STATEMENT OF ADDITIONAL INFORMATION

CONSULTING GROUP CAPITAL MARKETS FUNDS
GLOBAL SCIENCES AND TECHNOLOGY INVESTMENTS
JULY 30, 2001


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 Global Sciences and Technology Investments
(the "Portfolio"), a separate series of Consulting Group
Capital Markets Funds (the "Trust"), dated July 30, 2001,
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
21
Portfolio Transactions
22
Portfolio Turnover
24
Investment Management and Other Services
24
Distributor
28
Purchase of Shares
29
Redemption of Shares
29
Redemptions in Kind
29
Net Asset Value
30
Determination of Performance
30
Taxes
32
Financial Statements
36
Appendix
37

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, Director (Age 80).  Consultant to
companies in the financial services industry; Director of
Brinson Partners; Nicholas-Applegate (each a registered
investment adviser); Legend Properties, a real estate
management company; Banyan Realty Trust; Banyan Land Fund
II; Geotek Communications Inc., an international wireless
communications company. 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, Director (Age 79).  Consultant, HMK
Associates; Retired Vice Chairman of the Board of
Restaurant Associates Industries, Inc. Director or trustee
of 21 investment companies associated with Citigroup. His
address is c/o HMK Associates, 30 Columbia Turnpike,
Florham Park, New Jersey 07932.

	H. John Ellis, Jr., Director (Age 74).  Retired.
Director or trustee of 2 investment companies associated
with Citigroup.  His address is 858 East Crystal Downs
Drive, Frankfort, Michigan 49635.
Stephen E. Kaufman, Director (Age 69).  Attorney.
Director or trustee of 13 investment companies associated
with Citigroup. His address is 277 Park Avenue, New York,
New York 10172.
Armon E. Kamesar, Director (Age 74).  Chairman 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, California 92037.
*Heath B. McLendon, Chairman of the Board (Age 68).
Managing Director of Salomon Smith Barney, President of Smith
Barney Fund Management LLC (formerly known as SSB Citi Fund
Management LLC) ("SBFM") and Travelers Investment Adviser,
Inc. ("TIA").  Mr. McLendon also serves as Chairman, Co-
Chairman or Director of 71 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 43).  Managing Director of Salomon Smith Barney;
Director and Senior Vice President of SBFM  and TIA.  Mr.
Daidone also serves as Senior Vice President or Executive
Vice President and Treasurer of 61 investment companies
associated with Citigroup.  His address is 125 Broad Street,
New York, New York 10004.
	Paul M. Hatch, Vice President (Age 44). Vice
President, Chief Operating Officer and Deputy Director of
National Sales of Salomon Smith Barney's Consulting Group.
Prior to 1997, Branch Manager at Southfield, MI and McLean,
VA branches.  His address is 222 Delaware Avenue,
Wilmington, Delaware, 19801.
	Frank L. Campanale, Investment Officer (Age 48).
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 42).
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 51).  Managing
Director of Salomon Smith Barney; General Counsel and
Secretary of SBFM and TIA.  Ms. Sydor also 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 40). Director of
Salomon Smith Barney. Controller or Assistant Treasurer of
43 investment companies associated with Citigroup.  His
address is 125 Broad Street, New York, New York 10004.
Stephen M. Hagan, Vice President (Age 33). Vice
President of Salomon Smith Barney Consulting Group. His
address is 222 Delaware Avenue, Wilmington, Delaware,
19801.

As of July 13, 2001, 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, SBFM 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, SBFM 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 calendar year ended December 31, 2000, such
fees and expenses totaled $10,355.

For the fiscal period ended March 31, 2001, 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	77
Walter Auch	None	$182	None	$52,800	2
Martin Brody	None	71	None	132,950	21
H. John Ellis	None	182	None	54,900	2
Armon E. Kamesar	None	182	None	55,100	2
Stephen E. Kaufman	None	182	None	114,400	13

* Designates "interested trustee".
** As of December 31, 2000

INVESTMENT OBJECTIVES, MANAGEMENT POLICIES AND RISK FACTORS

The Portfolio is a non-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
primarily in equity securities of both domestic and foreign
companies.

Sector Investing. The Portfolio normally invests in the
securities of companies principally engaged in the
technology, telecommunications and healthcare sectors.  The
broad industry categories in which these companies may be
found include, but are not limited to, computer software
and hardware; network and capital broadcasting; internet
and internet-related businesses; the ownership, operation,
development, production, sale, and distribution of goods or
services used in the broadcast and media industries;
communications services or equipment; the design,
manufacture, or sale of electric components; defense and
data storage and retrieval; pharmaceuticals; medical
diagnostic, biochemical or other healthcare research and
development; healthcare facilities, healthcare products and
services and biotechnology.  The relative size of the
Portfolio's investments within these industries will vary
from time to time, and at times, some of these industries
may not be represented in the Portfolio's holdings.

The investment advisers believe that because of rapid
advances in each sector, an investment in companies with
business operations in these areas may offer substantial
opportunities for long-term capital appreciation.  Of
course, prices of common stocks of even the best managed,
most profitable corporations are subject to market risk,
which means their stock prices can decline. In addition,
swings in investor psychology or significant trading by
investors can result in price fluctuations. Industries
likely to be owned by the Portfolio include computers,
networking and internetworking software, computer aided
design, telecommunications, media and information services,
medical devices and biotechnology.  The Portfolio may also
invest in the stocks of companies that may benefit from the
commercialization of technological advances, although they
may not be directly involved in research and development.

The sectors have exhibited and may continue to exhibit
rapid growth, both through increasing demand for existing
products and services and the broadening of the sector. In
general, the stocks of large capitalized companies that are
well established in the sector and can be expected to grow
with the market will frequently be found among the
Portfolio's holdings. The expansion of each sector and its
related industries, however, also provides a favorable
environment for investment in small to medium capitalized
companies. The Portfolio's investment policy is not limited
to any minimum capitalization requirement and the Portfolio
may hold securities without regard to the capitalization of
the issuer. The investment advisers' overall stock
selection for the Portfolio is not based on the
capitalization or size of the company but rather on an
assessment of the company's fundamental prospects.

Companies in each sector face special risks. For example,
their products or services may not prove commercially
successful or may become obsolete quickly. The value of the
Portfolio's shares may be susceptible to factors affecting
the technology and science areas and to greater risk and
market fluctuation than an investment in a fund that
invests in a broader range of portfolio securities not
concentrated in any particular industry. As such, the
Portfolio is not an appropriate investment for individuals
who are not long-term investors and who, as their primary
objective, require safety of principal or stable income
from their investments.  Each sector may be subject to
greater governmental regulation than many other areas and
changes in governmental policies and the need for
regulatory approvals may have a material adverse effect on
these areas. Additionally, companies in each sector may be
subject to risks of developing technologies, competitive
pressures and other factors and are dependent upon consumer
and business acceptance as new technologies evolve.

Further, the market may value companies according to size,
or market capitalization, rather than on financial
performance. The companies in each sector may be developing
or changing.  They may be subject to greater business risks
and more sensitive to changes in economic conditions than
larger, more established companies.  Company earnings in
these sectors may fluctuate more than those of other
companies because of short product cycles and competitive
pricing.  Investors' enthusiasm for these stocks can also
change dramatically, causing stock prices to rise and fall
sharply.

Technology Securities.  Many technological products and
services are subject to rapid obsolescence, which may lower
the market value of the securities of the companies in this
sector.  Also, the Portfolio holds faster-growing, more
volatile technology companies the investment advisers
believe to be emerging leaders in their fields.  The market
prices of these companies tend to rise and fall more
rapidly than those of larger, more established companies.

Telecommunications Securities.  Companies in the media and
telecommunications sector are subject to the risks of rapid
obsolescence, lack of investor or consumer acceptance, lack
of standardization or compatibility with existing
technologies, an unfavorable regulatory environment,
intense competition, and a dependency on patent and
copyright protection.  The media sector can be
significantly (and adversely) affected by the federal
deregulation of cable and broadcasting, competitive
pressures, and government regulation, including regulation
of the concentration of investment in AM, FM, or TV
stations. The telecommunications industry, particularly
telephone operating companies, is subject to both federal
and state government regulations of rates of return and
services that may be offered. Many telecommunications
companies fiercely compete for market share.

Certain of the companies in which the Portfolio invests may
allocate greater than usual financial resources to research
and product development. The securities of such companies
may experience above-average price movements associated
with the perceived prospects of success of the research and
development programs.  In addition, companies in which the
Portfolio invests may be adversely affected by lack of
commercial acceptance of a new product or process or by
technological change and obsolescence.

Healthcare and Biotechnology Securities.  Many faster-
growing healthcare companies have limited operating
histories and their potential profitability may be
dependent on regulatory approval of their products, which
increases the volatility of these companies' security
prices. Many of these activities are funded or subsidized
by governments.  The withdrawal or curtailment of this
support could lower the profitability and market prices of
such companies.  Changes in government regulation could
also have an adverse impact.  Continuing technological
advances may mean rapid obsolescence of products and
services.  Patent considerations, intense competition,
rapid technological change and obsolescence, and government
regulation can significantly (and adversely) affect the
biotechnology sector. Biotechnology companies can have
persistent losses during a new product's transition from
development to production, and revenue patterns can be
erratic.

Equity Securities.  The Portfolio may invest in all types
of equity securities, including, but not limited to,
exchange-traded and over-the-counter common and preferred
stocks, warrants, rights, depository receipts and shares,
trust certificates, limited partnership interests, shares
of other investment companies, real estate investment
trusts and equity participations.  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.

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

Real Estate Investment Trusts ("REITs").  The 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 Portfolio may invest in
the securities of other investment companies to the extent
such investments are consistent with the Portfolio's
investment objectives and policies and permissible under
the Investment Company Act of 1940, as amended (the "1940
Act"). Under the 1940 Act, the 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.
The Portfolio will not invest in other investment companies
for which the investment advisers or any of their
affiliates act as an investment advisor or distributor.

The Portfolio may invest up to 10% of its assets in
securities of other investment companies, including shares
in a portfolio of securities that seeks to track the
performance of an underlying equity index or a portion of
an equity index ("exchange traded funds").

The 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.

Short Sales.  The Portfolio may seek to hedge investments
or realize additional gains through short sales.  Short
sales are transactions in which the Portfolio sells a
security it does not own in anticipation of a decline in
the market value of that security.  To complete such a
transaction, the Portfolio borrows the security to make
delivery to the buyer.  The Portfolio is obligated to
replace the security borrowed by purchasing it at the
market price at or prior to the time of replacement.  The
price at such time may be more or less than the price at
which the security was sold by the Portfolio.  Until the
security is replaced, the Portfolio is required to repay
the lender any dividends or interest that accrue during the
period of the loan.  To borrow the security, the Portfolio
also may be required to pay a premium, which would increase
the cost of the security sold.  A portion of the net
proceeds of the short sale may be retained by the broker
(or by the Portfolio's custodian in a special custody
account), to the extent necessary to collateralize the
broker and to meet margin requirements, until the short
position is closed out.  The Portfolio will also incur
transaction costs in effecting short sales.

The Portfolio will incur a loss as a result of the short
sale if the price of the security increases between the
date of the short sale and the date on which the Portfolio
replaces the borrowed security.  The Portfolio will realize
a gain if the security declines in price between those
dates.  The amount of any gain will be decreased, and the
amount of any loss increased, by the amount of the
premiums, dividends, interest or expenses the Portfolio may
be required to pay in connection with a short sale.  An
increase in the value of a security sold short by the
Portfolio over the price at which it was sold short will
result in a loss to the Portfolio, and there can be no
assurance that the Portfolio will be able to close out the
position at any particular time or at an acceptable price.
Thus the Portfolio's losses on short sales are potentially
unlimited.

Whenever the Portfolio engages in short sales, it maintains
cash or liquid securities in an amount that, when combined
with the amount of collateral deposited with the broker in
connection with the short sale, equals the current market
value of the security sold short.  The assets so maintained
are marked to market daily.

Management currently intends to limit the Portfolio's short
sales to shares issued by exchange traded funds.  Exchange
traded funds hold portfolios of securities that seek to
track the performance of a specific index or basket of
stocks.  Utilizing this strategy will allow the Subadvisor
to adjust the Portfolio's exposure in a particular sector,
in a cost effective and convenient manner, without having
to sell the Portfolio's holdings of individual stocks in
that sector.

Investing in Small and Medium Capitalization Companies.
The Portfolio may invest in securities of all market
capitalizations.  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 investment adviser considers
appropriate.

Fixed Income Securities. The Portfolio may invest a portion
of its assets in fixed income (or "debt") securities.  The
market value of the obligations held by the Portfolio can
be expected to vary inversely to changes in prevailing
interest rates.  Investors also should recognize that, in
periods of declining interest rates, the Portfolio's yield
will tend to be somewhat higher than prevailing market
rates and, in periods of rising interest rates, the
Portfolio's yield will tend to be somewhat lower.  Also,
when interest rates are falling, the inflow of net new
money to the Portfolio from the continuous sale of its
shares will tend to be invested in instruments producing
lower yields than the balance of its portfolio, thereby
reducing the Portfolio's current yield.  In periods of
rising interest rates, the opposite can be expected to
occur.  In addition, securities in which the Portfolio 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 Portfolio may also invest in U.S. Government
securities, corporate bonds, debentures, non-convertible
fixed income preferred stocks and Eurodollar and Yankee
instruments.

Eurodollar Instruments and Yankee Bonds.  The Portfolio 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.

High Yield Securities.  The Portfolio 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 investment advisers, 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 than 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 investment adviser
will consider the event in determining whether the
Portfolio should continue to hold the security. See "Debt
Securities Rating Criteria" below for additional
information regarding high yield securities.

HOLDRS. HOLDRS are depository receipts issued by the HOLDRS
Trust representing individual and undivided ownership
interests in the common stock of companies involved in a
specific segment of a particular industry. Holding Company
Depository Receipts ("HOLDRS") are a service mark of
Merrill Lynch and are traded on the American Stock
Exchange.

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 investment adviser.  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 the
Portfolio's net asset value to the extent it invests in
such securities.  In addition, the Portfolio may incur
additional expenses to the extent it is required to seek
recovery upon a default in payment of principal or interest
on its 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
the 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, the 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 the 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
investment advisers 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 Portfolio as initial
criteria for the selection of portfolio securities, but the
Portfolio will also rely upon the independent advice of
their respective investment advisers (separately an
investment adviser, collectively, the investment advisers)
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 the Portfolio, an issue of
debt obligations may cease to be rated or its rating may be
reduced below the minimum required for purchase by the
Portfolio. Neither event will require the sale of the debt
obligation by the Portfolio, but the Portfolio's investment
advisers 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, the Portfolio will attempt to use comparable
ratings as standards for its investments in accordance with
its investment objectives and policies.

Risks of Non-U.S. Investments.  To the extent the 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 the Portfolio's securities holdings 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 the 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 the Portfolio to accurately price
its securities holdings or to dispose of such securities at
the times determined by the investment adviser to be
appropriate. The risks associated with reduced liquidity
may be particularly acute in situations in which the
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, the 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 the 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 this is no
outright restriction on repatriation of capital, the
mechanics of repatriation may affect certain aspects of the
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. The 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, the
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 the 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 the Portfolio
against loss or theft of its assets.

Withholding and Other Taxes.  The Portfolio 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 the
Portfolio's investments in such countries. These taxes will
reduce the return achieved by the Portfolio.  Treaties
between the U.S. and such countries may not be available to
reduce the otherwise applicable tax rates.

Currency Exchange Rates.  The Portfolio's share value may
change significantly when the currencies, other than the
U.S. dollar, in which the 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.

Emerging Markets Countries.  A developing or emerging
markets country generally is considered to be a country
that is in the initial stages of its industrialization
cycle. Investing in the equity markets of developing
countries involves exposure to economic structures that are
generally less diverse and mature, and to political systems
that can be expected to have less stability, than those of
developed countries.  Historical experience indicates that
the markets of developing countries have been more volatile
than the markets of the more mature economies of developed
countries; however, such markets often have provided higher
rates of return to investors.

One or more of the risks discussed above could adversely
affect the economy of a developing market or the
Portfolio's investments in such a market.  The claims of
many property owners against those of governments may
remain unsettled.  There can be no assurance that any
investments the Portfolio might make in such emerging
markets would be expropriated, nationalized or otherwise
confiscated at some time in the future.  In such an event,
the Portfolio could lose its entire investment in the
market involved.  Moreover, changes in the leadership or
policies of such markets could halt the expansion or
reverse the liberalization of foreign investment policies
now occurring in certain of these markets and adversely
affect existing investment opportunities.

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.

Forward Currency Contracts.  The Portfolio 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
the 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
the Portfolio enters into the contract.  To assure that the
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 Portfolio, 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,
the 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, the 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 investment
adviser.  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 the 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 the 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, the 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 investment adviser 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.  The
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.  The 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 and
Securities Indices.  The Portfolio may also write (sell)
covered call and put options on securities or 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.

The 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.  The 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 Portfolio 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 the Portfolio, in return for the premium paid, to
purchase specified securities at a specified price during
the option period.  The 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.

The 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 the 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 the 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 the 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.

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.  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."

The 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, the 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 the 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 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 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 an investment
adviser'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
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.

Futures Contracts and Related Options. The Portfolio 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 investment adviser that such
contracts are necessary or appropriate in the management of
the 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 the
Portfolio intends to purchase.

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 securities or 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
a investment adviser'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.

When-Issued and Delayed Delivery Securities.  The 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
the 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.  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 investment
advisers, acting under the supervision of the Board of
Trustees, review 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 net 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 ("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.

Illiquid Securities. The Portfolio 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 investment
advisers.  The investment advisers 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 investment advisers' 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 the investment advisers of the
Portfolio, in consultation with the manager, believe 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 SBFM.  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.

Non-Diversified Classification.  The Portfolio is
classified as a non-diversified fund under the 1940 Act
which means the Portfolio is not limited in the proportion
of its assets it may invest in the obligations of a single
issuer.  As a result, the Portfolio may be subject to
greater volatility with respect to its securities holdings
than funds that are more broadly diversified.  The
Portfolio intends to conduct its operations, however, so as
to qualify as a "regulated investment company" for purposes
of the Code, which will relieve the Portfolio of any
liability for Federal income tax to the extent its earnings
are distributed to shareholders.  To qualify as a regulated
investment company, the Portfolio will, among other things,
limit its investments so that, at the close of each quarter
of the taxable year (a) not more than 25% of the market
value of the Portfolio's total assets will be invested in
the securities of a single issuer and (b) with respect to
50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested
in the securities of a single issuer and the Portfolio will
not own more than 10% of the outstanding voting securities
of a single issuer.

INVESTMENT RESTRICTIONS

The investment restrictions numbered 1 through 6 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 the 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 7 through 11 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.	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.

	2.	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.

	3.	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.

	4.	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.

	5.	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.

	6.	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.

	7.	The Portfolio will not invest in oil, gas or other
mineral leases or exploration or development programs.

	8.	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, except that the Portfolio may engage in short
sales on shares issued by exchange traded funds, and
provided that transactions in futures contracts and options
are not deemed to constitute selling securities short.

9. The Portfolio will not make investments for the
purpose of exercising control or management.

	10.	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.

	11.	The 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 2 above)
apply at the time of purchase of securities.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities for the Portfolio are
made by the investment advisers, 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 investment advisers 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 investment advisers 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 investment advisers 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, each investment
adviser seeks the best overall terms available. In
assessing the best overall terms available for any
transaction, the investment advisers 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
investment advisers authorize the investment advisers, 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 investment advisers or
their affiliates exercise investment discretion. The fees
under the Management Agreement and the Advisory Agreement,
respectively, are not reduced by reason of the Portfolio's
investment advisers 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 investment advisers, 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 investment
advisers, 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.

The following table sets forth certain information
regarding the Portfolio's payment of brokerage commissions
for the fiscal period ended March 31, 2001:

Total
Brokerage
Commissions
Commissions
paid to
Salomon
Smith
Barney
% of Total
Brokerage
Commissions
paid to
Salomon Smith
Barney
% of Total
Dollar Amount of
Transactions
Involving
Commissions Paid
to Salomon Smith
Barney

$17,154
$117
0.68%
0.74%


PORTFOLIO TURNOVER

The Portfolio does not intend to seek profits through
short-term trading. Nevertheless, the Portfolio will not
consider portfolio turnover rate a limiting factor in
making investment decisions.

The 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 Portfolio is authorized
to engage in transactions in options, it may experience
increased portfolio turnover under certain market
conditions as a result of its investment strategies. For
instance, the exercise of a substantial number of options
written by the 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 the
Portfolio's securities that are included in the computation
of turnover were replaced once during a period of one year.
For the fiscal period ended March 31, 2001, the portfolio
turnover was 55%.

Certain practices that may be employed by the 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 investment
adviser 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 the Portfolio's shares
as well as by requirements that enable the Portfolio to
receive favorable tax treatment.

INVESTMENT MANAGEMENT AND OTHER SERVICES

Manager; Investment Advisers; Administrator.  The manager
serves as investment manager to the Trust pursuant to an
investment management agreement ("Management Agreement").
The investment advisers serve as investment advisers to the
Portfolio pursuant to separate written agreements with the
manager ("Advisory Agreement").  SBFM 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 investment advisers, and SBFM.  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, SBFM 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 SBFM a fee for these
services that is computed daily and paid monthly at the
annual rate of 0.20% of the value of the Portfolio's
average daily net assets.

Under the Management Agreement, the Portfolio pays SBFM 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, SBFM pays each investment adviser,
based on the rates applied to the Portfolio's average daily
net assets on a monthly basis. The management fee paid to
SBFM is 0.90%. The applicable investment advisory fee paid
by SBFM to each investment adviser and the names of the
investment adviser are indicated below:


Investment Adviser
Investment Advisory Fee
INVESCO Funds Group, Inc.
0.65%
Elijah Asset Management, LLC
0.55%


For the fiscal period ended March 31, 2001 the Portfolio
incurred investment management and administration fees as
follows:

2001
Management
Fee
Administrati
on Fee

$41,515

$9,795


	The manager has agreed to waive a portion of the fees
otherwise payable to it by the Portfolio so that the
manager would retain, as its annual management fee, no more
than 0.90% of the Portfolio's average daily net assets. For
the fiscal period ended March 31, 2001, SBFM waived $12,244
of its management fees.

SBFM, through its predecessors, was incorporated on March
12, 1968 under the laws of Delaware and is a registered
investment adviser.  SBFM renders investment advice to
investment companies that had aggregate assets under
management as of May 31, 2001 in excess of $129 billion.
The Consulting Group, a division of SBFM, has extensive
experience in providing investment adviser 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-site evaluations of advisors annually.   As of
March 31, 2001, the Consulting Group provided services with
respect to over $245 billion in client assets representing
more than 657,697 separate accounts under a variety of
programs designed for individual and institutional
investors.

The manager and the investment advisers 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 investment advisers 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 investment advisers manage the securities
held by the Portfolio in accordance with the Portfolio's
stated investment objectives and policies, make investment
decisions for the Portfolio and place 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 investment advisers
for the Portfolio and thereafter monitoring the investment
advisers' performance through quantitative and qualitative
analysis as well as periodic in-person, telephonic and
written consultations with investment advisers.  In
evaluating prospective investment advisers, the manager
considers, among other factors, each investment adviser'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 investment advisers and ultimately
recommending to the Board of Trustees whether a investment
adviser'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 a investment adviser, custodian,
transfer agent, sub-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 investment
advisers.  However, the manager's decisions, including the
identity of the investment adviser and the specific amount
of the manager's compensation to be paid to the investment
adviser, 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 investment adviser 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 investment advisers.  The Exemption is
based on among other things:  (1) the manager will select,
monitor, evaluate and allocate assets to, the investment
advisers and ensure that the investment advisers 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 investment adviser and its investment advisory
contract within 90 days of the engagement of a new
investment adviser; (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,
the Portfolio, its manager, investment advisers and
principal underwriter have adopted codes of ethics that
permit personnel to invest in securities for their own
accounts, including securities that may be purchased or
held by the Portfolio.  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 codes 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 each of these Codes of Ethics is on file with the
SEC.

Organization of the Trust.   The Trust is organized as an
unincorporated business trust under the laws of The
Commonwealth of Massachusetts pursuant to a Master Trust
Agreement dated 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, 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 July 13, 2001, the following shareholders own of
record or beneficially 5% or more of shares of a Portfolio
of the Trust:

	Smith Barney Fund Management
	Seed Account
	Attn: Cindy Clark
	125 Broad Street 10th Floor
	New York, NY 10001
owned 1,250,000.000 shares (70.23%)

Auditors.  KPMG LLP, 757 Third Avenue, New York, New York
10017, has been selected to serve as independent auditors
of the Portfolio and to render an opinion on the
Portrfolio's financial statements for the fiscal year
ending March 31, 2002.

Distributor.  Salomon Smith Barney, 388 Greenwich Street,
New York, NY  10013 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.  PFPC Trust Company ("PFPC") and The Chase
Manhattan Bank ("Chase") serve as the custodians for the
Trust. The assets of the Trust are held under bank
custodianship in accordance with the 1940 Act. Under their
custody agreements with the Trust, PFPC and Chase are
authorized to establish separate accounts for foreign
securities owned by the Portfolio to be held with foreign
branches of U.S. banks as well as certain foreign banks and
securities depositories as sub-custodians of assets owned
by the Portfolio. For its custody services, PFPC and Chase
receive monthly fees charged to the Portfolio based upon
the month-end, aggregate net asset value of the Portfolio
plus certain charges for securities transactions. PFPC and
Chase are also reimbursed by the Portfolio for out-of-
pocket expenses including the costs of any foreign and
domestic sub-custodians.

Transfer Agent.  Citi Fiduciary Trust Company, located at
388 Greenwich Street, New York, New York 10013, 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.

Sub-Transfer Agent.  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.


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 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
Portfolio based on an evaluation of an investor's
investment objective and risk tolerances.  Shares of the
Portfolio are offered for purchase and redemption at its
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 advisers 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 the 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
SBFM 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.  The
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.

The 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 the 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 the 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 Portfolio's shares, including
data from Lipper Analytical Services, Inc., Standard &
Poor's 500 Composite Stock Price Index and other industry
publications.

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 November 28, 2000 through March 31,
2001
(35.00)%



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 November 28, 2000 through March 31,
2001
(35.05)%


Yield and Equivalent Taxable Yield

From time to time, the Trust may also quote the Portfolio's
yield in advertisements or in reports and other
communications to shareholders.  The 30-day yield figure 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 the 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.

The 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.

Investors should recognize that in periods of declining
interest rates, the 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 the 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.

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 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.

As described above, the Portfolio may invest in certain
types of warrants, foreign currencies, forward contracts,
options and futures contracts. The Portfolio anticipates
that these investment activities will not prevent it from
qualifying as a regulated investment company.

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.

The Portfolio expects 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 on the sale or
exchange of the share, to the extent of the capital gain
dividend, will be treated as a long-term capital loss.

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 any excess 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 from such state or local taxes
for dividends paid by the 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.

FINANCIAL STATEMENTS

The Portfolio's Annual Report for the fiscal year ended
March 31, 2001 is incorporated herein by reference in its
entirety.  The Annual Report was filed on June 4, 2001,
Accession Number 0000950130-01-502130.






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 therefore 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.






STATEMENT OF ADDITIONAL INFORMATION

CONSULTING GROUP CAPITAL MARKETS FUNDS
MULTI-STRATEGY MARKET NEUTRAL INVESTMENTS
July 30, 2001

222 Delaware Avenue - Wilmington, Delaware 19801 -
(212) 816-8725

This Statement of Additional Information ("SAI")
supplements the information contained in the current
prospectus of Multi-Strategy Market Neutral Investments, a
separate series of the Consulting Group Capital Markets
Funds (the "Trust"), dated July 30, 2001, and should be
read in conjunction with the prospectus. The prospectus may
be obtained by contacting your Financial Consultant or by
writing or calling the Trust at the address or telephone
number listed above. This SAI, 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
4
Investment Restrictions
18
Investment Management and Other
Services
21
Purchase of Shares
25
Redemption of Shares
25
Redemptions in Kind
26
Net Asset Value
26
Determination of Performance
27
Taxes
28
Distributor
32
Custodian, Transfer Agent and
Sub-Transfer Agent
32
Financial Statements
33



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 Portfolio. Each Trustee who is an
"interested person" of the Trust, as defined in the 1940
Act, is indicated by an asterisk. As of the date of this
SAI and the prospectus, the Trustees and officers of the
Trust as a group did not own any of the outstanding shares
of the Portfolio.

Walter E. Auch, Trustee (Age 80). Consultant to
companies in the financial services industry; Director of
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).  Consultant, HMK
Associates; Retired Vice Chairman of the Board of
Restaurant Associates Industries, Inc. Director or trustee
of 21 investment companies associated with Citigroup. His
address is c/o HMK Associates, 30 Columbia Turnpike,
Florham Park, New Jersey 07932.

H. John Ellis, Jr., Trustee (Age 74).  Retired.
Director or trustee of 2 investment companies associated
with Citigroup.His address is 858 East Crystal Downs Drive,
Frankfort, Michigan 49635.
Stephen E. Kaufman, Trustee (Age 69).  Attorney.
Director or trustee of 13 investment companies associated
with Citigroup. His address is 277 Park Avenue, New York,
New York 10172.
Armon E. Kamesar, Trustee (Age 74).  Chairman 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, California 92037.
*Heath B. McLendon, Chairman of the Board (Age 68).
Managing Director of Salomon Smith Barney, and President of
SBFM and TIA.  Mr. McLendon also serves as Chairman or Co-
Chairman 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 43).  Managing Director of Salomon Smith Barney;
Director and Senior Vice President of SBFM and TIA.  Mr.
Daidone also serves as Senior Vice President or Executive
Vice President and Treasurer of 83 investment companies
associated with Citigroup.  His address is 125 Broad
Street, New York, New York 10004.

	Frank L. Campanale, Investment Officer (Age 48).
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.

	Paul Hatch, Investment Officer (Age 44) Chief
Operating Officer of Salomon Smith Barney's Consulting
Group and Deputy Director of National Sales for Consulting
Group. Prior to 1997, a Branch Manager of a branch office
of Salomon Smith Barney Inc.  His address is 388 Greenwich
Street, New York, New York 10013.

	LeRoy T. Pease, CFA, Investment Officer (Age 42).
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 51).  Managing
Director of Salomon Smith Barney; General Counsel and
Secretary of SBFM 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 40).  Director of
Salomon Smith Barney and Controller or Assitant Treasurer
of 43 investment companies associated with Citigroup. His
address is 125 Broad Street, New York New York 10004.
Stephen M. Hagan, Vice President (Age 33). Vice
President of Salomon Smith Barney Consulting Group. His
address is 222 Delaware Avenue, Wilmington, Delaware,
19801.

As of July 13, 2001, 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,
SBFM 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 investment adviser, SBFM or any of
their affiliates a fee of $32,000 per annum plus $1,000 per
meeting attended. By the end of the calendar year in which
a Trustee attains the age of 80, Trustees are required to
change to emeritus status. The Trust reimburses the
Trustees for travel and out-of-pocket expenses to attend
meetings of the board.  For the calendar year ended
December 31, 2000, such fees and expenses totaled $10,355.


For the fiscal year ended March 31, 2001, the Trustees of
the Trust were paid the following compensation:






Name





Aggregate
Compensation

Pension or
Retirement
Benefits
Accrued as
Expense of
The Trust



Total
Compensation
From Fund
Complex*


Total
Number
of Funds
Served In
Complex
Heath B. McLendon**
None
None
None
78
Walter Auch
$466
None
$52,800
  2
Martin Brody
  297
None
132,950
21
H. John Ellis
  466
None
55,100
  2
Armon E. Kamesar
  472
None
55,100
  2
Stephen E. Kaufman
  466
None
114,400
13
*As of December 31, 2000
** "interested" Trustee


INVESTMENT OBJECTIVES, MANAGEMENT POLICIES AND RISK FACTORS

The prospectus discusses the investment objective of Multi-
Strategy Market Neutral Investments (the "Portfolio") and
the principal policies employed to achieve that objective.
This SAI sets out supplemental information concerning the
types of securities and other instruments in which the
Portfolio may invest, the investment policies and
strategies that the Portfolio may utilize and certain risks
associated with those investments, policies and strategies.

Short Sales.  The Portfolio will seek to neutralize the
exposure of its long equity positions to general equity
market risk and to realize additional gains through the use
of short sales (selling a security it does not own) in
anticipation of a decline in the value of the security sold
short relative to the long positions held by the Portfolio.
In pursuing the merger arbitrage strategy, the Portfolio
may use short sales as a hedge against any stock considered
to be received in the merger transaction.  To complete such
a short-sale transaction, the Portfolio must borrow the
security to make delivery to the buyer. The Portfolio then
is obligated to replace the security borrowed by purchasing
it at the market price at the time of replacement. The
price at such time may be more or less than the price at
which the security was sold by the Portfolio. Until the
security is replaced, the Portfolio is required to repay
the lender any dividends or interest that accrue during the
period of the loan. To borrow the security, the Portfolio
also may be required to pay a premium, which would increase
the cost of the security sold. The net proceeds of the
short sale will be retained by the broker (or by the
Portfolio's custodian in a special custody account) until
the short position is closed out, to the extent necessary
to meet margin requirements. The Portfolio also will incur
transaction costs in effecting short sales. The amount of
any gain will be decreased, and the amount of any loss
increased, by the amount of the premium, dividends,
interest or expenses the Portfolio may be required to pay
in connection with a short sale. An increase in the value
of a security sold short by the Portfolio over the price at
which it was sold short will result in a loss to the
Portfolio, and there can be no assurance that the Portfolio
will be able to close out the position at any particular
time or at an acceptable price.  The lender of the security
may demand the return of the security at any time.

EQUITY SECURITIES

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

Convertible Securities.  The Portfolio invests in
convertible securities, including debt obligations and
preferred stock of the issuer convertible at a stated
exchange rate into common stock of the issuer.  Convertible
securities generally offer lower interest or dividends
yields than non-convertible securities of similar quality.
As with all fixed income securities, the market value of
convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates
decline.  However, when the market price of the common
stock underlying a convertible security exceeds the
conversion price, the convertible security tends to reflect
the market price of the underlying common stock. 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.

The Portfolio may also purchase synthetic convertible
securities manufactured by other parties, including
convertible structured notes.  Convertible structured notes
are fixed income debentures linked to equity, and are
typically issued by investment banks.  Convertible
structured notes have the attributes of a convertible
security, however, the investment bank that issued the
convertible note assumes the credit risk associated with
the investment, rather than the issuer of the underlying
common stock into which the note is convertible.

Preferred Shares.  The Portfolio may invest in preferred
shares.  Preferred shares are equity securities, but they
have many characteristics of fixed income securities, such
as a fixed dividend payment rate and/or a liquidity
preference over the issuer's common shares. However,
because preferred shares are equity securities, they may be
more susceptible to risks traditionally associated with
equity investments than the Portfolio's fixed income
securities.

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

Real Estate Investment Trusts ("REITs") and Associated Risk
Factors.  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 Portfolio may invest in
the securities of other investment companies to the extent
that such investments are consistent with the Portfolio's
investment objective and policies and permissible under the
Investment Company Act of 1940, as amended (the
"1940 Act"). Under the 1940 Act, the 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. The Portfolio will not invest in other investment
companies for which the investment advisers or any of their
affiliates act as an investment adviser or distributor.

The Portfolio may invest up to 10% of its assets in
securities of other investment companies, including shares
in a portfolio of securities that seeks to track the
performance of an underlying equity index or a portion of
an equity index ("exchange traded funds").

The 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.

Risks of Non-U.S. Investments.  To the extent that the
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 the 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 the 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 the Portfolio to accurately price
its portfolio securities or to dispose of such securities
at the times determined by the investment adviser to be
appropriate. The risks associated with reduced liquidity
may be particularly acute in situations in which the
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, the 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 the 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 the
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. The 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, the
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.  Custodial
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 the Portfolio to make
intended securities purchases due to 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 due to 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 the Portfolio against loss
or theft of its assets.

Withholding and Other Taxes.  The Portfolio 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 the
Portfolio's investments in such countries. These taxes will
reduce the return achieved by the Portfolio. Treaties
between the U.S. and such countries may not be available to
reduce the otherwise applicable tax rates.

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

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.

Fixed Income Securities.  The market value of fixed income
obligations of the Portfolio will be affected by general
changes in interest rates which will result in increases or
decreases in the value of the obligations held by the
Portfolio.  The market value of the obligations held by the
Portfolio can be expected to vary inversely to changes in
prevailing interest rates.  Investors also should recognize
that, in periods of declining interest rates, the
Portfolio's yield will tend to be somewhat higher than
prevailing market rates and, in periods of rising interest
rates, the Portfolio's yield will tend to be somewhat
lower.  Also, when interest rates are falling, the inflow
of net new money to the Portfolio from the continuous sale
of its shares will tend to be invested in instruments
producing lower yields than the balance of its portfolio,
thereby reducing the Portfolio's current yield.  In periods
of rising interest rates, the opposite can be expected to
occur.  In addition, securities in which the Portfolio 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.

Debt Securities Rating Criteria.  Investment grade debt
securities are those rated "BBB" or higher by Standard &
Poor's Ratings Group ("Standard & Poor's"), the equivalent
rating of other national statistical rating organizations
or determined to be of equivalent credit quality by the
investment adviser.  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 Standard & Poor's or the equivalent rating of
other national statistical rating organizations.  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 the Portfolio's
net asset value to the extent that it invests in such
securities. In addition, the Portfolio may incur additional
expenses to the extent it is required to seek recovery upon
a default in payment of principal or interest on its
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
the 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, the 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 the 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
investment advisers 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.

Currency Exchange Rates.  The Portfolio's share value may
change significantly when the currencies, other than the
U.S. dollar, in which the 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 Portfolio 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
the 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
that the Portfolio enters into the contract.  To assure
that the 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 Portfolio, 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,
the 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 that 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, the 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 investment
adviser.  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 the 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 that an
active forward currency contract market will always exist.
These factors will restrict the 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, the 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 investment adviser 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 that 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.  The
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. The 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.  A call
option written by the Portfolio obligates the Portfolio to
sell specified securities to the holder of the option at a
specified price if the option is exercised at any time
before the expiration date. Call options covered means that
the Portfolio will own the securities subject to the
options as long as the options are outstanding, or the
Portfolio will use the other methods described below.  The
Portfolio's purpose in writing covered call options is to
realize greater income than would be realized on portfolio
securities transactions alone. However, the Portfolio may
forego the opportunity to profit from an increase in the
market price of the underlying security.

A covered put option written by the Portfolio would
obligate the Portfolio to purchase specified securities
from the option holder at a specified price if the option
is exercised at any time before the expiration date.  Put
options that are covered, means that the Portfolio would
have segregated assets with a value at least equal to the
exercise price of the put option.  The purpose of writing
such options is to generate additional income for the
Portfolio. However, in return for the option premium, the
Portfolio accepts the risk that it may be required to
purchase the underlying security at a price in excess of
its market value at the time of purchase.

Call and put options written by the Portfolio will also be
considered to be covered to the extent that the Portfolio's
liabilities under such options are wholly or partially
offset by its rights under call and put options purchased
by the Portfolio. In addition, a written call option or put
may be covered by entering into an offsetting forward
contract and/or by purchasing an offsetting option or any
other option which, by virtue of its exercise price or
otherwise, reduces the Portfolio's net exposure on its
written option position.

Writing Covered Call and Put Options on Securities Indices.
The 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.

The 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. The Portfolio may cover call and put options on
a securities index by segregated assets with a value equal
to the exercise price.

Writing Uncovered Call and Put Options on Securities an
Securities Indices.  The Portfolio may write options that
are not covered by portfolio securities.  This is regarded
as a speculative investment technique that could expose the
Portfolio to substantial losses.  The Portfolio will
designate liquid securities in the amount of its potential
obligation under uncovered options, and increase or
decrease the amount of designated assets daily based on the
amount of the then-current obligation under the option.
This designation of liquid assets will not eliminate the
risk of loss from writing the option but it will ensure
that the Portfolio can satisfy its obligations under the
option.

Purchasing Call and Put Options.  The Portfolio would
normally purchase call options in anticipation of an
increase in the market value of securities of the type in
which it may invest. The purchase of a call option would
entitle the Portfolio, in return for the premium paid, to
purchase specified securities at a specified price during
the option period. The Portfolio would 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
would realize either no gain or a loss on the purchase of
the call option.

The Portfolio would 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 would
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 the Portfolio for the purpose of affirmatively
benefiting from a decline in the price of securities which
it does not own. The Portfolio would 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 would 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 the 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 the 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.

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.  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."

The 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, the 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 the 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 which the Portfolio may write or purchase
may be affected by options written or purchased by other
investment advisory clients of Smith Barney Fund Management
LLC ("SBFM" or the "manager") (formerly known as SSB Citi
Fund Management LLC) and/or investment advisers. 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 investment
adviser'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 that 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 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. The Portfolio 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 manager that such contracts are
necessary or appropriate in the management of the
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 the
Portfolio intends to purchase.

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 a investment
adviser'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.

U.S. Government Securities.  The U.S. Government Securities
in which the Portfolio 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.  The
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.

When-Issued and Delayed Delivery Securities.  The 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
the 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.  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 investment
adviser, 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 in the event that 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 Inc. ("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.

Illiquid Securities.  The Portfolio 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 investment
adviser.  The investment advisers 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 investment advisers' application of
these guidelines and procedures. The inability of the
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 investment adviser of the Portfolio,
in consultation with the manager, determines 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 SBFM.  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.

INVESTMENT RESTRICTIONS

The investment restrictions 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 the Portfolio, which is defined in the 1940 Act as the
lesser of (i) 67% or more of the shares present at the
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.

	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.	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.	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) the Portfolio may, to the extent
consistent with its investment policies, enter into reverse
repurchase agreements, short sales, forward roll
transactions and similar investment strategies and
techniques and (c) for short-term purposes to satisfy
margin requirements or calls.

	5.	The Portfolio will not make loans.  This
restriction does not apply to: (a) the purchase of debt
obligations in which the 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 purchase any securities on
margin (except for such short-term credits as are necessary
for the clearance of purchases and sales of Portfolio
securities), except in connection with short-sales of
securities.  For purposes of this restriction, the deposit
or payment by the 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.

	7.	The Portfolio will not purchase or sell real
estate, real estate mortgages, commodities or commodity
contracts, but this restriction shall not prevent the
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 engage in the business of
underwriting securities issued by other persons, except to
the extent that the Portfolio may technically be deemed to
be an underwriter under the Securities Act of 1933, as
amended, in disposing of Portfolio securities.


Portfolio Transactions

Decisions to buy and sell securities for the Portfolio are
made by the investment adviser(s), 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
an investment adviser, 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 an investment adviser 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 investment adviser 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, each investment
adviser seeks the best overall terms available. In
assessing the best overall terms available for any
transaction, the investment adviser 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
investment adviser authorizes the investment adviser, 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 investment adviser or
its affiliates exercise investment discretion. The fees
under the investment management agreement and the
investment advisory agreements, respectively, are not
reduced by reason of the Portfolio's investment advisers
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 and in which
commissions may be paid. For the fiscal period ended March
31, 2000, the Portfolio did not direct brokerage
transactions or pay brokerage commissions on such
transactions to brokers because of research services
provided.


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 investment adviser, 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 investment
adviser, 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.

The following table sets forth certain information
regarding the Portfolio's payment of brokerage commissions
for the fiscal year ended March 31, 2001 and the fiscal
period ended March 31, 2000:





Fiscal
Year ended
March 31,




Total
Brokerage
Commissio
ns



Commissions
paid to
Salomon
Smith Barney

% of Total
Brokerage
Commissions
paid to
Salomon Smith
Barney
% of Total
Dollar Amount
of
Transactions
Involving
Commissions
Paid to
Salomon Smith
Barney

2001
$181,91
3
$0
0%
0%
2000
$222,19
2
$26,877
12.10%
12.52%

Portfolio Turnover

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. Under certain market conditions, the
Portfolio authorized to engage in transactions in options
may experience increased portfolio turnover as a result of
its investment strategies. For instance, the exercise of a
substantial number of options written by the Portfolio (due
to 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 the Portfolio's securities that are
included in the computation of turnover were replaced once
during a period of one year. For the fiscal year ended
March 31, 2001 and the fiscal period ended March 31, 2000,
the portfolio turnover was 317% and 249%, respectively.

Certain practices that may be employed by the 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 an investment
adviser 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 the Portfolio's shares
as well as by requirements that enable the Portfolio to
receive favorable tax treatment.

In addition, the Portfolio's use of merger arbitrage
probably will result in high portfolio turnover rates
because of the relatively short period of time that elapses
between the announcement of a reorganization and its
completion or termination.  The majority of mergers and
acquisitions are consummated in less than six months while
tender offers are normally completed in less than two
months.  Such short-term trading involves increased
brokerage commissions which expense is ultimately borne by
the shareholder.

INVESTMENT MANAGEMENT AND OTHER SERVICES

Manager; Investment Advisers; Administrator

The manager serves as investment manager to the Trust
pursuant to an investment management agreement ("Management
Agreement"). Each investment adviser serves as investment
investment adviser to the Portfolio pursuant to separate
written agreements with the Portfolio ("Advisory
Agreements"), SBFM 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 investment
advisers, and SBFM.  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, SBFM 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 SBFM a fee for these
services that is computed daily and paid monthly at the
annual rate of 0.20% of the value of the Portfolio's
average daily net assets.


Under the Management Agreement, the Portfolio pays SBFM 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, SBFM pays each investment adviser,
based on the rates applied to the Portfolio's average daily
net assets on a monthly basis. The management fee paid to
SBFM is 1.80%.  The applicable investment advisory fee paid
by SBFM to each investment adviser and the names of the
investment adviser are indicated below:

Investment Adviser
Investment Advisory Fee
Calamos Asset Management
1.00%
Pegasus Investments, Inc.
1.20%
SSgA Funds Management, Inc.
1.00%


For the fiscal year ended March 31, 2001 and the fiscal
period ended March 31, 2000 the Portfolio incurred
investment management and administration fees as follows:

Fiscal Year
ended March
31,
Management
Fee*
Administration
Fee
2001
$518,069
$75,879
2000
399,404
44,227
*For the fiscal year ended March 31, 2001
and fiscal period ended March 31, 2000,
SBFM waived $57,630 and $165,662,
respectively, of its management fees.

The manager has agreed to waive a portion of the fees
otherwise payable to it by the Portfolio so that the
manager would retain, as its annual management fee, no more
than 0.30% of the Portfolio's average daily net assets.

SBFM, through its predecessors, was incorporated on March
12, 1968 under the laws of Delaware and converted to a
Delaware limited company in 1999.  SBFM is a registered
investment adviser. SBFM  renders investment advice to
investment company clients that had aggregate assets under
management as of May 31, 2001 in excess of $129 billion.
The Consulting Group, a division of SBFM, has extensive
experience in providing investment adviser 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 Consulting Group's comprehensive database of
money management firms, through which the Consulting Group
tracks the historic and ongoing performance of over 800 of
the more than 16,000 registered investment advisors, and
conducts over 300 on-sight evaluation visits annually to
advisors.  As of March 31, 2001, the Consulting Group
provided services with respect to over $245 billion in
client assets representing more than 657,697 separate
accounts under a variety of programs designed for
individual and institutional investors.

SBFM and the investment advisers each pays 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 investment advisers 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 investment adviser manages the securities
held by the Portfolio it serves 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 investment advisers
for the Portfolio and thereafter monitoring investment
advisers' performance through quantitative and qualitative
analysis as well as periodic in-person, telephonic and
written consultations with investment advisers.  In
evaluating prospective investment advisers, the manager
considers, among other factors, each investment adviser'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 and financial strength; and quality of service
and client communications.  The manager has responsibility
for communicating performance expectations and evaluations
to investment advisers and ultimately recommending to the
Board of Trustees whether investment advisers' contracts
should be renewed, modified or terminated.  The manager
provides written reports to the Board of Trustees regarding
the results of its elevations and monitoring functions.
The manager is also responsible for conducting all
operations of the Trust except those operations contracted
to the investment adviser, 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 investment
advisers.  However, the manager's decisions, including the
identity of the investment adviser and the specific amount
of the manager's compensation to be paid to the investment
adviser 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
investment adviser 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 investment advisers.  The Exemption is
based on among other things:  (1) the manager will select,
monitor, evaluate and allocate assets to the investment
adviser and ensure that the investment advisers comply with
the Portfolio's investment objective, policies and
restrictions; (2) shares of the 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 investment adviser and its investment advisory
contract within 90 days of the engagement of  a new
investment adviser; (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, the Portfolio, its
investment advisers and principal underwriter have adopted
codes of ethics that permit personnel to invest in
securities for their own accounts, including securities
that may be purchased or held by the Portfolio.  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 codes 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 Portfolio's Code of Ethics is on file with
the Securities and Exchange Commission.

Counsel and Auditors

Willkie Farr & Gallagher serves as counsel to the Trust.
Stroock & Stroock & Lavan LLP serves as counsel to the
Trustees who are not interested persons of the Trust.

KPMG LLP, 757 Third Avenue, New York, New York 10017, has
been selected to serve as independent auditors of the
Portfolio and to render an opinion on the Portrfolio's
financial statements for the fiscal year ending March 31,
2002.

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 ("PFPC Trust"), 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
the 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 July 13, 2001, the following shareholders own of
record or beneficially 5% or more of shares of a Portfolio
of the Trust:

	Corman Foundation Inc.
	Attn: Charles R. Dettling
	P.O. Drawer 1268
	Attmore, AL 36504-1268
	owned 350,661.854 shares (5.60%)

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 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 of choices available. Advisory Services
generally provide investment advice in connection with
investments among the Portfolios of the Trust 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.  Shares of the Portfolio may be sold to
clients of Salomon Smith Barney or its affiliates that are
not participants in an Advisory Program.

The TRAK 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
Portfolio 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 investment advisers 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 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 the 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
SBFM 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.

Net asset value per share is determined as of the close of
trading on the NYSE and is computed by dividing the value
of the 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 the 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 the 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 the 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 SBFM 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 that is
written by the Portfolio is generally valued at the last
sale price or, in the absence of the last sale price, the
last offer price.  An option that is purchased by the
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 that is 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, SBFM may consult with an
independent pricing service retained by the Trust.

The valuation of the securities held by the 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 that the Portfolio would
receive if it sold the instrument.

DETERMINATION OF PERFORMANCE

From time to time, the Trust may quote the Portfolio's
total return in advertisements or in reports and other
communications to shareholders.

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 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 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 Business 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

The 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 the Portfolio's performance for any
specified period in the future.

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:

One-Year ended
March 31, 2001
Since Inception
Inception Date
6.68%
7.76%
May 10, 1999

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:

One-Year ended
March 31, 2001
Since Inception
Inception
Date
6.49%
7.57%
May 10, 1999

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 Portfolio intends to continue to qualify in each year
as a separate "regulated investment company" under 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) qualifies as 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.

As described above and in the prospectus, the Portfolio may
invest in certain types of warrants, foreign currencies,
forward contracts, options and futures contracts. The
Portfolio anticipates that these investment activities will
not prevent it from qualifying as a regulated investment
company.

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 the 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 the 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 sources
within foreign countries 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.

If the Portfolio acquires an equity interest (including a
depositary receipt for shares of stock) in certain foreign
investment entities, referred to as "passive foreign
investment companies" (a "PFIC") the Portfolio itself may
be subject to U.S. federal income tax and an additional
charge in the nature of interest on a portion of any
"excess distribution" from such PFIC or gain from the
disposition of its equity interest in such PFIC, even if
the distribution or gain is distributed by the Portfolio to
its shareholders.  If the Portfolio were able and elected
to treat a PFIC as a "qualified electing fund," in lieu of
the treatment described above, the Portfolio would be
required each year to include in income, and distribute to
shareholders in accordance with the distribution
requirements referred to above, the Portfolio's pro rata
share of the ordinary earnings and net capital gains of the
PFIC, whether or not actually received by the Portfolio.
The Portfolio generally should be able to make an
alternative election to mark these investments to market
annually, resulting in the recognition of ordinary income
(rather than capital gain) or ordinary loss, subject to
certain limitations on the ability to use any such loss.

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
PFICs 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

In order to avoid the application of a 4% nondeductible
federal 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.  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 expects to realize a significant amount of
net long-term capital gains that will be distributed as
described in the prospectus. Distributions of the excess 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, 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 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 under "wash sale" rules
to the extent the shares disposed of are replaced with
shares of the Portfolio within a period of 61 days
beginning 30 days before and ending 30 days after such
disposition, such as pursuant to reinvestment of dividends
in Portfolio 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.

The portion of the dividends received from the Portfolio
that qualifies for the dividends-received deduction for
corporations will be reduced to the extent that the
Portfolio holds dividend-paying stock for less than 46 days
(91 days for certain preferred stocks).  The Portfolio's
holding period requirement must be satisfied separately for
each dividend during a prescribed period before and after
the ex-dividend date and will not include any period during
which the Portfolio has reduced its risk of loss from
holding the stock by purchasing an option to sell, granting
an option to buy, or entering into a short sale of
substantially identical stock or securities, such as
securities convertible into the stock.  The holding period
for stock may also be reduced if the Portfolio diminishes
its risk of loss by holding one or more other positions
with respect to substantially similar or related
properties.  Dividends-received deductions will be allowed
only with respect to dividends paid on Portfolio shares for
which a corporate shareholder satisfies the same holding
period rules applicable to the Portfolio, and the deduction
is subject to limitations on debt financing at both the
Portfolio and shareholder levels.  Receipt of dividends
that qualify for the dividends-received deduction may
increase a corporate shareholder's liability, if any, for
alternative minimum tax.  Such a shareholder should also
consult its tax adviser regarding the possibility that its
federal tax basis in its Portfolio shares may be reduced by
the receipt of "extraordinary dividends" from the
Portfolio, and to the extent such basis would be reduced
below zero, current recognition of income would be
required.

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.

CUSTODIAN, TRANSFER AGENT AND SUB-TRANSFER AGENT

PFPC Trust Company serves as the custodian for the
Portfolio. The assets of the Portfolio are held under bank
custodianship in accordance with the 1940 Act. Under its
custody agreement with the Trust, PFPC Trust is authorized
to establish separate accounts for foreign securities owned
by the Portfolio to be held with foreign branches of U.S.
banks as well as certain foreign banks and securities
depositories as sub-custodians of assets owned by the
Portfolio.  For its custody services, PFPC Trust receives
monthly fees charged to the Portfolio based upon the month-
end, aggregate net asset value of the Portfolio plus
certain charges for securities transactions. PFPC Trust is
also reimbursed by the Portfolio for out-of-pocket expenses
including the costs of any foreign and domestic sub-
custodians.

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 March
31, 2001 is incorporated herein by reference in its
entirety.  The Annual Report was filed on June 4, 2001,
Accession Number 0000950130-01-502130.





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