prices of fixed income securities go down

 . An issuer of a security may default on its obligation to pay principal and/or
  interest or the security's credit rating may be downgraded

 . An issuer of a security may prepay principal earlier than scheduled, which
  would force an underlying fund to reinvest in lower yielding securities. This
  is known as call or prepayment risk

 . Slower than expected principal payments may extend a security's life. This
  locks in a below-market interest rate, increases the security's duration and
  reduces the value of the security. This is known as extension risk

Equity Securities:

 . Stock prices may decline generally

 . If an adverse event occurs, such as the issuance of an unfavorable earnings
  report, the value of a particular issuer's security may be depressed

                                       3

 Consulting Group Capital Markets Funds
<PAGE>


Large Capitalization Growth Investments

Investment objective

Capital appreciation.

Principal investment strategies

The Portfolio invests primarily in the common stocks of companies with favora-
ble growth prospects and total market capitalizations of $1 billion or more at
the time of purchase.

How the subadvisors select the Portfolio's investments

The manager has selected three subadvisors to manage the Portfolio. Each
subadvisor manages its portion of the Portfolio's assets using a different in-
vestment style. Each subadvisor's investment approach is described below.

Barclays Global Fund Advisors ("Barclays") is a passive, index-based manager
which uses a quantitative investment approach to create a portfolio which fully
replicates the performance of the Russell 1000 Growth Index. The percentage of
the Portfolio's assets allocated to Barclays is 60%.

TCW Investment Management Company (" TCW") employs an active management style
and seeks to invest in high quality companies with opportunities for growth
that are not fully reflected in stock market valuations. TCW utilizes a " bot-
tom-up" investment strategy that focuses primarily on assessing the operating
prospects of each prospective holding. Companies targeted for investment typi-
cally are those believed to have strong and enduring business models and inher-
ent advantages over competitors. TCW generally sells a security when a stock
price reflects full value as calculated by TCW's proprietary model or when a
security fails to meet operational expectations. The percentage of the Portfo-
lio's assets allocated to TCW is 20%.

Turner Investment Partners, Inc. (" Turner") employs an active management style
and seeks to invest in companies with improving earnings dynamics in each of
ten broad market sectors. In order to identify potential investments, the
subadvisor utilizes (i) a proprietary computer model which ranks stocks by sec-
tor and size by examining 80 factors; (ii) fundamental analysis of stocks se-
lected by the proprietary model, including communications with company manage-
ment, industry experts and competitors; and (iii) technical analysis, including
examination of money flow and relative strength. The subadvisor will sell a
stock because of a poor ranking from the model, concern about the fundamentals
of a stock, a downward revision in earnings estimates from Wall Street analysts
or company management, or changes in money flow for a stock. The percentage of
the Portfolio's assets allocated to Turner is 20%.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in equity securities generally. These principal risks are described on
page 3. Your investment in the Portfolio is also subject to the following spe-
cific risks:

 . Large cap or growth stocks may fall out of favor with investors

 . A share price that is generally more volatile than that of Large Capitaliza-
  tion Value Equity Investments because of the Portfolio's focus on growth
  stocks

The bar chart and tables below indicate the risks and returns of investing in
the Portfolio. The bar chart shows changes in the performance of the Portfolio
from year to year since its founding on November 18, 1991. The table shows how
the Portfolio's average annual returns for different calendar periods compare
to those of the Portfolio's benchmark index and its Lipper peer group. The
Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                    Large Capitalization Growth Investments

                                 92      6.52%
                                 93      0.20%
                                 94      0.26%
                                 95     31.66%
                                 96     20.71%
                                 97     29.03%
                                 98     38.05%
                                 99     32.84%

                       Calendar years ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                            One   Five    Life of  Inception
                                           year   years  Portfolio   Date
----------------------------------------------------------------------------
<S>                                        <C>    <C>    <C>       <C>
Portfolio (without advisory program fee)*  32.84% 30.33%   20.71%  11/18/91
Russell 1000 Growth Index                  20.91% 28.04%   20.86%     **
Lipper Growth Funds Average                30.43% 25.26%   20.67%     **
Lipper Large Cap Growth Funds Average      41.37% 29.44%   20.67%     **
----------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 11/18/91.

                                       4

 Consulting Group Capital Markets Funds
<PAGE>


                     Large Capitalization Growth Investments, continued

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                             26.04 %                                                4th/1998
Worst                            (9.26)%                                                3rd/1998
------------------------------------------------------------------------------------------------
Year-to-date                     (0.19)%                                        through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's benchmark is the
 Russell 1000 Growth Index. The
 index is comprised of those
 Russell 1000 securities with
 greater-than-average growth
 orientation. The Russell 1000
 Index is composed of the 1000
 largest U.S. companies by market
 capitalization. Unlike the
 Portfolio, the benchmark is
 unmanaged and does not include
 any expenses. In addition, the
 Portfolio compares its
 performance with the Lipper
 Large-Cap Growth Funds Average
 and Lipper Growth Funds Average.
 Lipper Large-Cap Growth Funds
 Average is an average of the
 reinvested performance of funds
 that normally invest in
 companies with long-term
 earnings expected to grow
 significantly faster than the
 earnings of the stocks
 represented in a major unmanaged
 stock index. These funds will
 normally have an above-average
 price-to-earnings ratio, price-
 to-book ratio and three-year
 earnings growth figure, compared
 to the U.S. diversified large-
 cap funds universe average.
 Large-cap funds will generally
 invest at least 75% of their
 assets in companies with market
 capitalizations (on a three-year
 weighted basis) greater than
 300% of the dollar-weighted
 median market capitalization of
 the S&P Mid-Cap 400 Index.

 Lipper Growth Funds Average is
 an average of the reinvested
 performance of funds that
 normally invest in companies
 with long-term earnings expected
 to grow significantly faster
 than the earnings of the stocks
 represented in major unmanaged
 stock indices.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses of the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   portfolio assets)
   Management fees                      0.60%
   Other expenses                       0.11%
                                        -----
  Total annual Portfolio operating
   expenses                             0.71%
                                        =====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $224                   $691                             $1,185                             $2,544
</TABLE>

                                       5

 Consulting Group Capital Markets Funds
<PAGE>

Large Capitalization Value Equity Investments
Investment objective

Total return consisting of capital appreciation and dividend income.

Principal investment strategies

The Portfolio invests primarily in common stock of companies with total market
capitalizations of $1 billion or more at the time of purchase. The majority of
the Portfolio's investments are expected to pay regular dividends.

How the subadvisors select the Portfolio's investments

The manager has selected four subadvisors to manage the Portfolio. Each
subadvisor manages its portion of the Portfolio's assets using a different in-
vestment style. Each subadvisor's investment approach is described below.

The Boston Company Asset Management ("TBCAM") seeks total return by investing
in portfolios of highly liquid common stocks that in its opinion have above av-
erage appreciation potential. The subadvisor employs an active portfolio man-
agement style using a proprietary quantitative model to identify those compa-
nies which demonstrate characteristics of both value and positive market momen-
tum. Those stocks ranking highest through quantitative analysis are then evalu-
ated using qualitative fundamental analysis to verify the quantitative scores
and to make recommendations for investment. The subadvisor assesses a company's
value by looking at traditional measures such as its price-to-earnings and
price-to-book ratios, as well as extensive balance sheet analysis, including
the company's break-up worth. The firm looks for momentum in a company's rising
expectations about earnings or sales, or through a return to financial health
following management changes or restructuring. The percentage of the Portfo-
lio's assets allocated to TBCAM is 20%.

Chartwell Investment Partners ("Chartwell") employs "top-down" and "bottom-up"
management techniques in managing its portion of the Portfolio's assets.
Chartwell focuses on a combination of low price to sales, price to earnings,
price to cash flow and price to book ratios, along with a preference for pre-
mium yielding issues. Specific price targets are established for each stock se-
lected for the Portfolio. The subadvisor then shifts its focus to identifying
those companies with evidence of a major catalyst for change. Stocks are evalu-
ated through such factors as management/board changes, the extent to which per-
formance incentives are in place, the degree of insider ownership, positive re-
structuring and acquisition opportunities. The percentage of the Portfolio's
assets allocated to Chartwell is 20%.

Parametric Portfolio Associates ("Parametric") seeks to track the performance
of the Russell 1000 Value Index. The subadvisor uses a quantitative process to
identify stocks which the firm believes are underpriced relative to their un-
derlying value. The subadvisor then looks for companies from that list with
rising earnings expectations, reasonable valuations and positive market momen-
tum through an analysis of the company's fundamentals, including factors such
as revenues, cash flow, earnings and analyst ratings. The subadvisor designs
the portfolio to have a risk profile similar to that of the Russell 1000 Value
Index. The percentage of the Portfolio's assets allocated to Parametric is 10%.

Barclays Global Fund Advisors ("Barclays") is a passive, index-based manager
which uses a quantitative investment approach to create a portfolio which fully
replicates the performance of the Russell 1000 Value Index. The percentage of
the Portfolio's assets allocated to Barclays is 50%.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in equity securities generally. These risks are described on page 3.
Your investment in the Portfolio is also subject to the following specific
risks:

 . Large cap or value stocks may fall out of favor with investors

 . The Portfolio can invest in issuers with a broad range of market capitaliza-
  tions. To the extent the Portfolio invests in companies at the lower end of
  such range, the Portfolio's investments may be more volatile and less liquid
  than other large cap funds

The bar chart and tables indicate the risks and returns of investing in the
Portfolio. The bar chart below shows changes in the performance of the Portfo-
lio from year to year since its founding on November 18, 1991. The table on the
next page shows how the Portfolio's average annual returns for different calen-
dar periods compare to those of the Portfolio's benchmark index and its Lipper
peer group. The Portfolio's past performance does not necessarily indicate how
the Portfolio will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                 Large Capitalization Value Equity Investments

                                 92      4.44%
                                 93      9.88%
                                 94     (3.63)%
                                 95     33.92%
                                 96     20.42%
                                 97     31.45%
                                 98     12.62%
                                 99      6.10%

                       Calendar years ended December 31


                                       6

 Consulting Group Capital Markets Funds
<PAGE>


               Large Capitalization Value Equity Investments, continued
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                           One   Five    Life of  Inception
                                           year  years  Portfolio   Date
---------------------------------------------------------------------------
<S>                                        <C>   <C>    <C>       <C>
Portfolio (without advisory program fee)*  6.10% 20.43%   14.14%  11/18/91
Russell 1000 Value Index                   7.35% 23.07%   18.83%        **
Lipper Multi-Cap Value Funds Average       7.02% 18.43%   15.61%        **
---------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                  Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                              16.84 %                                               4th/1998
Worst                            (14.09)%                                               3rd/1998
------------------------------------------------------------------------------------------------
Year-to-date                       2.05 %                                       through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>


            BENCHMARKS

 The Portfolio's benchmark is the
 Russell 1000 Value Index. The
 index represents the stocks in
 the Russell 1000 Index with less
 than average growth orientation.
 The Russell 1000 Index includes
 the 1,000 largest U.S. companies
 by market capitalization. Unlike
 the Portfolio, the benchmark is
 unmanaged and does not include
 any expenses. In addition, the
 Portfolio compares its
 performance with the Lipper
 Multi-Cap Value Funds Average.
 It is an average of the
 reinvested performance of funds
 that normally invest in
 companies considered to be
 undervalued relative to a major
 unmanaged stock index based on
 price-to-current earnings, book
 value, asset value or other
 factors. These funds will
 normally have a below-average
 price-to-earnings ratio, price-
 to-book ratio and three-year
 earnings growth figure, compared
 to the U.S. diversified multi-
 cap funds universe average.
 Multi-cap funds will generally
 have between 25% to 75% of their
 assets invested in companies
 with market capitalizations (on
 a three-year weighted basis)
 greater than 300% of the dollar-
 weighted median market
 capitalization of the S&P Mid-
 Cap 400 Index.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses of the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.67%
   Other expenses                       0.11%
                                        -----
  Total annual Portfolio operating
   expenses                             0.78%
                                        =====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual cost may be
higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $231                   $712                             $1,220                             $2,615
</TABLE>

                                       7

 Consulting Group Capital Markets Funds
<PAGE>


Small Capitalization Growth Investments

Investment objective

Capital appreciation.

Principal investment strategies

The Portfolio invests primarily in common stock of small capitalization
"growth" companies. The Portfolio considers small cap companies to have total
market capitalizations at the time of purchase below the maximum market capi-
talization permitted for a stock in the Russell 2000 Growth Index. As of June
30, 2000, that maximum market capitalization was $3.85 billion. A portion of the
Portfolio's assets will be invested in common stocks of companies with market
capitalizations at the lower range of the Russell 2000 Growth Index.

How the subadvisors select the Portfolio's investments

The manager has selected five subadvisors to manage the Portfolio. Each
subadvisor manages its portion of the Portfolio's assets using a different in-
vestment style. Each subadvisor's investment approach is described below.

Mellon Capital Management ("Mellon") is a passive, index-based manager that
seeks to fully replicate the performance of the Russell 2000 Growth Index. It
minimizes performance differences from the index through systematic quantita-
tive methods. The percentage of the Portfolio's assets allocated to Mellon is
40%.

Wall Street Associates ("Wall Street") is an active manager and follows a bot-
tom-up investment style. It looks for companies with superior earnings growth,
strong balance sheets, attractive valuations and potentially positive earning
surprises. The percentage of the Portfolio's assets allocated to Wall Street is
20%.

Westpeak Investment Advisors ("Westpeak") is an active manager and employs a
value-oriented and research-driven approach to identify reasonably priced
growth stocks that are likely to have positive earnings surprises and revi-
sions. The firm uses a value constraint to ensure that the growth stocks se-
lected are reasonably priced. The percentage of the Portfolio's assets allo-
cated to Westpeak is 15%.

Kern Capital Management ("Kern") is an active manager. Its investment style fo-
cuses fundamental research on uncovering innovative small-cap companies early
in their growth cycle. The firm's bottom-up investment process, which targets
the four most innovative sectors (technology, healthcare, consumer and servic-
es) involves (i) detailed financial analysis, (ii) in-depth meetings with cor-
porate management, (iii) discussions with brokerage firm and industry analysts
and (iv) competitive analysis for discovering attractively priced small-cap
companies. The percentage of the Portfolio's assets allocated to Kern is 15%.

Westfield Capital Management Co., Inc. ("Westfield") uses an active management
style and favors investing in earnings growth stocks given its conviction that
stock prices follow earnings progress and that they offer the best opportunity
for superior real rates of return. The subadvisor believes that reasonably
priced stocks with high earning potential are best identified through in-depth,
fundamental research. The subadvisor believes that the small cap portion of the
market is under-researched, and therefore less efficient than the large cap
sector. It generally sells a security when a stock price exceeds full value as
calculated by the subadvisor or as evidenced by declining earnings growth rates
and balance sheet trends. The percentage of the Portfolio's assets allocated to
Westfield is 10%.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in equity securities generally. These principal risks are described on
page 3. Your investment in the Portfolio is also subject to the following spe-
cific risks:

 . Growth stocks or small capitalization stocks may fall out of favor with in-
  vestors

 . Recession or adverse economic trends may have a greater adverse affect on the
  earnings or financial condition of smaller companies than on larger ones

 . Greater volatility of share price because of the focus on small cap compa-
  nies. Compared to large cap companies, small cap companies or the market for
  their equity securities are more likely to:

 . Be more sensitive to changes in earnings results and investor expectations

 . Have more limited product lines, capital resources and management depth

 . Experience sharper swings in market values

 . Be harder to sell at the times and prices the subadvisor believes appropri-
   ate

 . Offer greater potential for gain and loss

                                       8

 Consulting Group Capital Markets Funds
<PAGE>


                     Small Capitalization Growth Investments, continued

The bar chart and tables below indicate the risks and returns of investing
in the Portfolio. The bar chart shows changes in the performance of the Portfo-
lio from year to year since its founding on November 18, 1991. The table also
shows how the Portfolio's average annual returns for different
calendar periods compare to those of the Portfolio's benchmark index and its
Lipper peer group. The Portfolio's past performance does not necessarily indi-
cate how the Portfolio will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                    Small Capitalization Growth Investments

                                 92     11.42%
                                 93     23.52%
                                 94     13.11%
                                 95     34.19%
                                 96     18.88%
                                 97     10.30%
                                 98      2.17%
                                 99     49.55%

                       Calendar years ended December 31

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                            One   Five    Life of  Inception
                                            year  years  Portfolio   Date
----------------------------------------------------------------------------
<S>                                        <C>    <C>    <C>       <C>
Portfolio (without advisory program fee)*  49.55% 21.87%   21.05%  11/18/91
Russell 2000 Growth Index                  43.09% 18.99%   15.09%     **
Lipper Small-Cap Growth Funds Average      61.80% 22.33%   21.15%     **
----------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                              36.13%                                                4th/1999
Worst                            (23.81%)                                               3rd/1998
------------------------------------------------------------------------------------------------
Year-to-date                       0.84%                                        through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's benchmark is The
 Russell 2000 Growth Index. This
 index represents stocks in the
 Russell 2000 Index with better
 than average growth orientation.
 The Russell 2000 Index includes
 the smallest 2000 U.S. stocks
 out of Russell 3000 Universe.
 Unlike the Portfolio, the
 benchmark is unmanaged and does
 not include any expenses. In
 addition, the Portfolio compares
 its performance with the Lipper
 Small Cap Growth Funds Average.
 Lipper Small Cap Growth Funds
 Average is an average of the
 reinvested performance of funds
 that normally invest in
 companies with long-term
 earnings expected to grow
 significantly faster than the
 earnings of the stocks
 represented in a major unmanaged
 stock index. These funds will
 normally have an above-average
 price-to-earnings ratio, price-
 to-book ratio and three-year
 earnings growth figure, compared
 to the U.S. diversified small-
 cap funds universe average.
 Small-cap funds will generally
 invest at least 75% of their
 assets in companies with market
 capitalizations (on a three-year
 weighted basis) of less than
 250% of the dollar-weighted
 median market capitalization of
 the S&P Small-Cap 600 Index.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio based upon the expenses of the Portfolio's latest fis-
cal year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.80%
   Other expenses                       0.18%
                                        -----
  Total annual Portfolio operating
   expenses                             0.98%
                                        =====
</TABLE>

                                       9

 Consulting Group Capital Markets Funds
<PAGE>


                     Small Capitalization Growth Investments, continued

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $251                   $773                             $1,321                             $2,816
</TABLE>

                                       10

 Consulting Group Capital Markets Funds
<PAGE>




                       This page intentionally left blank

                                       11

 Consulting Group Capital Markets Funds
<PAGE>


Small Capitalization Value Equity Investments

Investment objective

Above average capital appreciation.

Principal investment strategies

The Portfolio invests primarily in common stocks of small capitalization "val-
ue" companies. The active subadvisors primarily invest the Portfolio's assets
in the common stocks of companies with total market capitalizations at the time
of purchase below the maximum market capitalization permitted for a stock in
the Russell 2000 Value Index. As of June 30, 2000, that maximum market capital-
ization was $2.42 billion. The Portfolio may also invest a portion of its assets
in common stocks of companies with total market capitalization of $550 million
or less at the time of purchase.

How the subadvisors select the Portfolio's investments

The manager has selected three subadvisors to manage the Portfolio. Each
subadvisor manages its portion of the Portfolio's assets using a different in-
vestment style. Each subadvisor's investment approach is described below.


Mellon Capital Management ("Mellon") is a passive, index based manager that
seeks to fully replicate the performance of the Russell 2000 Value Index. It
minimizes performance differences from the index through systematic quantita-
tive methods. The percentage of the Portfolio's assets allocated to Mellon is
60%.

NFJ Investment Group ("NFJ") uses an active management style that invests in a
diversified portfolio of small capitalization common stocks that it believes
are undervalued in the marketplace generally and within their respective indus-
tries. These securities are characterized as having below average price-to-
earnings ratios and improving fundamentals. These securities are often out of
favor, and widespread securities analyst coverage is not common. The subadvisor
also considers valuation factors such as price-to-book, price-to-cash flow,
dividend policy and industry outlook in selecting stocks for investment. The
percentage of the Portfolio's assets allocated to NFJ is 25%.

Rutabaga Capital Management LLC ("Rutabaga") uses an active management style
and focuses exclusively on micro and small cap stocks and looks to unearth un-
common or currently unfavored stocks. The subadvisor's analysts employ exten-
sive "bottom-up" fundamental research to identify high quality companies with
catalysts to increase margins and intrinsic value, but that are neglected or
misperceived by the market. All candidates are subject to careful group consid-
eration, with the final decisions being made by the portfolio manager. This
process focuses on clearly identifying the catalysts that should generate ac-
celerating earnings growth and thereby drive future stock performance. The
subadvisor also attempts to mitigate downside risk by buying stocks in compa-
nies with leading market positions, but with low valuations and low investor
expectations. The percentage of the Portfolio's assets allocated to Rutabaga is
15%.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in equity securities generally. These risks are described on page 3.
Your investment in the Portfolio is also subject to the following specific
risks:

 . Value stocks or small capitalization stocks fall out of favor with investors

 . Greater volatility of share price because of the focus on small cap compa-
  nies. Compared to large companies, small cap companies or the market for
  their equity securities are more likely to:

 . Be more sensitive to changes in earnings results and investor expectations

 . Have more limited product lines, capital resources and management depth

 . Experience sharper swings in market values

 . Be harder to sell at the times and prices the subadvisors believe appropri-
   ate

 . Offer greater potential for gain and loss

The bar chart and tables on the next page indicate the risks and returns
of investing in the
Portfolio. The bar chart shows changes in the performance of the Portfo-
lio from year to year since its founding on November 18, 1991. The table
also shows how the Portfolio's average annual returns for different
calendar periods compare to those of the Portfolio's benchmark index and its
Lipper peer group. The Portfolio's past performance does not necessarily indi-
cate how the Portfolio will perform in the future.

                                       12

 Consulting Group Capital Markets Funds
<PAGE>


               Small Capitalization Value Equity Investments, continued


                                    [GRAPH]

                         Percentage Total Returns for
                 Small Capitalization Value Equity Investments

                                 92     23.65%
                                 93     (4.27)%
                                 94     (8.54)%
                                 95     24.54%
                                 96     25.05%
                                 97     35.94%
                                 98     (8.88)%
                                 99     (3.96)%

                       Calendar years ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                            One    Five    Life of  Inception
                                           year    years  Portfolio   Date
-----------------------------------------------------------------------------
<S>                                        <C>     <C>    <C>       <C>
Portfolio (without advisory program fee)*  (3.96)% 13.13%    9.55%  11/18/91
Russell 2000 Value Index                   (1.49)% 13.14%   15.10%     **
Lipper Small-Cap Value Funds Average       5.92 %  13.57%    9.59%     **
-----------------------------------------------------------------------------
</TABLE>
 * The Portfolio is available only to investors participating in an advisory
   program. These programs charge an annual fee, which in the case of TRAK(R)
   may be up to 1.5%.
** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
Year                             Return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                              17.74 %                                               4th/1992
Worst                            (18.18)%                                               3rd/1998
------------------------------------------------------------------------------------------------
Year-to-date                       8.50 %                                       through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's benchmark is The
 Russell 2000 Value Index. The
 index represents stocks in the
 Russell 2000 Index with less
 than average growth orientation.
 The Russell 2000 Index is
 comprised of the smallest 2000
 U.S. stocks out of the Russell
 3000 Universe. Unlike the
 Portfolio, the benchmark is
 unmanaged and does not include
 any expenses. In addition, the
 Portfolio compares its
 performance with the Lipper
 Small-Cap Value Funds Average.
 It is an average of the
 reinvested performance of funds
 that normally invest in
 companies considered to be
 undervalued relative to a major
 unmanaged stock index based on
 price-to-current earnings, book
 value, asset value or other
 factors. These funds will
 normally have a below average
 price-to-earnings ratio, price-
 to-book ratio and three-year
 earnings growth figure, compared
 to the U.S. diversified small-
 cap funds universe average.
 Small-cap funds will generally
 invest at least 75% of their
 assets in companies with market
 capitalizations (on a three-year
 weighted basis) of less than
 250% of the dollar-weighted
 median market capitalization of
 the S&P Small-Cap 600 Index.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses of the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.76%
   Other expenses                       0.15%
                                        -----
  Total annual Portfolio operating
   expenses                             0.91%
                                        =====
</TABLE>

                                       13

 Consulting Group Capital Markets Funds
<PAGE>


               Small Capitalization Value Equity Investments, continued

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions.

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $244                   $751                             $1,285                             $2,746
</TABLE>

                                       14

 Consulting Group Capital Markets Funds
<PAGE>




                       This page intentionally left blank

                                       15

 Consulting Group Capital Markets Funds
<PAGE>


International Equity Investments

Investment objective

Capital appreciation.

Principal investment strategies

The Portfolio invests primarily in equity securities of companies located out-
side the U.S. The Portfolio focuses on companies located in developed markets,
but may also invest a portion of its assets in securities of companies located
in emerging markets. The Portfolio intends to diversify its assets by investing
primarily in securities of issuers located in at least three foreign countries.
The Portfolio generally attempts to hedge against unfavorable changes in cur-
rency exchange rates by engaging in forward currency transactions and trading
currency futures contracts and options on these futures. However, the Portfolio
may not always choose or be able to hedge its currency exposure.

How the subadvisors select the Portfolio's investments

The manager has selected three subadvisors to manage the Portfolio. Each
subadvisor manages its portion of the Portfolio's assets using a different in-
vestment style. Each subadvisor's investment approach is described below.

State Street Global Advisors ("SSGA") uses a quantitative process to construct
a portfolio that fully replicates the performance of the Morgan Stanley Capital
International Europe Australia Far East (EAFE) Index. The EAFE Index consists
of securities of companies located in 20 countries outside of North America and
represents approximately 60% of the total market value of all publicly traded
stocks in these countries. The percentage of the Portfolio's assets allocated
to SSGA is 40%.

Oechsle International Advisors, LLC ("Oechsle") first seeks to identify the
most attractive foreign markets by ranking their expected returns through coun-
try and currency analysis. It then selects investments within attractive mar-
kets through both a top-down and bottom-up company analysis. The percentage of
the Portfolio's assets allocated to Oechsle is 30%.

Scudder Kemper Investments, Inc. ("Scudder") evaluates the prospects of foreign
economies and analyzes individual companies to identify investment opportuni-
ties. In defining country allocations, the Portfolio may focus on global, eco-
nomic, industrial and investment themes. Individual stocks are purchased on the
basis of wide-ranging fundamental and valuation criteria. The subadvisor util-
izes a "three-circle" approach that includes extensive research on global
themes, company analysis and country analysis. The percentage of the Portfo-
lio's assets allocated to Scudder is 30%.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in equity securities generally. The principal risks associated with in-
vesting in equity securities are described on page 3.

Your investment is also subject to the unique risks of investing in foreign is-
suers. These risks are more pronounced to the extent that the Portfolio invests
in countries with emerging markets or the Portfolio invests significantly in
any one foreign country. These risks include:

 . Less information about foreign issuers or markets may be available because of
  less rigorous accounting standards or regulatory practices

 . Many foreign markets are smaller, less-liquid and more volatile than U.S.
  markets. In a changing market, the subadvisors may not be able to sell the
  Portfolio's securities in amounts and at prices they consider reasonable

 . The U.S. dollar may appreciate against non-U.S. currencies

 . Economic, political or social instability in foreign countries may signifi-
  cantly disrupt the principal financial markets in which the Portfolio invests

                                       16

 Consulting Group Capital Markets Funds
<PAGE>


                            International Equity Investments, continued

The bar chart and tables shown below indicate the risks of investing in the
Portfolio. The bar chart shows changes in the performance of the Portfolio from
year to year since the Portfolio's inception on November 18, 1991. The table
shows how the Portfolio's average annual returns for different calendar periods
compare to those of the Portfolio's benchmark index and its Lipper peer group.
The Portfolio's past performance does not necessarily indicate how the Portfo-
lio will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                     International Equity Investments

                                 92     (6.68)%
                                 93     28.97%
                                 94      9.50%
                                 95      9.64%
                                 96      4.87%
                                 97      1.73%
                                 98     22.51%
                                 99     41.52%

                       Calendar years ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                            One   Five    Life of  Inception
                                           year   years  Portfolio   Date
----------------------------------------------------------------------------
<S>                                        <C>    <C>    <C>       <C>
Portfolio (without advisory program fee)*  41.52% 15.19%   12.88%  11/18/91
EAFE Index                                 26.96% 12.83%   11.33%     **
Lipper International Funds Average         41.04% 15.13%   12.91%     **
----------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.

** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                             28.41 %                                                4th/1999
Worst                            (13.97)%                                               3rd/1988
------------------------------------------------------------------------------------------------
Year-to-date                     (13.87)%                                       through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's benchmark is the
 Morgan Stanley Capital Interna-
 tional EAFE--Capitalization
 Weighted Index. The index is a
 composite portfolio of equity
 total returns for the countries
 of Europe, Australia, New Zea-
 land and the Far East. Unlike
 the Portfolio, the benchmark is
 unmanaged and does not include
 any expenses. In addition, the
 Portfolio compares its perfor-
 mance with the Lipper Interna-
 tional Funds Average. It is an
 average of the reinvested per-
 formance of funds that invest
 their assets in securities whose
 primary trading markets are out-
 side of the United States.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio based upon expenses of the Portfolio's latest fiscal
year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.77%
   Other expenses                       0.17%
                                        -----
  Total annual Portfolio operating
   expenses                             0.94%
                                        =====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum TRAK(R) fee, would
be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $247                   $761                             $1,301                             $2,776
</TABLE>

                                       17

 Consulting Group Capital Markets Funds
<PAGE>


Emerging Markets Equity Investments

Investment objective.

Long-term capital appreciation.

Principal investment strategies

The Portfolio invests primarily in equity securities of issuers located in
countries with emerging markets. The Portfolio considers an emerging market
country to be one having per capita income in the low to middle ranges, as de-
termined by the International Bank for Reconstruction and Development (The
World Bank). To diversify its investments, the Portfolio invests primarily in
securities of issuers located in at least three foreign countries. The Portfo-
lio may also invest a portion of its assets in closed-end investment companies
that invest in emerging markets. The Portfolio generally attempts to hedge
against unfavorable changes in currency exchange rates by engaging in forward
currency transactions and trading currency futures contracts and options on
these futures. However, the Portfolio may not always choose or be able to hedge
its currency exposure.

How the subadvisors select the Portfolio's investments

The manager has selected three subadvisors to manage the Portfolio. Each
subadvisor manages its portion of the Portfolio's assets using a different in-
vestment style. Each subadvisor's investment approach is described below.

Foreign & Colonial Emerging Markets Ltd. ("Foreign & Colonial") is an active
manager. Its style combines a rigorous "top-down" macroeconomic approach to
country allocation with fundamental, "bottom-up" stock selection. Investment
decisions are founded on the primary research undertaken by the team of invest-
ment managers. Risk is controlled through a core/satellite approach to country
allocation and a focus on quality companies that must pass rigorous selection
criteria. Country allocation decisions are made within a disciplined framework
and revolve around analysis of key political and macro-economic variables. The
percentage of the Portfolio's assets allocated to Foreign & Colonial is 30%.

State Street Global Advisors ("SSGA") uses quantitative analysis to identify
countries and stocks which are under-valued relative to their growth rates. It
employs an investment process that combines top-down country selection with
bottom-up stock selection to determine an optimal country and security mix. The
percentage of the Portfolio's assets allocated to SSGA is 20%.

Baring Asset Management ("Baring") looks for unrecognized "growth" stocks
through an investment process that combines top-down country allocation, bot-
tom-up company research and risk analysis to determine an optimal country and
security mix. This process is driven by structured fundamental research using a
disciplined investment framework at both the country and company levels. The
fundamental research is supported by quantitative screening at the country lev-
el. The percentage of the Portfolio's assets allocated to Baring is 50%.

Principal risks of investing in the Portfolio

Because the Portfolio invests primarily in equity securities, your investment
in the Portfolio is subject to the risks associated with investing in equity
securities generally. These risks are described on page 3.

Your investment is also subject to the unique risks of investing in securities
of foreign issuers. These risks are more pronounced because the Portfolio in-
vests in countries with emerging markets. The market value for emerging market
equity securities historically has been very volatile and an investment in the
Portfolio involves a substantial degree of risk. These risks include:

 . Less information about emerging market issuers or markets may be available
  because of less rigorous disclosure or accounting standards or regulatory
  practices

 . Most emerging markets are smaller, less liquid and more volatile than devel-
  oped markets. In a changing market, the subadvisors may not be able to sell
  portfolio securities in amounts and at prices they consider reasonable

 . Economic, political or social instability in an emerging market country or
  region may significantly disrupt the principal financial market

 . The economies of emerging market countries may grow at slower rates than ex-
  pected or suffer a downturn or recession

 . Emerging market countries may experience rising interest rates, or, more sig-
  nificantly, rapid inflation or hyperinflation

 . The Portfolio could experience a loss from settlement and custody practices
  in some emerging markets

 . Withholding and other foreign taxes may decrease the Portfolio's return

                                       18

 Consulting Group Capital Markets Funds
<PAGE>


                         Emerging Markets Equity Investments, continued

The bar chart and tables below indicate the risks and returns of investing
in the Portfo-
lio. The bar chart shows changes in the performance of the Portfolio from year
to year since the Portfolio's inception on April 21, 1994. The table shows how
the Portfolio's average annual returns for different calendar periods compare
to those of the Portfolio's benchmark index. The Portfolio's past performance
does not necessarily indicate how the Portfolio will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                   Emerging Markets Equity Investments

                                 95     (2.52)%
                                 96     13.16%
                                 97     (8.06)%
                                 98    (32.02)%
                                 99     67.81%

                       Calendar years ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                             One   Five    Life of  Inception
                                            year   years  Portfolio   Date
-----------------------------------------------------------------------------
<S>                                         <C>    <C>    <C>       <C>
Portfolio (without advisory program fee)*   67.81%  2.96%    2.90%   4/21/94
Morgan Stanley Emerging Markets Free Index  26.96% 12.83%   11.93%     **
Lipper Emerging Markets Funds Average       70.26%  4.60%    2.46%     **
-----------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 4/21/94.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                              30.40 %                                               4th/1999
Worst                            (23.67)%                                               3rd/1998
------------------------------------------------------------------------------------------------
Year-to-date                     (21.48)%                                       through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's benchmark is the
 Morgan Stanley Emerging Markets
 Free Index. The index is com-
 posed of equity total returns of
 countries with low to middle per
 capita incomes, as determined by
 the World Bank. Unlike the Port-
 folio, the benchmark is unman-
 aged and does not include any
 expenses. In addition, the Port-
 folio compares its performance
 with the Lipper Emerging Markets
 Funds Average. It is an average
 of the reinvested performance of
 funds that invest at least 65%
 of total assets in emerging mar-
 ket equity securities, where
 emerging market is defined by a
 country's gross national product
 per capita or other economic
 measures.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio based upon expenses of the Portfolio's latest fiscal
year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      1.10%
   Other expenses                       0.56%
                                        -----
  Total annual Portfolio operating
   expenses                             1.66%
                                        =====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $319                   $974                             $1,654                             $3,467
</TABLE>

                                       19

 Consulting Group Capital Markets Funds
<PAGE>

Balanced Investments

Investment objective

Total return through a combination of current income and capital appreciation.

Principal investment strategies

The Portfolio balances its investments across both common stocks and investment
grade fixed income securities issued by corporate and governmental issuers. The
Portfolio intends to maintain at least a quarter of its assets in fixed-income
senior securities, preferred stocks and convertible debt securities and con-
vertible preferred stocks to the extent their value is attributable to their
fixed income characteristics.

How the subadvisors select the Portfolio's investments

The manager has selected two subadvisors to manage the Portfolio, an equity
subadvisor and a fixed income subadvisor.

Laurel Capital Advisors ("Laurel") manages the equity portion of the Portfo-
lio's assets. In selecting stocks for investment, it focuses on common stocks
of companies which it believes are undervalued and which exhibit improving
earnings momentum, while maintaining sector weightings similar to the S&P 500
Index. The percentage of the Portfolio's assets allocated to Laurel is 60%.

Seix Investment Advisors ("Seix") manages the fixed income portion of the Port-
folio's assets. The subadvisor combines traditional credit research with pro-
prietary analysis that seeks to identify mispriced or undervalued fixed-income
securities such as U.S. government securities and corporate bonds. It empha-
sizes those securities that have a potential for higher income while maintain-
ing a duration that is approximately equal to the Lehman Brothers Aggregate
Bond Index. The percentage of the Portfolio's assets allocated to Seix is 40%.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks of investing in equity
securities and of investing in fixed income securities generally. These risks
are described on page 3. The market prices of common stocks are generally more
volatile than fixed income investments. As a balanced investment, the Portfo-
lio's net asset value may be less volatile than other equity oriented portfo-
lios. However, since the Portfolio invests a significant portion of its assets
in fixed income securities, it has less potential for capital appreciation.

The market value of foreign securities may go down because of unfavorable for-
eign government actions, political, economic or market instability or the ab-
sence of accurate information about foreign companies. These risks may be more
severe for securities of issuers in emerging markets. Foreign securities are
sometimes less liquid and harder to value than securities of U.S. issuers.

The bar chart and tables below indicate the risks and returns of investing in
the Portfolio. The bar chart shows changes in the performance of the Portfolio
from year to year since its founding on February 16, 1993. The table shows how
the Portfolio's average annual returns for different calendar periods compare
to those of the Portfolio's benchmark indices and its Lipper peer group. The
Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                             Balanced Investments

                                 94     (2.68)%
                                 95     27.41%
                                 96     15.32%
                                 97     20.29%
                                 98      8.43%
                                 99      9.47%

                       Calendar years ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                            One    Five    Life of  Inception
                                           year    years  Portfolio   Date
-----------------------------------------------------------------------------
<S>                                        <C>     <C>    <C>       <C>
Portfolio (without advisory program fee)*   9.47 % 15.97%   12.31%   2/16/93
Lehman Gov/Corp Bond Index                 (2.15)%  7.61%    5.93%     **
S&P 500                                    21.03 % 28.54%   21.96%     **
Lipper Balanced Funds Average               8.92 % 16.37%   12.33%     **
-----------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 2/16/93.

                                       20

 Consulting Group Capital Markets Funds
<PAGE>


                                        Balanced Investments, continued

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                             11.66 %                                            2nd/1997
Worst                            (8.06)%                                            3rd/1998
------------------------------------------------------------------------------------------------
Year-to-date                      3.62 %                                        through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's benchmarks are
 Standard & Poor's 500 Index and
 the Lehman Brothers Government/
 Corporate Bond Index. The S&P
 500 is an index of 500 of the
 largest stocks in the U.S. The
 Lehman Index is a composite of
 debt securities of the U.S.
 government and its agencies and
 publicly issued fixed income,
 investment grade, non-
 convertible corporate debt
 securities. Unlike the
 Portfolio, the benchmarks are
 unmanaged and do not include any
 expenses. In addition, the
 Portfolio compares its
 performance with the Lipper
 Balanced Funds Average. It is an
 average of the reinvested
 performance of funds whose
 primary objective is to conserve
 principal by maintaining at all
 times a balanced portfolio of
 both stocks and bonds.
 Typically, the stock/bond ratio
 ranges around 60 percent/40
 percent, respectively.

 The Consulting Group has de-
 signed this Portfolio for in-
 vestors who participate in the
 TRAK(R) Advisory Service through
 employee benefit plans which do
 not make the full range of Capi-
 tal Markets Funds offered
 through this prospectus avail-
 able to participants. The Con-
 sulting Group will not recommend
 this Portfolio to investors in
 advisory programs which make all
 of the Capital Markets Funds
 available.


Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses of the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                  <C>
  Shareholder fees                        None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee             1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                       0.78%
   Other expenses                        0.38%
                                       -------
  Total annual Portfolio operating
   expenses                              1.16%
                                       =======
  Management and Administration fee
   waivers*                            (0.16)%
                                       -------
  Net annual portfolio expenses          1.00%
                                       =======
</TABLE>

* Management has agreed to waive a portion of management and administration
  fees. The manager may change or eliminate the management and/or administra-
  tion fee waivers at any time.

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After                  After                             After                             After
   1 year                3 years                           5 years                           10 years
   <S>                   <C>                               <C>                               <C>
    $269                  $826                             $1,410                             $2,993
</TABLE>

                                       21

 Consulting Group Capital Markets Funds
<PAGE>

Intermediate Fixed Income Investments

Investment objective

Current income and reasonable stability of principal.

Principal investment strategies

The Portfolio invests primarily in fixed income securities and instruments is-
sued by governmental and corporate issuers. These securities include mortgage-
related and asset-backed securities, although the Portfolio will not invest
more than 5% of its assets at the time of purchase in asset-backed securities.

Credit quality. The Portfolio invests exclusively in securities rated invest-
ment grade by a nationally recognized rating organization, or, if unrated, of
equivalent quality as determined by the subadvisor.

Maturity. The Portfolio's average maturity ranges from three to ten years. Av-
erage maturity is a weighted average of the stated maturities of the debt secu-
rities the Portfolio owns. Individual investments may be of any maturity.

How the subadvisors select the Portfolio's investments

The manager has selected three subadvisors to manage the Portfolio. Each
subadvisor manages its portion of the Portfolio's assets using a different in-
vestment style. Each subadvisor's investment approach is described below.

Pacific Investment Management Company ("PIMCO") employs top-down and bottom-up
investment techniques. It implements the following "top-down" strategies: dura-
tion and volatility analyses, sector evaluation and yield curve shape analysis.
The subadvisor also employs the following "bottom-up" strategies: credit analy-
sis, quantitative research, issue selection and cost-effective trading. The
percentage of the Portfolio's assets allocated to PIMCO is 40%.

Metropolitan West Asset Management, LLC ("MWAM") seeks to consistently
outperform the benchmark while maintaining below average volatility. The
subadvisor believes consistent outperformance is gained through the measured
application of five value-added strategies: limited average maturity/duration
shifts, yield curve management, utilization of all sectors of the bond market,
quantitative security selection and sophisticated buy/sell execution strate-
gies. The percentage of the Portfolio's assets allocated to MWAM is 20%.

BlackRock Financial Management, Inc. ("BlackRock") employs a relative value ap-
proach which entails portfolio duration within a narrow range and value added
through sector and sub-sector rotation within the corporate and mortgage sec-
tors. The subadvisor evaluates securities within a risk management framework
which consists of determining interest rate risk, yield curve risk, cash flow
risk, credit risk and liquidity risk of securities. The percentage of the Port-
folio's assets allocated to BlackRock is 40%.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in fixed income securities generally. These risks are described on page
3.

Your investment is also subject to the following specific risks:

 . Greater sensitivity to rising interest rates than Government Money Invest-
  ments because of the Portfolio's longer average maturity

 . Greater exposure to prepayment and extension risks because the Portfolio may
  invest a portion of its assets in mortgage-related and asset-backed securi-
  ties

 . Increased volatility in share price to the extent the Portfolio holds mort-
  gage derivative securities having imbedded leverage or unusual interest rate
  reset terms

The bar chart and tables indicate the risks and returns of investing in the
Portfolio. The bar chart below shows changes in the performance of the Portfo-
lio from year to year since its founding on November 18, 1991. The table on the
next page shows how the Portfolio's average annual returns for different calen-
dar periods compare to those of the Portfolio's benchmark index and its Lipper
Investor Services peer group. The Portfolio's past performance does not neces-
sarily indicate how the Portfolio will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                     Intermediate Fixed Income Investments

                                 92      5.86%
                                 93     10.49%
                                 94     (2.76)%
                                 95     14.67%
                                 96      3.64%
                                 97      7.45%
                                 98      7.23%
                                 99     (0.43)%

                       Calendar years ended December 31


                                       22

 Consulting Group Capital Markets Funds
<PAGE>


                       Intermediate Fixed Income Investments, continued

AVERAGE ANNUAL TOTAL RETURNS

(for the period ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                             One    Five    Life of  Inception
                                            year    years  Portfolio   Date
------------------------------------------------------------------------------
<S>                                         <C>     <C>    <C>       <C>
Portfolio (without advisory program fee)*   (0.43)% 6.40%    5.84%   11/18/91
Lehman Brothers Intermediate Gov/Corp Bond
 Index                                       0.49 % 6.93%    6.21%         **
Lipper Intermediate Investment Grade Debt
 Funds Average                              (1.23)% 6.85%    6.47%         **
------------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                  Total
                                  return                                          Quarter/Year
--------------------------------------------------------------------------------------------------
<S>                               <C>                                             <C>
Best                               5.08 %                                         1st/1993
Worst                             (2.30)%                                         1st/1994
--------------------------------------------------------------------------------------------------
Year-to-date                       5.86 %                                         through 3rd/2000
--------------------------------------------------------------------------------------------------
</TABLE>


                                   BENCHMARKS

 The Portfolio's primary
 benchmark is the Lehman Brothers
 Intermediate
 Government/Corporate Bond Index.
 The index is composed of debt
 securities of the U.S.
 government and its agencies and
 publicly issued, fixed rate,
 non-convertible, investment-
 grade domestic corporate debt
 with at least one year remaining
 to maturity. Unlike the
 Portfolio, the benchmark is
 unmanaged and does not include
 any expenses. In addition, the
 Portfolio compares its
 performance with the Lipper
 Intermediate Investment Grade
 Debt Funds Average. It is an
 average of the reinvested
 performance of funds that invest
 at least 65% of their assets in
 corporate investment grade debt
 issues rated in the top four
 grades by a nationally
 recognized rating organization
 with dollar-weighted average
 maturities of five to ten years.


Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses for the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.61%
   Other expenses                       0.17%
                                        -----
  Total annual Portfolio operating
   expenses                             0.78%
                                        =====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $231                   $712                             $1,220                             $2,615
</TABLE>

                                       23

 Consulting Group Capital Markets Funds
<PAGE>

Long-Term Bond Investments

Investment objective

Total return consisting of current income and appreciation of capital through
investments in fixed income securities without regard to remaining maturity.

Principal investment strategies

The Portfolio invests primarily in fixed income securities issued by U.S. gov-
ernmental and corporate issuers, U.S. dollar denominated fixed income securi-
ties of foreign issuers and mortgage-related and asset-backed securities. The
Portfolio will not invest more than 25% of its assets in privately issued mort-
gage-related securities.

Credit quality. The Portfolio invests exclusively in securities rated invest-
ment grade by a nationally recognized rating organization, or, if unrated, of
equivalent quality as determined by the subadvisor, Western Asset Management
Company.

Maturity. The Portfolio's average maturity is at least 10 years. Average matu-
rity is a weighted average of the stated maturity of debt securities the Port-
folio owns. Individual investments may be of any maturity.

How the subadvisor selects the Portfolio's investments

The subadvisor emphasizes three key strategies to enhance the Portfolio's total
return:

 . Adjusting the allocation of the Portfolio among the key sectors of the fixed-
  income market--government, corporate and mortgage and asset-backed--depending
  upon its forecast of relative values.

 . Tracking the duration of the overall portfolio so that it falls within a nar-
  row band relative to the benchmark index, with adjustment made to reflect the
  subadvisor's long-term outlook for interest rates.

 . Purchasing under-valued securities in each of the key sectors of the bond
  market while keeping overall quality high.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in fixed income securities generally. These risks are described on page
3.

Your investment is also subject to the following specific risks:

 . Greater sensitivity to rising interest rates than Intermediate Fixed Income
  Investments because of the Portfolio's longer average maturity

 . Greater exposure to prepayment and extension risks because the Portfolio may
  invest a portion of its assets in mortgage-related and asset-backed securi-
  ties

The bar chart and tables below indicate the risks and returns of investing in
the Portfolio. The bar chart shows changes in the performance of the Portfolio
from year to year since its founding on November 18, 1991. The table shows how
the Portfolio's average annual returns for different calendar periods compare
to those of the Portfolio's benchmark index and its Lipper peer group. The
Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                          Long-Term Bond Investments

                                 92      5.93%
                                 93     10.02%
                                 94     (5.12)%
                                 95     18.13%
                                 96      3.11%
                                 97     12.90%
                                 98     10.63%
                                 99     (9.57)%

                       Calendar years ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                              One    Five    Life of  Inception
                                             year    years  Portfolio   Date
-------------------------------------------------------------------------------
<S>                                          <C>     <C>    <C>       <C>
Portfolio (without advisory program fee)*    (9.57)% 6.59%    5.62%   11/18/91
Lehman Brothers Gov/Corp Bond Index          (2.15)% 7.61%    6.93%      **
Lipper Corporate Debt Funds A Rated Average  (2.50)% 6.96%    6.60%      **
-------------------------------------------------------------------------------
</TABLE>
 * The Portfolio is available only to investors participating in an advisory
   program. These programs charge an annual fee, which in the case of TRAK(R)
   may be up to 1.5%.
** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                              6.76 %                                                3rd/1998
Worst                            (3.95)%                                                1st/1999
------------------------------------------------------------------------------------------------
Year-to-date                     10.04 %                                        through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

                                       24

 Consulting Group Capital Markets Funds
<PAGE>


                                  Long-Term Bond Investments, continued

            BENCHMARKS

 The Portfolio's primary bench-
 mark is the Lehman Brothers
 Government/Corporate Bond Index.
 The index is composed of debt
 securities of the U.S. govern-
 ment and its agencies and pub-
 licly issued fixed rate, non-
 convertible, investment-grade
 corporate debt securities with
 at least one year remaining to
 maturity. Unlike the Portfolio,
 the benchmark is unmanaged and
 does not include any expenses.
 In addition, the Portfolio com-
 pares its performance with the
 Lipper Corporate Debt Funds A
 Rated Average. It is an average
 of the reinvested performance of
 funds that invest at least 65%
 of their assets in corporate
 debt issues rated "A" or better
 by a nationally recognized rat-
 ing organization or government
 issues.


Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses for the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.60%
   Other expenses                       0.32%
                                        -----
  Total annual Portfolio operating
   expenses                             0.92%
                                        =====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $245                   $755                             $1,291                             $2,756
</TABLE>

                                       25

 Consulting Group Capital Markets Funds
<PAGE>

Mortgage Backed Investments
Investment objective

High current income and secondarily capital appreciation, each to the extent
consistent with the protection of capital.

Principal investment strategies

The Portfolio invests primarily in mortgage-related securities representing
pools of mortgage loans assembled for sale to investors by various U.S. govern-
mental agencies, and government-related organizations, and private issuers. The
Portfolio will not invest more than 25% of its assets in privately issued mort-
gage-related securities.

The Portfolio may also invest in mortgage-related derivative securities such as
government stripped mortgage-backed securities (SMBS) and collateralized mort-
gage obligations (CMOs). SMBS represent the right to receive either principal
or interest payments on U.S. government securities. Interests in CMOs entitle
the holder to specified cash flows from a pool of mortgages. In order to en-
hance current income, the Portfolio may enter into mortgage dollar roll trans-
actions with respect to mortgage-related securities issued by U.S. governmental
agencies or instrumentalities.

How the subadvisor selects the Portfolio's investments

The subadvisor, Utendahl Capital Management CFI, uses a quantitative
computer-modelled in-
vestment process to seek to identify and capitalize on inefficiencies in the
mortgage-backed securities market.

The subadvisor generally maintains the portfolio's average duration within a
narrow band around the duration of the entire mortgage-backed securities mar-
ket. Duration is an approximate measure of the sensitivity of the market value
of the Portfolio's holdings to changes in interest rates. The subadvisor nor-
mally focuses the Portfolio's holdings on mortgage related securities issued by
U.S. government agencies and government related organizations.

Credit quality. The Portfolio generally invests in securities rated no lower
than "A" at the time of purchase by a nationally recognized rating agency or,
if unrated, of equivalent quality as determined by the subadvisor. However, up
to 20% of the Portfolio's assets may be invested in securities rated as low as
"B" by a nationally recognized rating organization or, if unrated, of equiva-
lent quality as determined by the subadvisor, upon the concurrence of the man-
ager.

Principal risks of investing in the Portfolio

Because mortgage-related securities are a type of fixed income security, your
investment in the Portfolio is subject to the risks of investing in fixed in-
come securities generally. These risks are described on page 3.

Your investment is also subject to the specific risks of investing primarily in
mortgage related securities. Mortgage-related securities generally represent
direct or indirect interests in the principal and interest payments on individ-
ual pools of mortgage loans. The mortgage loans typically allow the mortgagor
(i.e., the homeowner) to prepay principal on their mortgages whenever they
choose. For this reason, your investment is also subject to:

 . Increased prepayment and extension risk which increases price and yield vola-
  tility

 . Increased volatility in share price to the extent the Portfolio holds mort-
  gage derivative securities having imbedded leverage or unusual interest rate
  reset terms

 . To the extent the Portfolio enters into mortgage dollar roll transactions,
  the risk that the securities the Portfolio has agreed to purchase will be
  worth less on the repurchase date than the repurchase price because of
  changes in interest rates and market conditions

Payments of principal and interest on mortgage pools issued by government re-
lated organizations are not guaranteed by the U.S. government. Although mort-
gage pools issued by U.S. agencies are guaranteed with respect to payments of
principal and interest, such guarantee does not apply to losses resulting from
declines in the market value of such securities.

                                       26

 Consulting Group Capital Markets Funds
<PAGE>


                                 Mortgage Backed Investments, continued

The bar chart and tables below indicate the risks and returns of investing in
the Portfolio. The bar chart shows changes in the performance of the Portfolio
from year to year since its founding on November 18, 1991. The table shows how
the Portfolio's average annual returns for different calendar periods compare
to those of the Portfolio's benchmark index and its Lipper peer group. The
Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                          Mortgage Backed Investments

                                 92      6.55%
                                 93      6.20%
                                 94     (2.08)%
                                 95     15.46%
                                 96      4.69%
                                 97      8.78%
                                 98      6.93%
                                 99      0.83%

                       Calendar years ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                           One   Five    Life of  Inception
                                           year  years  Portfolio   Date
---------------------------------------------------------------------------
<S>                                        <C>   <C>    <C>       <C>
Portfolio (without advisory program fee)*  0.83% 7.23%    6.02%   11/18/91
Lehman Mortgage Backed Index               1.86% 7.98%    4.86%      **
Lipper U.S. Mortgage Funds Average         0.71% 7.03%    5.94%      **
---------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                              4.95 %                                                2nd/1995
Worst                            (2.16)%                                                1st/1994
------------------------------------------------------------------------------------------------
Year-to-date                      6.83 %                                        through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's primary
 benchmark is Lehman Brothers
 Mortgage Backed Securities
 Index. The index contains most
 fixed rate securities issued and
 backed by mortgage pools of
 federal agencies or government
 related organizations. Unlike
 the Portfolio, the benchmark is
 unmanaged and does not include
 any expenses. In addition, the
 Portfolio compares its
 performance with the Lipper U.S.
 Mortgage Funds Average. It is an
 average of the reinvested
 performance of funds that invest
 at least 65% of their assets in
 mortgages/securities issued or
 guaranteed as to principal and
 interest by the U.S. Government
 and certain federal agencies.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses of the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                  <C>
  Shareholder fees                        None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee             1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                       0.70%
   Other expenses                        0.27%
                                       -------
  Total annual Portfolio operating
   expenses                              0.97%
  Management and Administration
   Fee waivers*                        (0.12)%
                                       -------
  Net annual Portfolio operating
   expenses                              0.85%
                                       =======
</TABLE>
* Management has agreed to waive a portion of management and administration
  fees because it has voluntarily agreed to limit total annual portfolio oper-
  ating expenses (excluding interest expense) to 0.80% of average net assets.
  The interest expense for the most recent fiscal year was 0.05% of average net
  assets. The manager may change or eliminate this expense limitation at any
  time.

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;
 . You reinvest all dividends and distributions;
 . You redeem at the end of each period;
 . Your investment has a 5% return each year; and
 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $250                   $770                             $1,316                             $2,806
</TABLE>

                                       27

 Consulting Group Capital Markets Funds
<PAGE>

High Yield Investments

Investment objective

A high level of current income by investing primarily in below investment grade
debt securities.

Principal investment strategies

The Portfolio invests primarily in fixed income securities of corporate issuers
located in the United States. The Portfolio may invest a portion of its assets
in securities of issuers located in developed foreign countries. The Portfolio
may also invest up to 10% of its assets in equity and equity-related securi-
ties, including convertible securities, preferred stock, warrants and rights.

Credit quality. The Portfolio invests primarily in fixed-income securities
rated below investment grade by two or more nationally recognized rating orga-
nizations, or, if unrated, of equivalent quality as determined by the
subadvisor, Alliance Capital Management L.P. Securities rated below investment
grade are commonly known as "junk bonds."

Duration. The Portfolio's average duration ranges from two to six years. Dura-
tion is an approximate measure of the sensitivity of the market value of the
Portfolio's holdings to changes in interest rates. Individual securities may be
of any maturity.

How the subadvisor selects the Portfolio's investments

The subadvisor employs a relative value investment process, looking for securi-
ties of companies with improving or stable credit quality trends. The Portfolio
focuses on investments in the "BB" and "B" quality spectrum. The investing
process includes:

 . Extensive portfolio research on issuers and their business conditions

 . Thorough analysis of issuers and their credit quality

 . Emphasis on general economic and interest rate trends and forecasts

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks of investing in fixed
income securities generally. However, these risks, which are described on page
3, are significantly greater for the Portfolio because of its focus on non-in-
vestment grade fixed income securities.

Investment in high yield securities involves substantial risk of loss. These
securities are considered speculative with respect to the issuer's ability to
pay interest and principal and are susceptible to default or decline in market
value because of adverse economic and business developments. The market values
for high yield securities tend to be very volatile, and these securities are
less liquid than investment grade debt securities. For these reasons, your in-
vestment in the Portfolio is subject to the following specific risks:

 . Increased price sensitivity to changing interest rates

 . Greater risk of loss because of default or declining credit quality

 . Adverse company specific events are more likely to render the issuer unable
  to make interest and/or principal payments

 . A negative perception of the high yield market develops, depressing the price
  and liquidity of high yield securities. This negative perception could last
  for a significant period of time

The market value of foreign securities may decline because of unfavorable for-
eign government actions, political, economic or market instability or the ab-
sence of accurate information about foreign companies. These risks may be more
severe for securities of issuers in emerging markets. Foreign securities are
sometimes less liquid and harder to value than securities of U.S. issuers.

                                       28

 Consulting Group Capital Markets Funds
<PAGE>


                                      High Yield Investments, continued
The bar chart and tables below indicate the risks and returns of investing in
the Portfolio. The bar chart shows changes in the performance of the Portfolio
from year to year since its founding on July 13, 1998. The table shows how the
Portfolio's average annual returns for different calendar periods compare to
those of the Portfolio's benchmark index and its Lipper peer group. The Portfo-
lio's past performance does not necessarily indicate how the Portfolio will
perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                            High Yield Investments

                                 99      (6.96)%

                        Calendar year ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                            One    Five   Life of  Inception
                                           year    years Portfolio   Date
----------------------------------------------------------------------------
<S>                                        <C>     <C>   <C>       <C>
Portfolio (without advisory program fee)*  (6.96)%  n/a    (3.62)%  7/13/98
CS First Boston Global High Yield Index     3.28 %  n/a    (0.78)%    **
----------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 7/13/98.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                              2.11 %                                                2nd/1999
Worst                            (6.03)%                                                4th/1999
------------------------------------------------------------------------------------------------
Year-to-date                     (1.94)%                                        through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's benchmark is CS
 First Boston Global High Yield
 Index, a broad-based market
 measure of high yield bonds,
 commonly known as "junk bonds".
 Because the index is not a
 managed portfolio, there are no
 advisory fees or internal
 management expenses reflected in
 the index's performance. An
 investor cannot invest directly
 in an index.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses of the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.90%
   Other expenses                       0.30%
                                        -----
  Total annual Portfolio operating
   expenses                             1.20%
                                        =====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You redeem at the end of each period;

 . You reinvest all dividends and distributions;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After                  After                             After                             After
   1 year                3 years                           5 years                           10 years
   <S>                   <C>                               <C>                               <C>
    $273                  $838                             $1,430                             $3,032
</TABLE>

                                       29

 Consulting Group Capital Markets Funds
<PAGE>

Multi-Sector Fixed Income Investments

Investment objective

Total return consisting of capital appreciation and income.

Principal investment strategies

The Portfolio invests primarily in fixed-income securities issued by U.S. gov-
ernmental and corporate issuers and mortgage-related and asset-backed securi-
ties.

How the subadvisors select the Portfolio's investments

The manager has selected four subadvisors to manage the Portfolio. Each
subadvisor focuses on a different segment of the fixed income marketplace. Each
subadvisor's investment approach is described below.


Metropolitan West Asset Management LLC ("MWAM") seeks to consistently
outperform the benchmark while maintaining below average volatility. The
subadvisor believes consistent outperformance is gained through the measured
application of five value-added strategies: limited average maturity/duration
shifts, yield curve management, utilization of all sectors of the bond market,
quantitative security selection and sophisticated buy/sell execution strate-
gies. The percentage of the Portfolio's assets allocated to MWAM is 50%.

Western Asset Management Company ("Western") focuses on investment grade long-
term fixed income securities, including those issued by U.S. governmental and
corporate issuers, U.S. dollar denominated fixed income securities of foreign
issuers and mortgage-backed and asset-backed securities. It emphasizes three
key strategies to enhance the Portfolio's total return:

 . Adjusting the allocation of the Portfolio among the key sectors of the fixed
  income market (government, corporate and mortgage and asset-backed) depending
  on its forecast of relative values

 . Tracking the duration of the overall Portfolio so that it falls within a
  narrow band relative to the benchmark index, with adjustment made to reflect
  its long-term outlook for interest rates

 . Purchasing under-valued securities in each of the key sectors of the bond
  market while keeping overall quality high.

The percentage of the Portfolio's assets allocated to Western is 20%.

Utendahl Capital Management CFI ("Utendahl") focuses on mortgage-related
securities represent-
ing pools of mortgage loans assembled for sale to investors by various U.S.
government agencies, government-related organizations and private issuers. The
Portfolio may also invest in mortgage-related derivative securities such as
government stripped mortgage-backed securities ("SMBS") and collaterized mort-
gage obligations ("CMOs"). SMBS represent the right to receive either principal
or interest payments of U.S. government securities. Interests in CMOs entitle
the holder to specified cash flows from a pool of mortgages. In order to en-
hance current income, the Portfolio may enter into mortgage dollar roll trans-
actions with respect to mortgage-related securities issued by U.S. governmental
agencies or instrumentalities.

The subadvisor uses a quantitative computer-modelled investment process to seek
to identify and capitalize on inefficiencies in the mortgage-backed securities
market. The subadvisor generally maintains the Portfolio within a narrow band
around the duration of the entire mortgage-backed market and normally focuses
on mortgage-related securities issued by U.S. government agencies and govern-
ment related organizations. The percentage of the Portfolio's assets allocated
to Utendahl is 20%.

Alliance Capital Management L.P. ("Alliance") focuses on below investment grade
fixed income securities, also known as "high yield" securities and commonly re-
ferred to as "junk bonds." It invests primarily in fixed income securities of
corporate issuers located in the U.S., but may also invest in securities of is-
suers located in developed foreign countries. It may also invest a portion of
the Portfolio in equity and equity-related securities, including convertible
securities, preferred stocks, warrants and rights.

The subadvisor invests primarily in fixed income securities whose average dura-
tion ranges from two to six years. Individual securities may be of any maturi-
ty.

The subadvisor employs a relative value investment process, looking for securi-
ties of companies with improving or stable credit quality trends. It focuses on
investments in the "BB" and "B" quality spectrum. The investing process
includes:

 . Extensive research of issuers and their business conditions

 . Thorough analysis of issuers and their credit quality

 . Emphasis on general economic and interest rate trends and forecasts.

The percentage of the Portfolio's assets allocated to Alliance is 10%.

                                       30

 Consulting Group Capital Markets Funds
<PAGE>


                       Multi-Sector Fixed Income Investments, continued

Credit Quality. The intermediate maturity, long-term maturity and mortgage-re-
lated portions of the Portfolio are invested primarily in securities rated in-
vestment grade by a nationally recognized statistical rating organization, or,
if unrated, of equivalent quality as determined by the subadvisor. The high
yield portion of the Portfolio will primarily be invested in fixed income secu-
rities rated below investment grade, or, if unrated, of equivalent quality as
determined by the subadvisor. Securities rated below investment grade are com-
monly known as "junk bonds."

Duration and Maturity. The Portfolio's average duration is normally within one
year of the duration of the Lehman Brothers Aggregate Bond Index. Duration is
an approximate measure of the sensitivity of the market value of the Portfo-
lio's holdings to changes in interest rates. Individual securities may be of
any maturity.

Principal risks of investing in the Portfolio

An investment in the Portfolio involves specific risks relating to the nature
of its investment strategies. You should invest in the Portfolio only if you
are capable of bearing the risks described below.

 . You could lose money on your investment in the portfolio, or the portfolio
  may not perform as well as other investments

 . The manager's judgment about the attractiveness and risk adjusted return
  potential of particular asset classes, investment styles or other issues may
  prove to be wrong

 . When interest rates go up, prices of fixed income securities decline

 . An issuer of a security may prepay principal earlier than scheduled, which
  would force the portfolio to reinvest in lower yielding securities. This is
  known as call or prepayment risk

 . An issuer of a security may default on its obligation to pay principal and/or
  interest or the security's credit rating may be downgraded

 . Slower than expected principal payments may extend a security's life. This
  locks in a below-market interest rate, increases the security's duration and
  reduces the value of the security. This is known as extension risk

 . Greater sensitivity to rising interest rates because of the Portfolio's
  longer average maturity and because the Portfolio invests a portion of its
  assets in high yield securities

 . Increased volatility in share price because the Portfolio invests a portion
  of its assets in high yield securities and holds mortgage derivative securi-
  ties with embedded leverage or unusual interest rate reset terms

 . The Portfolio 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 underlying securities

Performance

Because this Portfolio commenced operations on October 1, 1999, the Portfolio
does not yet have a sufficient operating history to generate the performance
information which other Portfolios show in bar and table form at this location
of the prospectus.

Year to date: 6.37% (through 3rd Quarter 2000)


                                   BENCHMARK

The Portfolio's primary benchmark
is Lehman Brothers Aggregate Bond
Index. The Index is composed of
the Lehman Intermediate
Government/Corporate Bond Index
and the Lehman Mortgage-Backed
Securities Index and also
includes treasury issues, agency
issues, corporate bond issues and
mortgage-backed securities.
Unlike the Portfolio, the
benchmark is unmanaged and does
not include any expenses.

Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon estimated expenses for the Portfo-
lio's current fiscal year.

<TABLE>
  <S>                                  <C>
  Shareholder fees                        None
  (fees paid directly from your
   investment)
  Maximum annual TRAK(R) fee*            1.50%
  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fee                        0.85%
   Other expenses                        0.32%
                                       -------
  Total annual Portfolio operating
   expenses**                            1.17%
  Management and Administration fee
   waivers**                           (0.37)%
                                       -------
  Net annual Portfolio operating
   expenses                              0.80%
                                       =======
</TABLE>

* Fee payable under the TRAK(R) Personalized Investment Advisory Service for
  asset allocation services. See "Asset Allocation Programs."
** Management has agreed to waive a portion of management and administration
  fees because it has voluntarily agreed to limit total annual Portfolio oper-
  ating expenses to 0.80% of average net assets. The manager may change or
  eliminate this expense limitation at any time.


                                       31

 Consulting Group Capital Markets Funds
<PAGE>


                       Multi-Sector Fixed Income Investments, continued

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
                                                              After
     After 1                After 3                             5                              After 10
      year                   years                            years                             years
     <S>                    <C>                               <C>                              <C>
     $270                    $829                             $1,415                            $3,003
</TABLE>

                                       32

 Consulting Group Capital Markets Funds
<PAGE>




                       This page intentionally left blank

                                       33

 Consulting Group Capital Markets Funds
<PAGE>


International Fixed Income Investments

Investment objective

Maximize current income consistent with the protection of principal.

Principal investment strategies

The Portfolio invests primarily in non-U.S. dollar denominated fixed income se-
curities issued by foreign governments and corporations and supranational enti-
ties. The Portfolio invests primarily in fixed income securities of issuers lo-
cated in at least three countries and will not invest more than 25% of its as-
sets in the securities of governments or corporations in any one country. The
Portfolio attempts to hedge against unfavorable changes in currency exchange
rates by engaging in forward currency transactions and trading currency futures
contracts and options on these futures.

Credit Quality: The Portfolio invests in securities rated investment grade by a
nationally recognized rating organization, or if unrated, of equivalent quality
as determined by the subadvisor, Julius Baer Investment Management. The Portfo-
lio may invest up to 10% of its assets in emerging market debt securities rated
below investment grade, or if unrated, of equivalent quality as determined by
the subadvisor.

Duration: The Portfolio's average duration ranges from two to eight years. Du-
ration is an approximate measure of the sensitivity of the market value of the
Portfolio's holdings to changes in interest rates. The Portfolio may invest in
individual securities of any maturity.

How the subadvisor selects the Portfolio's investments

The subadvisor applies portfolio economic analysis to select a portfolio of
high-quality, well-diversified foreign bonds. From a universe of 20 developed
countries outside the U.S., the subadvisor forecasts which bond markets offer
the best opportunity to outperform the U.S. bond market, considering factors
such as currencies, local bond market conditions, issuers and instruments. It
pays particular attention to markets that offer attractive yields. The
subadvisor employs a proprietary computer model to analyze exchange rates to
assist in its forecasts and to help manage the risk of the Portfolio.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in fixed income securities generally. These risks are described on page
3.

Your investment is also subject to the unique risks of investing in securities
of foreign issuers. These risks are more pronounced to the extent that the
Portfolio invests in countries with emerging markets or the Portfolio invests
significantly in any one foreign country. These risks include:

 . Less information about foreign issuers or markets may be available because of
  less rigorous accounting standards or regulatory practices

 . Many foreign markets are smaller, less-liquid and more volatile than U.S.
  markets. In a changing market, the subadvisor may not be able to sell the
  Portfolio's securities in amounts and at prices the subadvisor considers
  reasonable

 . The foreign governmental issuer may default on, declare a moratorium on, or
  restructure its obligations

 . The U.S. dollar may appreciate against non-U.S. currencies

 . Economic, political or social instability in foreign countries may signifi-
  cantly disrupt the principal financial markets in which the Portfolio invests

The bar chart and tables indicate the risks and returns of investing in the
Portfolio. The bar chart below shows changes in the performance of the Portfo-
lio from year to year since the Portfolio's inception on November 18, 1991. The
table on the next page shows how the Portfolio's average annual returns for
different calendar periods compare to those of the Portfolio's benchmark index
and its Lipper peer group. The Portfolio's past performance does not necessar-
ily indicate how the Portfolio will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                    International Fixed Income Investments

                                 92      3.23%
                                 93     13.83%
                                 94      2.30%
                                 95     23.85%
                                 96      8.69%
                                 97     (2.38)%
                                 98     17.64%
                                 99     (6.83)%

                       Calendar years ended December 31


                                       34

 Consulting Group Capital Markets Funds
<PAGE>


                      International Fixed Income Investments, continued

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                            One     Five   Life of  Inception
                                           year     years Portfolio   Date
-----------------------------------------------------------------------------
<S>                                        <C>     <C>    <C>       <C>
Portfolio (without advisory program fee)*  (6.83)%  7.57%   7.76%   11/18/91
Salomon Smith Barney Non-U.S. Gov. Bond
 Index                                     (5.07)%  5.90%   7.68%      **
Lipper International Income Funds Average  (4.25)%  6.79%   6.74%      **
-----------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                             11.45 %                                                1st/1995
Worst                            (5.43)%                                                1st/1999
------------------------------------------------------------------------------------------------
Year-to-date                     (7.09)%                                        through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

            BENCHMARKS

 The Portfolio's primary bench-
 mark is the Salomon Smith Barney
 Non-U.S. Government Bond Index.
 The index is a market capital-
 ization-weighted index consist-
 ing of government bond markets
 in 13 developed countries, ex-
 cluding the U.S. Unlike the
 Portfolio, the benchmark is un-
 managed and does not include any
 expenses. In addition, the Port-
 folio compares its performance
 with the Lipper International
 Income Funds Average. It is an
 average of the reinvested per-
 formance of funds that invest
 primarily in U.S. dollar and
 non-U.S. dollar debt securities
 located in at least three coun-
 tries, excluding the United
 States, except in periods of
 market weakness.

Fee table
This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio based upon expenses of the Portfolio's latest fiscal
year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                       None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.70%
   Other expenses                       0.28%
                                        -----
  Total annual Portfolio operating
   expenses                             0.98%
                                        =====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $251                   $773                             $1,321                             $2,816
</TABLE>
 The Portfolio is a "non-diversified portfolio," which means that it
 is permitted to invest in a limited number of issuers. To the extent
 the Portfolio concentrates its investments in a limited number of is-
 suers or countries, it is subject, to a greater extent, to the risks
 associated with those issuers or countries.

                                       35

 Consulting Group Capital Markets Funds
<PAGE>

Municipal Bond Investments

Investment objective

A high level of interest income that is excluded from federal income taxation
to the extent consistent with prudent investment management and the preserva-
tion of capital.

Principal investment strategies

The Portfolio invests principally in tax exempt general obligation, revenue and
private activity bonds and notes, which are issued by or on behalf of states,
territories or possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities (including
Puerto Rico, the Virgin Islands and Guam). Tax exempt means that the bonds pay
interest that is excluded from gross income for federal income tax purposes.
The Portfolio's investments generally include municipal obligations with a full
range of maturities and broad issuer and geographic diversification.

Credit quality. The Portfolio limits its investments to municipal obligations
that are rated investment grade or higher by a nationally recognized rating or-
ganization, or, if unrated, of equivalent quality as determined by the
subadvisor, Smith Affiliated Capital Corporation.

How the subadvisor selects the Portfolio's investments

The subadvisor uses an active fixed-income management style that focuses first
on the appropriate maturity allocation for the Portfolio within a given market
environment. The maturity allocation is supplemented by a long-term market sec-
tor rotation. The subadvisor focuses primarily on:

 . ""Vital service" revenue bonds (i.e., water, electric, power, sewer and se-
  lect transportation authority) and secondarily on general obligation bonds of
  high-quality issuers.

 . Using portfolio credit analysis to evaluate the relative attractiveness of
  various securities and sectors.

 . Broad geographic and issuer diversification.

Maturity. The Portfolio is generally composed of a full range of maturities.
Individual investments may be of any maturity.

Principal risks of investing in the Portfolio

Because municipal obligations are a type of fixed income security, your invest-
ment in the Portfolio is subject to the risks associated with investing in
fixed income securities generally. These risks are described on page 3.

Your investment in the Portfolio is also subject to the following specific
risks:

 . New federal or state legislation may adversely affect the tax-exempt status
  of securities held by the Portfolio or the financial ability of the munici-
  palities to repay these obligations

 . The issuer of municipal obligations may not be able to make timely payments
  because of general economic downturns or increased governmental costs

It is possible that some of the Portfolio's income distributions may be, and
distributions of the Portfolio's gains will be, subject to federal taxation.
The Portfolio may realize taxable gains on the sale of its securities or other
transactions, and some of the Portfolio's income distributions may be subject
to the federal alternative minimum tax. This may result in a lower tax-adjusted
return. In addition, distribution of the Portfolio's income and gains will be
subject to state taxation.

The bar chart and tables indicate the risks and returns of investing in the
Portfolio. The bar chart below shows changes in the performance of the Portfo-
lio from year to year since its founding on November 18, 1991. The table on the
next page shows how the Portfolio's average annual returns for different calen-
dar periods compare to those of the Portfolio's benchmark index and its Lipper
peer group. The Portfolio's past performance does not necessarily indicate how
the Portfolio will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                          Municipal Bond Investments

                                 92      8.13%
                                 93     12.59%
                                 94    (10.20)%
                                 95     20.12%
                                 96      2.10%
                                 97      8.82%
                                 98      5.39%
                                 99     (5.62)%

                       Calendar years ended December 31



                                       36

 Consulting Group Capital Markets Funds
<PAGE>


                                  Municipal Bond Investments, continued

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                              One    Five    Life of  Inception
                                             Year    Years  Portfolio   Date
-------------------------------------------------------------------------------
<S>                                          <C>     <C>    <C>       <C>
Portfolio (without advisory program fee)*    (5.62)% 5.83%    4.91%   11/18/91
Lehman Municipal Bond Index                  (2.06)% 6.91%    6.42%      **
Lipper General Municipal Debt Funds Average  (4.58)% 5.78%    5.72%      **
-------------------------------------------------------------------------------
</TABLE>
* The Portfolio is available only to investors participating in an advisory
  program. These programs charge an annual fee, which in the case of TRAK(R)
  may be up to 1.5%.
** Index comparison begins on 11/18/91.

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                 Total
                                 return                                           Quarter/Year
------------------------------------------------------------------------------------------------
<S>                              <C>                                            <C>
Best                              8.99 %                                                1st/1995
Worst                            (8.16)%                                                1st/1994
------------------------------------------------------------------------------------------------
Year-to-date                     (8.07)%                                        through 3rd/2000
------------------------------------------------------------------------------------------------
</TABLE>

                                   BENCHMARKS

 The Portfolio's primary bench-
 mark is the Lehman Brothers Mu-
 nicipal Bond Index. The index is
 a composite measure of the total
 return performance of the munic-
 ipal bond market. Unlike the
 Portfolio, the benchmark is un-
 managed and does not include any
 expenses. In addition, the Port-
 folio compares its performance
 with the Lipper General Munici-
 pal Debt Funds Average. It is an
 average of the reinvested per-
 formance of funds that invest at
 least 65% of their assets in mu-
 nicipal debt issues in the top
 four credit ratings as deter-
 mined by a nationally recognized
 rating organization.


Fee table

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses of the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                   <C>
  Shareholder fees                      None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50%

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.60%
   Other expenses                       0.19%
                                        ----
  Total annual Portfolio operating
   expenses                             0.79%
                                        ====
</TABLE>

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $232                   $715                             $1,225                             $2,626
</TABLE>

                                       37

 Consulting Group Capital Markets Funds
<PAGE>


Government Money Investments

Investment objective

To provide maximum current income to the extent consistent with the maintenance
of liquidity and the preservation of capital.

Principal investment strategies

The Portfolio invests exclusively in U.S. dollar denominated short-term debt
securities issued or guaranteed by the U.S. government, its agencies, or in-
strumentalities and in repurchase agreements with respect to these securities.

Credit quality. The Portfolio invests exclusively in U.S. treasury securities
and other U.S. government securities rated by a nationally recognized rating
organization in the two highest short-term rating categories or, if unrated, of
equivalent quality as determined by the subadvisor, Standish Ayer & Wood, Inc..

Maturity. Individual securities must have remaining maturities of 397 days or
less. The Portfolio maintains a dollar-weighted portfolio maturity of 90 days
or less.

How the subadvisor selects the Portfolio's investments

The Portfolio seeks to maintain a constant net asset value of $1 per share by
investing in securities which the subadvisor believes present minimal credit
risks. It focuses on improving the Portfolio's yield by:

 . Actively managing sector allocations and the average maturity of the Portfo-
  lio.

 . Monitoring the spread relationships between U.S. Treasury and government
  agency issues and purchasing agencies when they provide a yield advantage.

 . Adjusting average portfolio maturity to reflect the subadvisor's outlook on
  interest rates.

Principal risks of investing in the Portfolio

Your investment in the Portfolio is subject to the risks associated with in-
vesting in fixed income securities generally. These risks are described on page
3. Because the Portfolio invests exclusively in short-term, high-quality debt
securities, these risks are less significant than in the case of Portfolios
which invest in longer-term securities or in below investment grade securities.

Investment in short-term U.S. government securities is generally the most con-
servative investment approach of all the Portfolios. Over time, the Portfolio
is likely to underperform other investment options.

The Portfolio seeks to maintain a $1 share price. However, the maintenance of a
$1 share price is not guaranteed and you may lose money on your investment.

The bar chart and tables below indicate the risks and returns of investing in
the Portfolio. The bar chart shows changes in the performance of the Portfolio
from year to year since its founding on November 18, 1991. The table shows how
the Portfolio's average annual returns for different calendar periods compare
to the return on the 90-day Treasury bill. The Portfolio's past performance
does not necessarily indicate how the Portfolio will perform in the future.


                                    [GRAPH]

                         Percentage Total Returns for
                         Government Money Investments

                                 92      3.25%
                                 93      2.69%
                                 94      3.71%
                                 95      5.48%
                                 96      4.91%
                                 97      5.04%
                                 98      4.99%
                                 99      4.58%

                       Calendar years ended December 31


AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                            One  Five   Life of  Inception
                                           year  years Portfolio   Date
--------------------------------------------------------------------------
<S>                                        <C>   <C>   <C>       <C>
Portfolio (without advisory program fee)*  4.58% 5.00%   4.32%   11/18/91
90-day T-bill Index                        4.74% 5.11%   4.54%         **
--------------------------------------------------------------------------
</TABLE>
 * The Portfolio is available only to investors participating in advisory pro-
   grams. These programs charge an annual fee, which in the case of TRAK(R)
   Personalized Investment Advisory Service may be up 1.5%

** Index comparison begins on 11/18/91.

The portfolio's 7-day yield as of December 31, 1999 was 5.11%.

                                       38

 Consulting Group Capital Markets Funds
<PAGE>


                                Government Money Investments, continued

PORTFOLIO'S BEST AND WORST CALENDAR QUARTERS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                  Total
                                  return                                         Quarter/Year
-------------------------------------------------------------------------------------------------
<S>                               <C>                                            <C>
Best                              1.40%                                          2nd/1995
Worst                             0.65%                                          1st & 2nd/1993
-------------------------------------------------------------------------------------------------
Year-to-date                      4.26%                                          through 3rd/2000
-------------------------------------------------------------------------------------------------
</TABLE>

                                   BENCHMARK

The Portfolio's benchmark is the
rate of return of the 90 day
Treasury bill. Unlike the
Portfolio, the benchmark is
unmanaged and does not include
any expenses.

Fees and Expenses

This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolio and is based upon expenses for the Portfolio's latest
fiscal year.

<TABLE>
  <S>                                  <C>
  Shareholder fees                      None
  (fees paid directly from your
   investment)

  Maximum annual TRAK(R) fee            1.50 %

  Annual Portfolio operating expenses
  (expenses that are deducted from
   Portfolio assets)
   Management fees                      0.35 %
   Other expenses                       0.43 %
                                       -----
  Total annual Portfolio operating
   expenses                             0.78 %
  Management and Administration fee
   waivers and expense
   reimbursements*                     (0.18)%
                                       -----
  Net annual Portfolio operating
   expenses                             0.60 %
                                       =====
</TABLE>
* Management has agreed to waive a portion of management and administration
  fees because it has voluntarily agreed to limit total annual Portfolio oper-
  ating expenses to 0.60% of average net assets. The manager may change or
  eliminate this expense limitation at any time.

Example

This example is intended to help you compare the cost of investing in the Port-
folio with the cost of investing in other mutual funds. Your actual costs may
be higher or lower.

The example assumes:

 . You invest $10,000 in the Portfolio for the time periods indicated;

 . You reinvest all dividends and distributions;

 . You redeem at the end of each period;

 . Your investment has a 5% return each year; and

 . The Portfolio's operating expenses remain the same.

Under these assumptions, your costs, including the maximum annual TRAK(R) fee,
would be:

<TABLE>
<CAPTION>
   After 1                After 3                           After 5                           After 10
    year                   years                             years                             years
   <S>                    <C>                               <C>                               <C>
    $231                   $712                             $1,220                             $2,615
</TABLE>

                                       39

 Consulting Group Capital Markets Funds
<PAGE>


More on the Portfolios' Investments

The section entitled "Investments, Risks and Performance" describes the Portfo-
lios' investment objectives and their principal investment strategies and
risks. This section provides some additional information about the Portfolios'
investments and certain investment management techniques the Portfolios may
use. More information about the Portfolios' investments and portfolio manage-
ment techniques, some of which entail risk, is included in the Statement of Ad-
ditional Information (SAI). To find out how to obtain an SAI, please turn to
the back cover of this prospectus.

         Percentage Limits

 Some Portfolio policies in this
 section are stated as a percent-
 age of assets. These percentages
 are applied at the time of pur-
 chase of a security and subse-
 quently may be exceeded because
 of changes in the values of a
 Portfolio's investments.


Equity Investments. The equity oriented Portfolios may invest in all types of
equity securities. Equity securities include exchange-traded and over-the-
counter common and preferred stocks, warrants, rights, convertible securities,
depositary receipts and shares, trust certificates, limited partnership inter-
ests, shares of other investment companies and real estate investment trusts
and equity participations.

Fixed Income Investments. The fixed income oriented Portfolios (except Govern-
ment Money Investments, Municipal Bond Investments and Balanced Investments,
which limit their investments to certain types of fixed income instruments) may
invest in all types of fixed income securities. The equity oriented Portfolios
may invest a portion of their assets in fixed income securities. Fixed income
investments include bonds, notes (including structured notes), mortgage-related
and asset-backed securities (Intermediate Fixed Income Investments, Long-Term
Bond Investments, Mortgage Backed Investments, Multi-Sector Fixed Income In-
vestments and Balanced Investments only), convertible securities, eurodollar
and yankee dollar instruments, preferred stocks and money market instruments.
Fixed income securities may be issued by corporate and governmental issuers and
may have all types of interest rate payment and reset terms, including fixed
rate, adjustable rate, zero coupon, contingent, deferred, payment-in-kind and
auction rate features.

An individual security's maturity is the date upon which the issuer must pay
back the face amount of the security. A security may have an "effective" matu-
rity which is shorter or longer than its stated maturity depending on the de-
gree of prepayment or extension risk associated with that security. Duration is
the measure of an individual security's price sensitivity to changing interest
rates. The longer a security's duration, the more sensitive that security's
price will be to changes in interest rates.

Mortgage-related securities may be issued by private companies or by agencies
of the U.S. government and represent direct or indirect participations in, or
are collateralized by and payable from, mortgage loans secured by real proper-
ty. Intermediate Fixed Income Investments, Long-Term Bond Investments and Mort-
gage Backed Investments may each invest up to 25% of their assets in privately
issued mortgage-related securities. Long-Term Bond Investments, Balanced In-
vestments and Intermediate Fixed Income Investments may each invest up to 5% of
their respective assets and Multi-Sector Fixed Income Investments may invest up
to 10% of its assets in asset-backed securities, which represent participations
in, or are secured by and payable from, assets such as installment sales or
loan contracts, leases, credit card receivables and other categories of receiv-
ables. A Portfolio's investments in asset-backed securities will be rated in
the highest rating category at the time of investment.

Certain debt instruments may pay principal only at maturity or may represent
only the right to receive payments of principal or payments of interest on un-
derlying pools of mortgages or government securities, but not both. The value
of these types of instruments may change more drastically than debt securities
that pay both principal and interest during periods of changing interest rates.
Interest only mortgage-backed securities are particularly subject to prepayment
risk. A Portfolio may obtain a below market yield or incur a loss on such in-
struments during periods of declining interest rates. Principal only instru-
ments are particularly subject to extension risk. For mortgage derivatives and
structured securities that have imbedded leverage features, small changes in
interest or prepayment rates may cause large and sudden price movements. Mort-
gage derivatives can also become illiquid and hard to value in declining mar-
kets.

Foreign Securities. Investments in securities of foreign entities and securi-
ties quoted or denominated in foreign currencies involve special risks. These
include possible political and economic instability and the possible imposition
of exchange controls or other restrictions on investments. If a Portfolio in-
vests in securities denominated or quoted in currencies other than the U.S.
dollar, changes in foreign currency rates relative to the U.S. dollar will af-
fect the U.S. dollar value of the Portfolio's assets.

Emerging market investments offer the potential of significant gains but also
involve greater risks than investing

 Consulting Group Capital Markets Funds
                                       40
<PAGE>


                         More on the Portfolios' Investments, continued

in more developed countries. Political or economic instability, lack of market
liquidity and government actions such as currency controls or seizure of pri-
vate businesses or property may be more likely in emerging markets. The Con-
sulting Group generally considers all of the western European countries, Cana-
da, Australia, New Zealand, Hong Kong, Singapore and Japan to have developed
markets and economies and the rest of the countries in the world to have emerg-
ing markets and economies.

Economic and monetary union (EMU) in Europe began to be implemented on January
1, 1999, when 11 European countries adopted a single currency--the euro. For
participating countries, EMU means sharing a single currency and single offi-
cial interest rate and adhering to agreed upon limits on government borrowing.
Budgetary decisions will remain in the hands of each participating country, but
will be subject to each country's commitment to avoid "excessive deficits" and
other more specific budgetary criteria. A European Central Bank is responsible
for setting the official interest rate to maintain price stability within the
euro zone. EMU is driven by the expectation of a number of economic benefits,
including lower transaction costs, reduced exchange risk, greater competition,
and a broadening and deepening of European financial markets. However, there
are a number of significant risks associated with EMU. Monetary and economic
union on this scale has never been attempted before. There is a significant de-
gree of uncertainty as to whether participating countries will remain committed
to EMU in the face of changing economic conditions. This uncertainty may in-
crease the volatility of the international markets.

Each Portfolio which is not an international oriented Portfolio (International
Equity Investments, International Fixed Income Investments and Emerging Markets
Equity Investments), may invest up to 10% of its assets in foreign securities,
including emerging market securities.

Municipal Obligations. Municipal Bond Investments invests primarily in munici-
pal obligations, which are debt obligations issued by or on behalf of states,
cities, municipalities and other public authorities. The two principal classi-
fications of municipal obligations are "general obligation" securities and
"revenue" securities. General obligation securities are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue securities are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of a facility being financed. Revenue securities may include private ac-
tivity bonds which may be issued by or on behalf of public authorities to fi-
nance various privately operated facilities and are not payable from the unre-
stricted revenues of the issuer. As a result, the credit quality of private ac-
tivity bonds is frequently related directly to the credit standing of private
corporations or other entities.

The secondary market for municipal obligations may be less liquid than for most
taxable fixed income securities which may limit the Portfolio's ability to buy
and sell these obligations at times and prices the manager believes would be
advantageous. There may be less information available about the financial con-
dition of an issuer of municipal obligations than about issuers of other pub-
licly traded securities. Also, state and federal bankruptcy laws could hinder
the Portfolio's ability to recover interest or principal in the event of a de-
fault by the issuer.

The Portfolio will not invest more than 25% of its total assets in municipal
obligations whose issuers are located in the same state or more than 25% of its
total assets in obligations that are secured by revenues from entities in any
one of the following categories: hospitals and health facilities; ports and
airports; or colleges and universities. The Portfolio also will not invest more
than 25% of its total assets in private activity bonds of similar projects. The
Portfolio may, however, invest more than 25% of its total assets in municipal
obligations of one or more of the following types: turnpikes and toll roads;
public housing authorities; general obligations of states and localities; state
and local housing finance authorities; municipal utilities systems; tax-free
prefunded bonds secured or backed by the U.S. Treasury or other U.S. government
guaranteed securities; and pollution control bonds.

                                       41

 Consulting Group Capital Markets Funds
<PAGE>


                         More on the Portfolios' Investments, continued


                                 Credit Quality

 A Portfolio's rating criteria
 are applied at the time of pur-
 chase. If a security is subse-
 quently downgraded, the
 subadvisor may, but is not re-
 quired to, sell the security. If
 a security is rated differently
 by two or more rating organiza-
 tions, the subadvisor may use
 the higher rating to determine
 the security's rating category.

 Securities are considered in-
 vestment grade if they are:

 . rated in one of the top four
   long-term rating categories by
   a nationally recognized sta-
   tistical rating organization.

 . unrated securities that the
   subadvisor believes to be of
   comparable quality.

 Securities are considered below
 investment grade if they are
 rated below the top four long-
 term ratings or are of equiva-
 lent quality if unrated. Below
 investment grade securities,
 also known as "high yield secu-
 rities," (commonly known as
 "junk bonds") are subject to:

 . the increased risk of an is-
   suer's inability to meet prin-
   cipal and interest obliga-
   tions.

 . greater price volatility be-
   cause of a heightened sensi-
   tivity to changing interest
   rates.

 . less liquidity.


Derivative contracts. Each Portfolio, except Government Money Investments, may,
but is not required to, use derivative contracts for any of the following pur-
poses:

 . To hedge against adverse changes caused by changing interest rates, stock
  market prices or currency exchange rates in the market value of securities
  held by or to be bought for a Portfolio.

 . As a substitute for purchasing or selling securities.

 . To shorten or lengthen the effective maturity or duration of a Portfolio's
  fixed income investments.

 . To enhance a Portfolio's potential gain in non-hedging situations.

 . To increase a Portfolio's liquidity.

The Portfolios may use various types of derivative instruments, including op-
tions on securities and securities indices, futures and options on futures (ex-
cept Government Money Investments, Municipal Bond Investments and Balanced In-
vestments) and, for those Portfolios that invest directly in foreign securi-
ties, forward currency contracts, currency futures contracts and options on
currencies and currency futures. A derivative contract will obligate or entitle
a Portfolio to deliver or receive an asset or a cash payment based on the
change in value of one or more designated securities, currencies or indices.
Even a small investment in derivative contracts can have a big impact on a
Portfolio's interest rate, stock market and currency exposure. Therefore, using
derivatives can disproportionately increase Portfolio losses and reduce oppor-
tunities for gains when interest rates, stock prices or currency rates are
changing. A Portfolio may not fully benefit from or may lose money on deriva-
tives if changes in their value do not correspond accurately to changes in the
value of the Portfolio's holdings. The other party to certain derivative con-
tracts presents the same types of credit risk as issuers of fixed income secu-
rities. Derivatives can also make a Portfolio's assets less liquid and harder
to value, especially in declining markets.

Mortgage Dollar Rolls. Mortgage Backed Investments, Balanced Investments and
Multi-Sector Fixed Income Investments may enter into mortgage dollar roll
transac-tions to earn additional income. In these transactions, a Portfolio
sells a U.S. agency mortgage-backed security and simultaneously agrees to re-
purchase at a future date another U.S. agency mortgage-backed security with the
same interest rate and maturity date, but generally backed by a different pool
of mortgages. The Portfolio loses the right to receive interest and principal
payments on the security it sold. However, the Portfolio benefits from the in-
terest earned on investing the proceeds of the sale and may receive a fee or a
lower repurchase price. The benefits from these transactions depend upon the
subadvisor's ability to forecast mortgage prepayment patterns on different
mortgage pools. The Portfolio may lose money if, during the period between the
time it agrees to the forward purchase of the mortgage securities and the set-
tlement date, these securities decline in value because of market conditions or
prepayments on the underlying mortgages.

High Yield Securities. High Yield Investments and Multi-Sector Fixed Income In-
vestments can invest in high yield securities. These are commonly known as
"junk bonds" and involve a substantial risk of loss. These securities are con-
sidered speculative with respect to the issuer's ability to pay interest and
principal and are susceptible to default or decline in market value be-cause of
adverse economic and business developments. The market values for high yield
securities tend to be very volatile, and these securities are less liquid than
investment grade debt securities. The Portfolio may experience increased price
sensitivity to changing interest rates and greater risk of loss because of de-
fault or declining credit quality. In addition, adverse company specific

                                       42

 Consulting Group Capital Markets Funds
<PAGE>


                         More on the Portfolios' Investments, continued

events are more likely to render the issuer unable to make interest and/or
principal payments. A negative perception of the high yield market may develop,
depressing the price and liquidity of high yield securities. This negative per-
ception could last for a significant period of time.

Swaps. Emerging Markets Equity Investments, with respect to 15% of the total
assets allocated to SSGA, may enter into index swaps.
Index swaps involve the exchange by the Portfolio with another party of the re-
spective amounts payable with respect to a notional principal amount related to
one or more indices. The Portfolio may enter into these transactions to pre-
serve a return or spread on a particular investment or portion of its assets,
as a duration management technique or to protect against any increase in the
price of securities the Portfolio anticipates purchasing at a later date. Swaps
have risks associated with them, including possible default by the counterparty
to the transaction, illiquidity and, where swaps are used as hedges, the risk
that the use of a swap could result in losses greater than if the swap had not
been employed.

Defensive investing. The Portfolios may depart from their principal investment
strategies 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. The Portfolios' investments in these assets are managed
by SSB Citi Fund Management LLC ("SSB Citi").

Impact of high portfolio turnover. Each Portfolio may engage in active and fre-
quent trading to achieve its principal investment strategies. This may lead to
the realization and distribution to shareholders of higher capital gains, which
would increase their tax liability. Frequent trading also increases transaction
costs, which could detract from a Portfolio's performance.

Order of Exemption. The Trust is subject to an Order of Exemption from the De-
partment of Labor requiring the Portfolio to limit its investments in the secu-
rities of affiliates of Salomon Smith Barney, including Citigroup, Inc., to one
percent of the Portfolio's net assets. Since the Portfolio will be managed to
comply with this limitation, this may result in differences in performance be-
tween the Portfolio and other funds that fully replicate the S&P 500 Index.

Investment Policies. The Portfolios' non-fundamental investment policies gener-
ally may be changed by the Board of Trustees without shareholder approval.

More information about investment styles. If a subadvisor follows a passive
style, the subadvisor's principal objective is to mirror the return of a bench-
mark index. The subadvisor may seek to achieve that goal by investing in all of
the securities in the index or by selecting certain securities in the index
with respect to which the subadvisor believes there is a high correlation be-
tween changes in the value of the index and these securities. An active
subadvisor seeks to outperform the index by selecting securities which the
subadvisor believes will appreciate in value at a rate greater than the index.
However, if the subadvisor is incorrect in its estimate of a security's perfor-
mance, the Portfolio may underperform the index. A risk controlled subadvisor
uses an active management style but employs investment criteria that are in-
tended to limit the positive or negative variances from the index. A top down
investment approach places greater emphasis on selecting the industries or sec-
tors, or in the case of an international fund, country allocations, that the
subadvisor believes will outperform the market rather than on individual stock
selection. Consequently, these subadvisors place greater emphasis upon economic
and market trends. A subadvisor using a bottom up approach primarily emphasizes
the outlook for individual companies. Stock picking and not overall market
trends or industry or sector weightings is most important. A subadvisor using a
contrarian approach primarily focuses on companies which are out of favor
and/or its market value is depressed. The subadvisor believes the stock market
will adjust ultimately to reflect the intrinsic value of these companies. If a
subadvisor or Portfolio focuses upon growth stocks, the emphasis is upon compa-
nies whose earnings are expected to increase at a rate that exceeds the average
of the market as a whole. Value investing seeks to identify companies that have
an underlying value that is not currently reflected in the company's market
price. The subadvisor anticipates that over time the market will reflect the
underlying value in the market price.

Potential Conversion. The High Yield Investments reserves the right, if ap-
proved by the Board of Trustees, to convert in the future to a "Master/Feeder"
fund that would invest all of its assets in a Master/Feeder fund having sub-
stantially the same investment objective, policies and restrictions. At least
30 days' written notice of any action would be given to all shareholders if,
and when, such a proposal is approved.

                                       43

 Consulting Group Capital Markets Funds
<PAGE>


The Manager
The manager. The Consulting Group, a division of SSB Citi, serves as the man-
ager for the Portfolios. SSB Citi is a wholly-owned subsidiary of Salomon Smith
Barney Holdings Inc., which in turn is a wholly-owned subsidiary 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. As manag-
er, the Consulting Group selects and oversees professional money managers who
are responsible for investing the assets of the Portfolios. The Consulting
Group was established to match the investment needs of institutional investors
and substantial individual investors with appropriate and well-qualified in-
vestment advisors. Since 1973, the Consulting Group has grown to become one of
the nation's foremost organizations providing portfolio evaluation, asset allo-
cation, market analysis and investment advisor selection services.

The Portfolios are part of a series of portfolios which comprise the Consulting
Group Capital Markets Funds (the "Trust"). The Trust is a series company that
consists of the Portfolios and the following additional portfolios which are
offered in separate prospectuses, copies of which can be obtained from any Sal-
omon Smith Barney Financial Consultant:

 . Multi-Strategy Market Neutral Investments

 . S&P 500 Index Investments

 . Global Sciences and Technology Investments



                             The Evaluation Process

 The Consulting Group screens
 more than 3,000 registered in-
 vestment advisory firms, tracks
 the performance of more than 700
 firms on its comprehensive data-
 base and evaluates the strength
 and performance of advisory
 firms in Consulting Group pro-
 grams each year. Throughout the
 evaluation, the Consulting Group
 focuses on a number of key is-
 sues:

 . level of expertise

 . relative performance and
   consistency of performance

 . strict adherence to investment
   discipline or philosophy

 . personnel, facility and finan-
   cial strength

 . quality of service and commu-
   nication.


The subadvisors. The subadvisors are responsible for the day-to-day investment
operations of the Portfolios in accordance with each Portfolio's investment ob-
jectives and policies. The name and address of each subadvisor, and the name
and background of each portfolio manager, is included on pages 45-49.

The subadvisor selection process. Subject to the review and approval of the
Portfolios' Trustees, the Consulting Group is responsible for selecting, super-
vising and evaluating subadvisors who manage the Portfolios' assets. The Con-
sulting Group may adjust the allocation of a Portfolio's assets among the
subadvisors by up to 10%. Any adjustment affecting more than 10% of a Portfo-
lio's assets can only be made by the Board of Trustees. The Consulting Group
employs a rigorous evaluation process to select those subadvisors that have
distinguished themselves through consistent and superior performance. The Con-
sulting Group is also responsible for communicating performance expectations
and evaluations to the subadvisors and ultimately recommending to the Board of
Trustees whether a subadvisor's contract should be renewed. The Consulting
Group provides written reports to the Trustees regarding the results of its
evaluation and monitoring functions.

The Portfolios rely upon an exemptive order from the Securities and Exchange
Commission which permits the manager to select new subadvisors or replace ex-
isting subadvisors without first obtaining shareholder approval. The Trustees,
including a majority of the "non-interested" Trustees, must approve each new
subadvisory contract. This allows the manager to act more quickly to change
subadvisors when it determines that a change is beneficial to shareholders by
avoiding the delay of calling and holding shareholder meetings to approve each
change. In accordance with the exemptive order, the Portfolios will provide in-
vestors with information about each new subadvisor and its subadvisory contract
within 90 days of the engagement of a new subadvisor.

                                       44

 Consulting Group Capital Markets Funds
<PAGE>


                                                 The Manager, continued
The subadvisors, portfolio managers and the percentage of Portfolio assets each
subadvisor manages are described below.
<TABLE>
<CAPTION>
            Fund                        Subadvisor            Percentage        Portfolio Manager
--------------------------------------------------------------------------------------------------------
<S>                           <C>                             <C>        <C>
Large Capitalization Growth   Barclays Global Fund Advisors      60%     Barclays uses a team management
 Investments                  45 Fremont Street                          approach to manage indexed
                              San Francisco, CA 94105                    portfolios.
                              TCW Investment Management          20%     Glen Bickerstaff
                              Company                                    Mr. Bickerstaff has been
                              865 South Figueroa Street                  responsible for the day-to-day
                              Suite 1800                                 management of the Portfolio
                              Los Angeles, CA 90017                      since 2000. He joined the firm
                                                                         in 1998. Prior to joining TCW,
                                                                         he was a senior portfolio
                                                                         manager of Transamerica
                                                                         Investments Services.
                              Turner Investment Partners,        20%     Robert Turner, CFA
                              Inc.                                       Mr. Turner has been primarily
                              1235 Westlakes Drive                       responsible for the day-to-day
                              Suite 350                                  management of the Portfolio
                              Berwyn, PA 19312                           since 2000. He has been
                                                                         chairman and chief investment
                                                                         officer of the firm since 1990
                                                                         and has 19 years of investment
                                                                         experience.
Large Capitalization Value    The Boston Company Asset           20%     Robert J. Eastman
 Equity Investments           Management L.L.C.                          Mr. Eastman has been
                              One Boston Place                           responsible for the day-to-day
                              Boston, MA 02108                           management of the Portfolio
                                                                         since 1996. He has been a vice
                                                                         president of the firm since
                                                                         1991.
                              Parametric Portfolio Associates    10%     David Stein
                              7310 Columbia Center                       Tom Seto
                              701 Fifth Avenue                           Mr. Stein has been primarily
                              Seattle, WA 98164                          responsible for the day-to-day
                                                                         management of the Portfolio
                                                                         since 1996. Mr. Stein, a
                                                                         managing director of
                                                                         Parametric, joined the firm in
                                                                         1997 and has had 13 years of
                                                                         investment experience. Mr. Seto
                                                                         is a portfolio manager and
                                                                         joined Parametric in 1998 and
                                                                         has 8 years of investment
                                                                         experience.
                              Barclays Global Fund Advisors      50%     Barclays uses a team management
                              45 Fremont Street                          approach to manage indexed
                              San Francisco, CA 94105                    portfolios.
                              Chartwell Investment Partners      20%     Bernard Schaffer
                              1235 Westlakes Drive, Suite 330            Mr. Schaffer has been primarily
                              Berwyn, PA 19312                           responsible for the day-to-day
                                                                         management of the Portfolio
                                                                         since 1999. He has been with
                                                                         Chartwell since 1997 and has
                                                                         had 29 years of investment
                                                                         experience.
</TABLE>

                                       45

 Consulting Group Capital Markets Funds
<PAGE>


                                                 The Manager, continued
<TABLE>
<CAPTION>
            Fund                        Subadvisor            Percentage        Portfolio Manager
--------------------------------------------------------------------------------------------------------
<S>                           <C>                             <C>        <C>
Small Capitalization Growth   Mellon Capital Management          40%     Mellon uses a team management
 Investments                  Corporation                                approach to manage indexed
                              595 Market Street, Suite 3000              portfolios.
                              San Francisco, CA 94105
                              Wall Street Associates             20%     William Jeffery, III
                              1200 Prospect Street, Suite 100            Kenneth McCain
                              La Jolla, CA 92037                         Messrs. Jeffery and McCain have
                                                                         been primarily responsible for
                                                                         the day-to-day management of
                                                                         the Portfolio since 1997.
                                                                         Messrs. Jeffery and McCain are
                                                                         founding partners of the firm
                                                                         and have over 25 years of
                                                                         investment experience.
                              Westpeak Investment Advisors,      15%     Gerald Scriver
                              L.P.                                       Mr. Scriver has been primarily
                              1011 Walnut Street, Suite 400              responsible for the day-to-day
                              Boulder, CO 80302                          management of the Portfolio
                                                                         since 1997. He has been
                                                                         president, chief investment
                                                                         officer and chief executive
                                                                         officer of the firm since its
                                                                         inception in 1991.
                              Kern Capital Management LLC 114    15%     David G. Kern
                              West 47th Street, Suite 1926               Mr. Kern has been primarily
                              New York, NY 10036                         responsible for the day-to-day
                                                                         management of the Portfolio
                                                                         since 1999. He has been with
                                                                         Kern since 1997 and has had 13
                                                                         years of investment experience.
                              Westfield Capital Management       10%     Randall Watts
                              Co., Inc.                                  Mr. Watts has been primarily
                              One Financial Center                       responsible for the day-to-day
                              Boston, MA 02111                           management of the Portfolio
                                                                         since 2000. He has been with
                                                                         Westfield since 1992 and has 10
                                                                         years of investment experience.
Small Capitalization Value    Mellon Capital Management          60%     Mellon uses a team management
 Equity Investments           Corporation                                approach to manage indexed
                              595 Market Street, Suite 3000              portfolios.
                              San Francisco, CA 94105
                              NFJ Investment Group               25%     Benno Fischer
                              2121 San Jacinto Street,                   Paul Magnuson
                              Suite 1840                                 Messrs. Fischer and Magnuson
                              Dallas, TX 75201                           have been responsible for the
                                                                         day-to-day management of the
                                                                         Portfolio since 1993. Mr.
                                                                         Fischer is a managing director
                                                                         and has been with NFJ since
                                                                         1989. Mr. Magnuson is a
                                                                         portfolio manager and has been
                                                                         with NFJ since 1992.
</TABLE>

                                       46

 Consulting Group Capital Markets Funds
<PAGE>


                                                 The Manager, continued
<TABLE>
<CAPTION>
            Fund                         Subadvisor            Percentage        Portfolio Manager
---------------------------------------------------------------------------------------------------------
<S>                           <C>                              <C>        <C>
Small Capitalization Value    Rutabaga Capital Management LLC     15%     Peter Schliemann
 Equity Investments--         Two Oliver Street                           Mr. Schliemann has been
 (Continued)                  Boston, MA 02109                            primarily responsible for the
                                                                          day-to-day management of the
                                                                          Portfolio since 2000. Mr.
                                                                          Schliemann founded Rutabaga in
                                                                          1999, and is President. Prior
                                                                          to founding Rutabaga, he was a
                                                                          director, executive vice
                                                                          president and portfolio manager
                                                                          of David L. Babson & Co. Inc.
International Equity          State Street Global Advisors        40%     State Street utilizes a team
 Investments                  Two International Place                     management approach.
                              Boston, MA 02110
                              Oechsle International Advisors,     30%     Kathleen Harris
                              LLC                                         Ms. Harris had shared
                              One International Place                     management responsibility since
                              Boston, MA 02110                            1997. She has been with Oechsle
                                                                          since 1997. Previously, Ms.
                                                                          Harris was portfolio manager
                                                                          and investment director for the
                                                                          State of Wisconsin Investment
                                                                          Board, where she managed the
                                                                          fund's international equity
                                                                          assets. Prior to that time, she
                                                                          was a fund manager and equity
                                                                          analyst for the Northern Trust
                                                                          Company.
                              Scudder Kemper Investments, Inc.    30%     Scudder uses a team management
                              345 Park Avenue                             approach.
                              New York, NY 10154
Emerging Markets Equity       State Street Global Advisors        20%     State Street uses a team
 Investments                  Two International Place                     management approach.
                              Boston, MA 02110
                              Foreign & Colonial Emerging         30%     Foreign & Colonial utilizes a
                              Markets Ltd.                                team management approach.
                              8th Floor
                              Exchange House
                              Primrose Street
                              London EC2A 2NY
                              England
                              Baring Asset Management, Inc.       50%     Baring utilizes a team
                              125 High Street                             management approach.
                              Boston, MA 02110
</TABLE>

                                       47

 Consulting Group Capital Markets Funds
<PAGE>


                                                 The Manager, continued
<TABLE>
<CAPTION>
            Fund                        Subadvisor            Percentage        Portfolio Manager
--------------------------------------------------------------------------------------------------------
<S>                           <C>                             <C>        <C>
Balanced Investments          Laurel Capital Advisors, LLP       60%     Bert Mullins
                              One Mellon Bank Center,                    Mr. Mullins is a senior vice
                              Suite 151-3925                             president and has been with the
                              Pittsburgh, PA 15258                       firm for 9 years and has had 34
                                                                         years of investment experience.
                                                                         He has been primarily
                                                                         responsible for the day-to-day
                                                                         management of the Portfolio
                                                                         since January 1999.
                              Seix Investment Advisors           40%     Christina Seix
                              300 Tice Boulevard                         Ms. Seix is Chairman and Chief
                              Woodcliff Lake, NJ 07675                   Investment Officer of the firm.
                                                                         She has been with the firm for
                                                                         8 years and has had 27 years of
                                                                         investment experience. Ms. Seix
                                                                         has been primarily responsible
                                                                         for the day-to-day management
                                                                         of the portfolio since January
                                                                         1999.
Intermediate Fixed Income     Metropolitan West Asset             20%    MWAM utilizes a
 Investments                  Management, LLC                            team management approach.
                              11766 Wilshire Boulevard
                              Suite 1580
                              Los Angeles, CA 90025
                              Pacific Investment Management       40%    William C. Powers
                              Company                                    Mr. Powers is a Managing
                              840 Newport Center Drive,                  Director at Pacific Investment
                              Suite 300                                  Management Company and has been
                              Newport Beach, CA 92660                    with the firm for 10 years. He
                                                                         has had 17 years of investment
                                                                         experience.
                              Black Rock Financial                40%    Black Rock utilizes a team
                              Management, Inc.                           approach.
                              345 Park Avenue
                              New York, NY 10154
Long-Term Bond Investments    Western Asset Management           100%    Western utilizes a team
                              Company                                    management approach.
                              117 East Colorado Boulevard
                              Pasadena, CA 91105
Mortgage Backed Investments   Utendahl Capital Management CFI    100%    Utendahl utilizes a team
                              (Successor to Atlantic                     management approach.
                              Portfolio Analytics &
                              Management, Inc.)
                              201 East Pine Street,
                              Suite 825
                              Orlando, FL 32801
High Yield Investments        Alliance Capital Management        100%    Nelson R. Jantzen
                              L.P. 1345 Avenue of the                    Sheryl A. Rothman
                              Americas                                   Mr. Jantzen is a senior vice
                              New York, NY 10105                         president and co-head of the
                                                                         High Yield Group and has had 26
                                                                         years of investment experience.
                                                                         Ms. Rothman is a senior vice
                                                                         president and portfolio manager
                                                                         and has 16 years of investment
                                                                         experience.
</TABLE>

                                       48

 Consulting Group Capital Markets Funds
<PAGE>


                                                 The Manager, continued
<TABLE>
<CAPTION>
            Fund                        Subadvisor            Percentage        Portfolio Manager
--------------------------------------------------------------------------------------------------------
<S>                           <C>                             <C>        <C>
Multi-Sector Fixed Income     Metropolitan West Asset      50%   MWAM utilizes a
Investments                  Management, LLC                     team management
                                                                   approach
                              11766 Wilshire Boulevard
                              Suite 1580
                              Los Angeles, CA 90025
                              Western Asset Management    20%   Western utilizes
a team
                              Company                                    management approach.
                              117 East Colorado Boulevard
                              Pasadena, CA 91105
                              Utendahl Capital Management CFI     20%    Utendahl utilizes a team
management approach.

                              201 East Pine Street, Suite 825
                              Orlando, FL 32801
                              Alliance Capital Management         10%    Nelson R. Jantzen
                              L.P. 1345 Avenue of the                    Sheryl A. Rothman
                              Americas                                   Mr. Jantzen is a senior vice
                              New York, NY 10105                         president and co-head of the
                                                                         High Yield Group and has had 26
                                                                         years of investment experience.
                                                                         Ms. Rothman is a senior vice
                                                                         president and portfolio manager
                                                                         and has 16 years of investment
                                                                         experience.
International Fixed Income    Julius Baer Investment             100%    Edward Dove
 Investments                  Management Inc.                            Mr. Dove has been primarily
                              330 Madison Avenue                         responsible for the day-to-day
                              New York, NY 10017                         management of the Portfolio
                                                                         since 1992. He is a Director of
                                                                         Fixed Income and Portfolio
                                                                         Manager at Julius Baer and has
                                                                         had 19 years of investment
                                                                         experience.
Municipal Bond Investments    Smith Affiliated Capital           100%    Smith utilizes a team
                              Corporation                                management approach.
                              880 Third Avenue
                              New York, NY 10022
Government Money Investments  Standish Ayer & Wood, Inc.         100%    Jennifer Pline
                              One Financial Center                       Ms. Pline has been primarily
                              Boston, MA 02111                           responsible for the day-to-day
                                                                         management of the Portfolio
                                                                         since its inception in 1991.
                                                                         Ms. Pline is a Vice President
                                                                         and joined Standish in 1987.
</TABLE>

                                       49

 Consulting Group Capital Markets Funds
<PAGE>


                                                 The Manager, continued


Management Fees. The Consulting       daily net assets for administra-
Group receives fees from each         tion services. The Consulting
Portfolio for its services. In        Group and SSB Citi may voluntar-
turn, the Consulting Group pays       ily waive a portion or all of
the subadvisors a portion of          their respective fees otherwise
this fee for their services. In       payable to them. The chart below
addition, each Portfolio pays SSB     shows the management fees paid by
Citi a fee at an annual rate of       each Portfolio.
0.20% of its average
<TABLE>
<CAPTION>
                                                                                         Actual
                                                                                       Management
                                                                                        Fee Paid
                                                                                         During
                                                                                          Most
                                                                                         Recent
                                                                            Management   Fiscal
               Portfolio                                                       Fee        Year
-------------------------------------------------------------------------------------------------
<S>                                                                         <C>        <C>
Large Capitalization Growth Investments                                       0.60%      0.40%
Large Capitalization Value Equity Investments                                 0.60%      0.47%
Small Capitalization Growth Investments                                       0.80%      0.62%
Small Capitalization Value Equity Investments                                 0.80%      0.56%
International Equity Investments                                              0.70%      0.57%
Emerging Markets Equity Investments                                           0.90%      0.90%
Balanced Investments                                                          0.60%      0.58%
Intermediate Fixed Income Investments                                         0.40%      0.41%
Long-Term Bond Investments                                                    0.40%      0.40%
Mortgage Backed Investments                                                   0.50%      0.50%
High Yield Investments                                                        0.70%      0.70%
Multi-Sector Fixed Income Investments                                         0.65%      0.36%
International Fixed Income Investments                                        0.50%      0.50%
Municipal Bond Investments                                                    0.40%      0.40%
Government Money Investments                                                  0.15%      0.13%
</TABLE>

Possible Conflict of Interest. The advisory fee paid by each Portfolio in the
Trust to the manager and the portion of that advisory fee paid by the manager
to each subadvisor varies depending upon the Portfolio of the Trust selected.
For this reason, the manager could retain a larger portion of the advisory fee
by recommending to clients in its asset allocation program certain Portfolios
in the Trust over other Portfolios for asset allocation. You should consider
this possible conflict of interest when evaluating the manager's asset alloca-
tion recommendation. The manager intends to comply with standards of fiduciary
duty that require it to act solely in the best interest of a participant when
making investment recommendations.


                                          Consulting Group Capital Markets Funds

                                       50
<PAGE>


Asset Allocation Programs
Shares of the Trust's Portfolios are available to participants in advisory pro-
grams or asset based fee programs sponsored by Salomon Smith Barney Inc., in-
cluding the TRAK(R) Personalized Investment Advisory Service, or other quali-
fied investment advisors approved by the Consulting Group. The advisory serv-
ices provide investors with asset allocation recommendations, which are imple-
mented through the Portfolios.

Advisory services generally include:

 . evaluating the investor's investment objectives and time horizon

 . analyzing the investor's risk tolerance

 . recommending an allocation of assets among the Portfolios in the Trust

 . providing monitoring reports containing an analysis and evaluation of an in-
  vestor's account and recommending any changes

While an advisory service makes a recommendation, the ultimate investment deci-
sion is up to the investor and not the provider of the advisory service.

Under an advisory service, an investor typically pays an advisory fee that may
vary based on a number of factors. The maximum fee for assets invested in the
Trust under a Salomon Smith Barney advisory service is 1.50% of average quar-
ter-end net assets. This fee may be reduced in certain circumstances. The fee
under a Salomon Smith Barney advisory program may be paid either by redemption
of shares of the Trust or by separate payment.

                                       51

 Consulting Group Capital Markets Funds
<PAGE>

Investment and Account Information
Account Transactions

Purchase of Shares. You may purchase shares of a Portfolio if you are a partic-
ipant in an advisory program or asset based fee program sponsored by Salomon
Smith Barney, including TRAK(R), or by qualified investment advisors not affil-
iated with Salomon Smith Barney. Purchases of shares of a Portfolio must be
made through a brokerage account maintained with Salomon Smith Barney or
through a broker that clears securities transactions through Salomon Smith Bar-
ney (an introducing broker). You may establish a brokerage account with Salomon
Smith Barney free of charge in order to purchase shares of a Portfolio.

 . The minimum initial aggregate investment in the TRAK program is $10,000. The
  minimum investment in a Portfolio is $100.

 . There is no minimum on additional investments.

 . The minimum initial aggregate investment in the TRAK program for employees of
  Salomon Smith Barney and members of their immediate families, and retirement
  accounts or plans for those persons, is $5,000.

 . The Portfolios and the TRAK program may vary or waive the investment minimums
  at any time.

 . You may establish a Systematic Withdrawal/Investment Schedule. For more in-
  formation, contact your Investment Professional or consult the SAI.

Shares of the Portfolios are sold at net asset value per share without imposi-
tion of a sales charge but will be subject to any applicable advisory program
fee. All orders to purchase accepted by Salomon Smith Barney or the introducing
broker before 4:00 p.m., Eastern time, will receive that day's share price. Or-
ders accepted after 4:00 p.m. will receive the next day's share price. All pur-
chase orders must be in good order to be accepted. This means you have provided
the following information:

 . Name of the Portfolio

 . Account Number

 . Dollar amount or number of shares to be purchased

 . Signatures of each owner exactly as the account is registered

Each Portfolio reserves the right to reject purchase orders or to stop offering
its shares without notice. No order will be accepted unless Salomon Smith Bar-
ney has received and accepted an advisory agreement signed by the investor par-
ticipating in the TRAK(R) program or other advisory program sponsored by Salo-
mon Smith Barney. With respect to investors participating in advisory programs
sponsored or asset based fee program by entities other than Salomon Smith
Barney, Salomon Smith Barney
must have received and accepted the appropriate documents before the order will
be accepted. Payment for shares must be received by Salomon Smith Barney or the
introducing broker within three business days after the order is placed in good
order.

Redemption of Shares. You may sell shares of a Portfolio at net asset value on
any day the New York Stock Exchange is open by contacting your broker. All re-
demption requests accepted by Salomon Smith Barney or an introducing broker be-
fore 4:00 p.m. Eastern time on any day will be executed at that day's share
price. Orders accepted after 4:00 p.m. will be executed at the next day's
price. All redemption orders must be in good form, which may require a signa-
ture guarantee (available from most banks, dealers, brokers, credit unions and
federal savings and loan associations, but not from a notary public) to assure
the safety of your account. If you discontinue your Salomon Smith Barney advi-
sory service, you must redeem your shares in the Portfolios.

Each Portfolio has the right to suspend redemptions of shares and to postpone
the transmission of redemption proceeds to a shareholder's account at Salomon
Smith Barney or at an introducing broker for up to seven days, as permitted by
law. Redemption proceeds held in an investor's brokerage account generally will
not earn any income and Salomon Smith Barney or the introducing broker may ben-
efit from the use of temporarily uninvested funds. A shareholder who pays for
shares of a Portfolio by personal check will be credited with the proceeds of a
redemption of those shares after the purchaser's check has cleared, which may
take up to 15 days.

Exchange of Shares. An investor that participates in an advisory program may
exchange shares in a Portfolio for shares in any other Portfolio in the Trust
at net asset value without payment of an exchange fee. Be sure to consider the
investment objectives and policies of any Portfolio into which you make an ex-
change. An exchange is a taxable transaction except for exchanges within a re-
tirement account.

The Consulting Group may limit additional exchanges and/or purchases by a
shareholder if it determines that the shareholder is pursuing a pattern of fre-
quent exchanges. Excessive exchange transactions can adversely affect a Portfo-
lio's performance, hurting the Portfolio's other shareholders. If the Consult-
ing Group discovers a pattern of frequent exchanges, it will provide notice in
writing or by telephone to the shareholder at least 15 days before suspending
his or her exchange privilege. During the 15-day period the shareholder will be
re-

                                       52

 Consulting Group Capital Markets Funds
<PAGE>


                          Investment and Account Information, continued
quired either to redeem his or her shares in the Portfolio or establish an al-
location which the shareholder expects to maintain for a significant period of
time.

Accounts with Low Balances. If your account falls below $7,500 as a result of
redemptions (and not because of performance or payment of the Salomon Smith
Barney Advisory Service fees), Salomon Smith Barney or the introducing broker
may ask you to increase the size of your account to $7,500 within thirty days.
If you do not increase the account to $7,500, Salomon Smith Barney may redeem
the shares in your account at net asset value and remit the proceeds to you.
The proceeds will be deposited in your brokerage account unless you instruct
otherwise.

Valuation of shares

Each Portfolio offers its shares at their net asset value per share. Each Port-
folio calculates net asset value once daily as of the close of regular trading
on the New York Stock Exchange (generally at 4:00 p.m., New York time) on each
day the exchange is open. The exchange is closed on certain holidays listed in
the SAI. If the exchange closes early, the Portfolio accelerates calculation of
net asset value and transaction deadlines to the actual closing time.

A Portfolio generally values its fund securities based on market prices or quo-
tations. A Portfolio's currency conversions, if any, are done when the London
stock exchange closes. When reliable market prices or quotations are not avail-
able, or when the Consulting Group believes they are unreliable or that the
value of a security has been materially affected by events occurring after the
securities or currency exchanges close, a Portfolio may price those securities
at fair value. Fair value is determined in accordance with procedures approved
by the Portfolios' Board of Trustees. A mutual 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.

International markets may be open, and trading may take place, on days when
U.S. markets are closed. For this reason, the values of foreign securities
owned by a Portfolio could change on days when shares of the Portfolio cannot
be bought or redeemed.

Dividends and distributions

Each Portfolio intends to distribute all or substantially all of its net in-
vestment income and realized capital gains, if any, for each taxable year. Gov-
ernment Money Investments declares dividends, if any, from net investment in-
come daily and pays dividends monthly. Shareholders in Government Money Invest-
ments receive dividends from the day following purchase through the date of
redemption. The other fixed income oriented Portfolios and Balanced Investments
declare and pay dividends, if any, from net investment income monthly. The eq-
uity oriented Portfolios declare and pay dividends, if any, from net investment
income annually. All of the Portfolios declare and distribute realized net cap-
ital gains, if any, annually, typically in December. All dividends and capital
gains are reinvested in shares of the Portfolio that paid them unless the
shareholder elects to receive them in cash.

The equity oriented Portfolios expect distributions to be primarily from capi-
tal gains. Balanced Investments expects distributions to be from both capital
gains and income. The fixed income oriented Portfolios expect distributions to
be primarily from income.

Taxes
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Transactions                                              Federal Tax Status
------------------------------------------------------------------------------
<S>                                                       <C>
Sales or exchange of shares                               Usually capital gain
                                                          or loss (except no
                                                          gain or loss for
                                                          Government Money
                                                          Investments); long-
                                                          term only if shares
                                                          owned more than one
                                                          year
------------------------------------------------------------------------------
Distributions of long term                                Long-term capital
 capital gain                                             gain
------------------------------------------------------------------------------
Distributions of short term                               Ordinary income
 capital gain
------------------------------------------------------------------------------
Dividends from net                                        Ordinary income (for
 investment income                                        all Portfolios
                                                          except Municipal
                                                          Bond Investments)
------------------------------------------------------------------------------
Any of the above received by                              Not a taxable event
 a retirement account
------------------------------------------------------------------------------
</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 a Portfolio is about to declare a capital gain distribution
or a taxable dividend, because it will be taxable to you even though it may ac-
tually be a return of a portion of your investment.

Dividends paid by Municipal Bond Investments that are derived from interest
earned on qualifying tax-exempt obligations are expected to be "exempt-inter-
est" dividends that shareholders may exclude from their gross incomes for fed-
eral income tax purposes if the Portfolio satisfies certain asset percentage
requirements.

                                       53

 Consulting Group Capital Markets Funds
<PAGE>


                          Investment and Account Information, continued

After the end of each year, you will receive a Form 1099 indicating your divi-
dends and distributions for the prior year, which are taxable as described
above even if reinvested, and your redemptions during that year. If you do not
provide the Portfolios with your correct taxpayer identification number and any
required certifications, you may be subject to backup withholding of 31% of a
Portfolio's distributions, dividends (other than exempt-interest 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 in-
vestment in a Portfolio.

As noted above, investors, out of their own assets, will pay an advisory serv-
ice fee. For most investors who are individuals, this fee will be treated as a
"miscellaneous itemized deduction" for federal income tax purposes. Under cur-
rent federal income tax law, an individual's miscellaneous itemized deductions
for any taxable year will be allowed as a deduction only to the extent the ag-
gregate of these deductions exceeds 2% of adjusted gross income. Such deduc-
tions are also subject to the general limitation on itemized deductions for in-
dividuals having, in 2000, adjusted gross income in excess of $128,950 ($64,475
for married individuals filing separately).

                                       54

 Consulting Group Capital Markets Funds
<PAGE>

Financial Highlights

The financial highlights tables are intended to help you understand the perfor-
mance of each portfolio for the past five years. The information in the follow-
ing tables was audited by KPMG LLP, independent auditors, whose report, along
with each portfolio's financial statements, is included in the annual report
(available upon request). Certain information reflects financial results for a
single share. Total return represents the rate that a shareholder would have
earned (or lost) on a share of a fund assuming reinvestment of all dividends
and distributions.

                  For a share of beneficial interest
                  outstanding throughout each year ended August
                  31:

                  Large Capitalization Growth Investments
                  -------------------------------------------------------------
<TABLE>
<CAPTION>
                                                2000   1999   1998   1997   1996
                  --------------------------------------------------------------
               <S>                            <C>    <C>    <C>    <C>    <C>
               Net Asset Value, Beginning of
               Year                           $24.35 $17.30 $17.27 $13.10 $12.13
                  --------------------------------------------------------------
               Income (Loss) From
               Operations:
                Net investment income (loss)  (0.04)   0.01   0.04   0.07   0.07
                Net realized and unrealized
                gain                            7.87   7.87   1.31   4.72   1.46
                  --------------------------------------------------------------
               Total Income From Operations     7.83   7.88   1.35   4.79   1.53
                  --------------------------------------------------------------
               Less Distributions From:
                Net investment income             -- (0.01) (0.08) (0.08) (0.06)
                Net realized gains            (2.85) (0.82) (1.24) (0.54) (0.50)
                  --------------------------------------------------------------
               Total Distributions            (2.85) (0.83) (1.32) (0.62) (0.56)
                  --------------------------------------------------------------
               Net Asset Value, End of Year   $29.33 $24.35 $17.30 $17.27 $13.10
                  --------------------------------------------------------------
               Total Return                   34.31% 46.29%  7.81% 37.47% 12.89%
                  --------------------------------------------------------------
               Net Assets, End of Year
               (millions)                     $2,758 $2,326 $1,793 $1,845 $1,205
                  --------------------------------------------------------------
               Ratios to Average Net Assets:
                Expenses                       0.71%  0.68%  0.76%  0.69%  0.83%
                Net investment income (loss)  (0.15)   0.06   0.16   0.50   0.63
                  --------------------------------------------------------------
               Portfolio Turnover Rate           59%    34%    39%    65%    40%
                  --------------------------------------------------------------

                  Large Capitalization Value Equity Investments
                  -------------------------------------------------------------
<CAPTION>
                                                2000   1999   1998   1997   1996
                  --------------------------------------------------------------
               <S>                            <C>    <C>    <C>    <C>    <C>
               Net Asset Value, Beginning of
               Year                           $13.53 $12.28 $14.91 $11.55 $10.42
                  --------------------------------------------------------------
               Income From Operations:
                Net investment income           0.17   0.17   0.16   0.23   0.26
                Net realized and unrealized
                gain                            0.31   2.94   0.08   4.09   1.25
                  --------------------------------------------------------------
               Total Income From Operations     0.48   3.11   0.24   4.32   1.51
                  --------------------------------------------------------------
               Less Distributions From:
                Net investment income         (0.17) (0.18) (0.11) (0.34) (0.24)
                Net realized gains            (1.91) (1.68) (2.76) (0.62) (0.14)
                  --------------------------------------------------------------
               Total Distributions            (2.08) (1.86) (2.87) (0.96) (0.38)
                  --------------------------------------------------------------
               Net Asset Value, End of Year   $11.93 $13.53 $12.28 $14.91 $11.55
                  --------------------------------------------------------------
               Total Return                    4.00% 26.36%  0.03% 38.98% 14.75%
                  --------------------------------------------------------------
               Net Assets, End of Year
               (millions)                     $1,933 $1,946 $1,712 $1,935 $1,512
                  --------------------------------------------------------------
               Ratios to Average Net Assets:
                Expenses                       0.78%  0.75%  0.80%  0.78%  0.80%
                Net investment income           1.34   1.10   1.18   1.70   2.31
                  --------------------------------------------------------------
               Portfolio Turnover Rate           78%    54%    57%    70%    24%
                  --------------------------------------------------------------
</TABLE>

                                       55

 Consulting Group Capital Markets Funds
<PAGE>


                                        Financial Highlights, continued
Small Capitalization Growth Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                         2000(1)   1999     1998   1997   1996
------------------------------------------------------------------------------
<S>                                      <C>     <C>    <C>      <C>    <C>
Net Asset Value, Beginning of Year       $17.93  $12.83   $18.29 $17.79 $17.19
------------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment loss                     (0.11)  (0.07)   (0.07) (0.06) (0.08)
 Net realized and unrealized gain (loss)   8.66    5.68   (4.23)   2.87   3.36
------------------------------------------------------------------------------
Total Income (Loss) From Operations        8.55    5.61   (4.30)   2.81   3.28
------------------------------------------------------------------------------
Less Distributions From:
 Net realized gains                      (2.12)  (0.51)   (1.16) (2.31) (2.68)
------------------------------------------------------------------------------
Total Distributions                      (2.12)  (0.51)   (1.16) (2.31) (2.68)
------------------------------------------------------------------------------
Net Asset Value, End of Year             $24.36  $17.93   $12.83 $18.29 $17.79
------------------------------------------------------------------------------
Total Return                             50.57%  44.32% (25.10)% 17.53% 21.33%
------------------------------------------------------------------------------
Net Assets, End of Year (millions)       $1,572  $1,109     $859   $777   $494
------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses                                 0.98%   0.93%    1.01%  0.90%  1.00%
 Net investment loss                     (0.50)  (0.39)   (0.43) (0.39) (0.49)
------------------------------------------------------------------------------
Portfolio Turnover Rate                    110%    108%      91%    81%    83%
------------------------------------------------------------------------------
</TABLE>

Small Capitalization Value Equity Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                           2000   1999  1998(1)   1997   1996
-----------------------------------------------------------------------------
<S>                                      <C>    <C>    <C>      <C>    <C>
Net Asset Value, Beginning of Year       $10.56 $11.11   $14.45 $11.11 $10.01
-----------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income                     0.20   0.19     0.17   0.19   0.16
 Net realized and unrealized gain (loss)   0.30   1.28   (1.66)   4.22   1.08
-----------------------------------------------------------------------------
Total Income (Loss) From Operations        0.50   1.47   (1.49)   4.41   1.24
-----------------------------------------------------------------------------
Less Distributions From:
 Net investment income                   (0.16) (0.20)   (0.13) (0.19) (0.14)
 Net realized gains                      (0.18) (1.82)   (1.72) (0.88)     --
-----------------------------------------------------------------------------
Total Distributions                      (0.34) (2.02)   (1.85) (1.07) (0.14)
-----------------------------------------------------------------------------
Net Asset Value, End of Year             $10.72 $10.56   $11.11 $14.45 $11.11
-----------------------------------------------------------------------------
Total Return                              5.09% 13.61% (12.84)% 42.40% 12.48%
-----------------------------------------------------------------------------
Net Assets, End of Year (millions)         $852   $744     $740   $622   $479
-----------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses                                 0.91%  0.96%    0.94%  0.90%  0.95%
 Net investment income                     2.12   1.70     1.45   1.62   1.52
-----------------------------------------------------------------------------
Portfolio Turnover Rate                     72%    53%      59%    53%    39%
-----------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
    method.

                                       56

 Consulting Group Capital Market Funds
<PAGE>


                                       Financial Highlights (continued)
International Equity Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      2000   1999   1998   1997   1996
----------------------------------------------------------------------
<S>                                 <C>    <C>    <C>    <C>    <C>
Net Asset Value, Beginning of Year  $12.43 $10.69 $10.63 $10.49 $10.50
----------------------------------------------------------------------
Income From Operations:
 Net investment income                0.14   0.09   0.14   0.09     --
 Net realized and unrealized gain     2.19   2.39   0.21   0.87   0.44
----------------------------------------------------------------------
Total Income From Operations          2.33   2.48   0.35   0.96   0.44
----------------------------------------------------------------------
Less Distributions From:
 Net investment income              (0.11) (0.15) (0.17) (0.12) (0.17)
 Net realized gains                 (1.15) (0.59) (0.12) (0.70) (0.28)
----------------------------------------------------------------------
Total Distributions                 (1.26) (0.74) (0.29) (0.82) (0.45)
----------------------------------------------------------------------
Net Asset Value, End of Year        $13.50 $12.43 $10.69 $10.63 $10.49
----------------------------------------------------------------------
Total Return                        19.17% 24.06%  3.53%  9.53%  4.23%
----------------------------------------------------------------------
Net Assets, End of Year (millions)  $1,569 $1,385 $1,331 $1,136   $844
----------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(1)                         0.94%  0.82%  0.90%  0.97%  1.00%
 Net investment income (loss)         0.54   0.90   1.23   0.70 (0.12)
----------------------------------------------------------------------
Portfolio Turnover Rate                75%    45%    45%    32%    50%
----------------------------------------------------------------------
</TABLE>
(1) During the year ended August 31, 1996, the portfolio earned credits from
    the custodian which reduced service fees incurred. If the credits are taken
    into consideration, the ratio of expenses to average net assets for
    International Equity Investments would be 1.00%; prior year numbers have
    not been restated to reflect these numbers.

                                       57

 Consulting Group Capital Markets Funds
<PAGE>


                                        Financial Highlights, continued

Emerging Markets Equity Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      2000(1)  1999(1)     1998     1997    1996
--------------------------------------------------------------------------------
<S>                                  <C>      <C>      <C>      <C>      <C>
Net Asset Value, Beginning of Year      $6.74    $4.37    $9.31    $8.50   $7.85
--------------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income (loss)(2)       (0.02)     0.05     0.06     0.04    0.03
 Net realized and unrealized gain
  (loss)                                 0.67     2.36   (4.44)     0.79    0.62
--------------------------------------------------------------------------------
Total Income (Loss) From Operations      0.65     2.41   (4.38)     0.83    0.65
--------------------------------------------------------------------------------
Less Distributions From:
 Net investment income                 (0.04)   (0.04)   (0.10)   (0.01)      --
 Net realized gains                        --       --   (0.46)   (0.01)      --
--------------------------------------------------------------------------------
Total Distributions                    (0.04)   (0.04)   (0.56)   (0.02)      --
--------------------------------------------------------------------------------
Net Asset Value, End of Year            $7.35    $6.74    $4.37    $9.31   $8.50
--------------------------------------------------------------------------------
Total Return                            9.62%   55.37% (49.49)%    9.88%   8.28%
--------------------------------------------------------------------------------
Net Assets, End of Year (000s)       $305,066 $317,626 $230,526 $226,280 $97,489
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(2)(3)                         1.66%    1.72%    1.69%    1.60%   1.84%
 Net investment income (loss)          (0.24)     0.84     0.80     0.39    0.26
--------------------------------------------------------------------------------
Portfolio Turnover Rate                  110%     135%     139%     105%    106%
--------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
    method.
(2) Expense ratios and the per share decreases in net investment income before
    fee waivers and/or expense reimbursements were as follows:

<TABLE>
<CAPTION>
                                                      Expense Ratios
                                       Net Investment    Without
                                         Income Per   Waivers and/or
                                       Share Decrease Reimbursements
  Portfolio                                 1996           1996
 -------------------------------------------------------------------
  <S>                                  <C>            <C>
  Emerging Markets Equity Investments      $0.01          1.97%
</TABLE>
(3) During the year ended August 31, 1996, the portfolio earned credits from
    the custodian which reduced service fees incurred. If the credits are taken
    into consideration, the ratio of expenses to average net assets for
    Emerging Markets Equity Investments would be 1.80%; prior year numbers have
    not been restated to reflect these numbers.

                                       58

 Consulting Group Capital Markets Funds
<PAGE>


                                        Financial Highlights, continued
Balanced Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      2000     1999     1998     1997     1996
------------------------------------------------------------------------------
<S>                               <C>      <C>      <C>      <C>      <C>
Net Asset Value, Beginning of
 Year                               $11.41   $10.87   $12.01   $10.00    $9.37
------------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income(1)             0.30     0.25     0.26     0.27     0.29
 Net realized and unrealized gain
  (loss)                              1.19     1.74   (0.53)     2.27     0.95
------------------------------------------------------------------------------
Total Income (Loss) From
 Operations                           1.49     1.99   (0.27)     2.54     1.24
------------------------------------------------------------------------------
Less Distributions From:
 Net investment income              (0.24)   (0.29)   (0.30)   (0.27)   (0.28)
 Net realized gains                 (1.48)   (1.16)   (0.57)   (0.26)   (0.33)
------------------------------------------------------------------------------
Total Distributions                 (1.72)   (1.45)   (0.87)   (0.53)   (0.61)
------------------------------------------------------------------------------
Net Asset Value, End of Year        $11.18   $11.41   $10.87   $12.01   $10.00
------------------------------------------------------------------------------
Total Return                        14.45%   18.78%  (2.85)%   26.05%   13.60%
------------------------------------------------------------------------------
Net Assets, End of Year (000s)     $58,810  $74,866  $68,470  $89,789  $50,281
------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(1)                         1.00%    0.85%    1.00%    1.00%    1.00%
 Net investment income                2.60     1.77     1.92     2.49     2.85
------------------------------------------------------------------------------
Portfolio Turnover Rate               303%     332%      57%      67%      47%
------------------------------------------------------------------------------
Intermediate Fixed Income Investments
------------------------------------------------------------------------------

<CAPTION>
                                      2000     1999     1998     1997     1996
------------------------------------------------------------------------------
<S>                               <C>      <C>      <C>      <C>      <C>
Net Asset Value, Beginning of
Year                                 $7.83    $8.19    $8.06    $7.92    $8.10
------------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income                0.48     0.44     0.48     0.50     0.50
 Net realized and unrealized gain
 (loss)                             (0.05)   (0.35)     0.15     0.14   (0.17)
------------------------------------------------------------------------------
Total Income From Operations          0.43     0.09     0.63     0.64     0.33
------------------------------------------------------------------------------
Less Distributions From:
 Net investment income              (0.44)   (0.45)   (0.50)   (0.50)   (0.51)
------------------------------------------------------------------------------
Total Distributions                 (0.44)   (0.45)   (0.50)   (0.50)   (0.51)
------------------------------------------------------------------------------
Net Asset Value, End of Year         $7.82    $7.83    $8.19    $8.06    $7.92
------------------------------------------------------------------------------
Total Return                         5.73%    1.07%    8.00%    8.23%    4.08%
------------------------------------------------------------------------------
Net Assets, End of Year (000s)    $564,715 $594,666 $574,998 $384,094 $296,053
------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Total expenses                      0.78%    0.61%    0.73%    0.73%    0.73%
 Interest expense                     0.03       --       --       --       --
 Other expenses                       0.75     0.61     0.73     0.73     0.73
 Net investment income                6.02     4.53     5.95     6.19     5.78
------------------------------------------------------------------------------
Portfolio Turnover Rate               195%     207%      63%     118%      98%
------------------------------------------------------------------------------
</TABLE>
(1) Expense ratios and the per share decreases in net investment income before
    fee waivers and/or expense reimbursements were as follows:

<TABLE>
<CAPTION>
                           Net Investment Income     Expense Ratios Without Waivers
                             Per Share Decrease           and/or Reimbursements
  Portfolio             2000  1999 1998  1997  1996   2000   1999   1998    1997   1996
 -----------------------------------------------------------------------------------------
  <S>                   <C>   <C>  <C>  <C>    <C>   <C>     <C>    <C>    <C>     <C>
  Balanced Investments  $0.02 N/A  N/A  $0.00* $0.03   1.16%   N/A    N/A    1.02%   1.26%
</TABLE>

* Amount represents less than $0.01 per share.

                                       59

 Consulting Group Capital Markets Funds
<PAGE>


                                       Financial Highlights (continued)
Long-Term Bond Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      2000     1999      1998     1997     1996
-------------------------------------------------------------------------------
<S>                               <C>      <C>       <C>      <C>      <C>
Net Asset Value, Beginning of
Year                                 $7.70    $9.05     $8.26    $7.87    $8.23
-------------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income(2)             0.48     0.49      0.52     0.53     0.51
 Net realized and unrealized gain
  (loss)                              0.21    (1.00)     0.78     0.46   (0.41)
-------------------------------------------------------------------------------
Total Income (Loss) From
Operations                            0.69   (0.51)      1.30     0.99     0.10
-------------------------------------------------------------------------------
Less Distributions From:
 Net investment income              (0.48)   (0.50)    (0.51)   (0.59)   (0.46)
 Net realized gains                 (0.05)   (0.34)        --       --       --
 Capital                            (0.01)       --        --   (0.01)       --
-------------------------------------------------------------------------------
Total Distributions                 (0.54)   (0.84)    (0.51)   (0.60)   (0.46)
-------------------------------------------------------------------------------
Net Asset Value, End of Year         $7.85    $7.70     $9.05    $8.26    $7.87
-------------------------------------------------------------------------------
Total Return                         9.50%  (6.19)%    16.22%   12.93%    1.11%
-------------------------------------------------------------------------------
Net Assets, End of Year (000s)     $75,091 $115,355  $157,612 $183,051 $155,910
-------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(2)                         0.92%    0.80%     0.82%    0.78%    0.80%
 Net investment income                6.18     5.81      5.96     6.54     6.18
-------------------------------------------------------------------------------
Portfolio Turnover Rate               358%      30%       63%      34%     125%
-------------------------------------------------------------------------------
Mortgage Backed Investments
-------------------------------------------------------------------------------

<CAPTION>
                                      2000     1999      1998     1997  1996(1)
-------------------------------------------------------------------------------
<S>                               <C>      <C>       <C>      <C>      <C>
Net Asset Value, Beginning of
 Year                                $7.73    $8.13     $7.96    $7.74    $7.91
-------------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income(2)             0.49     0.45      0.46     0.48     0.48
 Net realized and unrealized gain
  (loss)                              0.08   (0.34)      0.19     0.25   (0.14)
-------------------------------------------------------------------------------
Total Income From Operations          0.57     0.11      0.65     0.73     0.34
-------------------------------------------------------------------------------
Less Distributions From:
 Net investment income              (0.46)   (0.45)    (0.48)   (0.51)   (0.48)
 Net realized gains                     --   (0.05)        --       --       --
 Capital                                --   (0.01)        --       --   (0.03)
-------------------------------------------------------------------------------
Total Distributions                 (0.46)   (0.51)    (0.48)   (0.51)   (0.51)
-------------------------------------------------------------------------------
Net Asset Value, End of Year         $7.84    $7.73     $8.13    $7.96    $7.74
-------------------------------------------------------------------------------
Total Return                         7.58%    1.30%     8.37%    9.69%    4.37%
-------------------------------------------------------------------------------
Net Assets, End of Year (000s)    $100,342 $131,039  $156,043 $136,586 $120,945
-------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Total expenses(2)(3)                 0.85    0.80%     0.80%    0.80%    0.80%
 Interest expense                     0.05       --        --       --       --
 Other expenses                       0.80     0.80      0.80     0.80     0.80
 Net investment income                6.26     5.67      5.69     6.08     6.09
-------------------------------------------------------------------------------
Portfolio Turnover Rate                28%      87%      214%      94%      23%
-------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
    method.
</TABLE>
(2) Expense ratios and the per share decreases in net investment income before
    fee waivers and/or expense reimbursements were as follows:

<TABLE>
<CAPTION>
                       Net Investment Income       Expense Ratios Without Waivers
                        Per Share Decrease             and/or Reimbursements
  Portfolio        2000  1999  1998  1997  1996   2000   1999   1998   1997   1996
 ----------------------------------------------------------------------------------
  <S>              <C>   <C>   <C>   <C>   <C>   <C>    <C>    <C>    <C>    <C>
  Mortgage Backed
   Investments     $0.01 $0.01 $0.01 $0.01 $0.01  0.97%  0.91%  0.93%  0.93%  0.94%
</TABLE>
(3)As a result of a voluntary expense limitation, expense ratios (excluding
  interest expense) will not exceed 0.80%.

                                       60

 Consulting Group Capital Markets Funds
<PAGE>


                                   Financial Highlights, continued

High Yield Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      2000(2)   1999(2)   1998(3)
-----------------------------------------------------------------
<S>                                  <C>       <C>      <C>
Net Asset Value, Beginning of Year      $7.33     $7.89     $8.00
-----------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income(1)                0.69      0.83      0.05
 Net realized and unrealized loss      (1.37)    (0.54)    (0.16)
-----------------------------------------------------------------
Total Income (Loss) From Operations    (0.68)      0.29    (0.11)
-----------------------------------------------------------------
Less Distributions From:
 Net investment income                 (0.71)    (0.83)        --
 Net realized gains                        --    (0.02)        --
 Capital                                (0.09)       --        --
-----------------------------------------------------------------
Total Distributions                    (0.80)    (0.85)        --
-----------------------------------------------------------------
Net Asset Value, End of Year            $5.85     $7.33     $7.89
-----------------------------------------------------------------
Total Return                          (9.37)%     3.67% (1.38)%++
-----------------------------------------------------------------
Net Assets, End of Year (000s)       $164,056  $155,057   $76,557
-----------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(1)                            1.20%     1.19%    1.20%+
 Net investment income                  11.30     10.62     7.37+
-----------------------------------------------------------------
Portfolio Turnover Rate                  129%      122%       13%
-----------------------------------------------------------------
</TABLE>
(1)Expense ratios and the per share decreases in net investment income before
  fee waivers and/or expense reimbursements were as follows:

<TABLE>
<CAPTION>
                                                  Expense Ratios
                          Net Investment Income  Without Waivers
                           Per Share Decrease   and Reimbursements
  Portfolio                       1998                 1998
 -----------------------------------------------------------------
  <S>                     <C>                   <C>
  High Yield Investments          0.01                2.42+
</TABLE>

(2) Per share amounts have been calculated using the monthly average shares
    method.
(3) For the period from July 13, 1998 (commencement of operations) to August
    31, 1998.
 ++ Total return is not annualized, as it may not be representative of the
    total return for the year.
 +  Annualized.

                                       61

 Consulting Group Capital Markets Funds
<PAGE>


                                        Financial Highlights, continued

International Fixed Income Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                     2000(1)  1999(1)     1998     1997     1996
--------------------------------------------------------------------------------
<S>                                 <C>      <C>      <C>      <C>      <C>
Net Asset Value, Beginning of Year     $8.10    $8.34    $8.21    $9.11    $9.01
--------------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income                  0.36     0.42     0.51     0.51     0.55
 Net realized and unrealized gain
  (loss)                              (0.84)   (0.24)     0.31   (0.62)     0.49
--------------------------------------------------------------------------------
Total Income (Loss) From
 Operations                           (0.48)     0.18     0.82   (0.11)     1.04
--------------------------------------------------------------------------------
Less Distributions From:
 Net investment income                (0.06)   (0.42)   (0.27)   (0.55)   (0.94)
 Net realized gains                       --       --   (0.34)   (0.24)       --
 Capital                              (0.32)  (0.00)*   (0.08)       --       --
--------------------------------------------------------------------------------
Total Distributions                   (0.38)   (0.42)   (0.69)   (0.79)   (0.94)
--------------------------------------------------------------------------------
Net Asset Value, End of Year           $7.24    $8.10    $8.34    $8.21    $9.11
--------------------------------------------------------------------------------
Total Return                         (6.13)%    2.30%   10.45%  (1.52)%   12.05%
--------------------------------------------------------------------------------
Net Assets, End of Year (000s)      $235,566 $236,254 $192,068 $125,610 $129,410
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(2)                           0.98%    0.94%    0.97%    0.99%    1.02%
 Net investment income                  4.70     4.85     5.39     5.87     6.34
--------------------------------------------------------------------------------
Portfolio Turnover Rate                 225%     204%     211%     251%     211%
--------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
    method.
(2) During the years ended August 31, 1997 and August 31, 1996, the portfolios
    earned credits from the custodian which reduced service fees incurred. If
    the credits are taken into consideration, the ratio of expenses to average
    net assets for International Fixed Income Investments would be 0.97% and
    0.97%, respectively; prior year numbers have not been restated to reflect
    these numbers.
 * Amount represents less than $0.01 per share.

                                       62

 Consulting Group Capital Markets Funds
<PAGE>


                                      Financial Highlights  (continued)

Municipal Bond Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      2000     1999     1998     1997     1996
------------------------------------------------------------------------------
<S>                               <C>      <C>      <C>      <C>      <C>
Net Asset Value, Beginning of
Year                                 $8.22    $8.92    $8.62    $8.26    $8.27
------------------------------------------------------------------------------
Income (Loss) From Operations:
 Net investment income(1)             0.37     0.35     0.36     0.38     0.38
 Net realized and unrealized gain
 (loss)                               0.17   (0.57)     0.32     0.34       --
------------------------------------------------------------------------------
Total Income (Loss) From
Operations                            0.54   (0.22)     0.68     0.72     0.38
------------------------------------------------------------------------------
Less Distributions From:
 Net investment income              (0.35)   (0.35)   (0.38)   (0.36)   (0.39)
 In excess of net investment
 income                                 --       --  (0.00)*       --       --
 Net realized gains                 (0.01)   (0.13)       --       --       --
------------------------------------------------------------------------------
Total Distributions                 (0.36)   (0.48)   (0.38)   (0.36)   (0.39)
------------------------------------------------------------------------------
Net Asset Value, End of Year         $8.40    $8.22    $8.92    $8.62    $8.26
------------------------------------------------------------------------------
Total Return                         6.79%  (2.60)%    8.09%    8.88%    4.62%
------------------------------------------------------------------------------
Net Assets, End of Year (000s)     $48,789  $61,743  $72,511  $52,024  $46,485
------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(1)                         0.79%    0.78%    0.80%    0.80%    0.80%
 Net investment income                4.50     4.03     4.20     4.50     4.59
------------------------------------------------------------------------------
Portfolio Turnover Rate                37%     142%     160%      31%      29%
------------------------------------------------------------------------------
Government Money Investments
------------------------------------------------------------------------------

<CAPTION>
                                      2000     1999     1998     1997     1996
------------------------------------------------------------------------------
<S>                               <C>      <C>      <C>      <C>      <C>
Net Asset Value, Beginning of
 Year                                $1.00    $1.00    $1.00    $1.00    $1.00
------------------------------------------------------------------------------
 Net investment income(1)             0.05     0.04     0.05     0.05     0.05
 Dividends from net investment
  income                            (0.05)   (0.04)   (0.05)   (0.05)   (0.05)
------------------------------------------------------------------------------
Net Asset Value, End of Year         $1.00    $1.00    $1.00    $1.00    $1.00
------------------------------------------------------------------------------
Total Return                         5.44%    4.53%    5.10%    4.98%    5.02%
------------------------------------------------------------------------------
Net Assets, End of Year (000s)    $225,756 $303,160 $375,761 $388,713 $278,162
------------------------------------------------------------------------------
Ratios to Average Net Assets:
 Expenses(1)(2)                      0.60%    0.60%    0.60%    0.60%    0.60%
 Net investment income                5.30     4.46     4.99     4.91     4.93
------------------------------------------------------------------------------
</TABLE>

(1) Expense ratios and the per share decreases in net investment income before
    fee waivers and/or expense reimbursements were as follows:

<TABLE>
<CAPTION>
                                                            Expense Ratios
                         Net Investment Income              Without Waivers
                           Per Share Decrease            and/or Reimbursements
  Portfolio         2000   1999   1998   1997  1996  2000  1999  1998  1997  1996
 ---------------------------------------------------------------------------------
  <S>               <C>   <C>    <C>    <C>    <C>   <C>   <C>   <C>   <C>   <C>
  Municipal Bond
   Investments        N/A    N/A    N/A $0.00* $0.02   N/A   N/A   N/A 0.83% 1.02%
  Government Money
   Investments      $0.02 $0.00* $0.00*   0.01  0.01 0.78% 0.71% 0.66%  0.64  0.72
</TABLE>

(2) As a result of a voluntary expense limitation, expense ratios will not
    exceed 0.60%.
 * Amount represents less than $0.01 per share.

                                       63

 Consulting Group Capital Markets Funds
<PAGE>


                                        Financial Highlights, continued
Multi-Sector Fixed Income Investments
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                    2000(1)(2)
----------------------------------------------
<S>                                 <C>
Net Asset Value, Beginning of Year     $8.00
----------------------------------------------
Income From Operations:
 Net investment income(3)               0.45
 Net realized and unrealized gain       0.06
----------------------------------------------
Total Income From Operations            0.51
----------------------------------------------
Less Distributions From:
 Net investment income                (0.28)
----------------------------------------------
Total Distributions                   (0.28)
----------------------------------------------
Net Asset Value, End of Year           $8.23
----------------------------------------------
Total Return++                         6.47%
----------------------------------------------
Net Assets, End of Year (000s)       $29,989
----------------------------------------------
Ratios to Average Net Assets+:
 Expenses(3)(4)                        0.80%
 Net investment income                  6.13
----------------------------------------------
Portfolio Turnover Rate                 249%
----------------------------------------------
</TABLE>
(1) For the period from October 1, 1999 (commencement of operations) to August
    31, 2000.
(2) Per share amounts have been calculated using the monthly average shares
    method.
(3) Expense ratios and the per share decrease in net investment income before
    fee waivers and/or expense reimbursements were as follows:

<TABLE>
<CAPTION>
                             Net Investment Income Expense Ratio Without Waiver
                              Per Share Decrease        and Reimbursements
  Portfolio                          2000                      2000
 ------------------------------------------------------------------------------
  <S>                        <C>                   <C>
  Multi-Sector Fixed Income
   Investments                       $0.03                     1.17%
</TABLE>
(4) As a result of a voluntary expense limitation, expense ratios will not
    exceed 0.80%.
++Total return is not annualized, as it may not be representative of the total
  return for the year.
+ Annualized.
 * Amount represents less than $0.01 per share.

                                       64

 Consulting Group Capital Markets Funds
<PAGE>




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<PAGE>

                                   APPENDIX A

                               Investment Indices

Following are definitions of indices that are utilized in the Client's Recom-
mendation and Review.

Lehman Brothers Government/Corporate Bond Index
Composed of publicly issued, fixed rate, non-convertible domestic debt in three
major classifications: industrial, utility, financial as well as the domestic
debt of the U.S. Government or any agency thereof. All issues have at least one
year to maturity, or an outstanding par value of at least $100 million for U.S.
Government issues and $50 million for corporate issues. All corporate issues
have a minimum rating of Baa by Moody's or BBB by Standard & Poor's.

Lehman Brothers Aggregate Bond Index
Composed of the Lehman Intermediate Government/ Corporate Bond Index and the
Mortgage-Backed Securities Index and also includes treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.

Lehman Brothers Long Term Government/Corporate Bond Index
Includes all bonds covered by the Lehman Brothers Government/Corporate Bond
Index, with maturities of 10 years or longer. Total return includes income and
appreciation/depreciation as a percentage of original investment.

Lehman Brothers Intermediate Government/Corporate Bond Index
A subset of the Lehman Brothers Government/Corporate Bond Index covering issues
with maturities up to ten years.

Lehman Brothers Mortgage Backed Securities Bond Index
Contains all fixed securities issued and backed by mortgage pools of GNMA's,
FHLMC's, FNMA's, Graduated Payment Mortgage (GPM's), but not Graduated Equity
Mortgages (GEM).

Lehman Brothers Municipal Bond Index
A composite measure of the total return performance of the municipal bond
market, which includes more than two million different bond issues. For
simplicity, the market is divided into seven major sectors, with the
performance of each sector weighted according to issue volume (adjusted
annually).

Lipper Balanced Funds Average
An average of the reinvested performance of funds whose primary objective is to
conserve principal by maintaining at all times a balanced portfolio of both
stocks and bonds. Typically, the stock/bond ratio ranges around 60 percent/40
percent, respectively.

Lipper Corporate Debt Funds A Rated Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in corporate debt issues rated "A" or better or government issues.

Lipper Corporate Debt Funds A Rated Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper Emerging Markets Funds Average
An average of the reinvested performance of funds that investing at least 65%
of total assets in emerging market equity securities, where emerging market is
defined by a country's gross national product per capita or other economic
measures.

Lipper General Municipal Debt Funds Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in municipal debt issues in the top four credit ratings.

Lipper General Municipal Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.


Lipper General World Funds Average
An average of the reinvested performance of the following twelve Lipper
investment objectives: Gold Oriented, Global, Global Small Company,
International, International Small Company, European Region, Pacific Ex Japan,
Pacific Region, Emerging Markets, Japanese, Latin American and Canadian Funds.

Lipper Growth Funds Average
An average of the reinvested performance of funds that normally invest in
companies whose long-term earnings are expected to grow significantly faster
than the earnings of the stocks represented in the major unmanaged stock
indices.

Lipper Growth Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper International Funds Average
An average of the reinvested performance of funds that invest their assets in
securities whose primary trading markets are outside of the United States.

Lipper International Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper International Income Funds Average
An average of the reinvested performance of funds that invest primarily in U.S.
dollar and non-U.S. dollar debt securities located in at least three countries
excluding the United States, except in periods of market weakness.

Lipper Large-Cap Growth Funds Average
An average of the reinvested performance of funds that normally invest in
companies with long-term earnings expected to grow significantly faster than
the earnings of the stocks represented in a major unmanaged stock index. These
funds will normally have an above-average price-to-earnings ratio, price-to-
book ratio and three-year earnings

                                      A-1
<PAGE>

                                   APPENDIX A

                        Investment Indices--(Continued)

growth figure, compared to the U.S. diversified large-cap
funds universe average. Large-cap funds will generally invest at least 75% of
their assets in companies with market capitalizations (on a three-year weighted
basis) greater than 300% of the dollar-weighted median market capitalization of
the S&P Mid-Cap 400 Index.

Lipper Multi-Cap Value Funds Average
An average of the reinvested performance of funds that normally invest in
companies considered to be undervalued relative to a major unmanaged stock
index based on price-to-current earnings, book value, asset value or other
factors. These funds will normally have a below-average price-to-earnings
ratio, price-to-book ratio and three-year earnings growth figure, compared to
the U.S. diversified multi-cap funds universe average. Multi-cap funds will
generally have between 25% to 75% of their assets invested in companies with
market capitalizations (on a three-year weighted basis) greater than 300% of
the dollar-weighted median market capitalization of the S&P Mid-Cap 400 Index.

Lipper Small-Cap Growth Funds Average
An average of the reinvested performance of funds that normally invest in
companies with long-term earnings expected to grow significantly faster than
the earnings of the stocks represented in a major unmanaged stock index. These
funds will normally have an above-average price-to-earnings ratio, price-to-
book ratio and three-year earnings growth figure, compared to the U.S.
diversified small-cap funds universe average. Small-cap funds will generally
invest at least 75% of their assets in companies with market capitalizations
(on a three-year weighted basis) of less than 250% of the dollar-weighted
median market capitalization of the S&P Small-Cap 600 Index.

Lipper Small-Cap Value Funds Average
An average of the reinvested performance of funds that normally invest in
companies considered to be undervalued relative to a major unmanaged stock
index based on price-to-current earnings, book value, asset value or other
factors. These funds will normally have a below-average price-to-earnings
ratio, price-to-book ratio and three-year earnings growth figure, compared to
the U.S. diversified small-cap funds universe average. Small-cap funds will
generally invest at least 75% of their assets in companies with market
capitalizations (on a three-year weighted basis) of less than 250% of the
dollar-weighted median market capitalization of the S&P Small-Cap 600 Index.

Lipper Small Company Funds Average
An average of the reinvested performance of funds that by their prospectus or
portfolio practice, limit investments to companies on the basis of the size of
the company.

Lipper Small Company Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper U.S. Government Money Market Funds Index
An equally weighted performance index, adjusted for capital gains distributions
and income dividends of the largest qualifying funds having this investment
objective.

Lipper U.S. Mortgage Funds Average
An average of the reinvested performance of funds that invest at least 65% of
their assets in mortgages/securities issued or guaranteed as to principal and
interest by the U.S. Government and certain federal agencies.

Morgan Stanley EAFE (Capitalization Weighted)
A composite portfolio of equity (stock market) total returns for the countries
of Europe, Australia, New Zealand and the Far East. The return for each country
is weighted on the basis of its market capitalization.

Morgan Stanley Emerging Equity Markets Free Gross Dividend Index
A composite portfolio consisting of equity total returns for countries with low
to middle per capita income, as determined by the World Bank. Some of these
countries include: Argentina, Greece, India, Malaysia and Turkey. The return
for each country is weighted on the basis of its total market capitalization.

90-Day Treasury Bill Index
Unweighted average of weekly auction offering rates of 90-Day Treasury Bills.
Treasury Bills are backed by the full faith and credit of the U.S. Government.

Russell 1000 Index
The 1,000 largest U.S. companies by market capitalization, the smallest of
which has about $1.6 billion in market capitalization. The average market
capitalization for a company in this index is $14.10 billion.

Russell 1000 Value Index
Contains those Russell 1000 securities with less-than-average growth
orientation. Companies in this index generally have low price-to-book and
earnings ratios and lower forecasted growth values than stocks in the Russell
1000 Growth Index.

Russell 1000 Growth Index
Contains those Russell 1000 securities with greater-than-average growth
orientation. Companies in this index tend to exhibit high price-to-book and
earnings ratios and higher forecasted growth values than stocks in the Russell
1000 Value Index.

Russell 2000 Index
Composed of the 2,000 smallest U.S. securities as determined by total market
capitalization, representing approximately 8.0% of the Russell 3000 Index. The
average market capitalization for a company in this index is $580 million,
with the largest being $1.50 billion.


                                      A-2
<PAGE>

                                   APPENDIX A

                        Investment Indices--(Continued)

Russell 2000 Value Index
Contains those Russell 2000 securities with less-than-average growth
orientation. Companies in this index generally have low price-to-book and
earnings ratios and lower forecasted growth values than stocks in the Russell
2000 Growth Index.

Russell 2000 Growth Index
Contains those Russell 2000 securities with greater-than-average growth
orientation. Companies in this index tend to exhibit high price-to-book and
earnings ratios and higher forecasted growth values than stocks in the Russell
2000 Value Index.

Standard & Poor's 500 Index
As of November 30, 2000, the index tracks the total return of 500 of the
largest stocks (378 industrial, 38 utility, 10 transportation and 74 financial
companies) in the United States, which represent about 86% of the New York
Stock Exchange's total market capitalization. The return of each stock is
weighted on the basis of the stock's capitalization.

Salomon Smith Barney Non-U.S. Government Bond Index
A market capitalization-weighted index consisting of government bond markets of
Austria, France, Spain, Australia, Germany, Sweden, Belgium, Italy, United
Kingdom, Canada, Japan, Denmark and the Netherlands.

Wilshire Large Company Growth Equity Index
Focuses on the top 750 companies of the Wilshire 5000 in terms of market
capitalization. The smallest company's capitalization is $675 million. The
index excludes companies meeting one or more of the following criteria: less
than 5 years of operating history, high dividend payout, low price-to-book or
low return on equity.

Wilshire Large Company Value Equity Index
Focuses on the top 750 companies of the Wilshire 5000 in terms of market
capitalization. The index excludes companies that do not rank favorably on a
relative basis due to their high P/E and price-to-book ratios, or low yield.

Wilshire Small Company Growth Equity Index
Focuses on companies that rank between 751-1,750 of the Wilshire 5000 in terms
of market capitalization. The index excludes companies meeting one or more of
the following criteria: less than two years operating history, high yield,
little or no earnings growth or low beta.

Wilshire Small Company Value Equity Index
Focuses on companies that rank between 751-1,750 of the Wilshire 5000 in terms
of market capitalization. The index excludes companies that do not rank
favorably on a relative basis because of their high price-to-earnings and
price-to-book ratios, or low yield.

                                      A-3
<PAGE>




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<PAGE>




                       This page intentionally left blank
<PAGE>

                                   APPENDIX B

The following are copies of the proposed and final exemption and a technical
amendment to the final exemption from the Department of Labor from certain pro-
visions of the Employee Retirement Income Security Act of 1974 relating to the
purchase of shares and participation in TRAK by certain retirement plans and
individual retirement accounts.

--------------------------------------------------------------------------------
PENSION AND WELFARE BENEFITS ADMINISTRATION

[Application Nos. D-10809 and D-10865]

Notice of Proposed Individual Exemption to Amend and Replace Prohibited
Transaction Exemption (PTE) 99-15, Involving Salomon Smith Barney Inc., Located
in New York, NY

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of Labor.

ACTION: Notice of proposed individual exemption to modify and replace PTE 99-
15.
--------------------------------------------------------------------------------
SUMMARY: This document contains a notice of pendency before the Department of
Labor (the Department) of a proposed and replacement individual exemption
which, if granted, would amend PTE 99-15 (64 FR 1648, April 5, 1999), an
exemption granted to Salomon Smith Barney. PTE 99-15 relates to the operation
of the TRAK Personalized Investment Advisory Service product (the TRAK Program)
and the Trust for Consulting Group Capital Markets Funds (the Trust). If
granted, the proposed exemption would affect participants and beneficiaries of
and fiduciaries with respect to employee benefit plans (the Plans)
participating in the TRAK Program.

EFFECTIVE DATE: If granted, the proposed amendment will be effective as of
April 1, 2000.

DATES: Written comments and requests for a public hearing should be received by
the Department on or before July 17, 2000.

ADDRESSES: All written comments and requests for a public hearing (preferably,
three copies) should be sent to the Office of Exemption Determinations, Pension
and Welfare Benefits Administration, Room N-5649, U.S. Department of Labor, 200
Constitution Avenue, NW, Washington, DC 20210, Attention: Application Nos. D-
10809 and D-10865. The applications pertaining to the proposed exemption and
the comments received will be available for public inspection in the Public
Documents Room of the Pension and Welfare Benefits Administration, U.S.
Department of Labor, Room N-5507, 200 Constitution Avenue, NW, Washington, DC
20210.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption
Determinations, Pension and Welfare Benefits Administration, U.S. Department of
Labor, telephone (202) 219-8881. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency before the
Department of a proposed exemption that would amend and replace PTE 99-15. PTE
99-15, provides an exemption from certain prohibited transaction restrictions
of section 406 of the Employee Retirement Income Security Act of 1974 (the Act)
and from the sanctions resulting from the application of section 4975 of the
Internal Revenue Code of 1986 (the Code), as amended, by reason of section
4975(c)(1) of the Code. Specifically, PTE 99-15 provides exemptive relief from
the restrictions of section 406(a) of the Act and the sanctions resulting from
the application of section 4975 of the Code, by reason of section 4975(c)(1)(A)
through (D) of the Code, for the purchase or redemption of shares in the Trust
by an employee benefit plan, an individual retirement account (the IRA), a
retirement plan for a self-employed individual (the Keogh Plan), or an
individual account pension plan that is subject to the provisions of Title I of
the Act and established under section 403(b) of the Code (the Section 403(b)
Plan). PTE 99-15 also provides exemptive relief from the restrictions of
section 406(b) of the Act and the sanctions resulting from the application of
section 4975 of the Code, by reason of section 4975(c)(1)(E) and (F) of the
Code, with respect to the provision, by the Consulting Group of Salomon Smith
Barney (the Consulting Group), of (1) investment advisory services or (2) an
automatic reallocation option to an independent fiduciary of a participating
Plan (the Independent Plan Fiduciary) which may result in such fiduciary's
selection of a portfolio (the Portfolio) in the TRAK Program for the investment
of Plan assets./1/
-------
 /1/ PTE 99-15 also (a) described a series of corporate mergers which changed
the names of the parties identified in two prior TRAK exemptions which it
superseded [i.e., PTE 94-50 (59 FR 32024, June 21, 1994) and PTE 92-77 (55 FR
45833, October 5, 1992)] and which would permit broader distribution of TRAK-
related products; (b) implemented a recordkeeping reimbursement offset
procedure under the TRAK Program; (c) adopted an automated reallocation option
under the TRAK Program that would reduce the asset allocation (or "outside")
fee paid to Salomon Smith Barney by a Plan investor; and (d) expanded the scope
of the exemption to include Section 403(b) Plans. PTE 94-50 permitted Smith,
Barney Inc. (Smith Barney), Salomon Smith Barney's predecessor, to add a daily-
traded collective investment fund (the GIC Fund) to the existing Fund
portfolios and to describe the various entities operating the GIC Fund. PTE 94-
50 also replaced references to Shearson Lehman Brothers, Inc. (Shearson Lehman)
with Smith Barney and amended and replaced PTE 92-77. Finally, PTE 92-77
permitted Shearson Lehman to make the TRAK Program available to Plans that
acquired shares in the former Trust for TRAK Investments and allowed the
Consulting Group to provide investment advisory services to an Independent Plan
Fiduciary which might result in such fiduciary's selection of a Portfolio in
the TRAK Program for the investment of Plan assets.

 As of December 31, 1998, the TRAK Program held assets that were in excess of
$9.6 billion. Of those assets, approximately $1.9 billion were held in 407 Plan
accounts having cash or deferred compensation arrangements and approximately
$4.2 billion were held in more than 59,000 employee benefit plan and IRA/Keogh-
type Plan accounts. At present, the Trust consists of 17 Portfolios that are
managed by the Consulting Group and advised by one or more unaffiliated sub-
advisers selected by Salomon Smith Barney.

 Salomon Smith Barney requests a modification of PTE 99-15 and a replacement of
that exemption with a new exemption for purposes of uniformity./2/
Specifically, Salomon Smith Barney requests that the term "affiliate," as set
forth in PTE 99-15, in Section II(h) of the General Conditions and in Section
III(b) of the Definitions, be amended and clarified to avoid possible
misinterpretation. In this regard, Salomon Smith Barney also requests that the
term "officer" be defined and incorporated into the proposed exemption, in new
Section III(d), to limit the affiliate definition to persons who have a
significant management role. Further, Salomon Smith Barney requests that
Section II(i) of PTE 99-15 be amended to permit an independent sub-adviser (the
Sub-Adviser), under certain circumstances, to exceed the current one percent
limitation on the acquisition of securities that are issued by Salomon Smith
Barney and/or its affiliates, notably in the Sub-Adviser's replication of a
third-party index. If granted, the proposed exemption would be effective as of
April 1, 2000.

 The proposed exemption has been requested in an application filed on behalf of
Salomon Smith Barney pursuant to section 408(a) of the Act and section
4975(c)(2) of the Code, and in accordance with the procedures set forth in 29
CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990). Effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October
17, 1978) transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor. Accordingly, the
proposed exemption is being issued solely by the Department.
-------
 /2/ The Department deems PTE 94-50 as having been effectively superseded by
PTE 99-15. Therefore, the proposed amendments described herein will not apply
to PTE 94-50.


                                      B-1
<PAGE>

I. Proposed Modification of the Term "Affiliate"

 Salomon Smith Barney represents that in early December 1999, Citigroup and
State Street Corporation announced an agreement to form a joint venture called
CitiStreet LLC, a Delaware limited liability company (the Joint Venture). The
Joint Venture, which was closed on April 1, 2000, is each 50 percent owned by
Keeper Holdings LLC (Citi), a wholly owned subsidiary of Citigroup, and by
State Street Bank and Trust Company (State Street), a wholly owned subsidiary
of State Street Corporation. Both Citigroup and State Street Corporation are
publicly-held corporations.

 Salomon Smith Barney explains that the formation of the Joint Venture may have
resulted in the disqualification of State Street Global Advisers (SSgA), a
division of State Street, from acting as a Sub-Adviser in the TRAK Program due
to certain ambiguities in the meaning of the word "affiliate." Salomon Smith
Barney represents that SSgA is currently a Sub-Adviser with respect to
approximately $800 million in assets in the International Equity Investments
Portfolio and the Emerging Markets Equity Investments Portfolio.

A. Sections II(h) and III(b)

 Section II(h) of PTE 99-15 provides that--

 Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.

 Although the term "independent" is not defined in the exemption, Salomon Smith
Barney notes that this condition was added to the original Shearson Lehman
exemption request when Shearson Lehman agreed not to use affiliated Sub-
Advisers. Therefore, Salomon Smith Barney presumes that the term "independent"
means "not an affiliate." Salomon Smith Barney represents that Section III(b)
of PTE 99-15 defines the term "affiliate" of Salomon Smith Barney to include:

 (1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney.
(For purposes of this subparagraph, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)

 (2) Any officer, director or partner in such person, and

 (3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.

 Salomon Smith Barney notes that problems of interpretation have arisen because
subparagraphs (2) and (3) of the affiliate definition use the term "such
person" rather than referring directly to Salomon Smith Barney. Salomon Smith
Barney explains that when defining an "affiliate" of Salomon Smith Barney, the
definition may be construed to encompass only relationships with Salomon Smith
Barney that involve shared control, influence or economic interests or it could
be interpreted to cover affiliates of Salomon Smith Barney's affiliates, where
there is no basis for common management or identical economic interests,
because subparagraphs (2) and (3) have no clear antecedents.

 Salomon Smith Barney asserts that State Street is not under common corporate
control with either it or any of its corporate affiliates. Instead, State
Street is a subsidiary of an independently-owned and managed public company.
Therefore, there is no control relationship, as contemplated in subparagraph
(1) of Section III(b), between Citigroup and State Street Corporation, the
respective parent companies of Salomon Smith Barney and of State Street.
Salomon Smith Barney also states that the Joint Venture is not necessarily its
affiliate under subparagraph (1) of the definition because Salomon Smith
Barney's indirect 50 percent ownership interest in the Joint Venture is not a
"controlling interest." Therefore, if the Joint Venture is not an affiliate,
Salomon Smith Barney believes that State Street is not a partner of Salomon
Smith Barney, nor an officer or director of Salomon Smith Barney, as
contemplated in subparagraph (2) of Section III(b). Further, Salomon Smith
Barney explains that State Street's exclusive ownership by State
Street Corporation does not trigger the ownership provisions of subparagraph
(3) of Section III(b).

 In addition to the above, Salomon Smith Barney states that it will not
exercise control or influence in the operation of the Joint Venture that will
inure to State Street. In addition, Salomon Smith Barney represents that Citi
will not exercise control of the Joint Venture because it has only a 50 percent
interest. Further, since all significant corporate actions of the Joint Venture
will require unanimity, Salomon Smith Barney explains that neither Citi nor
State Street will be able to exercise exclusive control over the Joint Venture.

B. Proposed Amendment

 Salomon Smith Barney submits that subparagraph (1) of Section III(b) does not
require any clarification. However, it proposes that subparagraphs (2) and (3)
of the affiliate definition be modified to cover only those persons and
entities that have a significant role in the decisions made by Salomon Smith
Barney or which are managed or influenced by Salomon Smith Barney. These
entities or persons include individual officers, directors and partners in
Salomon Smith Barney and its corporate affiliates, and corporations and
partnerships in which Salomon Smith Barney and its corporate affiliates have a
10 percent or greater interest. Salomon Smith Barney believes that this
tailoring of the affiliate definition will avoid future problems in determining
the independence of the Sub-Advisers, including SSgA.

 Thus, on the basis of the foregoing, Section III(b) of PTE 99-15 is hereby
modified in this notice of proposed exemption to read as follows:

 (b) An "affiliate" of Salomon Smith Barney includes--

 (1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney;
(For purposes of this subparagraph, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)

 (2) Any individual who is an officer, director or partner in Salomon Smith
Barney or a person who is described in subparagraph (b)(1);

 (3) Any corporation or partnership of which Salomon Smith Barney or an
affiliate described in subparagraph (b)(1), is a 10 percent or more partner or
owner; and

 (4) Any corporation or partnership of which any individual which is an officer
or director of Salomon Smith Barney, is a 10 percent or more partner or owner.

 In connection with the revised affiliate definition, Salomon Smith Barney
requests that the term "officer" be defined in new subparagraph (d) of Section
III to limit this portion of the affiliate definition to individuals who have a
significant management role. Salomon Smith Barney points out that there are job
titles at fairly modest levels of authority within it as well as in any
company, and it wishes to ensure that future factual inquiries into an

                                      B-2
<PAGE>

individual's status as an affiliate do not require that it contact virtually
every official in its corporate population in a due diligence effort.
Therefore, Salomon Smith Barney proposes that Section III(d) should read as
follows:

 The term "officer" means a president, any vice president in charge of a
principal business unit, division or function (such as sales, administration or
finance), or any other officer who performs a policy-making function for the
entity.

 Under the foregoing modifications, Salomon Smith Barney believes that Sections
II(h) and III(b) of the proposed exemption will no longer have conflicting
meanings.

II. Proposed Modification of the One Percent Limitation on Stock Issued by
Salomon Smith Barney and/or Its Affiliates

 Salomon Smith Barney represents that there are a number of established market
indexes that have been created by parties which are unaffiliated with
Citigroup, its indirect parent. For example, the S&P 500 Index is a widely-used
benchmark index of domestic equity performance. This index consists of 500
stocks that have been selected by the Standard & Poor's Company (S&P) for
market capitalization, liquidity and industry group representation. The index
is market-value weighted so the performance of the larger of the included
companies has a greater impact on the performance of the index as a whole.
Currently, the common stock (the Common Stock) of Citigroup represents 1.57
percent of the S&P 500 Index.

 In addition to the S&P 500 Index, Salomon Smith Barney explains that the
Russell 3000 Index is composed of the 3,000 largest United States companies,
based upon total market capitalization. Salomon Smith Barney also points out
that there are a number of Russell Indexes which are based on subsets of the
Russell 3000 Index. These Indexes include (a) the Russell 2000 Index, which
measures the performance of the smallest 2,000 United States companies in the
Russell 3000 Index and therefore, excludes Citigroup; and (b) the Russell 1000
Index, which measures the performance of the 1,000 largest United States
companies in the Russell 3000 Value Index and includes Citigroup. In addition,
Salomon Smith Barney represents that there are further subsets of the Russell
Indexes which are based upon Russell's characterization of stock as either
"Growth" or "Value." For example, Salomon Smith Barney explains that Citigroup
is included within these subsets. As of March 31, 2000, Citigroup Common Stock
represented 3.8981 percent of the Russell 1000 Value Index and 3.6343 percent
of the Russell 3000 Value Index.

A. Section II(i)

 Based upon the foregoing descriptions of the stock indexes, Salomon Smith
Barney requests that Section II(i) of PTE 99-15 be modified in order to permit
an independent Sub-Adviser which manages the assets in a Portfolio to exceed
the one percent investment limitation on securities issued by Salomon Smith
Barney and/or its affiliates under certain circumstances. As currently drafted,
Section II(i) states that--

 Immediately following the acquisition by a Portfolio of any securities that
are issued by Salomon Smith Barney and/or its affiliates, the percentage of
that Portfolio's net assets invested in such securities will not exceed one
percent.

 In other words, the exception will apply to "any higher percentage" which may
result from a Sub-Adviser's management of an index fund (the Index Fund)
Portfolio which includes Citigroup Common Stock. The index will be an
established third party index and the Sub-Adviser will track the index results
using the "passive full replication" trading method./3/

 Because the Sub-Adviser will purchase and sell Citigroup Common Stock to
approximate the performance of an index rather than reflect the Sub-Adviser's
evaluation of the Common Stock in its individual merits, Salomon Smith Barney
states that any additional investment by a Portfolio in Citigroup Common Stock
over the one percent threshold will result from the implementation of the
trading method and not from the Sub-Adviser's exercise of investment
discretion.

 Due to the one percent limitation of Section II(i), Salomon Smith Barney
states that active Sub-Advisers for the Consulting Group may not own or trade
Citigroup Common Stock and they will continue to be prohibited from trading in
Citigroup Common Stock. However, Salomon Smith Barney proposes that passive or
pure Index Fund Sub-Advisers be permitted to hold Citigroup Common Stock in
their portfolios which exceed the one percent limitation to the extent such
higher percentage is
-------
 /3/ According to Salomon Smith Barney, there are two forms of index trading--
passive full replication (wherein each stock in the same weightings as the in-
dex is owned by a mutual fund) and sampling (in which each sector, but not nec-
essarily all stocks in such sector, in the same weightings as the index is also
owned by a mutual fund). Salomon Smith Barney notes that sampling is used most
often when a portfolio is smaller and cannot efficiently replicate the entire
index.

necessary to replicate the underlying index./4/ Salomon Smith Barney points out
that pure index Sub-Advisers that are responsible for investing only a portion
of the assets in the Consulting Group Capital Markets Large Cap Value Fund and
the Large Cap Growth Consulting Group Capital Markets Fund, are currently in
compliance with the one percent limitation. These Portfolios, which consist of
both an actively-managed portion and a distinct, passively-managed portion,
held less than one percent of the their total assets in Citigroup Common Stock.

 If an index-based Sub-Adviser were to manage a greater portion or all of
either of the aforementioned Portfolios, Salomon Smith Barney explains that the
total Portfolio may include Citigroup Common Stock which breaches the one
percent threshold. Similarly, Salomon Smith Barney notes that if the entire
Portfolio, such as the Consulting Group Capital Markets S&P 500 Index
Investment Fund Portfolio, has the investment objective of providing results
that correspond to the price and yield performance of the S&P 500 Index, the
Sub-Adviser would be expected to approximate the cited percentage of 1.57
percent for Citigroup Common Stock in the S&P 500 Index. This would also
violate the one percent investment limitation.

 Salomon Smith Barney states that the present one percent limitation placed on
Citigroup Common Stock increases the likelihood that the performance of an
Index Fund Portfolio will not replicate the applicable index. Because Citigroup
is among the largest companies on the basis of capitalization in the S&P 500,
Salomon Smith Barney states that Citigroup's performance can have a significant
impact in index performance calculations. However, if Citigroup Common Stock is
not proportionately represented, Salomon Smith Barney explains that Index Fund
performance will deviate from the index whether Citigroup Common Stock does
well or underperforms.
-------
 /4/ In its management of a "pure" Index Fund, the Sub-Adviser does not
evaluate individual companies to identify attractive investment candidates or
to eliminate underperforming investments. Instead, the Sub-Adviser attempts to
mirror the composition of the relevant index as closely as possible by
adjusting the Portfolio holdings daily to reflect the companies included in the
index and their relative weightings. Because performance of the Index Fund is
tied to the performance of the index that it tracks, investors are advised that
this investment strategy may mean losses if the applicable index performs
poorly relative to other indexes or individual stocks.
 The performance of a pure Index Fund generally does not mirror the index
performance exactly. The index is merely a composite performance figure, based
upon an established selection of companies. It does not represent actual assets
being managed so there are no expenses deducted from its performance results.
In contrast, an Index Fund Portfolio represents actual assets under management
and has liquidity requirements associated with Fund operation. To meet
redemption requests and to pay expenses, the Index Fund must maintain a portion
of its assets in cash and cash equivalents.
                                      B-3
<PAGE>

 In any event, Salomon Smith Barney believes that the one percent limitation
has the effect of depriving a Plan of the opportunity to invest in a Fund
(available to non-Plan investors) that might otherwise track the applicable
index more exactly. Because many Plan sponsors are anxious to have an Index
Fund available through the TRAK Program, Salomon Smith Barney wishes to move
quickly to accommodate the Plan market's design preferences.

 For these reasons, Salomon Smith Barney requests that the current one percent
restriction be lifted and allowed to be exceeded with respect to Portfolio
investments that are made by passive Sub-Advisers in Citigroup Common Stock in
their replication of third-party indexes. In addition, Salomon Smith Barney
seeks the flexibility to have the Portfolios consist, in whole or in part, of
Index Funds that are managed by passive Sub-Advisers. However, the ownership by
a Portfolio of Citigroup Common Stock which is in excess of the one percent
limitation would result solely from the activities of the passive Sub-Adviser
in replicating an index.

B. Exemptive Safeguards

Section II(i) of the proposed exemption has been further expanded to include a
number of substantive safeguards for the protection of Plans investing under
the TRAK Program. In this regard, Section II(i) requires that the amount held
by the Sub-Adviser in managing an Index Fund Portfolio be held in order to
replicate an established third party index. In addition, Section II(i) states
that the index must represent the investment performance of a specific segment
of the public market for equity securities in the United States and/or foreign
countries. In this regard, the organization creating the index must be (a)
engaged in the business of providing financial information; (b) a publisher of
financial news information; or (c) a public stock exchange or association of
securities dealers. The index must also be created and maintained by an
organization independent of Salomon Smith Barney and its affiliates and must be
a generally-accepted standardized index of securities which is not specifically
tailored for use by Salomon Smith Barney and its affiliates.

 Moreover, Section II(i) requires that the acquisition or disposition of
Citigroup Common Stock must not include any agreement, arrangement or
understanding regarding the design or operation of the Portfolio acquiring the
Citigroup Common Stock, which is intended to benefit Salomon Smith Barney or
any party in which Salomon Smith Barney may have an interest.

 Finally, Section II(i) requires that an Independent Plan Fiduciary authorize
the investment of a Plan's assets in an Index Fund Portfolio which purchases
and/or holds Citigroup Common Stock while the Sub-Adviser will be responsible
for voting any shares of Citigroup Common Stock that are held by an Index Fund
on any matter in which shareholders of Citigroup Common Stock are required or
permitted to vote.

Notice to Interested Persons

 Notice of the proposed exemption will be mailed by first class mail to the
Independent Plan Fiduciary of each Plan currently participating in the TRAK
Program, or, in the case of a Section 404(c) Plan, to the recordholder of Trust
shares. Such notice will be given within 15 days of the publication of the
notice of pendency in the Federal Register. The notice will contain a copy of
the notice of proposed exemption as published in the Federal Register and a
supplemental statement, as required pursuant to 29 CFR 2570.43(b)(2). The
supplemental statement will inform interested persons of their right to comment
on and/or to request a hearing with respect to the pending exemption. Written
comments and hearing requests are due within 45 days of the publication of the
proposed exemption in the Federal Register.

General Information

 The attention of interested persons is directed to the following:

 (1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;

 (2) The proposed exemption, if granted, will extend to transactions prohibited
under section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;

 (3) Before an exemption can be granted under section 408(a) of the Act and
section 4975(c)(2) of the Code, the Department must find that the exemption is
administratively feasible, in the interest of the plan and of its participants
and beneficiaries and protective of the rights of participants and
beneficiaries of the plan;

 (4) This proposed exemption, if granted, will be supplemental to, and not in
derogation of, any other provisions of the Act and the Code, including
statutory or administrative exemptions. Furthermore, the fact that a
transaction is subject to an administrative or statutory exemption is not
dispositive of whether the transaction is in fact a prohibited transaction; and

 (5) This proposed exemption, if granted, is subject to the express condition
that the facts and representations set forth in the notice of proposed
exemption relating to PTE 99-15 and this notice, accurately describe, where
relevant, the material terms of the transactions to be consummated pursuant to
this exemption.

Written Comments and Hearing Requests

 All interested persons are invited to submit written comments or requests for
a hearing on the pending exemption to the address above, within the time frame
set forth above, after the publication of this proposed exemption in the
Federal Register. All comments will be made a part of the record. Comments
received will be available for public inspection with the referenced
applications at the address set forth above.

Proposed Exemption

 Based on the facts and representations set forth in the application, the
Department is considering granting the requested exemption under the authority
of section 408(a) of the Act and section 4975(c)(2) of the Code and in
accordance with the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR
32836, August 10, 1990).

Section I. Covered Transactions

 A. If the exemption is granted, the restrictions of section 406(a) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, shall not apply, to
the purchase or redemption of shares by an employee benefit
                                      B-4
<PAGE>

plan, an individual retirement account (the IRA), a retirement plan for self-
employed individuals (the Keogh Plan), or an individual account pension plan
that is subject to the provisions of Title I of the Act and established under
section 403(b) of the Code (the Section 403(b) Plan; collectively, the Plans)
in the Trust for Consulting Group Capital Market Funds (the Trust), established
by Salomon Smith Barney, in connection with such Plans' participation in the
TRAK Personalized Investment Advisory Service product (the TRAK Program).

 B. If the exemption is granted, the restrictions of section 406(b) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(E) and (F) of the Code, shall not apply, to the
provision, by the Consulting Group, of (1) investment advisory services or (2)
an automatic reallocation option (the Automatic Reallocation Option) to an
independent fiduciary of a participating Plan (the Independent Plan Fiduciary),
which may result in such fiduciary's selection of a portfolio (the Portfolio)
in the TRAK Program for the investment of Plan assets. This proposed exemption
is subject to the following conditions that are set forth below in Section II.

Section II. General Conditions

 (a) The participation of Plans in the TRAK Program will be approved by an
Independent Plan Fiduciary. For purposes of this requirement, an employee,
officer or director of Salomon Smith Barney and/or its affiliates covered by an
IRA not subject to Title I of the Act will be considered an Independent Plan
Fiduciary with respect to such IRA.

 (b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.

 (c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.

 (d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.
 (e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.

 (f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--

 (1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be automatically
reallocated whenever the Consulting Group modifies the particular asset
allocation recommendation which the Independent Plan Fiduciary has chosen. Such
Election shall continue in effect until revoked or terminated by the
Independent Plan Fiduciary in writing.

 (2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and redemption procedures may delay such processing through a
series of purchase and redemption transactions to shift assets among the
affected Portfolios.

 (3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
any time within the period of 30 calendar days prior to the proposed Effective
Date that such fiduciary does not wish to follow such revised asset allocation
recommendation, the Allocation Model will remain at the current level, or at
such other level as the Independent Plan Fiduciary then expressly designates,
in writing. If the Independent Plan Fiduciary does not affirmatively "opt out"
of the new Consulting Group recommendation, in writing, prior to the proposed
Effective Date, such new recommendation will be automatically effected by a
dollar-for-dollar liquidation and purchase of the required amounts in the
respective account.

 (4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations on the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper.

 (g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Plan providing for participant- directed investments
(the Section 404(c) Plan), the Consulting Group will provide investment advice
that is limited to the Portfolios made available under the Plan.

 (h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.

 (i) Immediately following the acquisition by a Portfolio of any securities
that are issued by Salomon Smith Barney and/or its affiliates, such as
Citigroup Inc. common stock (the Citigroup Common Stock), the percentage of
that Portfolio's net assets invested in such securities will not exceed one
percent. However, this percentage limitation may be exceeded if--

 (1) The amount held by a Sub-Adviser in managing a Portfolio is held in order
to replicate an established third party index.

 (2) The index represents the investment performance of a specific segment of
the public market for equity securities in the United States and/or foreign
countries. The organization creating the index must be--
 (i) Engaged in the business of providing financial information;
 (ii) A publisher of financial news information; or
 (iii) A public stock exchange or association of securities dealers. The index
is created and maintained by an organization independent of Salomon Smith
Barney and its affiliates and is a generally-accepted standardized index of
securities which is not specifically tailored for use by Salomon Smith Barney
and its affiliates.

 (3)  The acquisition or disposition of Citigroup Common Stock does not include

                                      B-5
<PAGE>

any agreement, arrangement or understanding regarding the design or operation
of the Portfolio acquiring the Citigroup Common Stock, which is intended to
benefit Salomon Smith Barney or any party in which Salomon Smith Barney may
have an interest.

 (4) The Independent Plan Fiduciary authorizes the investment of a Plan's
assets in an Index Fund which purchases and/or holds Citigroup Common Stock and
the Sub-Adviser is responsible for voting any shares of Citigroup Common Stock
that are held by an Index Fund on any matter in which shareholders of Citigroup
Common Stock are required or permitted to vote.

 (j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and the Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.

 (k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares,

 (1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:

 (A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, Salomon Smith Barney and its subsidiaries and the
compensation paid to such entities./5/

 (B) Upon written or oral request to Salomon Smith Barney, a Statement of
Additional Information supplementing the Prospectus which describes the types
of securities and other instruments in which the Portfolios may invest, the
investment policies and strategies that the Portfolios may utilize and certain
risks attendant to those investments, policies and strategies.
-------
 /5/ The fact that certain transactions and fee arrangements are the subject of
an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of the fees and expenses to be paid by the
Plan, including the fees paid directly to Salomon Smith Barney or to other
third parties.

 (C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program and, if applicable,
informing Plan investors of the Automatic Reallocation Option.

 (D) Upon written request of Salomon Smith Barney, a copy of the respective
investment advisory agreement between the Consulting Group and the Sub-
Advisers.

 (E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by a
Salomon Smith Barney Financial Consultant (the Financial Consultant) to
eligible participants in such Plan, of the services offered under the TRAK
Program and the operation and objectives of the Portfolios.

 (F) A copy of the proposed exemption and the final exemption, if granted,
pertaining to the exemptive relief described herein.

 (2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this Section.

 (3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to Salomon Smith Barney that such fiduciary is (a) independent of
Salomon Smith Barney and its affiliates and (b) knowledgeable with respect to
the Plan in administrative matters and funding matters related thereto, and
able to make an informed decision concerning participation in the TRAK Program.

 (4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Plan Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to Salomon Smith Barney that
such fiduciary is (a) independent of Salomon Smith Barney and its affiliates,
(b) capable of making an independent decision regarding the investment of Plan
assets and (c) knowledgeable with respect to the Plan in administrative matters
and funding matters related thereto, and able to make an informed decision
concerning participation in the TRAK Program.

 (l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:

 (1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.

 (2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.

 (3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocations, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of Section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.

 (4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.

 (5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to
Salomon Smith Barney and its affiliates and (b) the average brokerage
commission per share paid by each Portfolio to Salomon Smith Barney and its
affiliates, as compared to the average brokerage commission per share paid by
the Trust to brokers other than Salomon Smith Barney and its affiliates, both
expressed as cents per share.

                                      B-6
<PAGE>

 (m) Salomon Smith Barney shall maintain, for a period of six years, the
records necessary to enable the persons described in paragraph (n) of this
Section to determine whether the conditions of this exemption have been met,
except that (1) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Salomon Smith Barney
and/or its affiliates, the records are lost or destroyed prior to the end of
the six year period, and (2) no party in interest other than Salomon Smith
Barney shall be subject to the civil penalty that may be assessed under section
502(i) of the Act, or to the taxes imposed by section 4975(a) and (b) of the
Code, if the records are not maintained, or are not available for examination
as required by paragraph (n) below.

 (n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subparagraphs (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section II shall be
unconditionally available at their customary location during normal business
hours by:

 (A) Any duly authorized employee or representative of the Department or the
Service;

 (B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;

 (C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and

 (D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.

 (2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of Salomon Smith
Barney or commercial or financial information which is privileged or
confidential.

Section III. Definitions

 For purposes of this proposed exemption:

 (a) The term "Salomon Smith Barney" means Salomon Smith Barney Inc. and any
affiliate of Salomon Smith Barney, as defined in paragraph (b) of this Section
III.

 (b) An "affiliate" of Salomon Smith Barney includes--

 (1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney;
(For purposes of this subparagraph, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)

 (2) Any individual who is an officer (as defined in Section III(d) hereof),
director or partner in Salomon Smith Barney or a person described in
subparagraph (b)(1);

 (3) Any corporation or partnership of which Salomon Smith Barney or an
affiliate described in subparagraphs(b)(1), is a 10 percent or more partner or
owner; and

 (4) Any corporation or partnership of which any individual which is an officer
or director of Salomon Smith Barney, is a 10 percent or more partner or owner.

 (c) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of Salomon Smith Barney and its affiliates and is either--

 (1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares under a Section 404(c) Plan;

 (2) A participant in a Keogh Plan;

 (3) An individual covered under (i) a self-directed IRA or (ii) a Section
403(b) Plan, which invests in Trust shares;

 (4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by Section 404(c) of the Act; or

 (5) A participant in a Plan, such as a Section 404(c) Plan, who is permitted
under the terms of such Plan to direct, and who elects to direct the investment
of assets of his or her account in such Plan.

 (d) The term "officer" means a president, any vice president in charge of a
principal business unit, division or function (such as sales, administration or
finance), or any other officer who performs a policymaking function for the
entity.

Section IV. Effective Dates

 If granted, this proposed exemption will be effective as of April 1, 2000,
with respect to the amendments to Section II(i) and Section III(b) and the
inclusion of new Section III(d).

 The availability of this proposed exemption is subject to the express
condition that the material facts and representations contained in the
application for exemption are true and complete and accurately describe all
material terms of the transactions. In the case of continuing transactions, if
any of the material facts or representations described in the applications
change, the exemption will cease to apply as of the date of such change. In the
event of any such change, an application for a new exemption must be made to
the Department.

 For a more complete statement of the facts and representations supporting the
Department's decision to grant PTE 92-77, PTE 94-50 and PTE 99-15, refer to the
proposed exemptions and the grant notices which are cited above.

 Signed at Washington, D.C., this 25th day of May, 2000.

Ivan L. Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.

[FR Doc. 00-13643 Filed 5-31-00; 8:45 am]

                                      B-7
<PAGE>

--------------------------------------------------------------------------------
DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-45; Exemption Application Nos. D-10809
and D-10865]

Grant of Individual Exemption To Amend and Replace Prohibited Transaction
Exemption (PTE) 99-15, Involving Salomon Smith Barney Inc. (Salomon Smith
Barney), Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration, Department of Labor.

ACTION: Grant of individual exemption to modify and replace PTE 99-15.

--------------------------------------------------------------------------------
SUMMARY: This document contains a final exemption (the Final Exemption) by the
Department of Labor (the Department) which amends and replaces PTE 99-15 (64 FR
1648, April 5, 1999), an exemption granted to Salomon Smith Barney. PTE 99-15
relates to the operation of the TRAK Personalized Investment Advisory Service
product (the TRAK Program) and the Trust for Consulting Group Capital Markets
Funds (the Trust). These transactions are described in a notice of pendency
(the Proposed Exemption) that was published in the Federal Register on June 1,
2000 at 65 FR 35138.

EFFECTIVE DATES: This exemption is effective as of April 1, 2000 with respect
to the amendments to Section II(i) and Section III(b) of the grant notice. In
addition, this exemption is effective as of April 1, 2000 with respect to the
inclusion of new Section III(d) in the grant notice.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady, Office of Exemption
Determinations, Pension and Welfare Benefits Administration, U.S. Department of
Labor, telephone (202) 219-8881. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On June 1, 2000, the Department published, in the
Federal Register, the above referenced Proposed Exemption which would amend and
replace PTE 99-15. PTE 99-15, provides an exemption from certain prohibited
transaction restrictions of section 406 of the Employee Retirement Income
Security Act of 1974 (the Act) and from the sanctions resulting from the
application of section 4975 of the Internal Revenue Code of 1986 (the Code), as
amended, by reason of section 4975(c)(1) of the Code. Specifically, PTE 99-15
provides exemptive relief from the restrictions of section 406(a) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, for the purchase or
redemption of shares in the Trust by an employee benefit plan, an individual
retirement account (the IRA), a retirement plan for a self-employed individual,
or an individual account pension plan that is subject to the provisions of
Title I of the Act and established under section 403(b) of the Code (the
Section 403(b) Plan; collectively, the Plans).

 PTE 99-15 also provides exemptive relief from the restrictions of section
406(b) of the Act and the sanctions resulting from the application of section
4975 of the Code, by reason of section 4975(c)(1)(E) and (F) of the Code, with
respect to the provision, by the Consulting Group of Salomon Smith Barney (the
Consulting Group), of (1) investment advisory services or (2) an automatic
reallocation option to an independent fiduciary of a participating Plan (the
Independent Plan Fiduciary) which may result in such fiduciary's selection of a
portfolio (the Portfolio) in the TRAK Program for the investment of Plan
assets./1/

 In the Proposed Exemption, Salomon Smith Barney requested a modification of
PTE 99-15 and a replacement of that exemption with a new exemption for purposes
of uniformity./2/ Specifically, Salomon Smith Barney requested that the term
"affiliate," as set forth in PTE 99-15, in Section II(h) of the General
Conditions and in Section III(b) of the Definitions, be amended and clarified
to avoid possible misinterpretation. In this regard, Salomon Smith Barney also
requested that the term
-------
 /1/PTE 99-15 also (a) described a series of corporate mergers which changed
the names of the parties identified in two prior TRAK exemptions which it
superseded [i.e., PTE 94-50 (59 FR 32024, June 21, 1994) and PTE 92-77 (55 FR
45833, October 5, 1992)] and which would permit broader distribution of TRAK-
related products; (b) implemented a recordkeeping reimbursement offset
procedure under the TRAK Program; (c) adopted an automated reallocation option
under the TRAK Program that would reduce the reallocation option under the TRAK
Program that would reduce the Plan-level investment advisory fee (the Outside
Fee) paid to Salomon Smith Barney by a Plan investor; and (d) expanded the
scope of the exemption to include Section 403(b) Plans.
 PTE 94-50 permitted Smith, Barney Inc. (Smith Barney), Salomon Smith Barney's
predecessor, to add a daily-traded collective investment fund (the GIC Fund) to
the existing portfolios (the Portfolios) of mutual funds (the Funds) comprising
the Trust, and to describe the various entities operating the GIC Fund. PTE 94-
50 also replaced references to Shearson Lehman Brothers, Inc. (Shearson Lehman)
with Smith Barney and amended and replaced PTE 92-77.
 Finally, PTE 92-77 permitted Shearson Lehman to make the TRAK Program
available to Plans that acquired shares in the former Trust for TRAK
Investments and allowed the Consulting Group to provide investment advisory
services to an Independent Plan Fiduciary which might result in such
fiduciary's selection of a Portfolio in the TRAK Program for the investment of
Plan assets.
 /2/The Department deems PTE 94-50 as having been effectively superseded by PTE
99-15. Therefore, the amendments described herein do not apply to PTE 94-50.

"officer" be defined and incorporated into the Proposed Exemption, in new
Section III(d), to limit the affiliate definition to persons who have a
significant management role. Further, Salomon Smith Barney requested that
Section II(i) of PTE 99-15 be amended to permit an independent sub-adviser (the
Sub-Adviser), under certain circumstances, to exceed the current one percent
limitation on the acquisition of securities that are issued by Salomon Smith
Barney and/ or its affiliates, notably in the Sub-Adviser's replication of a
third- party index (the Index). The Final Exemption is effective as of April 1,
2000 with respect to the amendments to Sections II(i) and III(b) of the grant
notice, and is effective as of July 10, 2000 with respect to Section III(d) of
the grant notice.

The Proposed Exemption was requested in an application filed on behalf of
SalomonSmith Barney pursuant to section 408(a) of the Act and section
4975(c)(2) of the Code, and in accordance with the procedures (the Procedures)
set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978
(43 FR 47713, October 17, 1978) transferred the authority of the Secretary of
the Treasury to issue exemptions of the type requested to the Secretary of
Labor. Accordingly, this Final Exemption is being issued solely by the
Department.

 The Proposed Exemption gave interested persons an opportunity to comment and
to request a hearing. During the comment period, the Department received two
written comments and no requests for a hearing. One of the comments was
submitted by the holder of an IRA which participates in the TRAK Program. The
commenter said he concurred with the modifications proposed by Salomon Smith
Barney to amend and clarify the terms "affiliate" and "officer." The commenter
also stated that he supported the proposed modification of the one percent
limitation on the acquisition, by an independent Sub-Adviser, of securities
that are issued by Salomon Smith Barney and/or its affiliates in the Sub-
Adviser's replication of an Index. The commenter explained that he believed the
requested changes made sense and would be beneficial to all TRAK Program
participants. Therefore, the commenter urged the Department to approve the
Final Exemption.

 The second comment was submitted by Salomon Smith Barney. The comment is
intended to clarify and modify the preamble (the Preamble) of the Proposed
Exemption.

                                      B-8
<PAGE>

Following is a discussion of Salomon Smith Barney's comment letter and the
Department's responses with respect thereto.

 1. Modifications to the Proposed Exemption. On page 35139 of the Proposed
Exemption, the first paragraph of the Preamble states that "As of December 31,
1998, the TRAK Program held assets that were in excess of $9.6 billion." Also,
in that same paragraph, the last sentence states, in part, that "one or more
unaffiliated [S]ub-advisers [is] selected by Salomon Smith Barney." Salomon
Smith Barney notes that the December 31, 1998 valuation date at the beginning
of the paragraph should be changed to September 30, 1999 and the last words of
the paragraph should be changed from "Salomon Smith Barney" to "the Consulting
Group," which actually chooses the Sub-Advisers.

 In addition, on page 35140 of the Proposed Exemption, the last paragraph of
the Preamble states, in part, that--

 Due to the one percent limitation of Section II(i), Salomon Smith Barney
states that active Sub-Advisers for the Consulting Group may not own or trade
Citigroup Common Stock and they will continue to be prohibited from trading in
Citigroup Common Stock. Salomon Smith Barney wishes to clarify that active Sub-
Advisers also do not trade in Citigroup Common Stock because of restrictions
that apply under Rule 12d3-1(c) of the Investment Company Act of 1940 (the
ICA)./3/

 On page 35141 of the Proposed Exemption, the third sentence of the first
"carry-over" paragraph of the Preamble identifies two Funds which currently
comply with the one percent limitation on investments in Citigroup Common
Stock. These Funds are the "Consulting Group Capital Markets Large Cap Value
Fund" and the "Large Cap Growth Consulting Group Capital Markets Fund."
However, Salomon Smith Barney suggests, for the purpose of clarity, that the
formal names of the subject Funds be specified. Thus, Salomon Smith Barney
explains that the proper names for the Funds are the "Consulting Group Capital
Markets Funds Large Capitalization Value Equity Investments" and the
"Consulting Group Capital Markets Funds Large Capitalization Growth
Investments." Similarly, in the next paragraph of the Proposed Exemption on
page
-------
/3/Rule 12d3-1(c) of the ICA states that an acquiring company, such as a
registered investment company, may not acquire a general partnership interest
or a security issued by the acquiring company's investment adviser, promoter,
or principal underwriter, or by any affiliated person of such investment
adviser, promoter, or principal underwriter.

35141 of the Preamble, Salomon Smith Barney wishes to clarify that the formal
name for the S&P Fund designated as the "Consulting Group Capital Markets S&P
500 Index Investment Fund Portfolio" is the "Consulting Group Capital Markets
S&P Index Investment Fund Portfolio."

 In response to these comments, the Department acknowledges the foregoing
clarifications to the names for the Funds identified in the Preamble of the
Proposed Exemption.

 2. General Information. As a matter of general information, Salomon Smith
Barney states that beginning with the billing cycle commencing on January 1,
2001, the Outside Fee charged to 401(k) Plan clients will be calculated on the
average daily asset value for the quarter for which the fee is billed rather
than the asset value on the last day of the quarter. Salomon Smith Barney
explains that this change generally conforms to the billing procedure in the
industry generally and is believed to be more equitable since it reflects the
asset value over time rather than on a single day during a calendar quarter
which may not be representative of the account balance during the period.

 In response to this comment, the Department notes Salomon Smith Barney's
modification to the billing procedure in the calculation of the Outside Fee for
participants in the TRAK Program that are section 401(k) Plans.

 For further information regarding the comments or other matters discussed
herein, interested persons are encouraged to obtain copies of the exemption
application files (Exemption Application Nos. D-10809 and D-10865) the
Department is maintaining in this case. The complete application files, as well
as all supplemental submissions received by the Department, are made available
for public inspection in the Public Documents Room of the Pension and Welfare
Benefits Administration, Room N-5638, U.S. Department of Labor, 200
Constitution Avenue, N.W., Washington, D.C. 20210.

 Accordingly, after giving full consideration to the entire record, including
the written comments received, the Department has decided to grant the
exemption subject to the modifications and clarifications described above.

General Information

 The attention of interested persons is directed to the following:

 (1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;

 (2) The exemption will extend to transactions prohibited under section
406(b)(3) of the Act and section 4975(c)(1)(F) of the Code;

 (3) In accordance with section 408(a) of the Act and section 4975(c)(2) of the
Code, and the Procedures cited above, and based upon the entire record, the
Department finds that the exemption is administratively feasible, in the
interest of the plan and of its participants and beneficiaries and protective
of the rights of participants and beneficiaries of the plan;

 (4) The exemption will be supplemental to, and not in derogation of, any other
provisions of the Act and the Code, including statutory or administrative
exemptions. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and

 (5) The exemption is subject to the express condition that the Summary of
Facts and Representations set forth in the notice of proposed exemption
relating to PTE 99-15, as amended by this Final Exemption, accurately describe,
where relevant, the material terms of the transactions to be consummated
pursuant to this exemption.

Exemption

 Under the authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the Procedures set forth above, the Department
hereby amends PTE 99-15 as follows:

Section I. Covered Transactions

 A. The restrictions of section 406(a) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by

                                      B-9
<PAGE>

reason of section 4975(c)(1)(A) through (D) of the Code, shall not apply, to
the purchase or redemption of shares by an employee benefit plan, an individual
retirement account (the IRA), a retirement plan for self-employed individuals
(the Keogh Plan), or an individual account pension plan that is subject to the
provisions of Title I of the Act and established under section 403(b) of the
Code (the Section 403(b) Plan; collectively, the Plans) in the Trust for
Consulting Group Capital Market Funds (the Trust), established by Salomon Smith
Barney, in connection with such Plans' participation in the TRAK Personalized
Investment Advisory Service product (the TRAK Program).

 B. The restrictions of section 406(b) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1)(E) and (F) of the Code, shall not apply, to the provision, by the
Consulting Group, of (1) investment advisory services or (2) an automatic
reallocation option (the Automatic Reallocation Option) to an independent
fiduciary of a participating Plan (the Independent Plan Fiduciary), which may
result in such fiduciary's selection of a portfolio (the Portfolio) in the TRAK
Program for the investment of Plan assets.

 This exemption is subject to the following conditions that are set forth below
in Section II.

Section II. General Conditions

 (a) The participation of Plans in the TRAK Program will be approved by an
Independent Plan Fiduciary. For purposes of this requirement, an employee,
officer or director of Salomon Smith Barney and/or its affiliates covered by an
IRA not subject to Title I of the Act will be considered an Independent Plan
Fiduciary with respect to such IRA.

 (b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.

 (c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.

 (d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.

 (e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.

 (f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--

 (1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be automatically
reallocated whenever the Consulting Group modifies the particular asset
allocation recommendation which the Independent Plan Fiduciary has chosen. Such
Election shall continue in effect until revoked or terminated by the
Independent Plan Fiduciary in writing.

 (2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and redemption procedures, may delay such processing through a
series of purchase and redemption transactions to shift assets among the
affected Portfolios.

 (3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
any time within the period of 30 calendar days prior to the proposed Effective
Date that such fiduciary does not wish to follow such revised asset allocation
recommendation, the Allocation Model will remain at the current level, or at
such other level as the Independent Plan Fiduciary then expressly designates,
in writing. If the Independent Plan Fiduciary does not affirmatively "opt out"
of the new Consulting Group recommendation, in writing, prior to the proposed
Effective Date, such new recommendation will be automatically effected by a
dollar-for-dollar liquidation and purchase of the required amounts in the
respective account.

 (4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations on the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper.

 (g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Plan providing for participant-directed investments
(the Section 404(c) Plan), the Consulting Group will provide investment advice
that is limited to the Portfolios made available under the Plan.

 (h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.

 (i) Immediately following the acquisition by a Portfolio of any securities
that are issued by Salomon Smith Barney and/or its affiliates, such as
Citigroup Inc. common stock (the Citigroup Common Stock), the percentage of
that Portfolio's net assets invested in such securities will not exceed one
percent. However, this percentage limitation may be exceeded if--

 (1) The amount held by a Sub-Adviser in managing a Portfolio is held in order
to replicate an established third party index (the Index).

 (2) The Index represents the investment performance of a specific segment of
the public market for equity securities in the United States and/or foreign
countries. The organization creating the Index must be--

 (i) Engaged in the business of providing financial information;

 (ii) A publisher of financial news information; or

 (iii) A public stock exchange or association of securities dealers.

 The Index is created and maintained by an organization independent of Salomon
Smith Barney and its affiliates and is a generally-accepted standardized Index
of

                                      B-10
<PAGE>

securities which is not specifically tailored for use by Salomon Smith Barney
and its affiliates.

 (3) The acquisition or disposition of Citigroup Common Stock does not include
any agreement, arrangement or understanding regarding the design or operation
of the Portfolio acquiring the Citigroup Common Stock, which is intended to
benefit Salomon Smith Barney or any party in which Salomon Smith Barney may
have an interest.

 (4) The Independent Plan Fiduciary authorizes the investment of a Plan's
assets in an Index Fund which purchases and/or holds Citigroup Common Stock and
the Sub-Adviser is responsible for voting any shares of Citigroup Common Stock
that are held by an Index Fund on any matter in which shareholders of Citigroup
Common Stock are required or permitted to vote.

 (j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and the Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.

 (k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares,

 (1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:

 (A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, Salomon Smith Barney and its subsidiaries and the
compensation paid to such entities./4/

 (B) Upon written or oral request to Salomon Smith Barney, a Statement of
Additional Information supplementing the Prospectus which describes the types
of securities and other instruments in which the Portfolios may invest, the
investment
-------
 /4/The fact that certain transactions and fee arrangements are the subject of
an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of the fees and expenses to be paid by the
Plan, including the fees paid directly to Salomon Smith Barney or to other
third parties.

policies and strategies that the Portfolios may utilize and certain risks
attendant to those investments, policies and strategies.

 (C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program and, if applicable,
informing Plan investors of the Automatic Reallocation Option.

 (D) Upon written request of Salomon Smith Barney, a copy of the respective
investment advisory agreement between the Consulting Group and the Sub-
Advisers.

 (E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by a
Salomon Smith Barney Financial Consultant (the Financial Consultant) to
eligible participants in such Plan, of the services offered under the TRAK
Program and the operation and objectives of the Portfolios.

 (F) A copy of the Proposed Exemption and the Final Exemption pertaining to the
exemptive relief described herein.

 (2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this Section.

 (3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to Salomon Smith Barney that such fiduciary is (a) independent of
Salomon Smith Barney and its affiliates and (b) knowledgeable with respect to
the Plan in administrative matters and funding matters related thereto, and
able to make an informed decision concerning participation in the TRAK Program.

 (4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Plan Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to Salomon Smith Barney that
such fiduciary is (a) independent of Salomon Smith Barney and its affiliates,
(b) capable of making an independent decision regarding the investment of Plan
assets and (c) knowledgeable with respect to the Plan in administrative matters
and funding matters related thereto, and able to make an informed decision
concerning participation in the TRAK Program.

 (l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:

 (1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.

 (2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.

 (3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing Plan level asset allocations, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of Section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.

 (4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.

 (5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to
Salomon Smith Barney and its affiliates and (b) the average brokerage
commission per share paid by each Portfolio to Salomon Smith Barney and its
affiliates, as compared to the average brokerage commission per share paid by
the

                                      B-11
<PAGE>

Trust to brokers other than Salomon Smith Barney and its affiliates, both
expressed as cents per share.

 (m) Salomon Smith Barney shall maintain, for a period of six years, the
records necessary to enable the persons described in paragraph (n) of this
Section to determine whether the conditions of this exemption have been met,
except that (1) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Salomon Smith Barney
and/or its affiliates, the records are lost or destroyed prior to the end of
the six year period, and (2) no party in interest other than Salomon Smith
Barney shall be subject to the civil penalty that may be assessed under section
502(i) of the Act, or to the taxes imposed by section 4975(a) and (b) of the
Code, if the records are not maintained, or are not available for examination
as required by paragraph (n) below.

 (n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subparagraphs (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section II shall be
unconditionally available at their customary location during normal business
hours by:

 (A) Any duly authorized employee or representative of the Department or the
Service;

 (B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;

 (C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and

 (D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.

 (2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of Salomon Smith
Barney or commercial or financial information which is privileged or
confidential.

Section III. Definitions

 For purposes of this exemption:

 (a) The term "Salomon Smith Barney" means Salomon Smith Barney Inc. and any
affiliate of Salomon Smith Barney, as defined in paragraph (b) of this Section
III.

 (b) An "affiliate" of Salomon Smith Barney includes--

 (1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney
(For purposes of this subparagraph, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual);

 (2) Any individual who is an officer (as defined in Section III(d) hereof),
director or partner in Salomon Smith Barney or a person described in
subparagraph (b)(1);

 (3) Any corporation or partnership of which Salomon Smith Barney, or an
affiliate described in subparagraphs(b)(1), is a 10 percent or more partner or
owner; and

 (4) Any corporation or partnership of which any individual which is an officer
or director of Salomon Smith Barney is a 10 percent or more partner or owner.

 (c) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of Salomon Smith Barney and its affiliates and is either--

 (1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares under a Section 404(c) Plan;

 (2) A participant in a Keogh Plan;

 (3) An individual covered under (i) a self-directed IRA or (ii) a Section
403(b) Plan, which invests in Trust shares;

 (4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by Section 404(c) of the Act; or

 (5) A participant in a Plan, such as a Section 404(c) Plan, who is permitted
under the terms of such Plan to direct, and who elects to direct, the
investment of assets of his or her account in such Plan.

 (d) The term "officer" means a president, any vice president in charge of a
principal business unit, division or function (such as sales, administration or
finance), or any other officer who performs a policymaking function for the
entity.

 Section IV. Effective Dates

 This exemption is effective as of April 1, 2000 with respect to the amendments
to Section II(i) and Section III(b) of this grant notice. In addition, this
exemption is effective as of April 1, 2000 with respect to the inclusion of new
Section III(d) in the grant notice.

 The availability of this exemption is subject to the express condition that
the material facts and representations contained in the application for
exemption are true and complete and accurately describe all material terms of
the transactions. In the case of continuing transactions, if any of the
material facts or representations described in the applications change, the
exemption will cease to apply as of the date of such change. In the event of
any such change, an application for a new exemption must be made to the
Department.

 For a more complete statement of the facts and representations supporting the
Department's decision to grant PTE 92-77, PTE 94-50 and PTE 99-15, refer to the
proposed exemptions and the grant notices which are cited above.

Signed at Washington, D.C., this 31st day of August, 2000.

Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits Administra-
tion, U.S. Department of Labor.

[FR Doc. 00-22853 Filed 9-6-00; 8:45 am]

                                      B-12
<PAGE>

--------------------------------------------------------------------------------
DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-45; Exemption Application Nos. D-10809
and D-10865]

Grant of Individual Exemption to Amend and Replace Prohibited Transaction
Exemption (PTE) 99-15, Involving Salomon Smith Barney Inc. (Salomon Smith
Barney), Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration, U.S. Department of Labor
(the Department).

ACTION: Notice of Technical Correction.
--------------------------------------------------------------------------------
 On September 7, 2000, the Department published in the Federal Register (65 FR
54315) a final exemption which amends and replaces PTE 99-15 (64 FR 1648,
April 5,
1999), an exemption granted to Salomon Smith Barney. PTE 99-15 relates to the
operation of the TRAK Personalized Investment Advisory Service product (the
TRAK Program) and the Trust for Consulting Group Capital Markets Funds (the
Consulting Group).

 On page 54316 of the grant notice, the last sentence of the third paragraph of
the Supplementary Information, erroneously refers to an effective date of July
10, 2000 with respect to Section III(d) of the grant notice. Thus, the sentence
should be revised to read as follows:

 The Final Exemption is effective as of April 1, 2000 with respect to the
amendments to Sections II(i) and III(b) of the grant notice and the inclusion
of new Section III(d) of the grant notice.

 Also on page 54316 of the grant notice, clause (c) of Footnote 1, should be
revised as follows to describe more accurately the purpose of the automated
reallocation option:

 (c) adopted an automated reallocation option under the TRAK Program which
would afford an Independent Plan Fiduciary the option of having his or her
asset allocation adjusted automatically whenever the Consulting Group changes
an allocation model;

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department at (202)
219-8881. (This is not a toll-free number.)

Signed at Washington, DC, this 18th day of September, 2000.

Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.

[FR Doc. 00-24388 Filed 9-21-00; 8:45 am]

TK 2088S

                                      B-13
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For More Information


If you want more information about a Portfolio, the following resources are
available upon request.

Annual and Semiannual Reports

Additional information about the Portfolios' investments will be available
in the
Portfolios' annual and semiannual reports to shareholders. The Portfolios'
annual reports will contain a discussion of the market conditions and investment
strategies that significantly affected the Portfolios' performance during its
last fiscal year.

Statement of Additional Information

The Statement of Additional Information provides more detailed information about
the Portfolios and is incorporated into this prospectus by reference.

Investment Professional

The investor's Financial Consultant is available to answer questions about the
Portfolios or the investor's overall asset allocation program.

Investors can get free copies of reports and SAIs, request other information and
discuss their questions about the Portfolios by contacting their Financial
Consultant, or by writing to the Portfolios' sub-transfer agent, PFPC

Global Fund Services, at:

  Consulting Group Capital Markets Funds
  c/o PFPC Global Fund Services
  P.O. Box 9699
  Providence, RI 02940-9699

  or by calling the Portfolios' transfer agent at 800-451-2010

Information about the Portfolios (including the SAI) can be reviewed and
copied at
the Securities and Exchange Commission's (the "Commission") Public Reference
Room in Washington, D.C. In addition, information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-202-942-8090.
Reports and other information about the Portfolio are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov. Copies of this
information may be obtained for a duplicating fee by electronic request at the
following E-mail address: publicinfo@sec.gov, or by writing the Commission's
Public Reference Section, Washington, D.C. 20549-0102.

If someone makes a statement about the Portfolios that is not in
this prospectus,
you should not rely upon that information. Neither the Portfolios' nor the
distributor is offering to sell shares of the Portfolios' to any person to whom
the Portfolios' may not lawfully sell its shares.

Investment Company Act File No. 811-06318

SALOMON SMITH BARNEY
----------------------------
A member of citigroup [LOGO]

Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.

Salomon Smith Barney, Inc, is a wholly-owned subsidiary of Citigroup Inc.
Citigroup businesses produce a broad range of financial services--asset
management, banking and consumer finance, credit and charge cards, insurance,
investments and investment banking and trading--and use diverse channels to make
them available to consumer and corporate customers around the world.

(R)2000 Salomon Smith Barney Inc.  TK2088  12/00



PART B
STATEMENT OF ADDITIONAL INFORMATION

CONSULTING GROUP CAPITAL MARKETS FUNDS
S&P 500 INDEX INVESTMENTS

DECEMBER 29, 2000

222 Delaware Avenue ~ Wilmington, Delaware 19801 ~
(212) 816-8725

This Statement of Additional Information supplements the
information contained in the current Prospectus (the
"Prospectus") of S&P 500 Index Investments (the
"Portfolio"), a separate series of Consulting Group Capital
Markets Funds (the "Trust"), dated December 29, 2000, and
should be read in conjunction with the Prospectus. The
Trust is a series company that consists of the Portfolio
and seventeen other portfolios offered in separate
prospectuses. The Prospectus for the Portfolio may be
obtained by contacting any Financial Consultant of Salomon
Smith Barney Inc. ("Salomon Smith Barney"), or by writing
or calling the Trust at the address or telephone number
listed above. This Statement of Additional Information,
although not in itself a prospectus, is incorporated by
reference into the Prospectus in its entirety.

CONTENTS

Trustees and Executive Officers of the Trust
1
Investment Objectives, Management Policies and Risk Factors
3
Investment Restrictions
7
Portfolio Transactions
9
Portfolio Turnover
10
Investment Management and Other Services
10
Purchase of Shares
13
Redemption of Shares
13
Redemptions in Kind
14
Net Asset Value
14
Determination of Performance
14
Taxes
16
Distributor
19
Custodians, Transfer Agent and Sub-Transfer Agent
19


Capitalized terms used but not defined in this Statement of
Additional Information have the meanings accorded to them
in the Prospectus.

TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST

The Trustees and executive officers of the Trust, together
with information as to their principal business
occupations, are set forth below. The executive officers of
the Trust are employees of organizations that provide
services to the Portfolios. Each Trustee who is an
"interested person" of the Trust, as defined in the 1940
Act, is indicated by an asterisk.

	Walter E. Auch, Trustee (Age 79). Consultant to
companies in the financial services industry; Director of
Pimco Advisers L.P.; Brinson Partners; Nicholas-Applegate
(each a registered investment adviser); Legend Properties,
a real estate management company; Banyan Realty Trust; and
Banyan Land Fund II. Director or trustee of 2 investment
companies associated with Citigroup Inc. ("Citigroup"). His
address is 6001 N. 62nd Place, Paradise Valley, Arizona
85253.

	Martin Brody, Trustee (Age 79). Private Investor;
Director or trustee of 20 investment companies associated
with Citigroup. His address is c/o HMK Associates, 30
Columbia Turnpike, Florham Park, N.J. 07932.

	H. John Ellis, Trustee (Age 73). Retired. Director or
trustee of 2 investment companies associated with
Citigroup.  His address is 858 East Crystal Downs Drive,
Frankfort, Michigan 49635.

	Armon E. Kamesar, Trustee (Age 73). Chairman of the
Board of TEC, an international organization of Chief
Executive Officers; Trustee, U.S. Bankruptcy Court.
Director or trustee of 2 investment companies associated
with Citigroup. His address is 7328 Country Club Drive, La
Jolla, CA 92037.

	Stephen E. Kaufman, Trustee (Age 68). Attorney.
Director or trustee of 13 investment companies associated
with Citigroup. His address is 277 Park Avenue, New York,
New York 10172.

	*Heath B. McLendon, Trustee and Chairman of the Board
(Age 67). Managing Director of Salomon Smith Barney and
Chairman of the Board of Salomon Smith Barney Strategy
Advisers Inc. and Director and President of SSB Citi Fund
Management LLC ("SSB Citi" or the "Manager") and Travelers
Investment Adviser, Inc. ("TIA"); Mr. McLendon serves on
the Board of 78 investment companies associated with
Citigroup. His address is 7 World Trade Center, New York,
New York 10048.

	Lewis E. Daidone, Senior Vice President and Treasurer
(Age 42). Managing Director of Salomon Smith Barney;
Director and Senior Vice President of SSB Citi and TIA.
Mr. Daidone serves as Senior Vice President and Treasurer
of 61 investment companies associated with Citigroup. His
address is 125 Broad Street, New York, New York 10004.

	Frank L. Campanale, Investment Officer (Age 47).
President and Chief Executive Officer of Salomon Smith
Barney's Consulting Group. Prior to 1996, National Sales
Director for Consulting Group. His address is 222 Delaware
Avenue, Wilmington, Delaware, 19801.

	LeRoy T. Pease, CFA, Investment Officer (Age 41).
First Vice President of Salomon Smith Barney Consulting
Group. Prior to 1996, Chief Investment Officer of EMT Group
and Manager for Investment Strategy for Bell Atlantic,
Philadelphia, Pennsylvania. His address is 222 Delaware
Avenue, Wilmington, Delaware, 19801.

	Christina T. Sydor, Secretary (Age 49). Managing
Director of Salomon Smith Barney; General Counsel and
Secretary of SSB Citi and TIA.  Ms. Sydor serves as
Secretary of 61 investment companies associated with
Citigroup.  Her address is 7 World Trade Center, New York,
New York 10048.

Irving David, Controller (Age 39). Director of
Salomon Smith Barney. Controller or Assistant Treasurer of
43 investment companies associated with Citigroup; Formerly
Assistant Treasurer of First Investment Management Company.
His address is 125 Broad Street, New York, New York 10004.

As of December 15, 2000, the Trustees and officers as a
group owned less than 1% of the outstanding common stock of
the Trust.

Remuneration.  No director, officer or employee of Salomon
Smith Barney, SSB Citi or any of their affiliates will
receive any compensation from the Trust for serving as an
officer or Trustee of the Trust. The Trust pays each
Trustee who is not a director, officer or employee of
Salomon Smith Barney, the Manager, any advisor, SSB Citi or
any of their affiliates a fee of $32,000 per annum plus
$1,000 per meeting attended. The Trust reimburses the
Trustees for travel and out-of-pocket expenses to attend
meetings of the Board. For the fiscal year ended August 31,
2000, such fees and expenses totaled $21,166.

For the fiscal year ended August 31, 2000, the Trustees of
the Trust were paid the following compensation:
			Total
		Pension or	Total	Number
	Aggregate		Retirement Benefits
	Compensation	of Funds
	Compensation	Aggregate	Accrued as Expense	From	Served in
	Name	From Portfolio	Compensation	of Trust 	Fund
Complex+	Complex
Heath B. McLendon*	None	None	None	None	78
Walter Auch	$283		$36,300	None	$50,600	2
Martin Brody	212	35,100	None	138,000	20
H. John Ellis	342	37,300	None	50,600	2
Armon E. Kamesar	342	 37,300	None	52,600	2
Stephen E. Kaufman	336	 37,300	None	110,650	13

*     Designates "interested trustee".
+     For the calendar year ended December 31, 1999.

INVESTMENT OBJECTIVES, MANAGEMENT POLICIES AND RISK FACTORS

The Portfolio is a diversified, open-end management
investment company. The Prospectus discusses the investment
objectives of the Portfolio, a separate series of the Trust
and the policies to be employed to achieve those
objectives.  Supplemental information is set out below
concerning the types of securities and other instruments in
which the Portfolio may invest, the investment policies and
strategies the Portfolio may utilize and certain risks
attendant to those investments, policies and strategies.

The Portfolio seeks to achieve its objective by investing,
under normal circumstances, at least 80% of its total
assets in common stocks included in the S&P 500 Index in
approximately the same weightings as the S&P 500 Index. The
Portfolio intends to invest in substantially all of the
stocks that comprise the S&P 500 Index.  The Portfolio
operates as a "pure" index fund and will not be actively
managed; as such, adverse performance of a security will
ordinarily not result in the elimination of the security
from its portfolio. The Portfolio will be reviewed daily
and adjusted, when necessary, to maintain security
weightings as close to those of the S&P 500 Index as
possible, given the amount of assets in the Portfolio at
that time.


Foreign Securities.  The Portfolio may purchase common
stocks of foreign corporations represented in the S&P 500
Index (such securities are publicly traded on securities
exchanges or over-the-counter in the United States).  The
Portfolio's investment in common stock of foreign
corporations represented in the S&P 500 Index may also be
in the form of American Depository Receipts (ADRs). ADRs
are receipts typically issued by a United States bank or
trust company evidencing ownership of the underlying
securities and are designated for use in the U.S.
Securities markets.

Investing in the securities of foreign companies involves
special risks and considerations not typically associated
with investing in U.S. companies.  These include
differences in accounting, auditing and financial reporting
standards, the possibility of expropriation or confiscatory
taxation, adverse changes in investment or exchange control
regulations, political instability which could affect U.S.
investments in foreign countries, and potential
restrictions on the flow of international capital.
Investments in foreign securities may be affected by
changes in governmental administration or economic policy
(in the United Stated and abroad) or changed circumstances
in dealings between nations.  Foreign companies may be
subject to less governmental regulation than U.S.
companies.  Securities of foreign companies may be more
volatile than securities of U.S. companies.  Moreover,
individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as
growth of gross domestic product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance
of payment positions.

Futures Contracts and Related Options. The Portfolio may
enter into futures contracts and purchase and write (sell)
options on these contracts. These contracts will be used
for the following reasons: to simulate full investment in
the S&P 500 Index while retaining a cash balance for fund
management purposes, to facilitate trading, to reduce
transactions costs or to seek higher investment returns
when a futures contract is priced more attractively than
stocks comprising the S&P 500 Index.  These contracts will
be entered into on exchanges designated by the Commodity
Futures Trading Commission ("CFTC") or, consistent with
CFTC regulations, on foreign exchanges.  These transactions
may be entered into for bona fide hedging and other
permissible risk management purposes including protecting
against anticipated changes in the value of securities the
Portfolio intends to purchase.  The Portfolio will not use
futures for speculative purposes.

The Portfolio 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
Portfolio'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.

The Portfolio may lose the expected benefit of these
futures or options transactions and may incur losses if the
prices of the underlying commodities move in an
unanticipated manner.  In addition, changes in the value of
the Portfolio's futures and options positions may not prove
to be perfectly or even highly correlated with changes in
the value of its portfolio securities.  Successful use of
futures and related options is subject to the Subadviser's
ability to predict correctly movements in the direction of
the securities markets generally, which ability may require
different skills and techniques than predicting changes in
the prices of individual securities.  Moreover, futures and
options contracts may only be closed out by entering into
offsetting transactions on the exchange where the position
was entered into (or a linked exchange), and as a result of
daily price fluctuation limits there can be no assurance
that an offsetting transaction could be entered into at an
advantageous price at any particular time.  Consequently,
the Portfolio may realize a loss on a futures contract or
option that is not offset by an increase in the value of
its portfolio securities that are being hedged or the
Portfolio may not be able to close a futures or options
position without incurring a loss in the event of adverse
price movements.

The Portfolio will incur brokerage costs whether or not its
hedging is successful and will be required to post and
maintain "margin" as a good-faith deposit against
performance of its obligations under futures contracts and
under options written by the Portfolio. Futures and options
positions are marked to the market daily and the Portfolio
may be required to make subsequent "variation" margin
payments depending upon whether its positions increase or
decrease in value. In this context margin payments involve
no borrowing on the part of the Portfolio.

Options on Securities Indices.  The Portfolio may purchase
put and call options on the S&P 500 Index. The Portfolio
may also enter into closing sale transactions in order to
realize gains or minimize losses on options it has
purchased.  The Portfolio will not use options for
speculative purposes. The Portfolio may terminate its
obligations under an exchange-traded call or put option by
purchasing an option identical to the one it has written.

Transactions by the Portfolio in options on securities
indices will be subject to limitations established by each
of the exchanges, boards of trade or other trading
facilities governing the maximum number of options in each
class which may be written or purchased by a single
investor or group of investors acting in concert. Thus, the
number of options which the Portfolio may write or purchase
may be affected by options written or purchased by other
investment advisory clients. An exchange, board of trade or
other trading facility may order the liquidation of
positions found to be in excess of these limits, and it may
impose certain other sanctions.

The hours of trading for options may not conform to the
hours during which the underlying securities are traded. To
the extent the options markets close before the markets for
the underlying securities, significant price movements can
take place in the underlying markets that cannot be
reflected in the options markets.

In addition to the risks of imperfect correlation between
the Portfolio's holdings and the index underlying the
option, the purchase of securities index options involves
the risk that the premium and transaction costs paid by the
Portfolio in purchasing an option will be lost. This could
occur as a result of unanticipated movements in the price
of the securities comprising the securities index on which
the option is based.

Money Market Instruments. The Portfolio may invest up to
10% of its assets 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.

Repurchase Agreements.  The Portfolio may enter into
repurchase agreements.  Under the terms of a typical
repurchase agreement, the Portfolio would acquire an
underlying debt obligation for a relatively short period
(usually not more than one week) subject to an obligation
of the seller to repurchase, and the Portfolio to resell,
the obligation at an agreed upon price and time, thereby
determining the yield during the Portfolio's holding
period.  This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the
Portfolio's holding period.  The Portfolio may enter into
repurchase agreements with respect to U.S. Government
Securities with member banks of the Federal Reserve System
and certain non-bank dealers approved by the board of
trustees.  Under each repurchase agreement, the selling
institution is required to maintain the value of the
securities subject to the repurchase agreement at not less
than their repurchase price.  The Portfolio's Subadviser,
acting under the supervision of the board of trustees,
reviews on an ongoing basis the value of the collateral and
the creditworthiness of those non-bank dealers with whom
the Portfolio enters into repurchase agreements.  The
Portfolio will not invest in a repurchase agreement
maturing in more than seven days if the investment,
together with illiquid securities held by the Portfolio,
exceeds 15% of the Portfolio's total assets.  In entering
into a repurchase agreement, the Portfolio bears a risk of
loss if the other party to the transaction defaults on its
obligations and the Portfolio is delayed or prevented from
exercising its rights to dispose of the underlying
securities, including the risk of a possible decline in the
value of the underlying securities during the period in
which the Portfolio seeks to assert its rights to them, the
risk of incurring expenses associated with asserting those
rights and the risk of losing all or a part of the income
from the agreement.

Borrowing.  Leverage increases investment risk as well as
investment opportunity.  If the income and investment gains
on securities purchased with borrowed money exceed the
interest paid on the borrowing, the net asset value of the
Portfolio's shares will rise faster than would otherwise be
the case.  On the other hand, if the income and investment
gains fail to cover the cost, including interest, of the
borrowings, or if there are losses, the net asset value of
the Portfolio's shares will decrease faster than otherwise
would be the case.

Lending Portfolio Securities.  Consistent with applicable
regulatory requirements, the Portfolio may lend portfolio
securities to brokers, dealers and other financial
organizations. The Portfolio will not lend securities to
Salomon Smith Barney unless the Portfolio has applied for
and received specific authority to do so from the
Securities and Exchange Commission (the "SEC"). The
Portfolio's loan of securities will be collateralized by
cash, letters of credit or U.S. Government Securities. The
Portfolio will maintain the collateral in an amount at
least equal to the current market value of the loaned
securities. From time to time, the Portfolio may pay a part
of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a
third party that is unaffiliated with the Portfolio and is
acting as a "finder." The Portfolio will comply with the
following conditions whenever it loans securities: (i) the
Portfolio must receive at least 100% cash collateral or
equivalent securities from the borrower; (ii) the borrower
must increase the collateral whenever the market value of
the securities loaned rises above the level of the
collateral; (iii) the Portfolio must be able to terminate
the loan at any time; (iv) the Portfolio 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 Portfolio may pay
only reasonable custodian fees in connection with the loan;
and (vi) voting rights on the loaned securities may pass to
the borrower except that, if a material event adversely
affecting the investment in the loaned securities occurs,
the Trust's Board of Trustees must terminate the loan and
regain the right to vote the securities.

Temporary Investments.  For temporary defensive purposes,
during periods when the Subadviser of the Portfolio, in
consultation with the Manager, believes that pursuing the
Portfolio's basic investment strategy may be inconsistent
with the best interests of its shareholders, the Portfolio
may invest its assets in the following money market
instruments: U.S. Government Securities (including those
purchased in the form of custodial receipts), repurchase
agreements, certificates of deposit and bankers'
acceptances issued by U.S. banks or savings and loan
associations having assets of at least $500 million as of
the end of their most recent fiscal year and high quality
commercial paper.  The Portfolio's U.S. dollar-denominated
temporary investments are managed by SSB Citi.  The
Portfolio also may hold a portion of its assets in money
market instruments or cash in amounts designed to pay
expenses, to meet anticipated redemptions or pending
investment in accordance with its objectives and policies.
Any temporary investments may be purchased on a when-issued
basis.  The Portfolio's investment in any other short-term
debt instruments would be subject to the Portfolio's
investment objectives and policies, and to approval by the
Trust's Board of Trustees.

Department of Labor ("DOL") Exemption. The Trust may offer
shares of its portfolios to certain employee benefit plans,
individual retirement accounts ("IRAs"), or retirement
plans for a self-employed individual ("Keogh Plans").
Because the Trust may offer shares of its portfolios to
these plans, it is subject to regulation by the DOL and the
provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA").  Salomon Smith Barney has received a DOL
exemption covering certain transactions in shares of the
Portfolio. The full text of the DOL exemption may be found
in Exhibit A of the Prospectus.  The DOL exemption
includes, among other things, a limitation on investments
in the securities of affiliates of Salomon Smith Barney,
including Citigroup, of one percent of the Portfolio's net
assets.  Since the Portfolio will be managed to comply with
this limitation, this may result in differences in
performance between the Portfolio and other funds that
fully replicate the S&P 500 Index.

INVESTMENT RESTRICTIONS

The investment restrictions numbered 1 through 7 below have
been adopted by the Trust as fundamental policies of the
Portfolio. Under the 1940 Act, a fundamental policy may not
be changed without the vote of a majority of the
outstanding voting securities of a Portfolio, which is
defined in the 1940 Act as the lesser of (i) 67% or more of
the shares present at a Portfolio meeting, if the holders
of more than 50% of the outstanding shares of the Portfolio
are present or represented by proxy, or (ii) more than 50%
of the outstanding shares of the Portfolio. Investment
restrictions 8 through 12 may be changed by a vote of a
majority of the Board of Trustees at any time.

Under the investment restrictions adopted by the Portfolio:

	1.	The Portfolio will not deviate from the definition
of a "diversified company" as defined in the 1940 Act and
rules thereunder.

	2.	The Portfolio will not invest more than 25% of its
total assets in securities, the issuers of which conduct
their principal business activities in the same industry.
For purposes of this limitation, U.S. government securities
and securities of state or municipal governments and their
political subdivisions are not considered to be issued by
members of any industry.

	3.	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.

	4.	The Portfolio will not borrow money, except that
(a) the Portfolio 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, in an amount not
exceeding 33 1/3% of the value of the Portfolio's total
assets (including the amount borrowed) valued at the lesser
of cost or market, less liabilities (not including the
amount borrowed) and (b) a Portfolio may, to the extent
consistent with its investment policies, enter into reverse
repurchase agreements, forward roll transactions and
similar investment strategies and techniques.

	5.	The Portfolio will not make loans. This
restriction does not apply to: (a) the purchase of debt
obligations in which a Portfolio may invest consistent with
its investment objectives and policies (including
participation interests in such obligations); (b)
repurchase agreements; and (c) loans of its portfolio
securities.

	6.	The Portfolio will not engage in the business of
underwriting securities issued by other persons, except to
the extent that a Portfolio may technically be deemed to be
an underwriter under the Securities Act of 1933, as
amended, in disposing of Portfolio securities.

	7.	The Portfolio will not purchase or sell real
estate, real estate mortgages, commodities or commodity
contracts, but this restriction shall not prevent a
Portfolio from (a) investing in and selling securities of
issuers engaged in the real estate business and securities
which are secured by real estate or interests therein; (b)
holding or selling real estate received in connection with
securities it holds; (c) trading in futures contracts and
options on futures contracts or (d) investing in or
purchasing real estate investment trust securities.

	8.	The Portfolio will not purchase any securities on
margin (except for such short-term credits as are necessary
for the clearance of purchases and sales of Portfolio
securities). For purposes of this restriction, the deposit
or payment by a Portfolio 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.

	9.	The Portfolio will not invest in oil, gas or other
mineral leases or exploration or development programs.

	10.	The Portfolio will not make short sales of
securities, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities
sold short and provided that transactions in futures
contracts and options are not deemed to constitute selling
securities short.

11. The Portfolio will not make investments for the
purpose of exercising control of management.

	12.	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.

The percentage limitations contained in the restrictions
listed above (other than with respect to Number 4 above)
apply at the time of purchase of securities.


PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for the Portfolio are
made by the Subadviser, subject to the overall review of
the manager and the Board of Trustees. Although investment
decisions for the Portfolio are made independently from
those of the other accounts managed by the Subadviser,
investments of the type that the Portfolio may make also
may be made by those other accounts. When the Portfolio and
one or more other accounts managed by the Subadviser 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 Subadviser to
be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by the
Portfolio or the size of the position obtained or disposed
of by the Portfolio.

Transactions on U.S. stock exchanges and some foreign stock
exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among
different brokers. On most foreign exchanges, commissions
are generally fixed. No stated commission is generally
applicable to securities traded in U.S. over-the-counter
markets, but the underwriters include an underwriting
commission or concession and the prices at which securities
are purchased from and sold to dealers include a dealer's
mark-up or mark-down. U.S. Government Securities generally
are purchased from underwriters or dealers, although
certain newly issued U.S. Government Securities may be
purchased directly from the U.S. Treasury or from the
issuing agency or instrumentality.

In selecting brokers or dealers to execute securities
transactions on behalf of the Portfolio, its Subadviser
seeks the best overall terms available. In assessing the
best overall terms available for any transaction, the
Subadviser will consider the factors it deems relevant,
including the breadth of the market in the security, the
price of the security, the financial condition and
execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In addition, the
Advisory Agreement between the Trust and the Subadviser
authorizes the Subadviser, in selecting brokers or dealers
to execute a particular transaction, and in evaluating the
best overall terms available, to consider the brokerage and
research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) provided to
the Portfolio and/or other accounts over which the
Subadviser or its affiliates exercise investment
discretion. The fees under the Management Agreement and the
Advisory Agreement, respectively, are not reduced by reason
of the Portfolio's Subadviser receiving brokerage and
research services. The Board of Trustees of the Trust will
periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative
periods of time were reasonable in relation to the benefits
inuring to the Portfolio. Over-the-counter purchases and
sales by the Portfolio are transacted directly with
principal market makers except in those cases in which
better prices and executions may be obtained elsewhere.

To the extent consistent with applicable provisions of the
1940 Act and the rules and exemptions adopted by the SEC
under the 1940 Act, the Board of Trustees has determined
that transactions for the Portfolio may be executed through
Salomon Smith Barney and other affiliated broker-dealers
if, in the judgment of the Subadviser, the use of an
affiliated broker-dealer is likely to result in price and
execution at least as favorable as those of other qualified
broker-dealers, and if, in the transaction, the affiliated
broker-dealer charges the Portfolio a fair and reasonable
rate.

The Portfolio will not purchase any security, including
U.S. Government Securities or Obligations, during the
existence of any underwriting or selling group relating
thereto of which Salomon Smith Barney is a member, except
to the extent permitted by the SEC.

The Portfolio may use Salomon Smith Barney and other
affiliated broker-dealers as a commodities broker in
connection with entering into futures contracts and options
on futures contracts if, in the judgment of the Subadviser,
the use of an affiliated broker-dealer is likely to result
in price and execution at least as favorable as those of
other qualified broker-dealers, and if, in the transaction,
the affiliated broker-dealer charges the Portfolio a fair
and reasonable rate. Salomon Smith Barney has agreed to
charge the Portfolio commodity commissions at rates
comparable to those charged by Salomon Smith Barney to its
most favored clients for comparable trades in comparable
accounts.

Brokerage Commissions Paid To Salomon Smith Barney

The following table sets forth certain information
regarding the Portfolio's payment
of brokerage commissions for the fiscal year ended August
31, 2000:






Portfolio




Total
Brokerage
Commissions



Commissions
paid to
Salomon
Smith
Barney

% of Total
Brokerage
Commissions
paid to
Salomon
Smith
Barney
% of Total
Dollar
Amount of
Transaction
s Involving
Commissions
Paid to
Salomon
Smith
Barney

S&P 500 Index
Investments
$31,840
$0
0%
0%


PORTFOLIO TURNOVER

Although the Portfolio generally seeks to invest for the
long term, it retains the right to sell securities
irrespective of how long they have been held.  However,
because of the "passive" investment management approach of
the Portfolio, the turnover rate is expected to be under
50%, a generally lower turnover rate than for most other
investment companies.  A portfolio turnover rate of 50%
would occur if one-half of the Portfolio's securities were
sold within one year. Ordinarily, securities will be sold
from the Portfolio only to reflect certain administrative
changes in the S&P 500 Index (including mergers or changes
in the composition of the Index) or to accommodate cash
flows into and out of the Portfolio while maintaining the
similarity of the Portfolio to the index.

The Portfolio's portfolio turnover rate for the fiscal
period ended August 31, 2000 was 54%.

INVESTMENT MANAGEMENT AND OTHER SERVICES

Manager; Subadvisers; Administrator.  The Manager serves as
investment manager to the Trust pursuant to an investment
management agreement ("Management Agreement"). The
Subadviser serves as investment advisor to the Portfolio
pursuant to a separate written agreement with the SSB Citi
("Advisory Agreement"), SSB Citi serves as administrator to
the Portfolio pursuant to a written agreement
("Administration Agreement").

The Portfolio bears its own expenses, which generally
include all costs not specifically borne by the Manager,
the Subadvisers, and SSB Citi.  Included among the
Portfolio's expenses are costs incurred in connection with
the Portfolio's organization; investment management and
administration fees; fees for necessary professional and
brokerage services; fees for any pricing service; the costs
of regulatory compliance; and costs associated with
maintaining the Trust's legal existence and shareholder
relations.  As administrator, SSB Citi generally oversees
all aspects of the Trust's administration and operations
including furnishing the Trust with statistical and
research data, clerical help, accounting, data processing,
bookkeeping, internal auditing and legal services and
certain other services required by the Trust, prepares
reports to the Trust's shareholders and prepares tax
returns, reports to and filings with the SEC and state blue
sky authorities. The Portfolio pays SSB Citi a fee for
these services that is computed daily and paid monthly at
the annual rate of 0.10% of the value of the Portfolio's
average daily net assets. For the fiscal period ended
August 31, 2000, the Portfolio accrued and waived
administration fees of $26,570.

SSB Citi, through its predecessors, was incorporated on
March 12, 1968 under the laws of Delaware and is a
registered investment adviser. SSB Citi renders investment
advice to investment companies that had aggregate assets
under management as of October 31, 2000 in excess of $140
billion. The Consulting Group, a division of SSB Citi, has
extensive experience in providing investment advisor
selection services. The Consulting Group, through its
predecessors, was established in 1973 with the primary
objective of matching the investment needs of institutional
and individual clients with appropriate and qualified money
management organizations throughout the nation. In 1989,
the Consulting Services Division was restructured and its
research and investment advisory evaluation services
functions were segregated and named the Consulting Group.
The Consulting Group's analysts, in the aggregate, have
many years of experience performing asset manager searches
for institutional and individual clients. They screen more
than 3,000 registered investment advisory firms and track
the performance of more than 700 firms on the Manager's
comprehensive database. In addition, the Manager conducts
over 300 on-sight evaluations of advisors annually. As of
August 31, 2000, the Consulting Group provided services
with respect to over $226 billion in client assets
representing more than 588,000 separate accounts under a
variety of programs designed for individual and
institutional investors.

Under the Management Agreement, the Portfolio pays SSB Citi
a fee, calculated daily and paid monthly, based on the rate
applied to the value of the Portfolio's average daily net
assets. In addition, SSB Citi pays the Subadviser, based on
the rates applied to the Portfolio's average daily net
assets on a monthly basis. The applicable management fee,
advisory fee paid by
SSB Citi to each Subadviser, and the Subadviser for the
Portfolio is indicated below:

A
n
n
u
a
l
Subadviser
	Management
Portfolio
	Subadvisers		Fee 		Fee

 S&P 500 Index Investments
Barclays Global Fund Advisors		0.02%
		0.02%

For the fiscal year ended August 31, 2000, the Portfolio
accrued investment management fees of $5,314.


The Manager and the Subadviser pay the salaries of all
officers and employees who are employed by it and the
Trust, and the Manager maintains office facilities for the
Trust. The Manager and the Subadviser bear all expenses in
connection with the performance of their respective
services under the Management Agreement, the Advisory
Agreement, and the Administration Agreement.

As noted in the Prospectus, subject to the supervision and
direction of the Manager and, ultimately, the Board of
Trustees, the Subadviser manages the securities held by the
Portfolio in accordance with the Portfolio's stated
investment objectives and policies, makes investment
decisions for the Portfolio and places orders to purchase
and sell securities on behalf of the Portfolio.

Subject to the supervision and direction of the Board of
Trustees, the Manager provides to the Trust investment
management evaluation services principally by performing
initial due diligence on prospective Subadvisers for the
Portfolio and thereafter monitoring the Subadviser's
performance through quantitative and qualitative analysis
as well as periodic in-person, telephonic and written
consultations with Subadvisers.  In evaluating prospective
Subadvisers, the Manager considers, among other factors,
each Subadviser's level of expertise; relative performance
and consistency of performance over a minimum period of
five years; level of adherence to investment discipline or
philosophy, personnel, facilities, financial strength and
quality of service and client communications.  The Manager
has responsibility for communicating performance
expectations and evaluations to the Subadviser and
ultimately recommending to the Board of Trustees whether
the Subadviser's contract should be renewed, modified or
terminated.  The Manager provides written reports to the
Board of Trustees regarding the results of its evaluations
and monitoring functions.  The Manager is also responsible
for conducting all operations of the Trust except those
operations contracted to the Subadviser, custodian,
transfer agent or administrator.

Investors should be aware that the Manager may be subject
to a conflict of interest when making decisions regarding
the retention and compensation of particular Subadvisers.
However, the Manager's decisions, including the identity of
the Subadviser and the specific amount of the Manager's
compensation to be paid to the Subadviser, are subject to
review and approval by a majority of the Board of Trustees
and separately by a majority of the Trustees who are not
affiliated with the manager or any of its affiliates.

Investors should also be aware that through Smith Barney
Advisory Services, the Consulting Group serves as
investment adviser to each participant in such service and
receives a fee from each participant that does not vary
based on the Portfolios of the Trust recommended for the
participant's investments.  At the same time, the
Consulting Group serves as the Trust's manager with
responsibility for identifying, retaining, supervising and
compensating each Portfolio's Subadviser and receives a fee
from each Portfolio of the Trust.  The portion of such fee
that is retained by the Manager varies based on the
Portfolio involved.  Consequently, the Consulting Group,
when making asset allocation recommendations for
participants in Smith Barney Advisory Services, may be
presented with a conflict of interest as to the specific
portfolios of the trust recommended for investment.  The
Consulting Group, however, is subject to and intends to
comply fully with standards of fiduciary duty that require
that it act solely in the best interest of the participant
when making investment recommendations.

The Trust has received an exemption (the "Exemption") from
certain provisions of the 1940 Act which would otherwise
require the Manager to obtain formal shareholder approval
prior to engaging and entering into investment advisory
agreements with Subadvisers.  The Exemption is based on
among other things:  (1) the Manager will select, monitor,
evaluate and allocate assets to, the Subadvisers and ensure
that the Subadvisers comply with a Portfolio's investment
objective, policies and restrictions; (2) shares of a
Portfolio relying on the Exemption will not be subject to
any sales loads or redemption fees or other charges for
redeeming shares; (3) the Trust will provide to
shareholders certain information about a new Subadviser and
its investment advisory contract within 90 days of the
engagement of a new Subadviser; (4) the Trust will disclose
in its prospectus the terms of the Exemption; and (5) the
Trustees, including a majority of the "non-interested"
Trustees, must approve each investment advisory contract in
the manner required under the 1940 Act. Any changes to the
Management Agreement between the Trust and the Manager
still require shareholder approval.

Code of Ethics

Pursuant to Rule 17j-1 of the 1940 Act, each, the Trust,
its investment adviser and principal underwriter has
adopted a code of ethics that permits personnel to invest
in securities for their own accounts, including securities
that may be purchased or held by the Portfolio of the
Trust.  All personnel must place the interests of clients
first and avoid activities, interests and relationships
that might interfere with the duty to make decisions in the
best interests of the clients.  All personal securities
transactions by employees must adhere to the requirements
of the code of ethics and must be conducted in such a
manner as to avoid any actual or potential conflict of
interest, the appearance of such a conflict, or the abuse
of an employee's position of trust and responsibility.

A copy of the Trust's code of ethics is on file with the
Securities and Exchange Commission.

Auditors

KPMG LLP, 757 Third Avenue, New York, New York 10017,
currently serves as the independent auditors of the Trust
and rendered an opinion on the Trust's most recent
financial statements and financial highlights.

Organization of the Trust.   The Trust has been organized
as an unincorporated business trust under the laws of The
Commonwealth of Massachusetts pursuant to a Master Trust
Agreement dated April 12, 1991, as amended from time to
time (the "Trust Agreement").

In the interest of economy and convenience, certificates
representing shares in the Trust are not physically issued.
PFPC Trust Company (successor by assignment from PNC Bank,
N.A.), the Trust's custodian, maintains a record of each
shareholder's ownership of Trust shares. Shares do not have
cumulative voting rights, which means that holders of more
than 50% of the shares voting for the election of Trustees
can elect all Trustees. Shares are transferable, but have
no preemptive, conversion or subscription rights.
Shareholders generally vote on a Trust-wide basis, except
with respect to continuation of the Advisory Agreement, in
which case shareholders vote by Portfolio.

Massachusetts law provides that shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Trust. The Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust,
however, and requires that notice of the disclaimer be
given in each agreement, obligation or instrument entered
into or executed by the Trust or a Trustee. The Trust
Agreement provides for indemnification from the Trust's
property for all losses and expenses of any shareholder
held personally liable for the obligations of the Trust.
Thus, the risk of a shareholder's incurring financial loss
on account of shareholder liability is limited to
circumstances in which the Trust would be unable to meet
its obligations, a possibility that the Trust's management
believes is remote. Upon payment of any liability incurred
by the Trust, the shareholder paying the liability will be
entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of the
Trust in a manner so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of
the Trust.


As of December 15, 2000, the following shareholders own of
record or beneficially 5% or more of shares of the
Portfolio:


PURCHASE OF SHARES

Purchases of shares of the Portfolio through an Advisory
Service must be made through a brokerage account maintained
with Salomon Smith Barney.  Payment for Portfolio shares
must be made by check directly to Salomon Smith Barney or
to a broker that clears securities transactions through
Salomon Smith Barney.  No brokerage account or inactivity
fee is charged in connection with a brokerage account
through which an investor purchases shares of a Portfolio.

Shares of the Portfolio are available exclusively to
participants in Advisory Services and are generally
designed to relieve investors of the burden of devising an
asset allocation strategy to meet their individual needs as
well as selecting individual investments within each asset
category among the myriad choices available. Advisory
Services generally provide investment advice in connection
with investments among the Trust's Portfolios by
identifying the investor's risk tolerances and investment
objectives through evaluation of an investment
questionnaire; identifying and recommending in writing an
appropriate allocation of assets among the Portfolios that
conform to those tolerances and objectives in a written
recommendation; and providing on a periodic basis, a
written monitoring report to the investor containing an
analysis and evaluation of an investor's account and
recommending any appropriate changes in the allocation of
assets among the Portfolios.  Usually under an Advisory
Service, all investment decisions ultimately rest with the
investor and investment discretion is not given to the
investment adviser.

The TRAK(r) Personalized Investment Advisory Service ("TRAK")
sponsored by Salomon Smith Barney is one such advisory
service.  Under the TRAK program the Consulting Group in
its capacity as investment adviser to participants in TRAK
generally directly provides to investors asset allocation
recommendations and related services with respect to the
Portfolios based on an evaluation of an investor's
investment objective and risk tolerances.  Shares of the
Portfolios are offered for purchase and redemption at their
respective net asset value next determined, without
imposition of any initial or contingent deferred sales
charge. If the Consulting Group is paid directly by the
investors purchasing Portfolio shares based on the
recommendation of investment advisors other than the
Consulting Group, or who contract with the Consulting Group
for services other than those described above, such
investors pay, in lieu of TRAK charges, different fees for
different levels of services as agreed upon with their
investment advisers.

REDEMPTION OF SHARES

Detailed information on how to redeem shares of the
Portfolio is included in the Prospectus. The right of
redemption of shares of the Portfolio may be suspended or
the date of payment postponed (i) for any periods during
which the New York Stock Exchange, Inc. (the "NYSE") is
closed (other than for customary weekend and holiday
closings), (ii) when trading in the markets the Portfolio
normally utilizes is restricted, or an emergency, as
defined by the rules and regulations of the SEC, exists
making disposal of the Portfolio's investments or
determination of its net asset value not reasonably
practicable or (iii) for such other periods as the SEC by
order may permit for the protection of the Portfolio's
shareholders.

REDEMPTIONS IN KIND

If the Board of Trustees determines that it would be
detrimental to the best interests of a Portfolio's
shareholders to make a redemption payment wholly in cash,
the Portfolio may pay, in accordance with rules adopted by
the SEC, any portion of a redemption in excess of the
lesser of $250,000 or 1% of the Portfolio's net assets by a
distribution in kind of readily marketable portfolio
securities in lieu of cash. Redemptions failing to meet
this threshold must be made in cash. Shareholders receiving
distributions in kind of portfolio securities may incur
brokerage commissions when subsequently disposing of those
securities.

NET ASSET VALUE

The Portfolio's net asset value per share is calculated by
SSB Citi on each day, Monday through Friday, except days on
which the NYSE is closed.  The NYSE is currently 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 when one of those holidays falls on a
Saturday or on the subsequent Monday when one of those
holidays falls on a Sunday.  On those days, securities held
by the Portfolio may nevertheless be actively traded and
the value of the Portfolio's shares could be significantly
affected.

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
Portfolio's Board of Trustees. Short-term obligations with
maturities of 60 days or less are valued at amortized cost,
which constitutes fair value as determined by the
Portfolio's Board of Trustees.  Amortized cost involves
valuing an instrument at its original cost to the Portfolio
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
Portfolio will be valued at fair value as determined in
good faith by the Portfolio's Board of Trustees.

DETERMINATION OF PERFORMANCE

Average Annual Total Return

From time to time, the Trust may advertise the Portfolio's
"average annual total return" over various periods of time.
This total return figure shows the average percentage
change in value of an investment in the Portfolio from the
beginning date of the measuring period to the ending date
of the measuring period and is reduced by the maximum
Salomon Smith Barney Advisory Service fee during the
measuring period.  The figure reflects changes in the price
of the Portfolio's shares and assumes that any income,
dividends and/or capital gains distributions made by the
Portfolio during the period are reinvested in shares of the
Portfolio.  Figures will be given for recent one-, five-
and ten-year periods (if applicable) and may be given for
other periods as well (such as from commencement of the
Portfolio's operations or on a year-by-year basis).
Aggregate total returns also may be shown by means of
schedules, charts or graphs, and may indicate subtotals of
the various components of total return (that is, the change
in value of initial investment, income dividends and
capital gains distributions).

In reports or other communications to shareholders or in
advertising material, the Portfolio may quote total return
figures that do not reflect Salomon Smith Barney Advisory
Service fees (provided that these figures are accompanied
by standardized total return figures calculated as
described above), as well as compare its performance with
that of other mutual funds as listed in the rankings
prepared by Lipper Analytical Services, Inc. or similar
independent services that monitor the performance of mutual
funds or with other appropriate indices of investment
securities.  The performance information also may include
evaluations of the Portfolio published by nationally
recognized ranking services and by financial publications
that are nationally recognized, such as Barron's, Business
Week, CDA Investment Technologies, Inc., Changing Times,
Forbes, Fortune, Institutional Investor, Investor's Daily,
Kiplinger's Personal Finance Magazine, Money, Morningstar
Mutual Fund Values, The New York Times, USA Today and The
Wall Street Journal.

The Portfolio's average annual total return figures are
computed according to a formula prescribed by the SEC,
expressed as follows:

P(1+T)n = ERV

Where:
	P=	a hypothetical initial payment of $1,000
T=	average annual total return, including the
effect of the maximum annual fee for
participation in TRAK.
	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 and the
effect of the maximum annual fee for
participation in TRAK.

The ERV assumes complete redemption of the hypothetical
investment at the end of the measuring period.  A
Portfolio's net investment income changes in response to
fluctuations in interest rates and the expenses of the
Portfolio. Consequently, the given performance quotations
should not be considered as representative of the
Portfolio's performance for any specified period in the
future.

A Portfolio's performance will vary from time to time
depending upon market conditions, the composition of its
portfolio and its operating expenses. Consequently, any
given performance quotation should not be considered
representative of a Portfolio's performance for any
specified period in the future. In addition, because
performance will fluctuate, it may not provide a basis for
comparing an investment in the Portfolio with certain bank
deposits or other investments that pay a fixed yield for a
stated period of time. Investors comparing a Portfolio's
performance with that of other mutual funds should give
consideration to the quality and maturity of the respective
investment companies' portfolio securities.


The Portfolio's average annual total return without the
effect of the maximum annual fee for participation in TRAK
and with the effect of fee waivers were as follows:

From
October 1
1999
through
August 31,
2000
18.24%


The Portfolio's average annual total return with the effect
of the maximum annual fee for participation in TRAK and
with the effect of fee waivers were as follows:

From
October 1,
1999
through
August 31,
2000
16.62%

Comparative performance information may be used from time
to time in advertising the Portfolios' shares, including
data from Lipper Analytical Services, Inc., Standard &
Poor's 500 Composite Stock Price Index and other industry
publications.

TAXES

The following is a summary of certain federal income tax
considerations that may affect the Portfolio and its
shareholders.  In addition to the considerations described
below, there may be other federal, state, local or foreign
tax applications to consider.  The summary does not address
all of the potential federal income tax consequences that
may be applicable to the Portfolio or to all categories of
investors, some of which may be subject to special tax
rules.  The summary is not intended as a substitute for
individual tax advice and investors are urged to consult
their own tax advisors as to the tax consequences of an
investment in the Portfolio. The summary is based on the
laws in effect on the date of this SAI, which are subject
to change.

The Portfolio intends to qualify in each year as a separate
"regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"), by complying with
certain requirements regarding the sources and distribution
of its income and the diversification of its assets.
Provided that the Portfolio (i) is a regulated investment
company and (ii) distributes to its shareholders at least
90% of its taxable net investment income (including, for
this purpose, any excess of its net short-term capital gain
over its net long-term capital loss) for a taxable year and
90% of its tax-exempt interest income (reduced by certain
expenses for that year), it will not be liable for federal
income taxes to the extent its taxable net investment
income and its net realized long-term and short-term
capital gains, if any, are distributed to its shareholders
in compliance with the Code's timing and other
requirements.

If, in any taxable year, the Portfolio 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 Portfolio
in computing its taxable income.  In addition, in the event
of a failure to qualify, the Portfolio's distributions, to
the extent derived from the Portfolio'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 would otherwise (at
least in part) be treated as long-term capital gains.  If
the Portfolio 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
Portfolio failed to qualify as a regulated investment
company for a period greater than one taxable year, the
Portfolio may be required to recognize any net built-in
gains with respect to certain of its assets (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.

In order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary
income and capital gains, the Portfolio may make an
additional distribution shortly before or shortly after
December 31 in each year of any undistributed ordinary
income or capital gains.  The Portfolio generally will seek
to pay any additional dividends and distributions necessary
to avoid the application of this tax.

The Portfolio'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 that, among other
things, may affect the character of gains and losses
realized by the Portfolio (i.e., may affect whether gains
or losses are ordinary or capital and, if capital, the
extent to which they are long-term or short-term),
accelerate recognition of income to the Portfolio and defer
Portfolio losses. These rules could therefore affect the
character, amount and timing of distributions to
shareholders. These provisions also (i) will require the
Portfolio to mark-to-market certain types of positions in
its portfolio (i.e., treat them as if they were closed
out), and (ii) may cause the Portfolio 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 that are referred to above.  The Portfolio will
monitor its transactions, will make the appropriate tax
elections, if any, 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 seek to prevent disqualification of the Portfolio
as a regulated investment company.

As a general rule, the Portfolio's gain or loss on a sale
or exchange of an investment will be a long-term capital
gain or loss if the Portfolio has held the investment for
more than one year and will be a short-term capital gain or
loss if it has held the investment for one year or less.
Gains or losses on the sale of debt securities denominated
in a foreign currency may be recharacterized as ordinary
income or losses, as described below.

Dividends or other income (including, in some cases,
capital gains) received by the Portfolio from investments
in foreign securities may be subject to withholding and
other taxes imposed by such countries.  Tax conventions
between certain countries and the United States may reduce
or eliminate such taxes in some cases.  The Portfolio 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 deductions or credits for such taxes on their
own tax returns.

The Portfolio may be required to treat amounts as taxable
income or gain, subject to the distribution requirements
referred to above, even though no corresponding amounts of
cash are received concurrently, as a result of (1) mark to
market, constructive sale or other rules applicable to
passive foreign investment companies or partnerships or
trusts in which the Portfolio invests or to certain
options, futures or forward contracts, or "appreciated
financial positions" or (2) the inability to obtain cash
distributions or other amounts due to currency controls or
restrictions on repatriation imposed by a foreign country
with respect to the Portfolio's investments (including
through depositary receipts) in issuers in such country or
(3) tax rules applicable to debt obligations acquired with
"original issue discount," including zero-coupon or
deferred payment bonds and pay-in-kind debt obligations, or
to market discount if an election is made with respect to
such market discount.  The Portfolio may therefore be
required to obtain cash to be used to satisfy these
distribution requirements by selling securities at times
that it might not otherwise be desirable to do so or
borrowing the necessary cash, thereby incurring interest
expenses.

Under Section 988 of the Code, gains or losses attributable
to fluctuations in exchange rates between the time the
Portfolio accrues income or receivables or expenses or
other liabilities denominated in a foreign currency and the
time the Portfolio actually collects such income or pays
such liabilities are generally treated as ordinary income
or ordinary loss.  Similarly, gains or losses on foreign
currency, foreign currency forward contracts, certain
foreign currency options or futures contracts and the
disposition of debt securities denominated in foreign
currency, to the extent attributable to fluctuations in
exchange rates between the acquisition and disposition
dates, are also treated as ordinary income or loss.

The Portfolio is permitted to carry forward any unused
capital losses to be utilized to offset its capital gains
realized during the eight-year period following the year in
which the losses arose, which will reduce the net realized
capital gains (if any) required to be distributed to
shareholders for those years.

Dividends and Distributions

For federal income tax purposes, dividends declared by the
Portfolio in October, November or December as of a record
date in such a month and which are actually paid in January
of the following year will be taxable to shareholders as if
they were paid on December 31 of the year in which they are
declared rather than in the year in which shareholders
actually receive the dividends.

As a general rule, a shareholder's gain or loss on a
redemption or other disposition of Portfolio shares that is
treated as a sale under the Code will be a long-term
capital gain or loss if the shareholder has held his or her
Portfolio shares for more than one year and will be a
short-term capital gain or loss if he or she has held his
or her Portfolio shares for one year or less.

The Portfolio may realize net long-term capital gains.
Distributions of the excess, if any, of net long-term
capital gain over net short-term capital loss ("capital
gain dividends") will be taxable to shareholders as long-
term capital gains, regardless of whether received in cash
or reinvested in additional shares and how long a
shareholder has held Portfolio shares. If a shareholder
receives a capital gain dividend with respect to any share
and redeems, sells or otherwise disposes of the share
before it has been held for more than six months, then any
loss, to the extent of the capital gain dividend, will be
treated as a long-term capital loss. Additionally, any loss
realized on a redemption, exchange or other disposition of
Portfolio shares generally 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 Portfolio, within a 61-day period
beginning 30 days before and ending 30 days after the
disposition of the shares.

Dividends paid from net investment income and distributions
of any excess of net short-term capital gain over net long-
term capital loss are taxable to shareholders as ordinary
income, regardless of how long shareholders have held their
Portfolio shares and whether such dividends and
distributions are received in cash or reinvested in
additional Portfolio shares.  Dividends paid by the
Portfolio that are declared from net investment income and
are attributable to qualifying dividends received by the
Portfolio from domestic corporations may qualify for the
federal dividends-received deduction for corporations.

Each shareholder will receive after the close of the
calendar year an annual statement as to the federal income
tax status of his or her dividends and distributions for
the prior calendar year.  Each shareholder will also
receive, if appropriate, various written notices after the
close of the Portfolio's prior taxable year as to the
federal income tax status of the Portfolio during the
Portfolio's prior taxable year. Shareholders should consult
their tax advisors as to any state and local taxes that may
apply to these dividends and distributions and the possible
availability of an exemption for dividends paid by a
Portfolio attributable to interest the Portfolio earns from
U.S. Government obligations.

If the Portfolio is the holder of record of any stock on
the record date for any dividends payable with respect to
the stock, these dividends will be included in the
Portfolio's gross income as of the later of (i) the date
the stock became ex-dividend with respect to the dividends
(i.e., the date on which a buyer of the stock would not be
entitled to receive the declared, but unpaid, dividends) or
(ii) the date the Portfolio acquired the stock.
Accordingly, in order to satisfy its income distribution
requirements, the Portfolio 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.

Investors considering buying shares of the Portfolio on or
just prior to the record date for a taxable dividend or
capital gain distribution should be aware that even if the
net asset value of the Portfolio's shares is reduced below
the investor's cost as a result of the distribution, the
amount of the forthcoming dividend or distribution payment
will be a taxable dividend or distribution payment even
though it may represent a return of invested capital.

If a shareholder fails to furnish a correct taxpayer
identification number, fails to report fully dividend or
interest income, or fails to certify that he or she has
provided a correct taxpayer identification number and that
he or she is not subject to "backup withholding," then the
shareholder may be subject to a 31% "backup withholding"
tax with respect to (i) dividends and distributions and
(ii) the proceeds of any redemptions of Portfolio shares.
An individual's taxpayer identification number is his or
her social security number. The 31% "backup withholding"
tax is not an additional tax and may be credited against a
taxpayer's federal income tax liability. Distributions to
nonresident aliens and foreign entities may be subject to
different tax rules, including other possible withholding
taxes.

The foregoing is only a summary of certain tax
considerations generally affecting the Portfolio and its
shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult
their tax advisors with specific reference to their own tax
situations, including their state and local tax
liabilities.

DISTRIBUTOR

Effective June 5, 2000, Salomon Smith Barney, located at
388 Greenwich Street, New York, New York 10013 replaced
CFBDS, Inc. as the Portfolio's distributor. Prior to June
5, 2000, CFBDS, Inc., located at 20 Milk Street, Boston,
Massachusetts 02109-5408 served as the Portfolio's
distributor. Salomon Smith Barney serves as the Portfolio's
distributor on a best efforts basis pursuant to a written
agreement, which was approved by the Trustees of the Trust.


CUSTODIANS, TRANSFER AGENT AND SUB-TRANSFER AGENT

PFPC Trust Company (successor as assigned by PNC Bank,
National Association) is located at 8800 Tinicum Blvd.,
Philadelphia, Pennsylvania 19153 and The Chase Manhattan
Bank ("Chase") located at Chase MetroTech Center, Brooklyn,
NY 11245, serve as the custodians for the Trust. Under
their respective custodian agreements with the respective
funds, each custodian is authorized to establish separate
accounts for foreign securities owned by the appropriate
fund to be held with foreign branches of other U.S. banks
as well as with certain foreign banks and securities
depositories. For its custody services to the Trust, each
custodian receives monthly fees based upon the month-end
aggregate net asset value of the appropriate Portfolio,
plus certain charges for securities transactions including
out-of-pocket expenses, and costs of any foreign and
domestic sub-custodians. The assets of the Trust are held
under bank custodianship in compliance with the 1940 Act.

Citi Fiduciary Trust Company, located at 125 Broad Street,
New York, New York 10004, serves as the Portfolio's
transfer and dividend-paying agent.  Under the transfer
agency agreement, the transfer agent maintains the
shareholder account records for the Portfolio, handles
certain communications between shareholders and the
Portfolio, distributes dividends and distributions payable
by the Portfolio and produces statements with respect to
account activity for the Portfolio and its shareholders.
For these services, the transfer agent receives fees from
the Portfolio computed on the basis of the number of
shareholder accounts that the transfer agent maintains for
the Portfolio during the month and is reimbursed for out-
of-pocket expenses.

PFPC Global Fund Services, located at P.O. Box 9699,
Providence, RI 02940-9699, serves as the Portfolio's sub-
transfer agent.  Under the transfer agency agreement, the
sub-transfer agent maintains the shareholder account records
for the Portfolio, handles certain communications between
shareholders and the Portfolio and distributes dividends and
distributions payable by the Portfolio.  For these services,
the sub-transfer agent receives a monthly fee computed on
the basis of the number of shareholder accounts it maintains
for the Portfolio during the month, and is reimbursed for
out-of-pocket expenses.


FINANCIAL STATEMENTS

The Portfolio's Annual Report for the fiscal year ended
August 31, 2000 is incorporated herein by reference in its
entirety.  The Annual Report was filed on November 9, 2000,
Accession Number 950130-00-5889.



"S&P 500(r)" is a trademark of The McGraw-Hill Companies, Inc.
and has been licensed for use by SSB Citi Fund Management
LLC.  The Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's (S&P), a division of The
McGraw-Hill Companies, Inc.  S&P makes no representation or
warranty, express or implied, to the shareholders of the
Portfolio or any member of the public regarding the
advisability of investing in securities generally or in the
Portfolio particularly or the ability of the S&P 500 Index
to track general stock market performance.  S&P's only
relationship to SSB Citi Fund Management LLC. is the
licensing of certain trademarks and trade names of S&P and
the S&P 500 Index which is determined, composed and
calculated by S&P without regard to SSB Citi Fund
Management LLC or the Portfolio.  S&P has no obligation to
take the needs of SSB Citi Fund Management LLC or the
shareholders of the Portfolio into consideration in
determining, composing or calculating the S&P 500 Index.
S&P is not responsible for and has not participated in the
determination of the prices and amount of the Portfolio's
shares or the timing of the issuance or sale of the
Portfolio's shares or in the determination or calculation
of the equation by which Portfolio shares are to be
converted into cash.  S&P has no obligation or liability in
connection with the administration, marketing or trading of
Portfolio shares.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.  S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
PORTFOLIO, OWNERS OF THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.  S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.




STATEMENT OF ADDITIONAL INFORMATION

CONSULTING GROUP CAPITAL MARKETS FUNDS
   December 29, 2000

222 Delaware Avenue ~ Wilmington, Delaware 19801 ~
(212) 816-8725

	This Statement of Additional Information supplements
the information contained in the current Prospectus (the
"Prospectus") of Consulting Group Capital Markets Funds
(the "Trust"), dated December 29, 2000, and should be read
in conjunction with the Prospectus. The Trust is a series
company that consists of eighteen portfolios, fifteen of
which are offered by the Prospectus.  These are Government
Money Investments, Intermediate Fixed Income Investments,
Long-Term Bond Investments, Municipal Bond Investments,
Mortgage Backed Investments, High Yield Investments,
Balanced Investments, Large Capitalization Value Equity
Investments, Large Capitalization Growth Investments, Small
Capitalization Value Equity Investments, Small
Capitalization Growth Investments, International Equity
Investments, International Fixed Income Investments,
Emerging Markets Equity Investments and Multi-Sector Fixed
Income Investments (individually, a "Portfolio" and
collectively, the "Portfolios"). Three additional
portfolios, Multi-Strategy Market Neutral Investments, S &
P 500 Index Investments and Global Sciences and Technology
Investments, are offered in separate prospectuses. The
Prospectus may be obtained by contacting any Financial
Consultant of Salomon Smith Barney Inc. ("Salomon Smith
Barney"), or by writing or calling the Trust at the address
or telephone number listed above. This Statement of
Additional Information, although not in itself a
prospectus, is incorporated by reference into the
Prospectus in its entirety.

CONTENTS

Trustees and Executive Officers of the Trust
2
Investment Objectives, Management Policies and Risk Factors
of the Portfolios
4
Investment Restrictions
25
Portfolio Transactions
27
Portfolio Turnover
31
Investment Management and Other Services
32
Purchase of Shares
38
Redemption of Shares
39
Redemptions in Kind
39
Net Asset Value
40
Determination of Performance
41
Taxes
45
Distributor
50
Custodians, Transfer Agent and Sub-Transfer Agent
50
Financial Statements
50
Appendix
51


Capitalized terms used but not defined in this Statement of
Additional Information have the meanings accorded to them
in the Prospectus.

TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST

The Trustees and executive officers of the Trust, together
with information as to their principal business
occupations, are set forth below. The executive officers of
the Trust are employees of organizations that provide
services to the Portfolios. Each Trustee who is an
"interested person" of the Trust, as defined in the 1940
Act, is indicated by an asterisk (Mr. Walter Auch is an
"interested person" of Large Capitalization Value Equity
Investments, Small Capitalization Value Equity Investments
and Intermediate Fixed Income Investments).

*Walter E. Auch, Trustee (Age 79). Consultant to companies
in the financial services industry; Director of Pimco
Advisers L.P.; Brinson Partners; Nicholas-Applegate (each a
registered investment adviser); Legend Properties, a real
estate management company; Banyan Realty Trust; and Banyan
Land Fund II. Director or trustee of 2 investment companies
associated with Citigroup Inc. ("Citigroup"). His address
is 6001 N. 62nd Place, Paradise Valley, Arizona 85253.

Martin Brody, Trustee (Age 79). Private Investor; Director
or trustee of 20 investment companies associated with
Citigroup. His address is c/o HMK Associates, 30 Columbia
Turnpike, Florham Park, N.J. 07932.

H. John Ellis, Trustee (Age 73). Retired. Director or
trustee of 2 investment companies associated with
Citigroup.  His address is 858 East Crystal Downs Drive,
Frankfort, Michigan 49635.

Armon E. Kamesar, Trustee (Age 73). Chairman of the Board
of TEC, an international organization of Chief Executive
Officers; Trustee, U.S. Bankruptcy Court. Director or
trustee of 2 investment companies associated with
Citigroup. His address is 7328 Country Club Drive, La
Jolla, CA 92037.

Stephen E. Kaufman, Trustee (Age 68). Attorney. Director or
trustee of 13 investment companies associated with
Citigroup. His address is 277 Park Avenue, New York, New
York 10172.

*Heath B. McLendon, Trustee and Chairman of the Board (Age
67). Managing Director of Salomon Smith Barney and Chairman
of the Board of Salomon Smith Barney Strategy Advisers Inc.
and Director and President of SSB Citi Fund Management LLC
("SSB Citi") (successor to SSBC Fund Management Inc.) and
Travelers Investment Adviser, Inc. ("TIA"); Mr. McLendon
serves on the Board of 78 investment companies associated
with Citigroup. His address is 7 World Trade Center, New
York, New York 10048.

Lewis E. Daidone, Senior Vice President and Treasurer (Age
42). Managing Director of Salomon Smith Barney; Director
and Senior Vice President of SSB Citi and TIA.  Mr. Daidone
serves as Senior Vice President and Treasurer of 61
investment companies associated with Citigroup. His address
is 125 Broad Street, New York, New York 10004.

Frank L. Campanale, Investment Officer (Age 47). President
and Chief Executive Officer of Salomon Smith Barney's
Consulting Group (the "Manager"). Prior to 1996, National
Sales Director for Consulting Group. His address is 222
Delaware Avenue, Wilmington, Delaware, 19801.

LeRoy T. Pease, CFA, Investment Officer (Age 41). First
Vice President of Salomon Smith Barney Consulting Group.
Prior to 1996, Chief Investment Officer of EMT Group and
Manager for Investment Strategy for Bell Atlantic,
Philadelphia, Pennsylvania. His address is 222 Delaware
Avenue, Wilmington, Delaware, 19801.

Christina T. Sydor, Secretary (Age 49). Managing Director
of Salomon Smith Barney; General Counsel and Secretary of
SSB Citi and TIA.  Ms. Sydor serves as Secretary of 61
investment companies associated with Citigroup.  Her
address is 7 World Trade Center, New York New York 10048.

Irving David, Controller (Age 39). Director of Salomon
Smith Barney. Controller or Assistant Treasurer of 43
investment companies associated with Citigroup; Formerly
Assistant Treasurer of First Investment Management Company;
His address is 388 Greenwich Street, New York, New York
10013.

As of December 15, 2000, the Trustees and officers as a
group owned less than 1% of the outstanding common stock of
the Trust. As of December 15, 2000, the following
shareholders own of record or beneficially 5% or more of
shares of a Portfolio of the Trust:

Balanced Investments

SB Corp. Trust
Custodian
Synthes (USA)
Attn: Patricia Davis
1690 Russell Road
Paoli, PA 19301
owned 1,274,831.708 shares (17.58%)

SBC Trust Company
TST Inc.
Attn: Jody Tourant
20232 E. 220th Street
Long Beach, CA 98010-1644
owned 630,361.086 shares (8.69%)

SBC Trust Company TTEE
Marketing Specialist Sales Co.
Attn: Lisa Snyder
201 North Walnut Street
9th Floor
Wilmington, DE 19801
owned 578,612.962 shares (7.98%)

SBC Trust Company TTEE
Reihalt Thomas Corporation Profit
Sharing and 401k Savings Plan
Attn: Lisa Snyder
201 North Walnut Street
9th Floor
Wilmington, DE 19801
owned 447,816.924 shares (6.17%)


Balanced Investments (Continued)

SBC Trust Company TTEE
EBCO Manufacturing Company
401 (k) Profit Sharing Plan
Attn: Lisa Snyder
201 North Walnut Street
9th Floor
Wilmington, DE 19801
owned 566,546.436 shares (5.05%)

Remuneration.  No director, officer or employee of Salomon
Smith Barney, SSB Citi or any of their affiliates will
receive any compensation from the Trust for serving as an
officer or Trustee of the Trust. The Trust pays each
Trustee who is not a director, officer or employee of
Salomon Smith Barney, the Manager, any advisor, SSB Citi or
any of their affiliates a fee of $32,000 per annum plus
$1,000 per meeting attended. The Trust reimburses the
Trustees for travel and out-of-pocket expenses to attend
meetings of the Board.  For the fiscal year ended August
31, 2000, such fees and expenses totaled $21,166.

For the fiscal year ended August 31, 2000, the Trustees of
the Trust were paid the following compensation:
		Total
	Pension or	Total	Number
		Retirement Benefits	Compensation	of
Funds
	Aggregate	Accrued as Expense	From	Served in
	Name	Compensation	of Trust 	Fund Complex*	Complex
Heath B. McLendon**	None	None	None	78
Walter Auch**	$36,300	None	$ 50,600	2
Martin Brody	35,100	None	 138,000	20
H. John Ellis	37,300	None	   50,600	2
Armon E. Kamesar	37,300	None	   52,600	2
Stephen E. Kaufman	37,300	None	  110,650	13

*    For calendar year ended December 31, 1999.
** Designates "interested trustee".  Mr. Auch is an
"interested trustee" of Large Capitalization Value Equity
Investments, Small Capitalization Value Equity Investments
and Intermediate Fixed Income Investments.

INVESTMENT OBJECTIVES, MANAGEMENT POLICIES AND RISK FACTORS

Each of the Portfolios is a diversified, open-end
management investment company, except International Fixed
Income Investments, which is a non-diversified Portfolio.
The Prospectus discusses the investment objectives of the
Portfolios, separate series of the Trust, and the policies
to be employed to achieve those objectives.  Supplemental
information is set out below concerning the types of
securities and other instruments in which the Portfolios
may invest, the investment policies and strategies that the
Portfolios may utilize and certain risks attendant to those
investments, policies and strategies. The Portfolios may
rely upon the independent advice of their respective
investment advisors (separately a "Subadvisor",
collectively, the "Subadvisors") to evaluate potential
investments.



Equity Securities.  The equity oriented Portfolios may
invest in all types of equity securities and High Yield
Investments may invest up to 10% of its assets in equity
securities. Common stock is an interest in a company,
limited liability company, or similar entity that entitles
the holder to a share in the profits of the company, in the
form of dividends, and the proceeds from a sale or
liquidation of the company.  The interests of common
shareholders are the most junior in a corporate structure.
This means that in the event of the bankruptcy of the
company its creditors and any holders of a preferred class
of equity securities are paid before the common
stockholders are entitled to receive anything.  However,
any assets of the company in excess of the amount owed to
creditors or preferred shareholders are shared pro-rata
among the common stockholders.  Common stockholders
normally have voting control of the company and are
entitled to vote on the election of directors and certain
fundamental corporate actions.

Preferred stocks are equity securities, but they have many
characteristics of fixed income securities.  Their
similarities to fixed income securities generally cause
preferred stocks to trade more like debt instruments than
common stocks.  Thus, the value of preferred stocks
reflects the credit risk of the company and the dividend
yield on the preferred stocks compared to prevailing
interest rates.  Preferred shares are entitled to receive
dividends before any dividend is paid to the holders of
common stock.  The dividend may be at a fixed or variable
dividend payment rate, may be payable on fixed dates or at
times determined by the company and may be payable in cash,
additional shares of preferred stock or other securities.
Many preferred stocks are redeemable at the option of the
company after a certain date.  Holders of preferred stock
are also entitled to receive a payment upon the sale or
liquidation of a company before any payment is made to the
company's common stockholders.  However, preferred stock is
an equity security and, therefore, is junior in priority of
payment to the company's creditors in the event of a
bankruptcy, including holders of the company's debt
securities.  This junior ranking to creditors makes
preferred stock riskier in some respects than fixed income
securities.

Convertible securities are preferred stocks or fixed income
securities that are convertible at the option of the
holder, or in some circumstances at the option of the
issuing company, at a stated exchange rate or formula into
the company's common stock or other equity securities.  At
the time a company sells the convertible securities, the
conversion price is normally higher than the market price
of the common stock.  A holder of convertible securities
will generally receive interest or dividends at a rate
lower than comparable debt securities, but the holder has
the potential for additional gain if the market value of
the common stock exceeds the conversion price.  When the
market price of the common stock is below the conversion
price, convertible securities tend to trade like fixed
income securities.  If the market price of the common stock
is higher than the conversion price, convertible securities
tend to trade like the common stock.  Convertible
securities rank senior to common stocks in an issuer's
capital structure and consequently may be of higher quality
and entail less risk than the issuer's common stock.

Warrants and stock purchase rights are securities
permitting, but not obligating, their holder to purchase
other securities, normally the issuer's common stock.
Stock purchase rights are frequently issued as a dividend
to a company's stockholders and represent the right to
purchase a fixed number of shares at a fixed or formula
price.  The price may reflect a discount to the market
price.  Warrants are generally sold by a company or issuer
together with fixed income securities and represent the
right to a fixed number of shares of common stock or other
securities at a fixed or formula price.  The exercise price
is normally higher than the market price at the time the
company sells the warrant.

Warrants and stock purchase rights do not carry with them
the right to receive dividends on or to vote the securities
that they entitle their holders to purchase.  They also do
not entitle the holder to share in the assets of the
company in a liquidation.  The rights to purchase common
stock or other securities conferred by a warrant or stock
purchase right can only be exercised on specific dates or
for a specific period.  Trading in these instruments is
affected both by the relationship of the exercise price to
the current market price of the common stock or other
securities and also by the period remaining until the right
or warrant expires.  An investment in warrants and stock
purchase rights may be considered more speculative than
other types of equity investments.  A warrant or stock
purchase right expires worthless if it is not exercised on
or prior to its expiration date.

Real Estate Investment Trusts ("REITs").  Each Portfolio
may invest in REITs.  REITs are pooled investment vehicles
which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination
of equity and mortgage REITs. Equity REITs invest the
majority of their assets directly in real property and
derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate
mortgages and derive income from the collection of interest
payments. REITs are not taxed on income distributed to
shareholders provided they comply with the applicable
requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). Debt securities issued by REITs, for
the most part, are general and unsecured obligations and
are subject to risks associated with REITs.

Investing in REITs involves certain unique risks in
addition to those risks associated with investing in the
real estate industry in general. An equity REIT may be
affected by changes in the value of the underlying
properties owned by the REIT. A mortgage REIT may be
affected by changes in interest rates and the ability of
the issuers of its portfolio mortgages to repay their
obligations. REITs are dependent upon the skills of their
managers and are not diversified. REITs are generally
dependent upon maintaining cash flows to repay borrowings
and to make distributions to shareholders and are subject
to the risk of default by lessees or borrowers. REITs whose
underlying assets are concentrated in properties used by a
particular industry, such as health care, are also subject
to risks associated with such industry.

REITs (especially mortgage REITs) are also subject to
interest rate risks. When interest rates decline, the value
of a REIT's investment in fixed rate obligations can be
expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can
be expected to decline. If the REIT invests in adjustable
rate mortgage loans the interest rates on which are reset
periodically, yields on a REIT's investments in such loans
will gradually align themselves to reflect changes in
market interest rates. This causes the value of such
investments to fluctuate less dramatically in response to
interest rate fluctuations than would investments in fixed
rate obligations.

REITs may have limited financial resources, may trade less
frequently and in a limited volume and may be subject to
more abrupt or erratic price movements than larger company
securities. Historically REITs have been more volatile in
price than the larger capitalization stocks included in
Standard & Poor's 500 Stock Index (the "S&P 500").

Other Investment Companies.  The Portfolios may invest in
the securities of other investment companies to the extent
such investments are consistent with the Portfolios'
investment objectives and policies and permissible under
the Investment Company Act of 1940, as amended (the "1940
Act"). Under the 1940 Act, a Portfolio may not acquire the
securities of other domestic or foreign investment
companies if, as a result, (i) more than 10% of the
Portfolio's total assets would be invested in securities of
other investment companies, (ii) such purchase would result
in more than 3% of the total outstanding voting securities
of any one investment company being held by the Portfolio,
or (iii) more than 5% of the Portfolio's total assets would
be invested in any one investment company. These
limitations do not apply to the purchase of shares of any
investment company in connection with a merger,
consolidation, reorganization or acquisition of
substantially all the assets of another investment company.
A Portfolio will not invest in other investment companies
for which the Subadvisors or any of their affiliates act as
an investment advisor or distributor.

A Portfolio, as a holder of the securities of other
investment companies, will bear its pro rata portion of the
other investment companies' expenses, including advisory
fees. These expenses are in addition to the direct expenses
of the Portfolio's own operations.

Investing in Small and Medium Capitalization Companies.
Investing in the equity securities of small and medium
capitalization companies involves additional risks compared
to investing in large capitalization companies.  Compared
to large companies, these companies may have more limited
product lines and capital resources; have less established
markets for their products; have earnings that are more
sensitive to changes in the economy, competition and
technology and be more dependent upon key members of
management.

The market value of the common stock of small and medium
capitalization companies may be more volatile, particularly
in response to company announcements or industry events;
have less active trading markets and be harder to sell at
the time and prices that a Subadvisor considers
appropriate.

Fixed Income Securities. The market value of the
obligations held by the Portfolios can be expected to vary
inversely to changes in prevailing interest rates.
Investors also should recognize that, in periods of
declining interest rates, the Portfolios' yield will tend
to be somewhat higher than prevailing market rates and, in
periods of rising interest rates, the Portfolios' yield
will tend to be somewhat lower.  Also, when interest rates
are falling, the inflow of net new money to the Portfolios
from the continuous sale of their shares will tend to be
invested in instruments producing lower yields than the
balance of their portfolios, thereby reducing the
Portfolios' current yield.  In periods of rising interest
rates, the opposite can be expected to occur.  In addition,
securities in which the Portfolios may invest may not yield
as high a level of current income as might be achieved by
investing in securities with less liquidity, less
creditworthiness or longer maturities.

The Portfolios invest in U.S. Government securities,
corporate bonds, debentures, non-convertible fixed income
preferred stocks, mortgage related securities, asset-backed
securities ("ABS"), Eurodollar certificates of deposit,
Eurodollar bonds and Yankee bonds.

Debt Securities Rating Criteria.  Investment grade debt
securities are those rated "BBB" or higher by Standard &
Poor's Ratings Group ("S & P"), the equivalent rating of
other nationally recognized statistical rating
organizations ("NRSROs") or determined to be of equivalent
credit quality by the Subadvisor.  Debt securities rated
BBB are considered medium grade obligations with
speculative characteristics, and adverse economic
conditions or changing circumstances may weaken the
issuer's ability to pay interest and repay principal.

Below investment grade debt securities are those rated "BB"
and below by S & P or the equivalent rating of other
NRSROs.  Below investment grade debt securities or
comparable unrated securities are commonly referred to as
"junk bonds" and are considered predominantly speculative
and may be questionable as to principal and interest
payments. Changes in economic conditions are more likely to
lead to a weakened capacity to make principal payments and
interest payments. The amount of junk bond securities
outstanding has proliferated as an increasing number of
issuers have used junk bonds for corporate financing.  An
economic downturn could severely affect the ability of
highly leveraged issuers to service their debt obligations
or to repay their obligations upon maturity. Factors having
an adverse impact on the market value of lower quality
securities will have an adverse effect on a Portfolio's net
asset value to the extent it invests in such securities. In
addition, the Portfolios may incur additional expenses to
the extent they are required to seek recovery upon a
default in payment of principal or interest on their
portfolio holdings.

The secondary market for junk bond securities, which is
concentrated in relatively few market makers, may not be as
liquid as the secondary market for more highly rated
securities, a factor which may have an adverse effect on a
Portfolio's ability to dispose of a particular security
when necessary to meet its liquidity needs. Under adverse
market or economic conditions, the secondary market for
junk bond securities could contract further, independent of
any specific adverse changes in the condition of a
particular issuer. As a result, a Portfolio could find it
more difficult to sell these securities or may be able to
sell the securities only at prices lower than if such
securities were widely traded. Prices realized upon the
sale of such lower rated or unrated securities, under these
circumstances, may be less than the prices used in
calculating the Portfolio's net asset value.

Since investors generally perceive that there are greater
risks associated with lower quality debt securities of the
type in which a Portfolio may invest a portion of its
assets, the yields and prices of such securities may tend
to fluctuate more than those for higher rated securities.
In the lower quality segments of the debt securities
market, changes in perceptions of issuers' creditworthiness
tend to occur more frequently and in a more pronounced
manner than do changes in higher quality segments of the
debt securities market, resulting in greater yield and
price volatility.

Lower rated and comparable unrated debt securities tend to
offer higher yields than higher rated securities with the
same maturities because the historical financial condition
of the issuers of such securities may not have been as
strong as that of other issuers.  However, lower rated
securities generally involve greater risks of loss of
income and principal than higher rated securities.  The
Subadvisors will attempt to reduce these risks through
portfolio diversification and by analysis of each issuer
and its ability to make timely payments of income and
principal, as well as broad economic trends and corporate
developments.

The definitions of the ratings of debt obligations may be
found in the Appendix following this Statement of
Additional Information.

Ratings as Investment Criteria. In general, the ratings of
an NRSRO such as Moody's Investors Service, Inc.
("Moody's") and S&P represent the opinions of those
agencies as to the quality of debt obligations that they
rate. It should be emphasized, however, that these ratings
are relative and subjective, are not absolute standards of
quality and do not evaluate the market risk of securities.
These ratings will be used by the Portfolios as initial
criteria for the selection of portfolio securities, but the
Portfolios also will rely upon the independent advice of
their Subadvisors to evaluate potential investments. Among
the factors that will be considered are the long term
ability of the issuer to pay principal and interest and
general economic trends.

Subsequent to its purchase by a Portfolio, an issue of debt
obligations may cease to be rated or its rating may be
reduced below the minimum required for purchase by that
Portfolio. Neither event will require the sale of the debt
obligation by the Portfolio, but the Portfolio's
Subadvisors will consider the event in their determination
of whether the Portfolio should continue to hold the
obligation. In addition, to the extent that the ratings
change as a result of changes in rating organizations or
their rating systems or owing to a corporate restructuring
of an NRSRO, a Portfolio will attempt to use comparable
ratings as standards for its investments in accordance with
its investment objectives and policies.

Municipal Obligations.  Municipal Bond Investments invests
in municipal obligations.  These are obligations issued by
or on behalf of states, territories and possessions of the
United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities the
interest on which, in the opinion of bond counsel to the
issuer, is exempt from federal income tax. Municipal
obligations are issued to obtain funds for various public
purposes, including the construction of public facilities
such as airports, bridges, highways, housing, hospitals,
mass transportation, schools, streets, water and sewer
works, gas, and electric utilities.  They may also be
issued to refund outstanding obligations, to obtain funds
for general operating expenses, to obtain funds to loan to
other public institutions and facilities or to obtain funds
in anticipation of the receipt of revenue or the issuance
of other obligations.  Municipal obligations consist of
municipal bonds, municipal notes and municipal commercial
paper as well as variable or floating rate obligations and
participation interests.

Municipal obligations are subject to the provisions of
bankruptcy, insolvency and other laws, such as the federal
Bankruptcy Code, affecting the rights and remedies of
creditors.  In addition, Congress or state legislatures may
enact laws extending the time for payment of principal or
interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of
municipalities to levy taxes.  There is also the
possibility that, as a result of litigation or other
conditions, the power or ability of any issuer to pay when
due the principal of and interest on its obligations may be
materially affected.

The yields on municipal obligations are dependent on a
variety of factors, including general market conditions,
supply and demand, general conditions of the municipal
market, size of a particular offering, the maturity of the
obligation and the rating of the issue.

For purposes of applying the Portfolio's diversification,
concentration and other restrictions, the identification of
the issuer of municipal obligations depends on the terms
and conditions of the obligation.  The "issuer" of
municipal obligations is generally deemed to be the person
expected to be the source of principal and interest
payments on the obligations and may be:

? the governmental agency, authority, instrumentality or
other political subdivision that issued the security;
? the non-governmental user of a revenue bond-financed
facility, the assets and revenues of which will be used
to meet the payment obligations on the municipal
security; or
? the guarantor of payment obligations on the municipal
obligations.

Municipal bonds, which generally have maturities of more
than one year when issued, are designed to meet longer-term
capital needs.  Municipal bonds have two principal
classifications: general obligation bonds and revenue
bonds.  General obligation bonds are backed by the issuer's
pledge of its full faith and credit based on its ability to
levy taxes for the payment of principal and interest.
These levies may be constitutionally or statutorily limited
as to rate or amount.  Revenue bonds are not backed by an
issuer's taxing authority but are payable only from the
revenue derived from a particular facility or class of
facilities.  The issuer may repay these bonds from the
proceeds of a special excise tax or other specific revenue
source, but not the issuer's general taxing power.

Private activity bonds include certain types of industrial
development bonds ("IDBs") issued by public authorities to
finance various privately-operated facilities for business
and manufacturing, housing, sports, convention or trade
show facilities, airport, mass transit, port and parking
facilities, air or water pollution control facilities, and
certain facilities for water supply, gas, electricity or
sewage or solid waste disposal.  Private activity bonds
are, in most cases, revenue bonds and are generally secured
by the revenues derived from payments by the private user.
The payment of the principal and interest on private
activity bonds is dependent solely on the ability of the
user of the facilities financed by the bonds to meet its
financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.

Private activity bonds that are issued by or on behalf of
public authorities to finance privately operated facilities
are considered to be municipal obligations if the interest
paid on them qualifies as excluded from gross income (but
not necessarily from alternative minimum taxable income)
for federal income tax purposes in the opinion of bond
counsel to the issuer.  Dividends derived from interest
income on municipal obligations are a "current earnings"
adjustment for purposes of the federal corporate
alternative minimum tax.

Interest income on certain types of private activity bonds
issued after August 7, 1986 to finance non-governmental
activities is a specific tax preference item for purposes
of the federal individual and corporate alternative minimum
taxes.  Individual and corporate shareholders may be
subject to a federal alternative minimum tax to the extent
that the fund's dividends are derived from interest on
those bonds.

Municipal notes are short-term obligations of issuing
municipalities or agencies, generally having maturities of
less than three years, such as tax anticipation notes,
revenue anticipation notes and bond anticipation notes.
These instruments are sold in anticipation of the
collection of taxes, receipt of other revenues or a bond
sale.  State and local governments or governmental entities
issue these notes to provide short-term capital or to meet
cash flow needs.

Mortgage Backed Securities.  Mortgage Backed Investments,
Intermediate Fixed Income Investments, Long-Term Bond
Investments, Balanced Investments and Multi-Sector Fixed
Income Investments may invest in mortgage related
securities.  The average maturity of pass-through pools of
mortgage backed securities varies with the maturities of
the underlying mortgage instruments. In addition, a pool's
stated maturity may be shortened by unscheduled payments on
the underlying mortgages. Factors affecting mortgage
prepayments include the level of interest rates, general
economic and social conditions, the location of the
mortgaged property and age of the mortgage. Because
prepayment rates of individual pools vary widely, it is not
possible to accurately predict the average life of a
particular pool. Common practice is to assume that
prepayments will result in an average life ranging from two
to ten years for pools of fixed rate 30-year mortgages.
Pools of mortgages with other maturities of different
characteristics will have varying average life assumptions.

Mortgage backed securities may be classified as private,
governmental or government related, depending on the issuer
or guarantor. Private mortgage backed securities represent
pass-through pools consisting principally of conventional
residential mortgage loans created by non-governmental
issuers, such as commercial banks, savings and loan
associations and private mortgage insurance companies.
Governmental mortgage backed securities are backed by the
full faith and credit of the United States. Government
National Mortgage Association ("GNMA"), the principal U.S.
guarantor of such securities, is a wholly owned U.S.
Governmental Corporation within the Department of Housing
and Urban Development. Government related mortgage backed
securities are not backed by the full faith and credit of
the United States. Issuers of these securities include the
Federal National Mortgage Association ("FNMA") and Federal
Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government sponsored corporation owned entirely by private
stockholders that is subject to general regulation by the
Secretary of Housing and Urban Development. Pass-through
securities issued by FNMA are guaranteed as to timely
payment of principal and interest by FNMA. FHLMC is a
corporate instrumentality of the United States, the stock
of which is owned by the Federal Home Loan Banks.
Participation certificates representing interests in
mortgages from FHLMC's national portfolio are guaranteed as
to the timely payment of interest and ultimate collection
of principal by FHLMC.

The Trust expects that private and governmental entities
may create mortgage loan pools offering pass-through
investments in addition to those described above. The
mortgages underlying these securities may be alternative
mortgage instruments, that is, mortgage instruments whose
principal or interest payments may vary or whose terms to
maturity may be shorter than previously customary. As new
types of mortgage backed securities are developed and
offered to investors, the Trust, consistent with the
Portfolios' investment objectives and policies, will
consider making investments in those new types of
securities on behalf of the Portfolios.  A Portfolio will
not invest more than 25% of its assets in privately issued
mortgage related securities.

Mortgage Backed Investments, Intermediate Fixed Income
Investments, Long-Term Bond Investments, Multi-Sector Fixed
Income Investments and Balanced Investments may invest in
government stripped mortgage related securities,
collateralized mortgage obligations ("CMOs") collateralized
by mortgage loans or mortgage pass-through certificates and
zero coupon securities, which, because of changes in
interest rates, may be more speculative and subject to
greater fluctuations in value than securities that pay
interest currently.  CMOs are obligations fully
collateralized by a portfolio of mortgages or mortgage
related securities. Payments of principal and interest on
the mortgages are passed through to the holders of the CMOs
on the same schedule as they are received, although certain
classes of CMOs have priority over others with respect to
the receipt of prepayments on the mortgages.  Therefore,
depending on the type of CMOs in which a Portfolio invests,
the investment may be subject to a greater or lesser risk
of prepayment than other types of mortgage related
securities.

The Portfolios also may invest in pass-through securities
backed by adjustable rate mortgages that have been
introduced by GNMA, FNMA and FHLMC. These securities bear
interest at a rate that is adjusted monthly, quarterly or
annually. The prepayment experience of the mortgages
underlying these securities may vary from that for fixed
rate mortgages. The Portfolios will only purchase mortgage
related securities issued by persons that are governmental
agencies or instrumentalities or fall outside, or are
excluded from, the definition of investment company under
the 1940 Act.

Asset-Backed Securities ("ABS").  Intermediate Fixed Income
Investments, Long-Term Bond Investments and Balanced
Investments may each invest up to 5% of their assets and
Multi-Sector Fixed Income Investments may invest up to 10%
of its assets in ABS.  ABS may enhance a Portfolio's
performance, however their use involves certain risks that
may not be found in other mutual fund investments.  The
Portfolios will only invest in ABS that have received a AAA
rating from both Moody's and S&P or an equivalent rating
from another nationally recognized statistical rating
organization.

Mortgage Dollar Roll Transactions.  In order to enhance
current income, Mortgage Backed Investments, Balanced
Investments and Multi-Sector Fixed Income Investments may
enter into mortgage dollar rolls with respect to mortgage
related securities issued by GNMA, FNMA and FHLMC.  In a
mortgage dollar roll transaction, a Portfolio sells a
mortgage related security to a financial institution, such
as a bank or a broker-dealer, and simultaneously agrees to
repurchase a similar security from the institution at a
later date at an agreed upon price.  The mortgage related
securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by
different pools of mortgages with different prepayment
histories than those sold.  During the period between the
sale and repurchase, a Portfolio will not be entitled to
receive interest and principal payments on the securities
sold.  Proceeds of the sale will be invested in short-term
instruments, particularly repurchase agreements, and the
income from these investments, together with any additional
fee income received on the sale, is intended to generate
income for a Portfolio exceeding the yield on the
securities sold.  Mortgage dollar roll transactions involve
the risk that the market value of the securities sold by a
Portfolio may decline below the repurchase price of those
securities.  At the time a Portfolio enters into a mortgage
dollar roll transaction, it will place in a segregated
custodial account liquid securities having a value equal to
the repurchase price (including accrued interest) and will
subsequently monitor the account to insure that the
equivalent value is maintained.  Mortgage dollar roll
transactions are considered to be borrowings by a
Portfolio.

High Yield Securities.  High Yield Investments and Multi-
Sector Fixed Income Investments may invest in medium or
lower rated securities and unrated securities of comparable
quality, sometimes referred to as "junk bonds."  Generally,
such securities offer a higher current yield than is
offered by higher rated securities, but also (i) will
likely have some quality and protective characteristics
that, in the judgment of the rating organizations, are
outweighed by large uncertainties or major risk exposures
to adverse conditions and (ii) are predominantly
speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms
of the obligations.

The market values of certain of these securities also tend
to be more sensitive to individual corporate developments
and changes in economic conditions than higher quality
bonds.  In addition, medium and lower rated securities and
comparable unrated securities generally present a higher
degree of credit risk.  The risk of loss because of default
by these issuers is significantly greater because medium
and lower rated securities generally are unsecured and
frequently subordinated to the prior payment of senior
indebtedness. In light of these risks, the Board of
Trustees has instructed the Subadvisors, in evaluating the
creditworthiness of an issue, whether rated or unrated, to
take various factors into consideration, which may include,
as applicable, the issuer's financial resources, its
sensitivity to economic conditions and trends, the
operating history of and the community support for the
facility financed by the issue, the ability of the issuer's
management and regulatory matters.

In addition, the market value of securities in lower rated
categories is more volatile than that of higher quality
securities, and the markets in which medium and lower rated
securities are traded are more limited that those in which
higher rated securities are traded.  The existence of
limited markets may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes
of valuing its securities and calculating its net asset
value.  Moreover, the lack of a liquid trading market may
restrict the availability of securities for the Portfolio
to purchase and may also have the effect of limiting the
ability of the Portfolio to sell securities at their fair
value either to meet redemption requests or to respond to
changes in the economy or the financial markets.

Lower rated debt obligations also present risks based on
payment expectations.  If an issuer calls the obligation
for redemption, the Portfolio may have to replace the
security with a lower yielding security, resulting in a
decreased return for investors.  Also, the principal value
of bonds moves inversely with movements in interest rates;
in the event of rising interest rates, the value of the
securities held by the Portfolio may decline
proportionately more than a portfolio consisting of higher
rated securities.  If the Portfolio experiences unexpected
net redemptions, it may be forced to sell its higher rated
bonds, resulting in a decline in the overall credit quality
of the securities held by the Portfolio and increasing the
exposure of the Portfolio to the risks of lower rated
securities.  Investments in zero coupon bonds may be more
speculative and subject to greater fluctuations in value
because of changes in interest rates than bonds that pay
interest currently.

Subsequent to its purchase by the Portfolio, an issue of
securities may cease to be rated or its rating may be
reduced below the minimum required for purchase by the
Portfolio.  Neither event will require sale of these
securities by the Portfolio, but the Subadvisor will
consider the event in determining whether the Portfolio
should continue to hold the security.

Non-Publicly Traded Securities.  Each Portfolio may invest
in non-publicly traded securities, which may be less liquid
than publicly traded securities.  Although these securities
may be resold in privately negotiated transactions, the
prices realized from these sales could be less than those
originally paid by a Portfolio.  In addition, companies
whose securities are not publicly traded are not subject to
the disclosure and other investor protection requirements
that may be applicable if their securities were publicly
traded.

Supranational Entities.  International Fixed Income
Investments, subject to the diversification requirements of
the tax code, may invest up to 25% of its total assets in
debt securities issued by supranational organizations such
as the International Bank for Reconstruction and
Development (commonly referred to as the World Bank), which
was chartered to finance development projects in developing
member countries; the European Coal and Steel Community,
which is an economic union of various European nations'
steel and coal industries; and the Asian Development Bank,
which is an international development bank established to
lend funds, promote investment and provide technical
assistance to member nations in the Asian and Pacific
regions.  As supranational entities do not possess taxing
authority, they are dependent upon their members' continued
support in order to meet interest and principal payments.

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

Eurodollar Instruments and Yankee Bonds.  Intermediate
Fixed Income Investments, Long-Term Bond Investments and
Multi-Sector Fixed Income Investments may invest in
Eurodollar certificates of deposit ("ECDs"), Eurodollar
bonds and Yankee bonds.  Eurodollar instruments are bonds
of corporate and government issuers that pay interest and
principal in U.S. dollars but are issued in markets outside
the United States, primarily in Europe.  Yankee bonds are
bonds of foreign governments and their agencies and foreign
banks and corporations that pay interest in U.S. dollars
and are typically issued in the U.S.  ECDs are U.S.
dollar-denominated certificates of deposit issued by
foreign branches of domestic banks.  Long-Term Bond
Investments may invest up to 15% of its assets in Yankee
bonds.

Risks of Non-U.S. Investments.  To the extent a Portfolio
invests in the securities of non-U.S. issuers, those
investments involve considerations and risks not typically
associated with investing in the securities of issuers in
the U.S.  These risks are heightened with respect to
investments in countries with emerging markets and
economies.  The risks of investing in securities of non-
U.S. issuers or issuers with significant exposure to non-
U.S. markets may be related, among other things, to (i)
differences in size, liquidity and volatility of, and the
degree and manner of regulation of, the securities markets
of certain non-U.S. markets compared to the securities
markets in the U.S.; (ii) economic, political and social
factors; and (iii) foreign exchange matters, such as
restrictions on the repatriation of capital, fluctuations
in exchange rates between the U.S. dollar and the
currencies in which a Portfolio's portfolio securities are
quoted or denominated, exchange control regulations and
costs associated with currency exchange. The political and
economic structures in certain non-U.S. countries,
particularly emerging markets, are expected to undergo
significant evolution and rapid development, and such
countries may lack the social, political and economic
stability characteristic of more developed countries.
Unanticipated political or social developments may affect
the values of a Portfolio's investments in such countries.
The economies and securities and currency markets of many
emerging markets have experienced significant disruption
and declines. There can be no assurances that these
economic and market disruptions will not continue.

Foreign Securities Markets and Regulations.  There may be
less publicly available information about non-U.S. markets
and issuers than is available with respect to U.S.
securities and issuers. Non-U.S. companies generally are
not subject to accounting, auditing and financial reporting
standards, practices and requirements comparable to those
applicable to U.S. companies. The trading markets for most
non-U.S. securities are generally less liquid and subject
to greater price volatility than the markets for comparable
securities in the U.S. The markets for securities in
certain emerging markets are in the earliest stages of
their development. Even the markets for relatively widely
traded securities in certain non-U.S. markets, including
emerging countries, may not be able to absorb, without
price disruptions, a significant increase in trading volume
or trades of a size customarily undertaken by institutional
investors in the U.S. Additionally, market making and
arbitrage activities are generally less extensive in such
markets, which may contribute to increased volatility and
reduced liquidity. The less liquid a market, the more
difficult it may be for a Portfolio to accurately price its
portfolio securities or to dispose of such securities at
the times determined by the Subadvisor to be appropriate.
The risks associated with reduced liquidity may be
particularly acute in situations in which a Portfolio's
operations require cash, such as in order to meet
redemptions and to pay its expenses.

Economic, Political and Social Factors.  Certain non-U.S.
countries, including emerging markets, may be subject to a
greater degree of economic, political and social
instability than is the case in the U.S. and Western
European countries. Such instability may result from, among
other things: (i) authoritarian governments or military
involvement in political and economic decision making;
(ii) popular unrest associated with demands for improved
economic, political and social conditions; (iii) internal
insurgencies; (iv) hostile relations with neighboring
countries; and (v) ethnic, religious and racial
disaffection and conflict. Such economic, political and
social instability could significantly disrupt the
financial markets in such countries and the ability of the
issuers in such countries to repay their obligations.
Investing in emerging countries also involves the risk of
expropriation, nationalization, confiscation of assets and
property or the imposition of restrictions on foreign
investments and on repatriation of capital invested. In the
event of such expropriation, nationalization or other
confiscation in any emerging country, a Portfolio could
lose its entire investment in that country.

Certain emerging market countries restrict or control
foreign investment in their securities markets to varying
degrees.  These restrictions may limit a Portfolio's
investment in those markets and may increase the expenses
of the Portfolio.  In addition, the repatriation of both
investment income and capital from certain markets in the
region is subject to restrictions such as the need for
certain governmental consents.  Even where there is no
outright restriction on repatriation of capital, the
mechanics of repatriation may affect certain aspects of a
Portfolio's operation.

Economies in individual non-U.S. countries may differ
favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rates of
inflation, currency valuation, capital reinvestment,
resource self-sufficiency and balance of payments
positions. Many non-U.S. countries have experienced
substantial, and in some cases extremely high, rates of
inflation for many years. Inflation and rapid fluctuations
in inflation rates have had, and may continue to have, very
negative effects on the economies and securities markets of
certain emerging countries.

Economies in emerging countries generally are dependent
heavily upon international trade and, accordingly, have
been and may continue to be affected adversely by trade
barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures
imposed or negotiated by the countries with which they
trade. These economies also have been, and may continue to
be, affected adversely by economic conditions in the
countries with which they trade.

Currency Risks.  The value of the securities quoted or
denominated in international currencies may be adversely
affected by fluctuations in the relative currency exchange
rates and by exchange control regulations. A Portfolio's
investment performance may be negatively affected by a
devaluation of a currency in which the Portfolio's
investments are quoted or denominated. Further, a
Portfolio's investment performance may be significantly
affected, either positively or negatively, by currency
exchange rates because the U.S. dollar value of securities
quoted or denominated in another currency will increase or
decrease in response to changes in the value of such
currency in relation to the U.S. dollar.

Custodian Services and Related Investment Costs.  Custodian
services and other costs relating to investment in
international securities markets generally are more
expensive than in the U.S. Such markets have settlement and
clearance procedures that differ from those in the U.S. In
certain markets there have been times when settlements have
been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such
transactions.  The inability of a Portfolio to make
intended securities purchases because of settlement
problems could cause the Portfolio to miss attractive
investment opportunities. Inability to dispose of a
portfolio security caused by settlement problems could
result either in losses to the Portfolio because of a
subsequent decline in value of the portfolio security or
could result in possible liability to the Portfolio. In
addition, security settlement and clearance procedures in
some emerging countries may not fully protect a Portfolio
against loss or theft of its assets.

Withholding and Other Taxes.  The Portfolios will be
subject to taxes, including withholding taxes, on income
(possibly including, in some cases, capital gains) that are
or may be imposed by certain non-U.S. countries with
respect to a Portfolio's investments in such countries.
These taxes will reduce the return achieved by a Portfolio.
Treaties between the U.S. and such countries may not be
available to reduce the otherwise applicable tax rates.

Economic Monetary Union ("EMU").  On January 1, 1999, 11
European countries adopted a single currency - the Euro.
The conversion to the Euro is being phased in over a three-
year period.  For participating countries, EMU will mean
sharing a single currency and single official interest rate
and adhering to agreed upon limits on government borrowing.
Budgetary decisions will remain in the hands of each
participating country, but will be subject to each
country's commitment to avoid "excessive deficits" and
other more specific budgetary criteria.  A European Central
Bank is responsible for setting the official interest rate
to maintain price stability within the Euro zone.

EMU is driven by the expectation of a number of economic
benefits, including lower transaction costs, reduced
exchange risk, greater competition, and a broadening and
deepening of European financial markets.  However, there
are a number of significant risks associated with EMU.
Monetary and economic union on this scale has never been
attempted before.  There is a significant degree of
uncertainty as to whether participating countries will
remain committed to EMU in the face of changing economic
conditions.  This uncertainty may increase the volatility
of European markets.

Currency Exchange Rates.  A Portfolio's share value may
change significantly when the currencies, other than the
U.S. dollar, in which that Portfolio's investments are
quoted or denominated, strengthen or weaken against the
U.S. dollar.  Currency exchange rates generally are
determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of
investments in different countries as seen from an
international perspective.  Currency exchange rates can
also be affected unpredictably by intervention by U.S. or
foreign governments or central banks or by currency
controls or political developments in the United States or
abroad.

Forward Currency Contracts.  The Portfolios may invest in
securities quoted or denominated in foreign currencies, may
hold currencies to meet settlement requirements for foreign
securities and may engage in currency exchange transactions
in order to protect against uncertainty in the level of
future exchange rates between a particular foreign currency
and the U.S. dollar or between foreign currencies in which
a Portfolio's securities are or may be quoted or
denominated. Forward currency contracts are agreements to
exchange one currency for another, for example, to exchange
a certain amount of U.S. dollars for a certain amount of
French francs at a future date.  The date (which may be any
agreed upon fixed number of days in the future), the amount
of currency to be exchanged and the price at which the
exchange will take place will be negotiated with a currency
trader and fixed for the term of the contract at the time a
Portfolio enters into the contract.  To assure that a
Portfolio's forward currency contracts are not used to
achieve investment leverage, the Portfolio will segregate
cash or high grade securities with its custodian in an
amount at all times equal to or exceeding the Portfolio's
commitment with respect to these contracts.

Forward currency contracts (i) are traded in an interbank
market conducted directly between currency traders
(typically commercial banks or other financial
institutions) and their customers, (ii) generally have no
deposit requirements and (iii) are typically consummated
without payment of any commissions. The Portfolios,
however, may enter into forward currency contracts
containing either or both deposit requirements and
commissions.

At or before the maturity of a forward currency contract, a
Portfolio may either sell a portfolio security and make
delivery of the currency, or retain the security and offset
its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the
Portfolio will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. If
the Portfolio retains the portfolio security and engages in
an offsetting transaction, the Portfolio, at the time of
execution of the offsetting transaction, will incur a gain
or a loss to the extent movement has occurred in forward
currency contract prices. Should forward prices decline
during the period between the Portfolio's entering into a
forward currency contract for the sale of a currency and
the date it enters into an offsetting contract for the
purchase of the currency, the Portfolio will realize a gain
to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, the Portfolio
will suffer a loss to the extent the price of the currency
it has agreed to purchase exceeds the price of the currency
it has agreed to sell.

In hedging specific portfolio positions, a Portfolio may
enter into a forward contract with respect to either the
currency in which the positions are denominated or another
currency deemed appropriate by the Portfolio's Subadvisor.
The amount the Portfolio may invest in forward currency
contracts is limited to the amount of the Portfolio's
aggregate investments in foreign currencies.  Risks
associated with entering into forward currency contracts
include the possibility that the market for forward
currency contracts may be limited with respect to certain
currencies and, upon a contract's maturity, the inability
of a Portfolio to negotiate with the dealer to enter into
an offsetting transaction.  Forward currency contracts may
be closed out only by the parties entering into an
offsetting contract.  In addition, the correlation between
movements in the prices of those contracts and movements in
the price of the currency hedged or used for cover will not
be perfect.  There is no assurance an active forward
currency contract market will always exist.  These factors
will restrict a Portfolio's ability to hedge against the
risk of devaluation of currencies in which the Portfolio
holds a substantial quantity of securities and are
unrelated to the qualitative rating that may be assigned to
any particular security.  In addition, although forward
currency contracts limit the risk of loss owing to a
decline in the value of the hedged currency, at the same
time, they limit any potential gain that might result
should the value of the currency increase. If a devaluation
is generally anticipated, a Portfolio may not be able to
contract to sell currency at a price above the devaluation
level it anticipates.  The successful use of forward
currency contracts as a hedging technique draws upon
special skills and experience with respect to these
instruments and usually depends on the ability of the
Portfolio's Subadvisor to forecast interest rate and
currency exchange rate movements correctly. Should interest
or exchange rates move in an unexpected manner, the
Portfolio may not achieve the anticipated benefits of
forward currency contracts or may realize losses and thus
be in a worse position than if those strategies had not
been used. Many forward currency contracts are subject to
no daily price fluctuation limits so adverse market
movements could continue with respect to those contracts to
an unlimited extent over a period of time.

Options on Securities and Securities Indices.  Each
Portfolio may purchase put and call options on any security
in which it may invest or options on any securities index
based on securities in which it may invest. A Portfolio
would also be able to enter into closing sale transactions
in order to realize gains or minimize losses on options it
has purchased.

Writing Covered Call and Put Options on Securities Indices.
Each Portfolio may also write (sell) covered call and put
options on any securities index composed of securities in
which it may invest. Options on securities indices are
similar to options on securities, except that the exercise
of securities index options requires cash payments and does
not involve the actual purchase or sale of securities. In
addition, securities index options are designed to reflect
price fluctuations in a group of securities or segments of
the securities market rather than price fluctuations in a
single security.

A Portfolio may cover call options on a securities index by
owning securities whose price changes are expected to be
similar to those of the underlying index, or by having an
absolute and immediate right to acquire such securities
without additional cash consideration (or for additional
consideration if cash in such amount is segregated) upon
conversion or exchange of other securities in its
portfolio. A Portfolio may cover call and put options on a
securities index by segregating assets with a value equal
to the exercise price.

Purchasing Call and Put Options.  The Portfolios will
normally purchase call options in anticipation of an
increase in the market value of securities of the type in
which they may invest. The purchase of a call option will
entitle a Portfolio, in return for the premium paid, to
purchase specified securities at a specified price during
the option period. A Portfolio will ordinarily realize a
gain if, during the option period, the value of such
securities exceeded the sum of the exercise price, the
premium paid and transaction costs; otherwise the Portfolio
will realize either no gain or a loss on the purchase of
the call option.

A Portfolio will normally purchase put options in
anticipation of a decline in the market value of securities
in its portfolio ("protective puts") or in securities in
which it may invest. The purchase of a put option will
entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the
option period. The purchase of protective puts is designed
to offset or hedge against a decline in the market value of
the Portfolio's securities. Put options may also be
purchased by a Portfolio for the purpose of affirmatively
benefiting from a decline in the price of securities which
it does not own. The Portfolio will ordinarily realize a
gain if, during the option period, the value of the
underlying securities decreased below the exercise price
sufficiently to more than cover the premium and transaction
costs; otherwise the Portfolio will realize either no gain
or a loss on the purchase of the put option. Gains and
losses on the purchase of protective put options would tend
to be offset by countervailing changes in the value of the
underlying portfolio securities.

Risks of Trading Options.  There is no assurance that a
liquid secondary market on an options exchange will exist
for any particular exchange-traded option, or at any
particular time. If a Portfolio is unable to effect a
closing purchase transaction with respect to covered
options it has written, the Portfolio will not be able to
sell the underlying securities or dispose of its segregated
assets until the options expire or are exercised.
Similarly, if a Portfolio is unable to effect a closing
sale transaction with respect to options it has purchased,
it will have to exercise the options in order to realize
any profit and will incur transaction costs upon the
purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be
insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening
or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with
respect to particular classes or series of options; (iv)
unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an
exchange or the Options Clearing Corporation (the "OCC")
may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future
date to discontinue the trading of options (or a particular
class or series of options), in which event the secondary
market on that exchange (or in that class or series of
options) would cease to exist, although outstanding options
on that exchange, if any, that had been issued by the OCC
as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

A Portfolio may terminate its obligations under an
exchange-traded call or put option by purchasing an option
identical to the one it has written.  Obligations under
over-the-counter options may be terminated only by entering
into an offsetting transaction with the counterparty to
such option.  Such purchases are referred to as "closing
purchase transactions."

A Portfolio may purchase and sell both options that are
traded on U.S. and foreign exchanges and options traded
over the counter with broker-dealers who make markets in
these options. The ability to terminate over-the-counter
options is more limited than with exchange-traded options
and may involve the risk that broker-dealers participating
in such transactions will not fulfill their obligations.
Until such time as the staff of the Securities and Exchange
Commission (the "SEC") changes its position, a Portfolio
will treat purchased over-the-counter options and all
assets used to cover written over-the-counter options as
illiquid securities, except that with respect to options
written with primary dealers in U.S. Government securities
pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid
securities may be calculated with reference to the formula.

Transactions by a Portfolio in options on securities and
indices will be subject to limitations established by each
of the exchanges, boards of trade or other trading
facilities governing the maximum number of options in each
class which may be written or purchased by a single
investor or group of investors acting in concert. Thus, the
number of options that a Portfolio may write or purchase
may be affected by options written or purchased by other
investment advisory clients. An exchange, board of trade or
other trading facility may order the liquidations of
positions found to be in excess of these limits, and it may
impose certain other sanctions.

The writing and purchase of options is a highly specialized
activity which involves investment techniques and risks
different from those associated with ordinary portfolio
securities transactions. The successful use of protective
puts for hedging purposes depends in part on a Subadvisor's
ability to predict future price fluctuations and the degree
of correlation between the options and securities markets.

The hours of trading for options may not conform to the
hours during which the underlying securities are traded. To
the extent the options markets close before the markets for
the underlying securities, significant price movements can
take place in the underlying markets that cannot be
reflected in the options markets.

In addition to the risks of imperfect correlation between a
Portfolio's portfolio and the index underlying the option,
the purchase of securities index options involves the risk
that the premium and transaction costs paid by the
Portfolio in purchasing an option will be lost. This could
occur as a result of unanticipated movements in the price
of the securities comprising the securities index on which
the option is based.

Futures Contracts and Related Options. Each Portfolio other
than Government Money Investments 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 futures contracts and
put and call options on these futures contracts.  These
contracts will be entered into only upon the concurrence of
the Subadvisor that such contracts are necessary or
appropriate in the management of a Portfolio's assets.
These contracts will be entered into on exchanges
designated by the Commodity Futures Trading Commission
("CFTC") or, consistent with CFTC regulations, on foreign
exchanges.  These transactions may be entered into for bona
fide hedging and other permissible risk management purposes
including protecting against anticipated changes in the
value of securities a Portfolio intends to purchase.

A Portfolio 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 that
Portfolio'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.

A Portfolio may lose the expected benefit of these futures
or options transactions and may incur losses if the prices
of the underlying securities or commodities move in an
unanticipated manner.  In addition, changes in the value of
a Portfolio's futures and options positions may not prove
to be perfectly or even highly correlated with changes in
the value of its portfolio securities.  Successful use of
futures and related options is subject to a Subadvisor's
ability to predict correctly movements in the direction of
the securities markets generally, which ability may require
different skills and techniques than predicting changes in
the prices of individual securities.  Moreover, futures and
options contracts may only be closed out by entering into
offsetting transactions on the exchange where the position
was entered into (or a linked exchange), and as a result of
daily price fluctuation limits there can be no assurance
that an offsetting transaction could be entered into at an
advantageous price at any particular time.  Consequently, a
Portfolio may realize a loss on a futures contract or
option that is not offset by an increase in the value of
its portfolio securities that are being hedged or the
Portfolio may not be able to close a futures or options
position without incurring a loss in the event of adverse
price movements.

A Portfolio will incur brokerage costs whether or not its
hedging is successful and will be required to post and
maintain "margin" as a good-faith deposit against
performance of its obligations under futures contracts and
under options written by the Portfolio. Futures and options
positions are marked to the market daily and a Portfolio
may be required to make subsequent "variation" margin
payments depending upon whether its positions increase or
decrease in value. In this context margin payments involve
no borrowing on the part of a Portfolio.

Swaps.  Emerging Markets Equity Investments, with respect
to 15% of the total assets allocated to State Street Global
Advisors, may enter into index swaps. Index swaps involve
the exchange by the Portfolio with another party of the
respective amounts payable with respect to a notional
principal amount related to one or more indices.  The
Portfolio may enter into these transactions to preserve a
return or spread on a particular investment or portion of
its assets, as a duration management technique or to
protect against any increase in the price of securities the
Portfolio anticipates purchasing at a later date.  The
Portfolio may also use these transactions for speculative
purposes, such as to obtain the price performance of a
security without actually purchasing the security in
circumstances where, for example, the subject security is
illiquid, is unavailable for direct investment or available
only on less attractive terms.  Swaps have risks associated
with them, including possible default by the counterparty
to the transaction, illiquidity and, where swaps are used
as hedges, the risk that the use of a swap could result in
losses greater that if the swap had not been employed.

The Portfolio will usually enter into swaps on a net basis,
i.e., the two payment streams are netted out in a cash
settlement on the payment date or dates specified in the
agreement, with the Portfolio receiving or paying, as the
case may be, only the net amount of the two payments.
Swaps do not involve the delivery of securities, other
underlying assets or principal.  Accordingly, the risk of
loss with respect to swaps is limited to the net amount of
payments that the Portfolio is contractually obligated to
make.  If the counterparty to a swap defaults, the
Portfolio's risk of loss consists of the net amount of
payments that the Portfolio is contractually entitled to
receive.  Where swaps are entered into for good faith
hedging purposes, the Portfolio believes such obligations
do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to the
Portfolio's borrowing restrictions.  Where swaps are
entered into for other than hedging purposes, the Portfolio
will segregate an amount of cash or liquid securities
having a value equal to the accrued excess of its
obligations over its entitlements with respect to each swap
on a daily basis.

U.S. Government Securities.  The U.S. Government Securities
in which the Portfolios may invest include debt obligations
of varying maturities issued by the U.S. Treasury or issued
or guaranteed by an agency or instrumentality of the U.S.
government, including the Federal Housing Administration,
Federal Financing Bank, Farmers Home Administration,
Export-Import Bank of the U.S., Small Business
Administration, Government National Mortgage Association
("GNMA"), General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal National Mortgage Association ("FNMA"), Maritime
Administration, Tennessee Valley Authority, District of
Columbia Armory Board, Student Loan Marketing Association,
Resolution Trust Corporation and various institutions that
previously were or currently are part of the Farm Credit
System (which has been undergoing reorganization since
1987).  Some U.S. Government Securities, such as U.S.
Treasury bills, Treasury notes and Treasury bonds, which
differ only in their interest rates, maturities and times
of issuance, are supported by the full faith and credit of
the United States.  Others are supported by: (i) the right
of the issuer to borrow from the U.S. Treasury, such as
securities of the Federal Home Loan Banks; (ii) the
discretionary authority of the U.S. Government to purchase
the agency's obligations, such as securities of the FNMA;
or (iii) only the credit of the issuer, such as securities
of the Student Loan Marketing Association.  No assurance
can be given that the U.S. Government will provide
financial support in the future to U.S. Government
agencies, authorities or instrumentalities that are not
supported by the full faith and credit of the United
States.  Securities guaranteed as to principal and interest
by the U.S. Government, its agencies, authorities or
instrumentalities include: (i) securities for which the
payment of principal and interest is backed by an
irrevocable letter of credit issued by the U.S. Government
or any of its agencies, authorities or instrumentalities;
and (ii) participations in loans made to foreign
governments or other entities that are so guaranteed.  The
secondary market for certain of these participations is
limited and, therefore, may be regarded as illiquid.

U.S. Government Securities may include zero coupon
securities that may be purchased when yields are attractive
and/or to enhance portfolio liquidity.  Zero coupon U.S.
Government Securities are debt obligations that are issued
or purchased at a significant discount from face value.
The discount approximates the total amount of interest the
security will accrue and compound over the period until
maturity or the particular interest payment date at a rate
of interest reflecting the market rate of the security at
the time of issuance.  Zero coupon U.S. Government
Securities do not require the periodic payment of interest.
These investments benefit the issuer by mitigating its need
for cash to meet debt service, but also require a higher
rate of return to attract investors who are willing to
defer receipt of cash.  These investments may experience
greater volatility in market value than U.S. Government
Securities that make regular payments of interest.  A
Portfolio accrues income on these investments for tax and
accounting purposes, which is distributable to shareholders
and which, because no cash is received at the time of
accrual, may require the liquidation of other portfolio
securities to satisfy the Portfolio's distribution
obligations, in which case the Portfolio will forego the
purchase of additional income producing assets with these
funds.  Zero coupon U.S. Government Securities include
STRIPS and CUBES, which are issued by the U.S. Treasury as
component parts of U.S. Treasury bonds and represent
scheduled interest and principal payments on the bonds.

Exchange Rate-Related U.S. Government Securities.  Each
Portfolio, except Government Money Investments, may invest
up to 5% of its net assets in U.S. Government Securities
for which the principal repayment at maturity, while paid
in U.S. dollars, is determined by reference to the exchange
rate between the U.S. dollar and the currency of one or
more foreign countries ("Exchange Rate-Related
Securities"). The interest payable on these securities is
denominated in U.S. dollars and is not subject to foreign
currency risk and, in most cases, is paid at rates higher
than most other U.S. Government Securities in recognition
of the foreign currency risk component of Exchange Rate-
Related Securities.

Exchange Rate-Related Securities are issued in a variety of
forms, depending on the structure of the principal
repayment formula. The principal repayment formula may be
structured so that the security holder will benefit if a
particular foreign currency to which the security is linked
is stable or appreciates against the U.S. dollar. In the
alternative, the principal repayment formula may be
structured so that the securityholder benefits if the U.S.
dollar is stable or appreciates against the linked foreign
currency. Finally, the principal repayment formula can be a
function of more than one currency and, therefore, be
designed as a combination of those forms.

Investments in Exchange Rate-Related Securities entail
special risks. There is the possibility of significant
changes in rates of exchange between the U.S. dollar and
any foreign currency to which an Exchange Rate-Related
Security is linked. If currency exchange rates do not move
in the direction or to the extent anticipated by the
Subadvisor at the time of purchase of the security, the
amount of principal repaid at maturity might be
significantly below the par value of the security, which
might not be offset by the interest earned by the
Portfolios over the term of the security. The rate of
exchange between the U.S. dollar and other currencies is
determined by the forces of supply and demand in the
foreign exchange markets. These forces are affected by the
international balance of payments and other economic and
financial conditions, government intervention, speculation
and other factors. The imposition or modification of
foreign exchange controls by the U.S. or foreign
governments or intervention by central banks could also
affect exchange rates. Finally, there is no assurance that
sufficient trading interest to create a liquid secondary
market will exist for a particular Exchange Rate-Related
Security because of conditions in the debt and foreign
currency markets. Illiquidity in the forward foreign
exchange market and the high volatility of the foreign
exchange market may from time to time combine to make it
difficult to sell an Exchange Rate-Related Security prior
to maturity without incurring a significant price loss.

Custodial Receipts.  Each Portfolio other than Government
Money Investments may acquire custodial receipts or
certificates, such as CATS, TIGRs and FICO Strips,
underwritten by securities dealers or banks that evidence
ownership of future interest payments, principal payments
or both on certain notes or bonds issued by the U.S.
Government, its agencies, authorities or instrumentalities.
The underwriters of these certificates or receipts purchase
a U.S. Government Security and deposit the security in an
irrevocable trust or custodial account with a custodian
bank, which then issues receipts or certificates that
evidence ownership of the periodic unmatured coupon
payments and the final principal payments on the U.S.
Government Security.  Custodial receipts evidencing
specific coupon or principal payments have the same general
attributes as zero coupon U.S. Government Securities,
described above.  Although typically under the terms of a
custodial receipt a Portfolio is authorized to assert its
rights directly against the issuer of the underlying
obligation, the Portfolio may be required to assert through
the custodian bank such rights as may exist against the
underlying issuer.  Thus, in the event the underlying
issuer fails to pay principal and/or interest when due, a
Portfolio may be subject to delays, expenses and risks that
are greater than those that would have been involved if the
Portfolio had purchased a direct obligation of the issuer.
In addition, if the trust or custodial account in which the
underlying security has been deposited is determined to be
an association taxable as a corporation, instead of a non-
taxable entity, the yield on the underlying security would
be reduced in respect of any taxes paid.

When-Issued and Delayed Delivery Securities.  Each
Portfolio may purchase securities, including U.S.
government securities, on a when-issued basis or may
purchase or sell securities for delayed delivery. In such
transactions, delivery of the securities occurs beyond the
normal settlement period, but no payment or delivery is
made by a Portfolio prior to the actual delivery or payment
by the other party to the transaction. The purchase of
securities on a when-issued or delayed delivery basis
involves the risk that the value of the securities
purchased will decline prior to the settlement date. The
sale of securities for delayed delivery involves the risk
that the prices available in the market on the delivery
date may be greater than those obtained in the sale
transaction. When-issued and delayed delivery transactions
will be fully collateralized by segregated liquid assets.

Repurchase Agreements.  Each Portfolio may enter into
repurchase agreements.  Under the terms of a typical
repurchase agreement, a Portfolio would acquire an
underlying debt obligation for a relatively short period
(usually not more than one week) subject to an obligation
of the seller to repurchase, and the Portfolio to resell,
the obligation at an agreed upon price and time, thereby
determining the yield during the Portfolio's holding
period.  This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the
Portfolio's holding period.  A Portfolio may enter into
repurchase agreements with respect to U.S. Government
Securities with member banks of the Federal Reserve System
and certain non-bank dealers approved by the board of
trustees.  Under each repurchase agreement, the selling
institution is required to maintain the value of the
securities subject to the repurchase agreement at not less
than their repurchase price.  A Portfolio's Subadvisor,
acting under the supervision of the Board of Trustees,
reviews on an ongoing basis the value of the collateral and
the creditworthiness of those non-bank dealers with whom
the Portfolio enters into repurchase agreements.  A
Portfolio will not invest in a repurchase agreement
maturing in more than seven days if the investment,
together with illiquid securities held by that Portfolio,
exceeds 10% of the Portfolio's total assets (or 15% of the
assets of Multi-Sector Fixed Income Investments ).  In
entering into a repurchase agreement, a Portfolio bears a
risk of loss in the event the other party to the
transaction defaults on its obligations and the Portfolio
is delayed or prevented from exercising its rights to
dispose of the underlying securities, including the risk of
a possible decline in the value of the underlying
securities during the period in which the Portfolio seeks
to assert its rights to them, the risk of incurring
expenses associated with asserting those rights and the
risk of losing all or a part of the income from the
agreement.

Reverse Repurchase Agreements.  Emerging Markets Equity
Investments may enter into reverse repurchase agreements
with the financial institutions with which it may enter
into repurchase agreements.  Under a reverse repurchase
agreement, a Portfolio sells securities to a financial
institution and agrees to repurchase them at a mutually
agreed upon date, price and rate of interest.  During the
period between the sale and repurchase, the Portfolio would
not be entitled to principal and interest paid on the
securities sold by the Portfolio.  The Portfolio, however,
would seek to achieve gains derived from the difference
between the current sales price and the forward price for
the future purchase as well as the interest earned on the
proceeds on the initial sale.  Reverse repurchase
agreements will be viewed as borrowings by a Portfolio for
the purpose of calculating the Portfolio's indebtedness and
will have the effect of leveraging the Portfolio's assets.

Borrowing.  Leverage increases investment risk as well as
investment opportunity.  If the income and investment gains
on securities purchased with borrowed money exceed the
interest paid on the borrowing, the net asset value of a
Portfolio's shares will rise faster than would otherwise be
the case.  On the other hand, if the income and investment
gains fail to cover the cost, including interest, of the
borrowings, or if there are losses, the net asset value of
a Portfolio's shares will decrease faster than otherwise
would be the case.

Lending Portfolio Securities.  Consistent with applicable
regulatory requirements, each Portfolio other than
Municipal Bond Investments, may lend portfolio securities
to brokers, dealers and other financial organizations. A
Portfolio will not lend securities to Salomon Smith Barney
unless the Portfolio has applied for and received specific
authority to do so from the SEC. A Portfolio's loan of
securities will be collateralized by cash, letters of
credit or U.S. Government Securities. A Portfolio will
maintain the collateral in an amount at least equal to the
current market value of the loaned securities. From time to
time, a Portfolio may pay a part of the interest earned
from the investment of collateral received for securities
loaned to the borrower and/or a third party that is
unaffiliated with the Portfolio and is acting as a
"finder." A Portfolio will comply with the following
conditions whenever it loans securities: (i) the Portfolio
must receive at least 100% cash collateral or equivalent
securities from the borrower; (ii) the borrower must
increase the collateral whenever the market value of the
securities loaned rises above the level of the collateral;
(iii) the Portfolio must be able to terminate the loan at
any time; (iv) the Portfolio 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 Portfolio may pay only
reasonable custodian fees in connection with the loan; and
(vi) voting rights on the loaned securities may pass to the
borrower except that, if a material event adversely
affecting the investment in the loaned securities occurs,
the Trust's Board of Trustees must terminate the loan and
regain the right to vote the securities.

Short Sales "Against the Box".  Each Portfolio may from
time to time make short sales against the box.  In a short
sale, a Portfolio borrows from a broker or bank securities
identical to those being sold and delivers the borrowed
securities to the buying party.  The Portfolio is said to
have a short position in the securities sold until it
replaces the borrowed securities, at which time it receives
the proceeds of the sale.  A short sale is ''against the
box'' if the Portfolio owns or has the right to acquire at
no added cost securities identical to those sold short.

Illiquid Securities.  Each Portfolio will not invest more
than 10% of its net assets (except that Multi-Sector Fixed
Income Investments will not invest more than 15% of its net
assets) in illiquid and other securities that are not
readily marketable. Repurchase agreements maturing in more
than seven days will be included for purposes of the
foregoing limit. Securities subject to restrictions on
resale under the Securities Act of 1933, as amended (the
"1933 Act") are considered illiquid unless they are
eligible for resale pursuant to Rule 144A or another
exemption from the registration requirements of the
1933 Act and are determined to be liquid by the Subadvisor.
The Subadvisors determine the liquidity of Rule 144A and
other restricted securities according to procedures adopted
by the Board of Trustees. The Board of Trustees monitors
the Subadvisors' application of these guidelines and
procedures. The inability of a Portfolio to dispose of
illiquid investments readily or at reasonable prices could
impair the Portfolio's ability to raise cash for
redemptions or other purposes.

Temporary Investments.  For temporary defensive purposes,
during periods when a Subadvisor of a Portfolio, in
consultation with the Manager, believes that pursuing a
Portfolio's basic investment strategy may be inconsistent
with the best interests of its shareholders, that Portfolio
may invest its assets in the following money market
instruments: U.S. Government Securities (including those
purchased in the form of custodial receipts), repurchase
agreements, certificates of deposit and bankers'
acceptances issued by U.S. banks or savings and loan
associations having assets of at least $500 million as of
the end of their most recent fiscal year and high quality
commercial paper.  A Portfolio's U.S. dollar-denominated
temporary investments are managed by SSB Citi.  A Portfolio
also may hold a portion of its assets in money market
instruments or cash in amounts designed to pay expenses, to
meet anticipated redemptions or pending investment in
accordance with its objectives and policies.  Any temporary
investments may be purchased on a when-issued basis.  A
Portfolio's investment in any other short-term debt
instruments would be subject to the Portfolio's investment
objectives and policies, and to approval by the Trust's
Board of Trustees.

For the same purposes, Emerging Markets Equity Investments,
International Fixed Income Investments and International
Equity Investments may invest in obligations issued or
guaranteed by foreign governments or by any of their
political subdivisions, authorities, agencies or
instrumentalities that are rated at least "AA" by an NRSRO,
or if unrated, are determined by the Subadvisor to be of
equivalent quality.  Emerging Markets Equity Investments
may also invest in obligations of foreign banks, but will
limit its investments in such obligations to U.S. dollar-
denominated obligations of foreign banks which at the time
of investment (i) have assets with a value of more than $10
billion; (ii) are among the 75 largest foreign banks in the
world, based on the amount of assets; (iii) have branches
in the United States; and (iv) are of comparable quality to
obligations issued by United States banks in which the
Portfolio may invest in the opinion of the Portfolio's
Subadvisor.

INVESTMENT RESTRICTIONS

The investment restrictions numbered 1 through 8 below have
been adopted by the Trust as fundamental policies of the
Portfolios. Under the 1940 Act, a fundamental policy may
not be changed without the vote of a majority of the
outstanding voting securities of a Portfolio, which is
defined in the 1940 Act as the lesser of (i) 67% or more of
the shares present at a Portfolio meeting, if the holders
of more than 50% of the outstanding shares of the Portfolio
are present or represented by proxy, or (ii) more than 50%
of the outstanding shares of the Portfolio. Investment
restrictions 9 through 12 may be changed by a vote of a
majority of the Board of Trustees at any time.

Under the investment restrictions adopted by the
Portfolios:

	1.	A Portfolio, other than International Fixed Income
Investments, will not deviate from the definition of a
"diversified company" as defined in the 1940 Act and rules
thereunder.

	2.	A Portfolio, except Municipal Bond Investments,
will not invest more than 25% of its total assets in
securities, the issuers of which conduct their principal
business activities in the same industry. For purposes of
this limitation, U.S. Government Securities and Securities
of state or municipal governments and their political
subdivisions are not considered to be issued by members of
any industry.

	3.	A Portfolio will not 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.

	4.	A Portfolio will not borrow money, except that (a)
a Portfolio 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, in an amount not
exceeding 33 1/3% of the value of the Portfolio's total
assets (including the amount borrowed) valued at the lesser
of cost or market, less liabilities (not including the
amount borrowed) and (b) a Portfolio may, to the extent
consistent with its investment policies, enter into reverse
repurchase agreements, forward roll transactions and
similar investment strategies and techniques.

	5.	A Portfolio will not make loans. This restriction
does not apply to: (a) the purchase of debt obligations in
which a Portfolio may invest consistent with its investment
objectives and policies (including participation interests
in such obligations); (b) repurchase agreements; and (c)
loans of its portfolio securities.

	6.	A Portfolio will not purchase or sell real estate,
real estate mortgages, commodities or commodity contracts,
but this restriction shall not prevent a Portfolio from (a)
investing in and selling securities of issuers engaged in
the real estate business and securities which are secured
by real estate or interests therein; (b) holding or selling
real estate received in connection with securities it
holds; (c) trading in futures contracts and options on
futures contracts or (d) investing in or purchasing real
estate investment trust securities.

	7.	A Portfolio will not engage in the business of
underwriting securities issued by other persons, except to
the extent that a Portfolio may technically be deemed to be
an underwriter under the Securities Act of 1933, as
amended, in disposing of portfolio securities.

	8.	A Portfolio will not purchase any securities on
margin (except for such short-term credits as are necessary
for the clearance of purchases and sales of portfolio
securities). For purposes of this restriction, the deposit
or payment by a Portfolio 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.

	9.	A Portfolio will not invest in oil, gas or other
mineral leases or exploration or development programs.

	10.	A Portfolio will not make short sales of
securities, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities
sold short and provided that transactions in futures
contracts and options are not deemed to constitute selling
securities short.

	11.	A Portfolio will not make investments for the
purpose of exercising control or management.

	12.	A Portfolio will not purchase any security if,
as a result, (unless the security is acquired pursuant to a
plan of reorganization or an offer of exchange) the
Portfolio would own more than 3% of any registered
investment company's outstanding voting stock; or more than
5% of the value of the Portfolio's total assets would be
invested in securities of any one registered investment
company or more than 10% of the Portfolio's total assets
would be invested in registered investment companies in
general.

The percentage limitations contained in the restrictions
listed above (other than with respect to Number 4 above)
apply at the time of purchase of securities.

Department of Labor ("DOL") Exemption. The Trust may offer
shares of its Portfolios to certain employee benefit plans,
individual retirement accounts ("IRAs"), or retirement
plans for a self-employed individual ("Keogh Plans").
Because the Trust may offer shares of its Portfolios to
these plans, it is subject to regulation by the DOL and the
provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA").  Salomon Smith Barney has received a DOL
exemption covering certain transactions in shares of the
Portfolios. The full text of the DOL exemption may be found
in Annex B of the Prospectus.  The DOL exemption includes,
among other things, a limitation on investments in the
securities of affiliates of Salomon Smith Barney, including
Citigroup, of one percent of a Portfolio's net assets.
Since the Portfolios will be managed to comply with this
limitation, this may result in differences in performance
between the Portfolios and other funds that fully replicate
the S&P 500 Index.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for a Portfolio are
made by the Subadvisor(s), subject to the overall review of
the Manager and the Board of Trustees. Although investment
decisions for the Portfolios are made independently from
those of the other accounts managed by a Subadvisor,
investments of the type that the Portfolios may make also
may be made by those other accounts. When a Portfolio and
one or more other accounts managed by a Subadvisor 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 Subadvisor to
be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by a Portfolio
or the size of the position obtained or disposed of by a
Portfolio.

Transactions on U.S. stock exchanges and some foreign stock
exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among
different brokers. On most foreign exchanges, commissions
are generally fixed. No stated commission is generally
applicable to securities traded in U.S. over-the-counter
markets, but the underwriters include an underwriting
commission or concession and the prices at which securities
are purchased from and sold to dealers include a dealer's
mark-up or mark-down. U.S. Government Securities generally
are purchased from underwriters or dealers, although
certain newly issued U.S. Government Securities may be
purchased directly from the U.S. Treasury or from the
issuing agency or instrumentality.

In selecting brokers or dealers to execute securities
transactions on behalf of a Portfolio, its Subadvisor seeks
the best overall terms available. In assessing the best
overall terms available for any transaction, the Subadvisor
will consider the factors it deems relevant, including the
breadth of the market in the security, the price of the
security, the financial condition and execution capability
of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a
continuing basis. In addition, each Advisory Agreement
between the Trust and the Subadvisor authorizes the
Subadvisor, in selecting brokers or dealers to execute a
particular transaction, and in evaluating the best overall
terms available, to consider the brokerage and research
services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the
Portfolio and/or other accounts over which the Subadvisor
or its affiliates exercise investment discretion. The fees
under the Management Agreement and the Advisory Agreements,
respectively, are not reduced by reason of a Portfolio's
Subadvisor receiving brokerage and research services. The
Board of Trustees will periodically review the commissions
paid by a Portfolio to determine if the commissions paid
over representative periods of time were reasonable in
relation to the benefits inuring to the Portfolio. Over-
the-counter purchases and sales by a Portfolio are
transacted directly with principal market makers except in
those cases in which better prices and executions may be
obtained elsewhere.

To the extent consistent with applicable provisions of the
1940 Act and the rules and exemptions adopted by the SEC
under the 1940 Act, the Board of Trustees has determined
that transactions for a Portfolio may be executed through
Salomon Smith Barney and other affiliated broker-dealers
if, in the judgment of its Subadvisor, the use of an
affiliated broker-dealer is likely to result in price and
execution at least as favorable as those of other qualified
broker-dealers, and if, in the transaction, the affiliated
broker-dealer charges the Portfolio a fair and reasonable
rate.

The Portfolios will not purchase any security, including
U.S. Government Securities or Obligations, during the
existence of any underwriting or selling group relating
thereto of which Salomon Smith Barney is a member, except
to the extent permitted by the SEC.

The Portfolios may use Salomon Smith Barney and other
affiliated broker-dealers as a commodities broker in
connection with entering into futures contracts and options
on futures contracts if, in the judgment of the Subadvisor,
the use of an affiliated broker-dealer is likely to result
in price and execution at least as favorable as those of
other qualified broker-dealers, and if, in the transaction,
the affiliated broker-dealer charges the Portfolio a fair
and reasonable rate. Salomon Smith Barney has agreed to
charge the Portfolios commodity commissions at rates
comparable to those charged by Salomon Smith Barney to its
most favored clients for comparable trades in comparable
accounts.


BROKERAGE COMMISSIONS PAID TO SALOMON SMITH BARNEY

The following table sets forth certain information
regarding each Portfolio's payment
of brokerage commissions for the fiscal year ended August
31, 2000:






Portfolio




Total
Brokerage
Commissions



Commissions
paid to
Salomon
Smith
Barney and
Affiliates

% of Total
Brokerage
Commissions
paid to
Salomon
Smith
Barney and
Affiliates
% of Total
Dollar
Amount of
Transaction
s Involving
Commissions
Paid to
Salomon
Smith
Barney and
Affiliates

Balanced Investments
$48,616
$2,550
5.25%
1.05%
Large Capitalization
Value Equity
Investments
2,619,944
58,133
2.22
1.88
Large Capitalization
Growth Investments
1,547,137
3,240
0.21
0.15
Small Capitalization
Value Equity
Investments
736,866
5,964
0.81
0.42
Small Capitalization
Growth Investments
1,959,457
12,474*
0.64
0.17
International Equity
Investments
3,990,924
24,707
0.62
0.94
Emerging Markets
Equity Investments
1,861,903
  13,190**
0.71
0.18
 *Includes $4,488 for execution, research and statistical
services.
 *Includes $377 for execution, research and statistical
services.

Government Money Investments, Intermediate Fixed Income
Investments, Long-Term Bond Investments, Municipal Bond
Investments, Mortgage Backed Investments, International
Fixed Income Investments, Multi-Sector Fixed Income
Investments and High Yield Investments did not pay
brokerage commissions during the year ended August 31,
2000.


The following table sets forth certain information
regarding each Portfolio's payment
of brokerage commissions for the fiscal year ended August
31, 1999:






Portfolio




Total
Brokerage
Commissions



Commissions
paid to
Salomon
Smith
Barney

% of Total
Brokerage
Commissions
paid to
Salomon
Smith
Barney
% of Total
Dollar
Amount of
Transaction
s Involving
Commissions
Paid to
Salomon
Smith
Barney

Balanced Investments
$144,938
$3,636
  2.51%
0.45%
Large Capitalization
Value Equity
Investments
2,358,891
91,291*
3.87

4.36
Large Capitalization
Growth Investments
930,284
0
0.00

0.00
Small Capitalization
Value Equity
Investments
1,604,130
17,682
1.10

0.51
Small Capitalization
Growth Investments
1,633,318
0
0.00

0.00
International Equity
Investments
2,541,653
9,755
0.38

0.64
Emerging Markets
Equity Investments
1,585,052
1,261
0.08

0.08
 *Includes $8,906 for execution, research and statistical
services.

Government Money Investments, Intermediate Fixed Income
Investments, Long-Term Bond Investments, Municipal Bond
Investments, Mortgage Backed Investments, International
Fixed Income Investments and High Yield Investments did not
pay brokerage commissions during the year ended August 31,
1999.  There is no information present for Multi-Sector
Fixed Income Investments because it commenced operations on
October 1, 1999.


The following table sets forth certain information
regarding each Portfolio's payment of brokerage commissions
for the fiscal year ended August 31, 1998:






Portfolio




Total
Brokerage
Commissions



Commissions
paid to
Salomon
Smith
Barney

% of Total
Brokerage
Commissions
paid to
Salomon
Smith
Barney
% of Total
Dollar
Amount of
Transaction
s Involving
Commissions
Paid to
Salomon
Smith
Barney

Balanced Investments
$108, 343
$27,565
25.44%
14.34%
Large Capitalization
Value Equity
Investments
2,783,192
152,635
5.48
4.44
Large Capitalization
Growth Investments
737,579
9
0.001
0.00
Small Capitalization
Value Equity
Investments
1,470,232
24,868
1.69
0.78
Small Capitalization
Growth Investments
1,550,679
6,218
0.40
0.14
International Equity
Investments
3,180,676
70,525
2.22
0.43
Emerging Markets
Equity Investments
2,550,496
0
0.00
0.00

Government Money Investments, Intermediate Fixed Income
Investments, Long-Term Bond Investments, Municipal Bond
Investments, Mortgage Backed Investments, International
Fixed Income Investments and High Yield Investments did not
pay brokerage commissions during the year ended August 31,
1998.



PORTFOLIO TURNOVER

Government Money Investments may attempt to increase yields
by trading to take advantage of short-term market
variations, which results in high portfolio turnover.
Because purchases and sales of money market instruments are
usually effected as principal transactions, this policy
does not result in high brokerage commissions to the
Portfolio. Municipal Bond Investments, Mortgage Backed
Investments, International Fixed Income and Emerging
Markets Equity Investments may engage in active short-term
trading to benefit from yield disparities among different
issues of securities, to seek short-term profits during
periods of fluctuating interest rates or for other reasons.
The other Portfolios do not intend to seek profits through
short-term trading. Nevertheless, the Portfolios will not
consider portfolio turnover rate a limiting factor in
making investment decisions.

A Portfolio's turnover rate is calculated by dividing the
lesser of purchases or sales of its portfolio securities
for the year by the monthly average value of the portfolio
securities. Securities or options with remaining maturities
of one year or less on the date of acquisition are excluded
from the calculation. Because the Portfolios are authorized
to engage in transactions in options, they may experience
increased portfolio turnover under certain market
conditions as a result of their investment strategies. For
instance, the exercise of a substantial number of options
written by a Portfolio (because of appreciation of the
underlying security in the case of call options or
depreciation of the underlying security in the case of put
options) could result in a turnover rate in excess of 100%.
A portfolio turnover rate of 100% would occur if all of a
Portfolio's securities that are included in the computation
of turnover were replaced once during a period of one year.

Certain practices that may be employed by a Portfolio could
result in high portfolio turnover. For example, portfolio
securities may be sold in anticipation of a rise in
interest rates (market decline) or purchased in
anticipation of a decline in interest rates (market rise)
and later sold. In addition, a security may be sold and
another of comparable quality purchased at approximately
the same time to take advantage of what a Subadvisor
believes to be a temporary disparity in the normal yield
relationship between the two securities. These yield
disparities may occur for reasons not directly related to
the investment quality of particular issues or the general
movement of interest rates, such as changes in the overall
demand for, or supply of, various types of securities.
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 a Portfolio's shares
as well as by requirements that enable a Portfolio to
receive favorable tax treatment.


The Portfolios' portfolio turnover rates for the last two
fiscal years were as follows:



Portfolio
Year Ended
August 31,
2000
Year Ended
August 31,
1999
Government Money Investments
N/A
N/A
Intermediate Fixed Income
Investments
195%
207%
Long-Term Bond Investments
358%
30%
Municipal Bond Investments
37%
142%
Mortgage Backed Investments
28%
87%
High Yield Investments
129%
122%
Balanced Investments
303%
332%
Large Capitalization Value Equity
Investments
78%
54%
Large Capitalization Growth
Investments
59%
34%
Small Capitalization Value Equity
Investments
72%
53%
Small Capitalization Growth
Investments
110%
108%
International Equity Investments
75%
45%
International Fixed Income
Investments
225%
204%
Emerging Markets Equity Investments
110%
135%
Multi-Sector Fixed Income
Investments
249%
N/A


INVESTMENT MANAGEMENT AND OTHER SERVICES

Manager; Subadvisors; Administrator.  The Manager serves as
investment manager to the Trust pursuant to an investment
management agreement ("Management Agreement"). Each
Subadvisor serves as investment advisor to a Portfolio
pursuant to separate written agreements with the Portfolios
("Advisory Agreements"). SSB Citi serves as administrator
to the Portfolio pursuant to a written agreement
("Administration Agreement").

The Portfolios bear their own expenses, which generally
include all costs not specifically borne by the Manager,
the Subadvisors, and SSB Citi.  Included among the
Portfolios' expenses are costs incurred in connection with
a Portfolio's organization; investment management and
administration fees; fees for necessary professional and
brokerage services; fees for any pricing service; the costs
of regulatory compliance; and costs associated with
maintaining the Trust's legal existence and shareholder
relations.  As administrator, SSB Citi generally oversees
all aspects of the Trust's administration and operations
including furnishing the Trust with statistical and
research data, clerical help, accounting, data processing,
bookkeeping, internal auditing and legal services and
certain other services required by the Trust, prepares
reports to the Trust's shareholders and prepares tax
returns, reports to and filings with the SEC and state blue
sky authorities.


Under the Management Agreement, each Portfolio pays SSB
Citi a fee, calculated daily and paid monthly, based on the
rates applied to the value of each Portfolio's average
daily net assets. In addition, SSB Citi pays each
Subadvisor, based on the rates applied to each respective
Portfolio's average daily net assets on a monthly basis.
The Subadvisor for each Portfolio, as well as the  maximum
allowable annual management fee and advisory fee paid by
SSB Citi to each Subadvisor are indicated below:
										Maximum

	Allowable
A
n
n
u
a
l
Subadvisor
	Management
Portfolio
	Subadvisors		Fee 		Fee

 Government Money Investments
Standish, Ayer & Wood, Inc.
                                            on the first
$100 million 		0.15%     	0.15%
                                            on the amount
over $100 million	0.10         	0.15

 High Yield Investments
Alliance Capital Management L.P.   	0.45
		0.70


 Intermediate Fixed Income Investments
Metropolitan West Asset Management Co.
0.20		0.40

                                       Pacific Investment
Management Co. 	     0.25		0.40

			BlackRock Financial Management, Inc.
 		 	     on the first $500 million
0.20      	0.40
                                            on the amount
over $500 million	     0.15		0.40


 Long-Term Bond Investments
Western Asset Management Co.		0.20
	0.40

 Municipal Bond Investments
Smith Affiliated Capital Corp.
	0.20		0.40

 Mortgage Backed Investments
Utendahl Capital Management CFI	0.25
	0.50

 Balanced Investments
Laurel Capital Advisors, LLP		0.30
	0.60

                                        Seix Investment
Advisors, Inc. 		0.25		0.60




A
n
n
u
a
l
Subadvisor
	Management
Portfolio
	Subadvisors		Fee 		Fee

 Large Capitalization Value Equity Investments
Barclays Global Fund Advisors		0.02%
		0.32%

                                       The Boston Co. Asset
Management, Inc.:
                                                   on the
first $350 million 		0.30		0.60
                                                   on the
amount over $350 million 	0.25		0.60

                                       Parametric Portfolio
Associates:
                                              	on the
first $300 million		 0.20		0.50
                                               	on the
amount over $300 million 0.15		0.45

Chartwell Investment Partners		0.30
	0.60

 Large Capitalization Growth Investments
Turner Investment Partners, Inc.:
                                             	on the
first $300 million		  0.35		0.60
                                               	on the
amount over $300 million  0.30 		0.60

                                       Barclays Global Fund
Advisors		  0.02		0.32

 TCW Investment Management Co.:
                                             	on the
first $500 million		  0.40		0.60
                                               	on the
amount over $500 million  0.35 		0.60


 Small Capitalization Value Equity Investments

NFJ Investment Group
                                                    on the
first $450 million		  0.50		0.80
                                               	on the
amount over $450 million  0.45		0.75

                                       Rutabaga Capital
Management LLC          0.50		0.80

                                       Mellon Capital
Management Corp. 	  0.06		0.36

 Small Capitalization Growth Investments
Wall Street Associates			0.50
	0.80
                                       Mellon Capital
Management Corp.	0.06		0.36
                                       Westpeak Investment
Advisors, L.P.	0.50		0.80
                                       Kern Capital
Management  LLC 	0.50		0.80
Westfield Capital Management Co., Inc.
	0.50		0.80




A
n
n
u
a
l
Subadvisor
	Management
Portfolio
	Subadvisors		Fee 		Fee

International Equity Investments
             Oechsle International    Advisors,
LLC	  0.40%		0.70%

                                       Scudder Kemper
Investments, Inc.
	on the first $300 million
0.45		0.70
                                               	on the
amount over $300 million  0.40 		0.70

                                       State Street Global
Advisors 		   0.06		0.36

 International Fixed Income Investments
Julius Baer Investments Management Inc.
0.25		0.50

 Emerging Markets Equity Investments
          Foreign & Colonial Emerging Markets
Ltd.  0.60		0.90
                                    State Street Global
Advisors		   0.60		0.90
                                    Baring Asset
Management, Inc.		   0.60		0.90

Multi-Sector Fixed Income Investments
 			Metropolitan West Asset Management
Co.0.20      	0.45
 			Western Asset Management Co.
0.20		0.45
Alliance Capital Management L.P.
0.45      	0.45
Utendahl Capital Management CFI
0.25		0.45


For the year ended August 31, 2000, the Portfolios
accrued investment management and administration
fees as follows:

Portfolio
Management Fee
Administration
Fee
Government Money Investments
$353,955
$542,112
High Yield Investments
797,658
227,902
Intermediate Fixed Income
Investments
2,652,133
1,280,232
Long-Term Bond Investments
356,034
178,017
Municipal Bond Investments
225,438
112,719
Mortgage Backed Investments
550,030
220,012
Balanced Investments
400,180
137,760
Large Capitalization Value Equity
Investments
8,722,993
3,753,593
Large Capitalization Growth
Investments
10,060,076
5,084,520
Small Capitalization Value Equity
Investments
4,199,206
1,513,068
Small Capitalization Growth
Investments
8,804,328
2,862,089
International Equity Investments
9,305,764
3,299,702
International Fixed Income
Investments
1,219,508
485,469
Emerging Markets Equity Investments
2,491,540
553,676
Multi-Sector Fixed Income
Investments
98,644
50,248

For the fiscal year ended August 31, 2000, management,
administration and custody fees, in the aggregate, were
waived as follows: Government Money Investments - $413,632;
Multi-Sector Fixed Income Investments - $94,359; Mortgage
Backed Investments - $179,068; and Balanced Investments -
$106,924.

For the fiscal years ended August 31, 1999 and 1998 the
Portfolios accrued investment management and administration
fees as follows:



1999
1998
Portfolio
Management
Fee
Administrati
on Fee
Management
Fee
Administrati
on Fee

Government Money Investments

$497,007

$662,677
$624,357
$832,477
High Yield Investments
923,581
263,880
47,537
13,582
Intermediate Fixed Income
Investments
2,448,152
1,224,478
1,862,860
934,088
Long-Term Bond Investments
559,894
279,947
703,985
351,993
Municipal Bond Investments
284,311
142,156
255,992
127,996
Mortgage Backed Investments
732,616
293,046
766,937
306,775
Balanced Investments
436,950
148,790
506,736
168,912
Large Capitalization Value
Equity Investments
9,718,618
3,901,989
9,677,020
3,922,176
Large Capitalization Growth
Investments
8,640,613
4,546,476
8,517,286
3,867,159
Small Capitalization Value
Equity Investments
4,638,188
1,530,784
4,705,182
1,721,750
Small Capitalization Growth
Investments
6,456,592
2,077,503
6,308,016
2,167,276
International Equity
Investments
6,938,953
2,706,824
7,088,985
2,704,967
International Fixed Income
Investments
1,165,291
475,963
718,551
287,421
Emerging Markets Equity
Investments
2,444,974
536,702
2,430,735
540,163
Multi-Sector Fixed Income
Investments
N/A
N/A
N/A
N/A

For the fiscal year ended August 31, 1999, management,
administration and custody fees, in the aggregate, were
waived as follows: Government Money Investments - $364,437
and Mortgage Backed Investments - $163,318.

For the fiscal year ended August 31, 1998, management,
administration and custody fees, in the aggregate, were
waived as follows: Government Money Investments - $250,798;
Mortgage Backed Investments - $185,737; and High Yield
Investments - $85,979.

The Manager has agreed to waive a portion of the fees
otherwise payable to it by certain of the Trust's
Portfolios so that the Manager would retain, as its annual
management fee, no more than 0.30% of each such Portfolio's
average daily net assets.

SSB Citi, through its predecessors, was incorporated on
March 12, 1968 under the laws of Delaware and is a
registered investment adviser. SSB Citi renders investment
advice to investment companies that had aggregate assets
under management as of October 31, 2000 in excess of $140
billion.  The Consulting Group, a division of SSB Citi, has
extensive experience in providing investment advisor
selection services. The Consulting Group, through its
predecessors, was established in 1973 with the primary
objective of matching the investment needs of institutional
and individual clients with appropriate and qualified money
management organizations throughout the nation. In 1989,
the Consulting Services Division was restructured and its
research and investment advisory evaluation services
functions were segregated and named the Consulting Group.
The Consulting Group's analysts, in the aggregate, have
many years of experience performing asset manager searches
for institutional and individual clients. These analysts
rely on the Manager's comprehensive database of money
management firms, through which the Manager tracks the
historic and ongoing performance of over 800 of the more
than 16,000 registered investment advisors, and annually
conducts over 300 on-sight evaluation visits to advisors.
As of August 31, 2000, the Consulting Group provided
services with respect to over $226 billion in client assets
representing more than 588,000 separate accounts under a
variety of programs designed for individual and
institutional investors.


The Manager and the Subadvisors each pay the salaries of
all officers and employees who are employed by them and the
Trust, and the Manager maintains office facilities for the
Trust. The Manager and the Subadvisors bear all expenses in
connection with the performance of their respective
services under the Management Agreement, the Advisory
Agreements, and the Administration Agreement.

As noted in the Prospectus, subject to the supervision and
direction of the Manager and, ultimately, the Board of
Trustees, each Subadvisor manages the securities held by
the Portfolio it serves in accordance with that Portfolio's
stated investment objectives and policies, makes investment
decisions for the Portfolio and places orders to purchase
and sell securities on behalf of the Portfolio.

Subject to the supervision and direction of the Board of
Trustees, the Manager provides to the Trust investment
management evaluation services principally by performing
initial due diligence on prospective Subadvisors for the
Portfolios and thereafter monitoring each Subadvisor's
performance through quantitative and qualitative analysis
as well as periodic in-person, telephonic and written
consultations with Subadvisors.  In evaluating prospective
Subadvisors, the Manager considers, among other factors,
each Subadvisor's level of expertise; relative performance
and consistency of performance over a minimum period of
five years; level of adherence to investment discipline or
philosophy, personnel, facilities, financial strength and
quality of service and client communications.  The Manager
has responsibility for communicating performance
expectations and evaluations to Subadvisors and ultimately
recommending to the Board of Trustees whether Subadvisors'
contracts should be renewed, modified or terminated. The
Manager provides written reports to the Board of Trustees
regarding the results of its evaluations and monitoring
functions.  The Manager is also responsible for conducting
all operations of the Trust except those operations
contracted to the Subadvisor, custodian, transfer agent or
administrator.

Investors should be aware that the Manager may be subject
to a conflict of interest when making decisions regarding
the retention and compensation of particular Subadvisors.
However, the Manager's decisions, including the identity of
a Subadvisor and the specific amount of the Manager's
compensation to be paid to a Subadvisor, are subject to
review and approval by a majority of the Board of Trustees
and separately by a majority of the Trustees who are not
affiliated with the Manager or any of its affiliates.

Investors should also be aware that through Smith Barney
Advisory Services, the Consulting Group serves as
investment adviser to each participant in such service and
receives a fee from each participant that does not vary
based on the Portfolios of the Trust recommended for the
participant's investments.  At the same time, the
Consulting Group serves as the Trust's Manager with
responsibility for identifying, retaining, supervising and
compensating each Portfolio's Subadvisor and receives a fee
from each Portfolio of the Trust.  The portion of such fee
that is retained by the Manager varies based on the
Portfolio involved.  Consequently, the Consulting Group,
when making asset allocation recommendations for
participants in Smith Barney Advisory Services, may be
presented with a conflict of interest as to the specific
Portfolios of the trust recommended for investment.  The
Consulting Group, however, is subject to and intends to
comply fully with standards of fiduciary duty that require
that it act solely in the best interest of the participant
when making investment recommendations.

The Trust has received an exemption (the "Exemption") from
certain provisions of the 1940 Act which would otherwise
require the Manager to obtain formal shareholder approval
prior to engaging and entering into investment advisory
agreements with Subadvisors.  The Exemption is based on
among other things:  (1) the Manager will select, monitor,
evaluate and allocate assets to the Subadvisors and ensure
that the Subadvisors comply with a Portfolio's investment
objective, policies and restrictions; (2) shares of a
Portfolio relying on the Exemption will not be subject to
any sales loads or redemption fees or other charges for
redeeming shares; (3) the Trust will provide to
shareholders certain information about a new Subadvisor and
its investment advisory contract within 90 days of the
engagement of new Subadvisor; (4) the Trust will disclose
in its prospectus the terms of the Exemption; and (5) the
Trustees, including a majority of the "non-interested"
Trustees, must approve each investment advisory contract in
the manner required under the 1940 Act. Any changes to the
Management Agreement between the Trust and the Manager
still require shareholder approval.

Code of Ethics

Pursuant to Rule 17j-1 of the 1940 Act, each, the Trust,
its investment adviser and principal underwriter has
adopted a code of ethics that permits personnel to invest
in securities for their own accounts, including securities
that may be purchased or held by the Portfolio of the
Trust.  All personnel must place the interests of clients
first and avoid activities, interests and relationships
that might interfere with the duty to make decisions in the
best interests of the clients.  All personal securities
transactions by employees must adhere to the requirements
of the code and must be conducted in such a manner as to
avoid any actual or potential conflict of interest, the
appearance of such a conflict, or the abuse of an
employee's position of trust and responsibility.

A copy of the Trust's code of ethics is on file with the
Securities and Exchange Commission.

Auditors

KPMG LLP, 757 Third Avenue, New York, New York 10017,
currently serves as the independent auditors of the Trust
and rendered an opinion on the Trust's most recent
financial statements and financial highlights.

Organization of the Trust.   The Trust has been organized
as an unincorporated business trust under the laws of The
Commonwealth of Massachusetts pursuant to a Master Trust
Agreement dated April 12, 1991, as amended from time to
time (the "Trust Agreement").

In the interest of economy and convenience, certificates
representing shares in the Trust are not physically issued.
PNC Bank, N.A., the Trust's custodian, maintains a record
of each shareholder's ownership of Trust shares. Shares do
not have cumulative voting rights, which means that holders
of more than 50% of the shares voting for the election of
Trustees can elect all Trustees. Shares are transferable,
but have no preemptive, conversion or subscription rights.
Shareholders generally vote on a Trust-wide basis, except
with respect to continuation of the Advisory Agreements, in
which case shareholders vote by Portfolio.

Massachusetts law provides that shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Trust. The Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust,
however, and requires that notice of the disclaimer be
given in each agreement, obligation or instrument entered
into or executed by the Trust or a Trustee. The Trust
Agreement provides for indemnification from the Trust's
property for all losses and expenses of any shareholder
held personally liable for the obligations of the Trust.
Thus, the risk of a shareholder's incurring financial loss
on account of shareholder liability is limited to
circumstances in which the Trust would be unable to meet
its obligations, a possibility that the Trust's management
believes is remote. Upon payment of any liability incurred
by the Trust, the shareholder paying the liability will be
entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of the
Trust in a manner so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of
the Trust.

PURCHASE OF SHARES

Purchases of shares of a Portfolio through an Advisory
Service must be made through a brokerage account maintained
with Salomon Smith Barney.  Payment for Portfolio shares
must be made by check directly to Salomon Smith Barney or
to a broker that clears securities transactions through
Salomon Smith Barney.  No brokerage account or inactivity
fee is charged in connection with a brokerage account
through which an investor purchases shares of a Portfolio.

Shares of the Portfolios are available exclusively to
participants in Advisory Services and certain asset based
fee programs and are generally designed to relieve
investors of the burden of devising an asset allocation
strategy to meet their individual needs as well as
selecting individual investments within each asset category
among the myriad choices available. Advisory Services
generally provide investment advice in connection with
investments among the Trust's Portfolios by identifying the
investor's risk tolerances and investment objectives
through evaluation of an investment questionnaire;
identifying and recommending in writing an appropriate
allocation of assets among the Portfolios that conform to
those tolerances and objectives in a written
recommendation; and providing on a periodic basis, a
written monitoring report to the investor containing an
analysis and evaluation of an investor's account and
recommending any appropriate changes in the allocation of
assets among the Portfolios.  Usually under an Advisory
Service, all investment decisions ultimately rest with the
investor and investment discretion is not given to the
investment adviser.

The TRAK(r) Personalized Investment Advisory Service ("TRAK")
sponsored by Salomon Smith Barney is one such advisory
service.  Under the TRAK program the Consulting Group, in
its capacity as investment adviser to participants in TRAK,
generally directly provides to investors asset allocation
recommendations and related services with respect to the
Portfolios based on an evaluation of an investor's
investment objective and risk tolerances.  Shares of the
Portfolios are offered for purchase and redemption at their
respective net asset value next determined, without
imposition of any initial or contingent deferred sales
charge except that the Consulting Group is paid directly by
the investors purchasing Portfolio shares based on the
recommendation of investment advisors other than the
Consulting Group, or who contract with the Consulting Group
for services other than those described above, pay, in lieu
of TRAK charges, different fees for different levels of
services as agreed upon with their investment advisers.

REDEMPTION OF SHARES

Detailed information on how to redeem shares of a Portfolio
is included in the Prospectus. The right of redemption of
shares of a Portfolio may be suspended or the date of
payment postponed (i) for any periods during which the New
York Stock Exchange, Inc. (the "NYSE") is closed (other
than for customary weekend and holiday closings), (ii) when
trading in the markets a Portfolio normally utilizes is
restricted, or an emergency, as defined by the rules and
regulations of the SEC, exists making disposal of a
Portfolio's investments or determination of its net asset
value not reasonably practicable or (iii) for such other
periods as the SEC by order may permit for the protection
of a Portfolio's shareholders.

REDEMPTIONS IN KIND

If the Board of Trustees determines that it would be
detrimental to the best interests of a Portfolio's
shareholders to make a redemption payment wholly in cash,
the Portfolio may pay, in accordance with rules adopted by
the SEC, any portion of a redemption in excess of the
lesser of $250,000 or 1% of the Portfolio's net assets by a
distribution in kind of readily marketable portfolio
securities in lieu of cash.  Redemptions failing to meet
this threshold must be made in cash.  Shareholders
receiving distributions in kind of portfolio securities may
incur brokerage commissions when subsequently disposing of
those securities.

NET ASSET VALUE

Each Portfolio's net asset value per share is calculated by
SSB Citi on each day, Monday through Friday, except days on
which the NYSE is closed.  The NYSE is currently 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 when one of those holidays falls on a
Saturday or on the subsequent Monday when one of those
holidays falls on a Sunday.  On those days, securities held
by a Portfolio may nevertheless be actively traded and the
value of that Portfolio's shares could be significantly
affected.

Net asset value per share is determined as of the close of
trading on the NYSE and is computed by dividing the value
of a Portfolio's net assets by the total number of its
shares outstanding. Securities that are primarily traded on
foreign exchanges are generally valued for purposes of
calculating a Portfolio's net asset value at the preceding
closing values of the securities on their respective
exchanges, except that, when an occurrence subsequent to
the time a value was so established is likely to have
changed that value, the fair market value of those
securities will be determined by consideration of other
factors by or under the direction of the Board of Trustees.
A security that is primarily traded on a domestic or
foreign stock exchange is valued at the last sale price on
that exchange as reported to a Portfolio or, if no sales
occurred during the day, these investments are quoted at
the mean between the current bid and ask prices.  A
security that is listed or traded on more than one exchange
is valued for purposes of calculating a Portfolio's net
asset value at the quotation on the exchange determined to
be the primary market for the security. Debt securities of
U.S. issuers (other than U.S. Government Securities and
short-term investments) are valued by SSB Citi after
consultation with an independent pricing service. When, in
the judgment of the pricing service, quoted bid prices are
available and are representative of the bid side of the
market, these investments are valued at the mean between
the quoted bid and ask prices.  Investments for which no
readily obtainable market quotations are available, in the
judgment of the pricing service, are carried at fair value
as determined by the pricing service. The procedures of the
pricing service are reviewed periodically by the officers
of the Trust under the general supervision and
responsibility of the Board of Trustees.  An option
written by a Portfolio is generally valued at the last sale
price or, in the absence of the last sale price, the last
offer price.  An option purchased by a Portfolio is
generally valued at the last sale price or, in the absence
of the last sale price, the last bid price.  The value of a
futures contract is equal to the unrealized gain or loss on
the contract determined by marking the contract to the
current settlement price for a like contract on the
valuation date of the futures contract.  A settlement price
may not be used if the market makes a limit move with
respect to a particular futures contract or if the
securities underlying the futures contract experience
significant price fluctuations after the determination of
the settlement price.  When a settlement price cannot be
used, futures contracts will be valued at their fair market
value as determined by or under the direction of the Board
of Trustees.

All assets and liabilities initially expressed in foreign
currency values will be converted into U.S. dollar values
at the mean between the bid and offered quotations of the
currencies against U.S. dollars as last quoted by a
recognized dealer.  If the bid and offered quotations are
not available, the rate of exchange will be determined in
good faith by the Board of Trustees.  In carrying out the
Board's valuation policies, SSB Citi may consult with an
independent pricing service retained by the Trust.

The valuation of the securities held by a Portfolio in U.S.
dollar-denominated securities with less than 60 days to
maturity are based upon their amortized cost, which does
not take into account unrealized capital gains or losses.
Amortized cost valuation involves initially valuing an
instrument at its cost and, thereafter, assuming a constant
amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method
provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive
if it sold the instrument.

DETERMINATION OF PERFORMANCE

From time to time, the Trust may quote a Portfolio's yield
or total return in advertisements or in reports and other
communications to shareholders.

Yield and Equivalent Taxable Yield

For a Portfolio other than Government Money Investments,
the 30-day yield figure described in the Prospectus is
calculated according to a formula prescribed by the SEC,
expressed as follows:


YIELD = 2[(a - b + 1)6 - 1]
cd
Where:
	a = dividends and interest earned during the period.

	b= expenses accrued for the period (net of
reimbursement), including a ratable portion of the maximum
annual fee for participation in TRAK.

	c= the average daily number of shares outstanding
during the period that were entitled to receive dividends.

	d= the maximum offering price per share on the last
day of the period.

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

A Portfolio's equivalent taxable 30-day yield is computed
by dividing the portion of the Portfolio's 30-day yield
that is tax exempt by one minus a stated income tax rate
and adding the product to any portion of the Portfolio's
yield that is not tax exempt.

The yield for Municipal Bond Investments for the 30-day
period ended August 31, 2000 was 4.99%.  The equivalent
taxable yield for that same period was 7.80%, assuming the
payment of Federal income taxes at a rate of 36%.

The yields for the thirty-day period ended August 31, 2000
for the following funds were:

Portfolio



Long-Term Bond Investments
  6.12%
Intermediate Fixed Income
Investments
  6.22
International Fixed Income
Investments
  3.66
Mortgage-Backed Investments
  6.24
High Yield Investments
13.10

The yield for Government Money Investments is computed by:
(a) determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing
account in the Portfolio having a balance of one share at
the beginning of a seven day period for which yield is to
be quoted; (b) subtracting a hypothetical charge reflecting
deductions from shareholder accounts; (c) dividing the
difference by the value of the account at the beginning of
the period to obtain the base period return; and (d)
annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased
with dividends declared on the original share and any such
additional shares, but does not include realized gains and
losses or unrealized appreciation and depreciation. In
addition, the Portfolio may calculate a compound effective
annualized yield by adding one to the base period return
(calculated as described above), raising the sum to a power
equal to 365/7 and subtracting one.

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

For the seven-day period ended August 31, 2000, the yield
for the Government Money Investments portfolio was 5.96%
(the effective yield was 6.14%) with an average dollar-
weighted portfolio maturity of 33 days.

Average Annual Total Return

From time to time, the Trust may advertise a Portfolio's
"average annual total return" over various periods of time.
This total return figure shows the average percentage
change in value of an investment in that Portfolio from the
beginning date of the measuring period to the ending date
of the measuring period and is reduced by the maximum
Salomon Smith Barney Advisory Service fee during the
measuring period.  The figure reflects changes in the price
of a Portfolio's shares and assumes that any income,
dividends and/or capital gains distributions made by a
Portfolio during the period are reinvested in shares of
that Portfolio.  Figures will be given for recent one-,
five- and ten-year periods (if applicable) and may be given
for other periods as well (such as from commencement of the
Portfolios' operations or on a year-by-year basis).
Aggregate total returns also may be shown by means of
schedules, charts or graphs, and may indicate subtotals of
the various components of total return (that is, the change
in value of initial investment, income dividends and
capital gains distributions).

In reports or other communications to shareholders or in
advertising material, a Portfolio may quote total return
figures that do not reflect Salomon Smith Barney Advisory
Service fees (provided that these figures are accompanied
by standardized total return figures calculated as
described above), as well as compare its performance with
that of other mutual funds as listed in the rankings
prepared by Lipper Analytical Services, Inc. or similar
independent services that monitor the performance of mutual
funds or with other appropriate indices of investment
securities.  The performance information also may include
evaluations of a Portfolio published by nationally
recognized ranking services and by financial publications
that are nationally recognized, such as Barron's, Business
Week, CDA Investment Technologies, Inc., Changing Times,
Forbes, Fortune, Institutional Investor, Investor's Daily,
Kiplinger's Personal Finance Magazine, Money, Morningstar
Mutual Fund Values, The New York Times, USA Today and The
Wall Street Journal.


A Portfolio's average annual total return figures are
computed according to a formula prescribed by the SEC,
expressed as follows:

P(1+T)n = ERV

Where:
	P=	a hypothetical initial payment of $1,000
T=	average annual total return, including the
effect of the maximum annual fee for
participation in TRAK.
	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 and the
effect of the maximum annual fee for
participation in TRAK.

The ERV assumes complete redemption of the hypothetical
investment at the end of the measuring period. A
Portfolio's net investment income changes in response to
fluctuations in interest rates and the expenses of the
Portfolio.  Consequently, the given performance quotations
should not be considered as representative of a Portfolio's
performance for any specified period in the future.

A Portfolio's net investment income changes in response to
fluctuations in interest rates and the expenses of the
Portfolio. A Portfolio's performance will vary from time to
time depending upon market conditions, the composition of
its portfolio and its operating expenses. Consequently, any
given performance quotation should not be considered
representative of a Portfolio's performance for any
specified period in the future. In addition, because
performance will fluctuate, it may not provide a basis for
comparing an investment in a Portfolio with certain bank
deposits or other investments that pay a fixed yield for a
stated period of time. Investors comparing a Portfolio's
performance with that of other mutual funds should give
consideration to the quality and maturity of the respective
investment companies' portfolio securities.

Comparative performance information may be used from time
to time in advertising the Portfolios' shares, including
data from Lipper Analytical Services, Inc., Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average and other industry publications.


The Portfolios' average annual total returns without the
effect of the maximum annual fee for participation in TRAK
and with the effect of fee waivers were as follows:



Portfolio
From
September
1, 1999
through
August 31,
2000
From
September
1, 1995
through
August 31,
2000
From
Inception**
** through
August 31,
2000
Government Money Investments
5.44%

5.01%
4.42%
High Yield Investments*
(9.37)%

N/A
(3.50)%
Intermediate Fixed Income
Investments
5.73%

5.39%
5.95%
Long-Term Bond Investments
9.50%
6.39%
6.43%
Municipal Bond Investments
6.79%
5.07%
5.54%
Mortgage Backed Investments
7.58%
6.22%
6.24%
Multi-Sector Fixed Income
Investments+
N/A
N/A
6.47%
Balanced Investments**
14.45%
13.59%
12.12%
Large Capitalization Value Equity
Investments
4.00%
15.96%
13.21%
Large Capitalization Growth
Investments
34.31%
26.87%
20.17%
Small Capitalization Value Equity
Investments
5.09%
10.76%
9.81%
Small Capitalization Growth
Investments
50.57%
18.34%
20.33%
International Equity Investments
19.17%
11.81%
10.70%
International Fixed Income
Investments
(6.13)%
3.15%
6.35%
Emerging Markets Equity
Investments***
9.62%
0.50%
0.50%

*	High Yield Investments commenced operations on July
13, 1998.
**		Balanced Investments commenced operations on February
16, 1993.
***	Emerging Market Equity Investments commenced
operations on April 21, 1994.
****	The remaining Portfolios commenced operations on
November 18, 1991.
+	Multi-Sector Fixed Income Investments commenced
operations on October 1, 1999.


The Portfolios' average annual total returns with the
effect of the maximum annual fee for participation in TRAK
and with the effect of fee waivers were as follows:



Portfolio
From
September 1,
1999 through
August 31,
2000
From
September
1, 1995
through
August 31,
2000
From
Inception**
** through
August 31,
2000
Government Money Investments
3.88%
3.45%
2.87%
High Yield Investments*
(10.71)%
N/A
(4.93)%
Intermediate Fixed Income
Investments
4.16%
3.82%
4.38%
Long-Term Bond Investments
7.88%
4.81%
4.85%
Municipal Bond Investments
5.21%
3.51%
3.98%
Mortgage Backed Investments
5.98%
4.64%
4.66%
Multi-Sector Fixed Income
Investments+
N/A
N/A
5.02%
Balanced Investments**
12.76%
11.91%
10.46%
Large Capitalization Value Equity
Investments
2.47%
14.24%
11.53%
Large Capitalization Growth
Investments
32.32%
24.99%
18.38%
Small Capitalization Value Equity
Investments
3.53%

9.12%
8.18%
Small Capitalization Growth
Investments
48.34%
16.59%
18.54%
International Equity Investments
17.41%
10.15%
9.06%
International Fixed Income
Investments
(7.53)%
1.62%
4.77%
Emerging Markets Equity
Investments***
7.99%
(1.00)%
(1.00)%
_________________
*		High Yield Investments commenced operations on July
13, 1998.
**		Balanced Investments commenced operations on February
16, 1993.
***	Emerging Market Equity Investments commenced
operations on April 21, 1994.
****	The remaining Portfolios commenced operations on
November 18, 1991.
+	Multi-Sector Fixed Income Investments commenced
operations on October 1, 1999.


TAXES

The following is a summary of certain federal income tax
considerations that may affect the Portfolios and their
shareholders.  In addition to the considerations described
below, there may be other federal, state, local or foreign
tax applications to consider.  The summary does not address
all of the potential federal income tax consequences that
may be applicable to a Portfolio or to all categories of
investors, some of which may be subject to special tax
rules.  The summary is not intended as a substitute for
individual tax advice and investors are urged to consult
their own tax advisors as to the tax consequences of an
investment in a Portfolio.  The summary is based on the
laws in effect on the date of this SAI, which are subject
to change.

Each Portfolio intends to continue to qualify in each year
as a separate "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"), by
complying with certain requirements regarding the sources
and distribution of its income and the diversification of
its assets.  Provided that a Portfolio (i) is a regulated
investment company and (ii) distributes to its shareholders
at least 90% of its taxable net investment income
(including, for this purpose, any excess of its net short-
term capital gain over its net long-term capital loss) for
a taxable year and 90% of its tax-exempt interest income
(reduced by certain expenses for that year), it will not be
liable for federal income taxes to the extent its taxable
net investment income and its net realized long-term and
short-term capital gains, if any, are distributed to its
shareholders in compliance with the Code's timing and other
requirements.

If, in any taxable year, a Portfolio 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 Portfolio
in computing its taxable income.  In addition, in the event
of a failure to qualify, a Portfolio's distributions, to
the extent derived from its 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 a long-term capital
gain or as tax-exempt interest.  If a Portfolio 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 a Portfolio failed to qualify as a
regulated investment company for a period greater than one
taxable year, the Portfolio may be required to recognize
any net built-in gains with respect to certain of its
assets (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.

In order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary
income and capital gains, a Portfolio may make an
additional distribution shortly before or shortly after
December 31 in each year of any undistributed ordinary
income or capital gains.  Each Portfolio generally will
seek to pay any additional dividends and distributions
necessary to avoid the application of this tax.

Interest on indebtedness incurred by a shareholder to
purchase or carry shares of Municipal Bond Investments will
not be deductible for federal income tax purposes. If a
shareholder receives exempt-interest dividends with respect
to any share of Municipal Bond Investments and if the share
is held by the shareholder for six months or less, then any
loss on the sale or exchange of the share may, to the
extent of the exempt-interest dividends, be disallowed. In
addition, the Code may require a shareholder that receives
exempt-interest dividends to treat as taxable income a
portion of certain otherwise non-taxable social security
and railroad retirement benefit payments. Furthermore, that
portion of any exempt-interest dividend paid by Municipal
Bond Investments that represents income derived from
certain revenue or AMT-Subject Bonds held by the Portfolio
may not retain its tax-exempt status in the hands of a
shareholder who is a "substantial user" of a facility
financed by such bonds, or a "related person" thereof.
Moreover, as noted in the Prospectus, some or all of
Municipal Bond Investments' exempt-interest dividends may
be a specific preference item, or a component of an
adjustment item, for purposes of the federal individual and
corporate alternative minimum taxes. In addition, the
receipt of Municipal Bond Investments' dividends and
distributions may affect a foreign corporate shareholder's
federal "branch profits" tax liability and the federal
"excess net passive income" tax liability of a shareholder
of a Subchapter S corporation. Shareholders should consult
their own tax advisors as to whether they are (i)
"substantial users" with respect to a facility or "related"
to such users within the meaning of the Code or (ii)
subject to a federal alternative minimum tax, the federal
"branch profits" tax, or the federal "excess net passive
income" tax.

As described above, a Portfolio may invest in certain types
of warrants, foreign currencies, forward contracts, options
and futures contracts. The Portfolios anticipate that these
investment activities will not prevent them from qualifying
as regulated investment companies.

A Portfolio'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 that, among other
things, may affect the character of gains and losses
realized by that Portfolio (i.e., may affect whether gains
or losses are ordinary or capital and, if capital, the
extent to which they are long-term or short-term),
accelerate recognition of income to the Portfolio and defer
Portfolio losses. These rules could therefore affect the
character, amount and timing of distributions to
shareholders. These provisions also (i) will require a
Portfolio to mark-to-market certain types of positions in
its portfolio (i.e., treat them as if they were closed
out), and (ii) may cause the Portfolio 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 that are referred to above.  Each Portfolio will
monitor its transactions, will make the appropriate tax
elections, if any, 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 seek to prevent disqualification of the Portfolio
as a regulated investment company.

As a general rule, a Portfolio's gain or loss on a sale or
exchange of an investment will be a long-term capital gain
or loss if the Portfolio has held the investment for more
than one year and will be a short-term capital gain or loss
if it has held the investment for one year or less. Gains
or losses on the sale of debt securities denominated in a
foreign currency may be recharacterized as ordinary income
or losses, as described below.

The Portfolios, other than Government Money Investments,
Intermediate Fixed Income Investments, Municipal Bond
Investments, Mortgage Backed Investments and Multi-Sector
Fixed Income Investments, expect to realize a significant
amount of net long-term capital gains that will be
distributed as described in the Prospectus. Distributions
of net realized long-term capital gains ("capital gain
dividends") will be taxable to shareholders as long-term
capital gains, regardless of how long a shareholder has
held Portfolio shares, and will be designated as capital
gain dividends in a written notice mailed to the
shareholders after the close of the Portfolio's prior
taxable year. If a shareholder receives a capital gain
dividend with respect to any share held for six months or
less, then any loss (to the extent not disallowed pursuant
to the other six-month rule described above with respect to
Municipal Bond Investments) on the sale or exchange of the
share, to the extent of the capital gain dividend, shall be
treated as a long-term capital loss.

Dividends or other income (including, in some cases,
capital gains) received by a Portfolio from investments in
foreign securities may be subject to withholding and other
taxes imposed by such countries.  Tax conventions between
certain countries and the United States may reduce or
eliminate such taxes in some cases.  A Portfolio 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 deductions or credits for such taxes on their
own tax returns.

A Portfolio may be required to treat amounts as taxable
income or gain, subject to the distribution requirements
referred to above, even though no corresponding amounts of
cash are received concurrently, as a result of (1) mark to
market, constructive sale or other rules applicable to
passive foreign investment companies or partnerships or
trusts in which the Portfolio invests or to certain
options, futures or forward contracts, or "appreciated
financial positions" or (2) the inability to obtain cash
distributions or other amounts due to currency controls or
restrictions on repatriation imposed by a foreign country
with respect to a Portfolio's investments (including
through depositary receipts) in issuers in such country or
(3) tax rules applicable to debt obligations acquired with
"original issue discount," including zero-coupon or
deferred payment bonds and pay-in-kind debt obligations, or
to market discount if an election is made with respect to
such market discount.  A Portfolio may therefore be
required to obtain cash to be used to satisfy these
distribution requirements by selling securities at times
that it might not otherwise be desirable to do so or
borrowing the necessary cash, thereby incurring interest
expenses.

Under Section 988 of the Code, gains or losses attributable
to fluctuations in exchange rates between the time a
Portfolio accrues income or receivables or expenses or
other liabilities denominated in a foreign currency and the
time the Portfolio actually collects such income or pays
such liabilities are generally treated as ordinary income
or ordinary loss.  Similarly, gains or losses on foreign
currency, foreign currency forward contracts, certain
foreign currency options or futures contracts and the
disposition of debt securities denominated in foreign
currency, to the extent attributable to fluctuations in
exchange rates between the acquisition and disposition
dates, are also treated as ordinary income or loss.

A Portfolio is permitted to carry forward any unused
capital losses to be utilized to offset its capital gains
realized during the eight-year period following the year in
which the losses arose, which will reduce the net realized
capital gains (if any) required to be distributed to
shareholders for those years.

On August 31, 2000, the unused capital loss carryovers, by
Portfolio, were approximately as follows:  Government Money
Investments, $30,000, Intermediate Fixed Income
Investments, $13,922,000, Long-Term Bond Investments,
$780,000, Municipal Bonds Investments, $733,000, Mortgage-
Backed Investments, $589,000, High Yield Investments,
$4,320,000, Multi-Sector Fixed Income Investments, $13,000,
International Fixed Income Investments, $1,461,000 and
Emerging Markets Equity Investments, $83,792,000. For
federal income tax purposes, these amounts are available to
be applied against future capital gains of the Portfolio
that has the carryovers, if any, that are realized prior to
the expiration of the applicable carryover.  The carryovers
expire as follows:

PORTFOLIO
August
31,





(in thousands)
2003
2004
2005
2006
2007
2008
Government Money
$12

$8
--
--
--
    $10
Intermediate Fixed
Income
387
$1,46
2
$773
--
--
11,300
Long-Term Bond
--
--
--
--
--

780
Municipal Bonds
--
--
--
--
--

733
Mortgage Backed
--
--
--
--
--

589
High Yield
--
--
--
--
--

4,320
Multi-Sector Fixed
Income
--
--
--
--
--

13
International Fixed
Income
--
--
--
--
--

1,461
Emerging Markets
Equity
--
--
--
--
$83,792
--

Dividends and Distributions

For federal income tax purposes, dividends declared by a
Portfolio in October, November or December as of a record
date in such a month and which are actually paid in January
of the following year will be taxable to shareholders as if
they were paid on December 31 of the year in which they are
declared rather than in the year in which shareholders
actually receive the dividends.

As a general rule, a shareholder's gain or loss on a
redemption or other disposition of Portfolio shares that is
treated as a sale under the Code will be a long-term
capital gain or loss if the shareholder has held his or her
Portfolio shares for more than one year and will be a
short-term capital gain or loss if he or she has held his
or her Portfolio shares for one year or less.

A Portfolio may realize net long-term capital gains.
Distributions of the excess of net long-term capital gain
over net short-term capital loss ("capital gain dividends"
if any) will be taxable to shareholders as long-term
capital gains, regardless of whether received in cash or
reinvested in additional shares and how long a shareholder
has held Portfolio shares. If a shareholder receives a
capital gain dividend with respect to any share and
redeems, sells or otherwise disposes of the share before it
has been held for more than six months, then any loss, to
the extent of the capital gain dividend, will be treated as
a long-term capital loss. Additionally, any loss realized
on a redemption, exchange or other disposition of Portfolio
shares generally 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 Portfolio, within a 61-day period
beginning 30 days before and ending 30 days after the
disposition of the shares.

Dividends paid from net investment income and distributions
of any excess of net short-term capital gain over net long-
term capital loss are taxable to shareholders as ordinary
income, regardless of how long shareholders have held their
Portfolio shares and whether such dividends and
distributions are received in cash or reinvested in
additional Portfolio shares.  Dividends paid by a Portfolio
that are declared from net investment income and are
attributable to qualifying dividends received by the
Portfolio from domestic corporations may qualify for the
federal dividends-received deduction for corporations.

Each shareholder will receive after the close of the
calendar year an annual statement as to the federal income
tax status of his or her dividends and distributions for
the prior calendar year.  Each shareholder will also
receive, if appropriate, various written notices after the
close of a Portfolio's prior taxable year as to the federal
income tax status of the Portfolio during the Portfolio's
prior taxable year. Shareholders should consult their tax
advisors as to any state and local taxes that may apply to
these dividends and distributions and the possible
availability of an exemption for dividends paid by a
Portfolio attributable to interest the Portfolio earns from
U.S. Government obligations.

If a Portfolio is the holder of record of any stock on the
record date for any dividends payable with respect to the
stock, these dividends will be included in the Portfolio's
gross income as of the later of (i) the date the stock
became ex-dividend with respect to the dividends (i.e., the
date on which a buyer of the stock would not be entitled to
receive the declared, but unpaid, dividends) or (ii) the
date the Portfolio acquired the stock. Accordingly, in
order to satisfy its income distribution requirements, a
Portfolio 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.

Investors considering buying shares of a Portfolio on or
just prior to the record date for a taxable dividend or
capital gain distribution should be aware that even if the
net asset value of the Portfolio's shares is reduced below
the investor's cost as a result of the distribution, the
amount of the forthcoming dividend or distribution payment
will be a taxable dividend or distribution payment even
though it may represent a return of invested capital.

If a shareholder fails to furnish a correct taxpayer
identification number, fails to report fully dividend or
interest income, or fails to certify that he or she has
provided a correct taxpayer identification number and that
he or she is not subject to "backup withholding," then the
shareholder may be subject to a 31% "backup withholding"
tax with respect to (i) dividends and distributions and
(ii) the proceeds of any redemptions of Portfolio shares.
An individual's taxpayer identification number is his or
her social security number. The 31% "backup withholding"
tax is not an additional tax and may be credited against a
taxpayer's federal income tax liability. Distributions to
nonresident aliens and foreign entities may be subject to
different tax rules, including other possible withholding
taxes.

The foregoing is only a summary of certain tax
considerations generally affecting the Portfolios and their
shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult
their tax advisors with specific reference to their own tax
situations, including their state and local tax
liabilities.

DISTRIBUTOR

Effective June 5, 2000, Salomon Smith Barney, located at
388 Greenwich Street, New York, New York 10013 replaced
CFBDS, Inc. as the Portfolio's distributor. Prior to June
5, 2000, CFBDS, Inc., located at 20 Milk Street, Boston,
Massachusetts 02109-5408 served as the Portfolio's
distributor. Salomon Smith Barney serves as the Portfolio's
distributor on a best efforts basis pursuant to a written
agreement, which was approved by the Trustees of the Trust.

CUSTODIANS, TRANSFER AGENT AND SUB-TRANSFER AGENT

PFPC Trust Company (successor as assigned by PNC bank,
National Association) is located at 8800 Tinicum Blvd.,
Philadelphia, Pennsylvania 19153 and The Chase Manhattan
Bank ("Chase") located at Chase MetroTech Center, Brooklyn,
NY 11245, serve as the custodians for the Trust. Under
their respective custodian agreements with the respective
funds, each custodian is authorized to establish separate
accounts for foreign securities owned by the appropriate
fund to be held with foreign branches of other U.S. banks
as well as with certain foreign banks and securities
depositories. For its custody services to the Trust, each
custodian receives monthly fees based upon the month-end
aggregate net asset value of the appropriate Portfolio,
plus certain charges for securities transactions including
out-of-pocket expenses, and costs of any foreign and
domestic sub-custodians. The assets of the Trust are held
under bank custodianship in compliance with the 1940 Act.

Citi Fiduciary Trust Company, located at 125 Broad Street,
New York, New York 10004, serves as each Portfolio's
transfer and dividend-paying agent.  Under the transfer
agency agreement, the transfer agent maintains the
shareholder account records for each Portfolio, handles
certain communications between shareholders and a
Portfolio, distributes dividends and distributions payable
by a Portfolio and produces statements with respect to
account activity for a Portfolio and its shareholders.  For
these services, the transfer agent receives fees from each
Portfolio computed on the basis of the number of
shareholder accounts that the transfer agent maintains for
each Portfolio during the month and is reimbursed for out-
of-pocket expenses.

PFPC Global Fund Services, located at P.O. Box 9699,
Providence, RI 02940-9699, serves as each Portfolio's sub-
transfer agent.  Under the transfer agency agreement, the
sub-transfer agent maintains the shareholder account records
for the Portfolio, handles certain communications between
shareholders and the Portfolio and distributes dividends and
distributions payable by the Portfolio.  For these services,
the sub-transfer agent receives a monthly fee computed on
the basis of the number of shareholder accounts it maintains
for the Portfolio during the month, and is reimbursed for
out-of-pocket expenses.




FINANCIAL STATEMENTS

The Trust's Annual Reports for the fiscal year ended August
31, 2000 is incorporated herein by reference in their
entirety. The Annual Reports were filed on November 9,
2000, Accession Number 950130-00-5889.





APPENDIX - RATINGS OF DEBT OBLIGATIONS

BOND AND NOTE RATINGS

Moody's Investors Services, Inc.

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

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

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

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

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

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

Caa - Bonds which are rated "Caa" are of poor standing.
Such issues may be in default or there may be present
elements of danger with respect to principal or interest

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

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

Con (..)- Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition
are rated conditionally.  These are bonds secured by (a)
earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals
which begin when facilities are completed, or (d) payments
to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of
condition.

Note:  The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its
generic rating category.

Standard & Poor's Ratings Group

AAA - Debt rated "AAA" has the highest rating assigned by
Standard & Poor's Ratings Group ("S&P").  Capacity to pay
interest and repay principal is extremely strong.

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

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

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

BB, B, CCC, CC, C - Debt rated "BB", "B", "CCC", "CC" and
"C" is regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation.  "BB"
indicates the lowest degree of speculation and "C" the
highest degree of speculation.  While such debt will likely
have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.

Plus (+) or Minus (-): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus to show relative
standing within the major rating categories.

Provisional Ratings: The letter "p" indicates that the
rating is provisional.  A provisional rating assumes the
successful completion of the project being financed by the
debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the
successful and timely completion of the project.  This
rating, however, while addressing credit quality subsequent
to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion.  The investor should exercise judgment with
respect to such likelihood and risk.

L - The letter "L" indicates that the rating pertains to the
principal amount of those bonds where the underlying deposit
collateral is fully insured by the Federal Savings & Loan
Insurance Corp. or the Federal Deposit Insurance Corp.

+ Continuance of the rating is contingent upon S&P's receipt
of closing documentation confirming investments and cash
flow.

* Continuance of the rating is contingent upon S&P's receipt
of an executed copy of the escrow agreement.

NR- Indicates no rating has been requested, that there is
insufficient information on which to base a rating, or that
S&P does not rate a particular type of obligation as a
matter of policy.


COMMERCIAL PAPER RATINGS

Moody's Investors Service, Inc.

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

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

Standard & Poor's Ratings Group

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

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




PART C

Item 23.	Exhibits

(a)(1)	Master Trust Agreement is incorporated by reference to
Registrant's Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission (the "Commission") on May
24, 1991 (the "Registration Statement").

(a)(2)	Amendment No. 1 to Master Trust Agreement is
incorporated by reference to the Registration Statement.

(a)(3)	Amendment No. 2 to Master Trust Agreement is
incorporated by reference to Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A as
filed with the Commission on July 22, 1991 ("Pre-Effective
Amendment No. 1").

(a)(4)	Amendment No. 3 to Master Trust Agreement is
incorporated by reference to Post-Effective Amendment
No. 6 ("Post-Effective Amendment No. 6") to the Registration
Statement on Form N-1A filed on March 18, 1994.

(b)(1)	By-Laws are incorporated by reference to the
Registration Statement.

(b)(2)	Amended and Restated By-Laws are incorporated by
reference to Pre-Effective Amendment No. 1.

(c)	Not Applicable.

(d)(1)	Investment Management Agreement dated July 30, 1993
between the Registrant and The Consulting Group, a division of Smith,
Barney Advisers, Inc., is incorporated by reference to Post-Effective
Amendment No. 3 ("Post-Effective Amendment No. 3") to the
Registration Statement on Form N-1A filed with the Commission
on October 29, 1993.

(d)(2)	Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Smith Affiliated Capital Corp.
relating to Registrant's Municipal Bond Investments Portfolio is
incorporated by reference to Post-Effective Amendment No. 3.

(d)(3)	Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Atlantic Portfolio Analytics &
Management, Inc. relating to Registrant's Mortgage Backed Investments
Portfolio is incorporated by reference to Post-Effective Amendment No. 3.

(d)(4)	Investment Advisory Agreement dated January 4, 1999
between Mutual Management Corp. and Seix Investment Advisors Inc.
relating to Registrant's Balanced Investments Portfolio is incorporated by
reference to Post-Effective Amendment No. 28 ("Post-Effective Amendment No.
28") to the Registration Statement on Form N-1A filed with the Commission
on December 23, 1999.

(d)(4)	Investment Advisory Agreement dated January 4, 1999
between Mutual Management Corp. and Laurel Capital Advisors, LLP
relating to Registrant's Balanced Investments Portfolio is incorporated by
reference to Post-Effective Amendment No. 28.

(d)(6)	Investment Advisory Agreement dated April 1, 1999
between SSBC Fund Management Inc. (formerly Smith, Barney Advisers, Inc.)
and Standish, Ayer & Wood, Inc.
relating to Registrant's Intermediate Fixed Income Investments Portfolio
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(7)	Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Julius Baer Investment Management
Inc. relating to Registrant's International Fixed Income Investments
Portfolio is incorporated by reference to Post-Effective Amendment No. 3.

(d)(8)	Investment Advisory Agreement dated April 1, 1998
between Mutual Management Corp. and NFJ Investment Group Inc. relating
to Registrant's Small Capitalization Value Equity Investments
Portfolio is incorporated by reference to Post-Effective Amendment No.27.

(d)(9)    Investment Advisory Agreement dated October 1, 1998 between
Mutual Management Corp. (Formerly Smith Barney Mutual Funds
Management Inc.) and The Boston Company
Asset Management LLC relating to Registrant's Large Capitalization Value
Equity Investments Portfolio is incorporated by reference to Post-Effective
Amendment No. 28.

(d)(10)	Investment Advisory Agreement dated March 10, 1995
between Smith Barney Mutual Funds Management Inc. and Parametric Portfolio
Associates, Inc. relating to Registrant's Large Capitalization Value Equity
Investments Portfolio is to be filed by amendment.

(d)(11)	Investment Advisory Agreement
dated January 11, 1999 between Mutual Management Corp. and Provident
Investment Counsel relating to Registrant's Large Capitalization Growth
Investments Portfolio is incorporated by reference to Post-Effective
Amendment No. 28.

(d)(12)	Investment Advisory Agreement dated October 1, 1998
between Mutual Management Corp. and Standish, Ayer & Wood, Inc.
relating to Registrant's Government Money Investments Portfolio is
incorporated by reference to Post-Effective Amendment No. 28.

(d)(13)	Investment Advisory Agreement dated October 1, 1998
between Mutual Management Corp. and Oechsle International Advisors
L.P. relating to Registrant's International Equity Investments Portfolio is
incorporated by reference to Post-Effective Amendment No. 28.

(d)(14)	Investment Advisory Agreement dated March 3, 1994
between Smith, Barney Advisers, Inc. and John Govett & Company, Ltd.
relating to Registrant's Emerging Markets Equity Investments Portfolio
is incorporated by reference to Post-Effective Amendment No. 6.

(d)(15)	  Administration Agreement dated June 2, 1994 between the
Registrant and Smith, Barney Advisers, Inc. is incorporated by
reference to Post-Effective Amendment No. 16.

(d)(16)   Investment Advisory Agreement dated October 1, 1999 between SSB
Citi Fund Management LLC. (formerly Mutual Management Corp. and SSBC Fund
Management Inc.) and Western Asset Management Company relating to
Long-Term Bond Investments is incorporated by reference to
Post-Effective Amendment No. 27.

(d)(17)   Investment Advisory Agreement dated June, 1997 between
Smith Barney Mutual Funds Management Inc. and Wall Street Associates
relating to Small Capitalization Growth Investments is incorporated
by reference to Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A filed.

(d)(18)   Investment Advisory Agreement dated November 18,1997 between
Smith Barney Mutual Funds Management Inc. and Westpeak Investment
Advisors, LP relating to Small Capitalization Growth Investments is
Incorporated by reference to Post-Effective Amendment No. 19 to the
Registration
Statement on Form N-1A filed.

(d)(19)   Investment Advisory Agreement dated April 1, 1998 between Mutual
Management Corp. and Mellon Capital Management Corporation relating to Small
Capitalization Value Equity Investments is incorporated by reference to
Post-Effective Amendment No. 28.

(d)(20)   Investment Advisory Agreement dated April 1, 1998 between Mutual
Management Corp. and Mellon Capital Management Corporation relating to Small
Capitalization Growth Investments is incorporated by reference to Post-
Effective Amendment No. 28.

(d)(21)   Investment Advisory Agreement dated April 1, 1998 between Mutual
Management Corp. and Barclays Global Fund Advisors relating to Large
Capitalization Growth Investments is incorporated by reference to
Post-Effective Amendment No. 27.

(d)(22)   Investment Advisory Agreement dated January 11, 1999 between
Mutual Management Corp. and Barclays Global Fund Advisors relating to Large
Capitalization Value Equity Investments is incorporated by
 reference to Post-Effective Amendment No.27.

(d)(23) Investment Advisory Agreement dated April 1, 1998 between Mutual
Management Corp. and David L. Babson & Co. Inc. relating to Small
Capitalization Value Equity Investments is incorporated by reference to
Post-Effective Amendment No. 28.

(d)(24)   Investment Advisory Agreement dated June 15, 1998 between Mutual
Management Corp. and Alliance Capital Management L.P. relating to Large
Capitalization Value Equity Investments is incorporated by reference to
Post-Effective Amendment No. 28.

(d)(25)   Investment Advisory Agreement dated October 1, 1998 between Mutual
Management Corp. and State Street Global Advisors relating to International
Equity Investments is incorporated by reference to Post-Effective Amendment
No. 28.

(d)(25)   Investment Advisory Agreement dated July 15, 1998 between Mutual
Management Corp. and State Street Global Advisors relating to Emerging
Markets Equity Investments is incorporated by reference to Post-Effective
Amendment No. 28.

(d)(26)   Investment Advisory Agreement dated August 3, 1998 between Mutual
Management Corp. and Baring Asset Management, Inc. relating to Emerging
Markets Equity Investments is incorporated by reference to Post-Effective
Amendment No. 28.

(d)(27)	Investment Advisory Agreement dated April 15, 1999
between SSBC Fund Management Inc. (formerly Mutual Management Corp.)
and  Pegasus Investments, Inc.
relating to Registrant's  Multi-Strategy Market Neutral Investments is
incorporated by reference to Post-Effective Amendment No. 27.

(d)(28)	Investment Advisory Agreement dated April 15, 1999
between SSBC Fund Management Inc. (formerly Mutual Management Corp.)
and  State Street Global Advisors
relating to Registrant's  Multi-Strategy Market Neutral Investments  is
incorporated by reference to Post-Effective Amendment No. 27.

(d)(29)	Investment Advisory Agreement dated April 15, 1999
between SSBC Fund Management Inc. (formerly Mutual Management Corp.)
and  Calamos Asset Management
relating to Registrant's  Multi-Strategy Market Neutral Investments is
incorporated by reference to Post-Effective Amendment No. 27.

(d)(30)	Investment Advisory Agreement dated October 1 , 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management Inc.
and Mutual Management Corp.) and Standish, Ayer & Wood, Inc.
relating to Registrant's Multi-Sector Fixed Income Investments
is incorporated by reference to Post-Effective Amendment No.27.

(d)(31)	Investment Advisory Agreement dated October 1, 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management Inc.
and Mutual Management Corp.) and National Asset Management Corp.
relating to Registrant's Multi-Sector Fixed Income Investments
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(32)	Investment Advisory Agreement dated October 1, 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management Inc.
and Mutual Management Corp.) and Atlantic Portfolio Analytics and Management
Inc. relating to Registrant's Multi-Sector Fixed Income Investments
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(33)	Investment Advisory Agreement dated October 1, 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management Inc.
and Mutual Management Corp.) and Alliance Capital Management, L.P.
relating to Registrant's Multi-Sector Fixed Income Investments
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(34)	Investment Advisory Agreement dated October 1 , 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management Inc.
and Mutual Management Corp.) and Barclays Global Fund Advisors
relating to Registrant's S & P 500 Index Investments
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(35)	Investment Advisory Agreement dated April 1, 1999
between SSBC Fund Management Inc. (formerly Mutual Management Corp.) and
Chartwell Investment Partners relating to Registrant's Large Capitalization
Value Equity Investments Portfolio is incorporated by reference to
Post-Effective Amendment No. 27.

(d)(36)   Investment Advisory Agreement dated April 1, 1999 between
SSBC Fund Management Inc. (formerly Mutual Management Corp.) and Kern
capital Management LLC relating to Small Capitalization Growth Investments
is incorporated by reference to Post-Effective Amendment No.27.

(d)(37)   Investment Advisory Agreement dated April 1, 1999 between SSBC
Fund Management Inc. (formerly Mutual Management Corp.) and  Marvin & Palmer
Associates relating to International Equity Investments is incorporated
by reference to Post-Effective Amendment No.27.

(d)(38)	Investment Advisory Agreement dated April 1, 1999
between SSBC Fund Management Inc. and Pacific Investment Management Co.
relating to Registrant's Intermediate Fixed Income Investments Portfolio
is incorporated by reference to Post-Effective Amendment No. 27.

(e)(1)	Distribution Agreement dated July 30, 1993 between the
Registrant and Smith Barney Shearson Inc. is incorporated by reference to
Post-Effective Amendment No. 3.

(e)(2) Form of Distribution Agreement between the Registrant
and CFBDS Inc. is incorpotated by reference to
Post-Effective Amendment No.23.

(e)(3) Form of Distribution Agreement between the Registrant
and Salomon Smith Barney Inc. is incorporated by reference to
Post-Effective Amendment No. 30 to the Registration Statement
on Form N-1A as filed on July 26, 2000 ("Post-Effective Amendment
No. 30").

(f)	Not Applicable.

(g)(1) Custody Agreements between the Registrant and PNC
Bank and Morgan Guaranty and Trust Company dated March
3, 1995 and August 24, 1995, respectively, are incorporated by reference to
Post-Effective Amendment No. 13 to the Registration Statement
on Form N-1A as filed on November 2, 1995.

(g) (2) Custody Agreement between the Registrant and Chase Manhattan Bank
dated December 6, 1996 is to be filed by amendment.

(h) (1) Transfer Agency and Registrar Agreement between the
Registrant and The Shareholder Services Group, Inc., dated September 26,
1993, is incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, as filed on
December 30, 1993.

(h) (2) Form of Transfer Agency Agreement between the Registrant and Smith
Barney Private Trust Company (Currently known as Citi Fiduciary Trust
Company) is incorporated by reference to Post-Effective Amendment No. 30.

(h) (3) Form of Sub-Transfer Agency Agreement between the First Data
Investor Services Group Inc. (Currently known as PFPC Global Fund Services)
and Smith Barney Private Trust Company (Currently known as Citi Fiducaiary
Trust Company) is incorporated by reference to
Post-Effective Amendment No. 30.


(i)	Opinion of Willkie Farr & Gallagher, including Consent,
is incorporated by reference to Post-Effective Amendment
No. 13 to the Registration Statement on Form N-1A filed
 on November 2, 1995.

(j)	Auditors' Consent is filed herein.

(k)	Not Applicable.

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

(m)	Not Applicable.

(n)	Financial Data Schedules are filed herein.

(o)	Not Applicable.

(p)(1)Code of Ethics-North America is incorporated by reference to Post-
Effective Amendment No. 30.

(p)(2)Code of Ethics of Sub-Advisers will be filed by amendment.


Item 24.	Persons Controlled by or Under Common Control with
Registrant

None.

Item 25.	Indemnification

	Incorporated by reference to Pre-Effective Amendment
No. 2 to the Registration Statement on Form N-1A as filed on
January 7, 1993.

Item 26(a)	Business and Other Connections of Investment
Advisors

	Investment Manager - The Consulting Group

	The Consulting Group and its predecessor have been in
the investment counseling business since 1973.  The Consulting Group is a
division of  SSB Citi Fund Management LLC ("SSB Citi")(formerly known as
SSBC Fund Management Inc.), which was incorporated in 1968 under the laws of
the State of Delaware. On September 21, 1999, SSB Citi was converted
into a Delaware Limited Liability Company.  SSB Citi is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc., which is in turn a
wholly owned subsidiary of Citigroup Inc.

	The list required by this Item 26 of officers and
directors of SSB Citi and the Consulting Group, together with information as
to any other business, profession, vocation or employment of a substantial
nature engaged in by such officers and directors during the past two fiscal
years, is incorporated by reference to Schedules A and D of Form ADV filed
by SSB Citi on behalf of the Consulting Group pursuant to the Advisers
Act (SEC File No. 801-8314).

Item 26.(b)	Business and Other Connections of Advisors

	Advisors - Standish, Ayer & Wood, Inc.

	Standish, Ayer & Wood, Inc. ("SAW") serves as
investment advisor to Government
Money Investments. SAW is registered as a commodity trading adviser with the
National Futures Association.  SAW has been registered as an investment
advisor under the Advisers Act since 1940.  SAW provides investment advisory
services to individuals and institutions.  SAW's principal executive
offices are located at One Financial Center, Boston, Massachusetts 02111.

	The list required by this Item 26 of officers and
directors of SAW, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by SAW pursuant to the
Advisers Act (SEC File No. 801-584).


	Advisors - Smith Affiliated Capital Corp.

	Smith Affiliated Capital Corp. ("SACC") serves as
investment advisor to Municipal Bond Investments.  SACC has been registered
as an investment advisor under the Advisers Act since 1982.  SACC provides
investment advisory services to individuals and institutions, and is a
general partner of, and investment advisor to, a limited partnership
primarily investment in municipal bonds.  SAW's principal executive offices
are located at 880 Third Avenue, New York, New York 10022.

	The list required by this Item 26 of officers and
directors of SACC, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by SACC pursuant to the
Advisers Act (SEC File No. 801-17037).

	Advisors - Utendahl Capital Management CFI

	Utendahl Capital Management CFI ("Utendahl")
serves as investment advisor to Mortgage Backed Investments and Multi-Sector
Fixed Income Investments.  Utendahl has been registered as an investment
advisor under the Advisers Act
since 1984. Utendahl serves as an investment advisor to institutions.
Utendahl's principal executive offices are located at 201 East Pine Street,
Suite 600, Orlando, Florida 32801.

	The list required by this Item 26 of officers and
directors of Utendahl, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Utendahl pursuant to the
Advisers Act (SEC File No. 801-24775).

	Advisors - Western Asset Management Company

	Western Asset Management Company ("Western")
serves as investment advisor to Long-Term Bond Investments and Multi-Sector
Fixed Income Investments.  Western has been registered as an investment
advisor under the Advisers Act
since 1971. Western serves as an investment advisor to institutions
and retail clients. Western's principal executive offices are located at 117
East Colorado Blvd., Pasadena, CA 91105.

	The list required by this Item 26 of officers and
directors of Western, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Western pursuant to the
Advisers Act (SEC File No. 801-8162).

 	Advisors - Pacific Investment Management Company

	Pacific Investment Management Company ("PIMCO")
serves as an investment advisor to Intermediate Fixed Income Investments.
PIMCO has been registered as an investment advisor under the Advisers Act
since 1971. PIMCO serves as an investment advisor to institutions
and retail clients. PIMCO's principal executive offices are located at 840
Newport Center Drive, Suite 300, Newport Beach, CA 92660.

	The list required by this Item 26 of officers and
directors of PIMCO, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by PIMCO pursuant to the
Advisers Act (SEC File No. 801-48187).

	Advisors - Metropolitan West Asset Management LLC

	 Metropolitan West Asset Management LLC ("MWAM")
serves as an investment advisor to Intermediate Fixed Income Investments
and Multi-Sector Fixed Income Investments. MWAM has been registered as an
investment advisor under the Advisers Act since 1996. MWAM serves as an
investment advisor to institutional clients. MWAM's principal executive
offices are located at 11766 Wilshire Boulevard, Suite 1580, Los Angeles, CA
90025.

	The list required by this Item 26 of officers and
directors of MWAM, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by MWAM pursuant to the
Advisers Act (SEC File No. 801-53332).

	Advisors - BlackRock Financial Management, Inc.

	 BlackRock Financial Management, Inc. ("BlackRock")
serves as an investment advisor to Intermediate Fixed Income Investments.
BlackRock has been registered as an investment advisor under the Advisers
Act since 1988. BlackRock serves as an investment advisor to institutional
and retail clients. BlackRock's principal executive offices are located at
345 Park Avenue, New York, New York 10154.

	The list required by this Item 26 of officers and
directors of BlackRock, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by BlackRock pursuant to
the Advisers Act (SEC File No. 801-48433).

	Advisors - Chartwell Investment Partners

	Chartwell Investment Partners ("Chartwell")
serves as investment advisor to fLArge Capitalization Value Equity
Investments.  Chartwell has been registered as an investment advisor under
the Advisers Act since 1997. Chartwell serves as an investment advisor to
institutions. Chartwell's principal executive offices are located at 1235
Westlakes Drive, Suite330, Berwyn, PA 19312.

	The list required by this Item 26 of officers and
directors of Chartwell, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Chartwell pursuant to
the Advisers Act (SEC File No. 801-54124).

	Advisors - The Boston Company Asset Management LLC

	The Boston Company Asset Management LLC ("TBCAM") serves as
co-investment advisor to Large Capitalization Value Equity Investments.
TBCAM has been registered as an investment advisor under the Advisers Act
since 1970.  TBCAM's principal executive offices are located at One Boston
Place, Boston, Massachusetts 02108.

	The list required by this Item 26 of officers and
directors of TBCAM, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by TBCAM pursuant to the
Advisers Act (SEC File No.801-6829).

	Advisors - Parametric Portfolio Associates, Inc.

	Parametric Portfolio Associates, Inc. ("PPA") serves as
co-investment advisor to Large Capitalization Value Equity Investments.
PPA has been registered as an investment advisor under the Advisers Act
since 1987.  PPA provides investment advisory services to a number of
individual and institutional clients.  PPA's principal executive offices
are located at 7310 Columbia Center, 701 Fifth Avenue, Seattle, Washington
98104-7090.

	The list required by this Item 26 of officers and
directors of PPA, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by PPA pursuant to the
Advisers Act (SEC File No. 801-29855).

	Advisors - Barclays Global Fund Advisors

	Barclays Global Fund Advisors ("Barclays") serves as an
investment advisor to Large Capitalization Value Equity Investments,
Large Capitalization Growth Investments and S&P 500 Index Investments.
Barclays is registered as an investment advisor under the Advisers Act.
Barclays provides investment advisory services to a number of
individual and institutional clients.  Barclays' principal executive offices
are located at 45 Fremont Street, San Francisco, CA 94105.

	The list required by this Item 26 of officers and
directors of Barclays, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Barclays pursuant to the
Advisers Act (SEC File No. 801-22609).

	Advisors - TCW Investment Management Company

	TCW Investment Management Company ("TCW") serves as
investment advisor to Large Capitalization Growth Investments.  TCW is
registered as an investment advisor under the Advisers Act. TCW provides
investment advisory services to individual and
institutional clients.  TCW's principal executive offices are located at
865 South Figueroa Street, Suite 1800, Los Angeles, CA  90017.

	The list required by this Item 26 of officers and
directors of TCW, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by TCW pursuant to the
Advisers Act (SEC File No. 801-44088).

	Advisors - Turner Investment Partners, Inc.

	 Turner Investment Partners, Inc. ("Turner") serves as
investment advisor to Large Capitalization Growth Investments.  Turner has
been registered as an investment advisor under the Advisers Act
since 1990.  Turner provides investment advisory services to individual and
institutional clients.  Turner's principal executive offices are located
at 1235 Westlakes Drive, Suite 350, Berwyn, PA 19312.

	The list required by this Item 26 of officers and
directors of Turner, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Turner pursuant to the
Advisers Act (SEC File No. 801-36220).

Advisors - Mellon Capital Management Corporation

	Mellon Capital Management Corporation ("Mellon") serves as an
investment advisor to Small Capitalization Value Equity Investments
and Small Capitalization Growth Investments. Mellon is registered as an
investment advisor under the Advisors Act.  Mellon provides investment
advisory services to a number of institutional clients.  Mellon's principal
executive offices are located at 595 Market Street, Suite 3000, San
Francisco, CA 94105.

	The list required by this Item 26 of officers and
directors of Mellon, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and  directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Mellon pursuant to the
Advisers Act (SEC File No. 801-19785).

   	Advisors - NFJ Investment Group, Inc.

	NFJ Investment Group, Inc. ("NFJ") serves as co-
investment advisor to Small Capitalization Value Equity Investments.
NFJ has been registered as an investment advisor under the Advisors
Act since 1989.  NFJ provides investment advisory services to a number
of individual and institutional clients.  NFJ's principal executive offices
are located at 2121 San Jacinto Street, Suite 1440, Dallas, Texas 75201.

	The list required by this Item 26 of officers and
directors of NFJ, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and  directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by NFJ pursuant to the
Advisers Act (SEC File No. 801-42814).

	Advisors - Rutabaga Capital Management LLC

	Rutabaga Capital Management LLC ("Rutabaga") serves as an investment
advisor to Small Capitalization Value Equity Investments.
Rutabaga has been registered as an investment advisor under the Advisors
Act since 1999.  Rutabaga provides investment advisory services to
institutional clients.  Rutabaga's principal executive offices are located
at 2 Oliver Street, Boston, MA 02109.

	The list required by this Item 26 of officers and
directors of Rutabaga, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and  directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Rutabaga pursuant to the
Advisers Act (SEC File No. 801-56233).

	Advisors - Wall Street Associates

	Wall Street Associates ("WSA") will serve as
co-investment advisor to Small Capitalization Growth Investments.  WSA has
been registered as an investment advisor under the Advisers Act since 1987.
WSA is the investment adviser of various institutional clients.  WSA's
principal executive offices are located at 1200 Prospect Street,
Suite 100, LaJolla, CA 92037.

	The list required by this Item 26 of officers and
directors of WSA, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by WSA pursuant to the
Advisers Act (SEC File No.801-30019).


	Advisors - Westpeak Investment Advisors, LP

	Westpeak Investment Advisors, LP("WSA") will serve as
co-investment advisor to Small Capitalization Growth Investments.  Westpeak
has been registered as an investment advisor under the Advisers Act since
1991. Westpeak is the investment adviser of various institutional clients.
Westpeak's principal executive offices are located at 1011 Walnut Street,
Suite 400, Boulder, CO 80302.

	The list required by this Item 26 of officers and
directors of Westpeak, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Westpeak pursuant to the
Advisers Act (SEC File No.801-39554).

Advisors - Kern Capital Management LLC

	Kern Capital Management LLC ("Kern") serves as an investment advisor
to Small Capitalization Growth Investments.  Kern has been registered as an
investment advisor under the Advisers Act since 1997. Kern is the investment
adviser of various institutional and retail clients.  Kern's
principal executive offices are located at 114 West 47th Street, Suite 1926,
New York, NY 10036.

	The list required by this Item 26 of officers and
directors of Kern, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Kern pursuant to the
Advisers Act (SEC File No.801-54766).

Advisors - Westfield Capital Management Company

	Westfield Capital Management Company ("Westfield")
serves as an investment advisor to Small Capitalization Growth Investments.
Westfield is the investment adviser of various institutional clients.
Westfield's principal executive offices are located One Financial Center,
Boston, MA  02111.

	The list required by this Item 26 of officers and
directors of Westfield, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to _____.

	Advisors - Oechsle International Advisors, L.P.

	Oechsle International Advisors, L.P. ("OIA") serves as
investment advisor to International Equity Investments.  OIA has been
registered as an investment advisor under the Advisers Act since 1986.  OIA
provides investment advisory services to a number of individual and
institutional clients.  OIA's principal executive offices are located at
One International Place, Boston, Massachusetts 02110.

	The list required by this Item 26 of officers and
directors of OIA,  together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by OIA pursuant to the
Advisers Act  (SEC File No. 801-28111).

	Advisors - State Street Global Advisors

	State Street Global Advisors ("SSGA") serves as an
investment advisor to International Equity Investments, Emerging Markets
Equity Investments and Multi-Strategy Market Neutral Investments. SSGA
provides investment advisory services to a number of individual and
institutional clients.  SSGA's principal executive offices are located at
Two International Place, Boston, Massachusetts 02110.

	The list required by this Item 26 of officers and
directors of SSGA,  together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to _____.

	Advisors - Scudder Kemper Investments, Inc.

	Scudder Kemper Investments, Inc. ("Scudder") serves as
an investment advisor to International Equity Investments.  Scudder is
registered as an investment advisor under the Advisers Act.  Scudder
provides investment advisory services to a number of individual and
institutional clients.  Scudder's principal executive offices are located at
345 Park Avenue, New York, NY  10154.

	The list required by this Item 26 of officers and
directors of Scudder,  together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Scudder pursuant to the
Advisers Act  (SEC File No. 801-252).

	Advisors - Julius Baer Investment Management Inc.

	Julius Baer Investment Management Inc. ("JBIM") serves
as investment advisor to International Fixed Income Investments.  JBIM has
been registered as an investment advisor under the Advisers Act
since 1984. Directly and through Julius Baer Securities Inc., JBIM
provides investment advisory services to a wide variety of individual and
institutional clients, including registered investment companies.  JBIM's
principal executive offices are located at 330 Madison Avenue, New
York, New York 10017.

	The list required by this Item 26 of officers and
directors of JBIM together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by JBIM pursuant to the
Advisers Act (SEC File No. 801-18766).


	Advisors - Baring Asset Management, Inc.

	Baring Asset Management, Inc. ("Baring") serves as an
investment advisor to Emerging Markets Equity Investments.  Baring has been
registered as an investment advisor under the Advisers Act since 1967.
Baring is the investment adviser of various institutional clients.  Baring's
principal executive offices are located at 125 High Street, Boston, MA
02110.

	The list required by this Item 26 of officers and
directors of Baring, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Baring pursuant to the
Advisers Act (SEC File No.801-4611).

	Advisors - Foreign & Colonial Emerging Markets Ltd.

	 Foreign & Colonial Emerging Markets Ltd. ("F&C") serves as an
investment advisor to Emerging Markets Equity Investments.  F&C has been
registered as an investment advisor under the Advisers Act since 1987.
Baring is the investment adviser of various institutional clients.  F&C's
principal executive offices are located at 8th Floor, Exchange House,
Primrose Street, London EC2A 2NY England.

	The list required by this Item 26 of officers and
directors of F&C, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by F&C pursuant to the
Advisers Act (SEC File No.801-44724).

	Advisors - Alliance Capital Management L.P.

	Alliance Capital Management L.P. ("Alliance") will serve as
investment advisor to High Yield Investments and Multi-Sector Fixed Income
Investments.  Alliance has been
registered as an investment advisor under the Advisers Act since 1971.
Alliance is the investment adviser of various institutional and individual
clients.  Alliance's principal executive offices are located at 1345 Avenue
of the Americas, New York, New York .

	The list required by this Item 26 of officers and
directors of Alliance, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Alliance pursuant to the
Advisers Act (SEC File No.801-32361).


	Advisors - Laurel Capital Advisors, LLP

	Laurel Capital Advisors, LLP ("Laurel") serves as an
investment advisor to Balanced Investments.  Laurel has been registered as
an investment advisor under the Advisers Act since 1990.  Laurel is the
investment adviser of various institutional and individual clients.
Babson's principal executive offices are located at One Mellon Bank Center,
Suite 151-3925, Pittsburgh, PA 15258.

	The list required by this Item 26 of officers and
directors of Laurel, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Laurel pursuant to the
Advisers Act (SEC File No.801-37598).

	Advisors - Seix Investment Advisors

	Seix Investment Advisors ("Seix") serve as an
investment advisor to Balanced Investments.  Seix has been registered as an
investment advisor under the Advisers Act since 1992.  Seix is the
investment adviser of various institutional clients.  Seix's principal
executive offices are located at 300 Tice Blvd., Woodcliff Lake, NJ 07675.

	The list required by this Item 26 of officers and
directors of Seix, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Seix pursuant to the
Advisers Act (SEC File No.801-42070).

	Advisors - Pegasus Investments, Inc.

	Pegasus Investments, Inc. ("Pegasus") serves as an
investment advisor to Multi-Strategy Market Neutral Investments.  Pegasus
has been registered as an investment advisor under the Advisers Act since
1999.  Pegasus is the investment adviser of various institutional clients.
Pegasus's principal executive offices are located at One Boston Place,
Boston, Massachusetts 02108.

	The list required by this Item 26 of officers and
directors of Pegasus, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Pegasus pursuant to the
Advisers Act (SEC File No.801-___).

	Advisors - Calamos Asset Management

	Calamos Asset Management ("Calamos") serves as an
investment advisor to Multi-Strategy Market Neutral Investments.  Calamos
has been registered as an investment advisor under the Advisers Act since
1977.  Pegasus is the investment adviser of various retail  and
institutional clients.  Calamos's principal executive offices are located at
1111 East Warrenville Road, Naperville, Illinois 60563.

	The list required by this Item 26 of officers and
directors of Calamos, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Calamos pursuant to the
Advisers Act (SEC File No.801-29688).

Item 27.	Principal Underwriters


(a)

    Salomon Smith Barney, Inc., ("Salomon Smith Barney")
the Registrant's Distributor,
is also the distributor for the following Smith Barney
funds: Smith Barney Investment Series (formerly Concert Investment
Series),Greenwich Street Series Fund, Smith Barney
Adjustable Rate Government Income Fund, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation Fund
Inc., Smith Barney Arizona Municipals Fund Inc., Smith
Barney California Municipals Fund Inc., Smith Barney Allocation Series
Inc. (formerly Smith Barney Concert
Allocation Series Inc.), Smith Barney Equity Funds, Smith
Barney Fundamental Value Fund Inc., Smith Barney Funds,
Inc., Smith Barney Income Funds, Smith Barney Institutional
Cash Management Fund, Inc., Smith Barney Investment Funds
Inc., Smith Barney Investment Trust, Smith Barney Managed
Governments Fund Inc., Smith Barney Managed Municipals Fund Inc.,
Smith Barney Massachusetts Municipals Fund,
Smith Barney Money Funds, Inc., Smith Barney Muni Funds, Smith
Barney Municipal Money Market Fund, Inc., Smith Barney New
Jersey Municipals Fund Inc., Smith Barney Oregon Municipals
Fund Inc., Smith Barney Principal Return Fund,
Smith Barney Sector Series Inc., Smith Barney
Small Cap Blend Fund, Inc., Smith Barney Telecommunications
Trust, Smith Barney Variable Account Funds, Smith Barney
World Funds, Inc., Travelers Series Fund Inc., and various
series of unit investment trusts.


(b) The information required by
this Item 27 with respect to each director, officer and partner
of Salomon Smith Barney is incorporated by reference
to Schedule A of FORM BD filed by Salomon Smith Barney pursuant to
the Securities Exchange Act of 1934 (SEC File No. 812-8510).


(c)	Not applicable.

Item 28.	Location of Accounts and Records

	Consulting Group Capital Markets Funds
	222 Delaware Avenue
	Wilmington, Delaware  19801

	SSB Citi Fund Management LLC
	7 World Trade Center, 39th Floor
	New York, New York 10048

	PFPC Trust Co.
	8800 Tinicum Boulevard
	Philadelphia, PA  19153

	The Chase Manhattan Bank
	Chase MetroTech Center
	Brooklyn, NY  11245

	Salomon Smith Barney Inc.
	388 Greenwich Street
	New York, New York  10013
   	and
	125 Broad Street
	New York, New York 10004

	Citi Fiduciary Trust Company
	125 Broad Street
	New York, New York 10004

	PFPC Global Fund Services
	P. O. Box 9699
	Providence, RI 02940-9699


Item 29.	Management Services

	Not Applicable.

Item 30.	Undertakings

	Not Applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended
(the"1933 Act") and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b)
under the 1933 Act and the Registrant has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, this Post-Effective Amendment, and where applicable, the true and
lawful attorney-in-fact, thereto duly authorized, in the City of New York and
State of New York on the 28th day of December 2000.

CONSULTING GROUP CAPITAL MARKETS FUNDS

BY /s/ Heath B. McLendon
	(Heath B. McLendon, Chief Executive Officer)

     Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.

	Signature	Title	Date



/s/ Heath B. McLendon
Trustee and Chairman of the Board 		December 28, 2000
Heath B. McLendon  (Chief Executive Officer)

/s/ Lewis E. Daidone
Senior Vice President and Treasurer  		December 28, 2000
Lewis E. Daidone  (Chief Financial and Accounting
Officer)

/s/ Walter E. Auch, Sr.*
    Walter E. Auch, Sr., Trustee 			December 28, 2000

/s/ H. John Ellis**
    H. John Ellis,  Trustee

/s/ Armon E. Kamesar, Trustee, 			December 28, 2000
     Armon E. Kamesar

/s/ Martin Brody*
    Martin Brody, Trustee, 				December 28, 2000

/s/ Stephen E. Kaufman*
    Stephen E. Kaufman, Trustee, 			December 28, 2000

* Signed pursuant to power of attorney filed  October 29, 1993 as an exhibit
  to Post-Effective Amendment No. 3.

/s/ Heath B. McLendon
    Heath B. McLendon					December 28, 2000

** Signed pursuant to power of attorney dated March 1, 2000 filed as an
exhibit to Post-Effective Amendment No. 30.

/s/ Heath B. McLendon
    Heath B. McLendon					December 28, 2000