<PAGE>
TRAK(R)
----------------------------------------
Personalized Investment Advisory Service
Consulting Group
Capital Markets Funds
Multi-Strategy Market Neutral
Investments
Semi-Annual Report
September 30, 1999
[LOGO OF SALOMON SMITH BARNEY]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
CONSULTING GROUP CAPITAL MARKETS FUNDS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Shareholder Letter.......................................................... 2
Schedule of Investments..................................................... 4
Statement of Assets and Liabilities......................................... 13
Statement of Operations..................................................... 14
Statement of Changes in Net Assets.......................................... 15
Notes to Financial Statements............................................... 16
Financial Highlights........................................................ 23
</TABLE>
1
<PAGE>
CONSULTING GROUP CAPITAL MARKETS FUNDS
Dear Shareholder:
Since the inception of Multi-Strategy Market Neutral Investments ("Portfolio")
on May 10, 1999, the U.S. equity markets have seen substantial volatility. We
are pleased to report that during the first five months of operation, the
Portfolio has met its objective by producing capital appreciation while
simultaneously limiting its exposure to stock market fluctuations.
The investment objective of the Portfolio is long-term capital appreciation,
which is derived from stock selection and other strategies rather than general
stock market movements. Each of these strategies involves taking both long and
short positions in securities. The Portfolio employs three investment
strategies: equity market neutral, convertible arbitrage and merger arbitrage.
The Portfolio's assets are equal-weighted between each of the sub-advisors,
however, such allocations may vary due to cash flows.
Market Overview
For the two years leading up to the second quarter of 1999, equity markets knew
exactly where they were going. They knew who the leaders were. The leaders were
the large cap growth companies -- even better -- the "mega" cap growth
companies. However, in the second quarter, a sudden reversal occurred. Large
cap issues under-performed smaller cap issues and value outperformed growth.
Then, in the third quarter, some questions arose. These included questions
about market leadership, questions about the direction of interest rates, and
even questions about the sustainability of earnings. After advancing broadly
throughout much of the second quarter, the stock market gave back some ground
in late July, following the release of economic reports suggesting the economy
may be growing too strongly, and wages rising too quickly, to suit the Federal
Reserve. U.S. fixed income markets suffered from the same bout of inflation
phobia. Bond prices fell, and bond yields, which move in the opposite direction
of bond prices, rose.
The Portfolio
The Portfolio has performed in line with expectations. Since inception, the
Portfolio has returned 5.50% through September 30, 1999, versus a negative
3.81% for the S&P 500 Index and 1.96% for the 90-day Treasury.* Historically,
the returns from market neutral investing have not been closely correlated with
the broader market indicies. This low correlation provides investors with an
effective vehicle for portfolio diversification. The Portfolio has delivered
consistent returns in a period of considerable U.S. stock market volatility and
interest rates worries.
Consulting Group, as manager of the Portfolio, allocates the assets among sub-
advisors, who employ three separate and distinct hedging strategies:
. State Street Global Advisors ("SSGA") attempts to be beta, sector,
dollar and capitalization neutral. The focus of SSGA is to construct a
long portfolio of relatively undervalued stocks with solid growth
potential, and a short portfolio of overvalued stocks with deteriorating
growth characteristics. SSGA seeks to achieve the profile by applying
quantitative techniques that employ a combination of relative value and
growth factors mainly to mid- and large-capitalization equity
securities.
. Calamos Asset Management ("Calamos") employs a convertible arbitrage
strategy. Calamos seeks market neutrality by purchasing qualified
convertible securities then hedging the transaction by selling short the
underlying common stock. To determine the appropriate hedge ratio, the
firm will analyze the "delta ratio", which identifies the convertible
security's sensitivity to changes in the underlying common stock price.
. Pegasus Investments, Inc. ("Pegasus") advises the merger arbitrage
segment of the Portfolio. Pegasus seeks to profit from U.S. mergers and
acquisitions where the target company is trading at a discount from its
takeover price. Market neutrality is sought by hedging each merger
transaction.
- -------
* The performance data represents past performance and is not indicative of
future results. The investment return and principal value of an investment in
a fund will fluctuate and, therefore an investor's shares may be worth more or
less than their original cost when redeemed.
2
<PAGE>
As you can see, the sub-advisors ability to select individual securities is
paramount to meeting the Portfolio's investment objective. Rather than
benefiting from the market's general direction, the Portfolio must rely on
stock selection and maintaining a truly neutral position. The Consulting Group
closely monitors each sub-advisor with the objective of bringing the best
skills available to the process.
We wish to thank you for the confidence you have shown in Consulting Group and
your investment in Consulting Group Capital Markets Funds. As always, if you
should have any questions or comments about the Consulting Group Capital
Markets Funds, your Financial Consultant remains ready to assist you.
Sincerely,
/s/ Heath B. McLendon /s/ Frank L. Campanale
Heath B. McLendon Frank L. Campanale
Chairman of the Board of Trustees Investment Officer of the Consulting
of the Consulting Group Capital Group Capital Markets Funds
Markets Funds
October 15, 1999
3
<PAGE>
Schedule of Investments (unaudited) September 30, 1999
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
COMMON STOCK -- 65.4%
- --------------------------------------------------------------------------------
Advertising -- 1.3%
8,952 Outdoor Systems, Inc.*................................ $ 320,035
- --------------------------------------------------------------------------------
Aerospace -- 0.5%
2,100 Cordant Technologies, Inc. ........................... 63,919
1,100 Rockwell International Corp. ......................... 57,750
- --------------------------------------------------------------------------------
121,669
- --------------------------------------------------------------------------------
Aerospace & Defense -- 0.9%
1,500 General Dynamics Corp................................. 93,658
2,101 United Technologies Corp. ............................ 124,615
- --------------------------------------------------------------------------------
218,273
- --------------------------------------------------------------------------------
Apparel -- 0.4%
3,300 Jones Apparel Group, Inc.* ........................... 94,876
- --------------------------------------------------------------------------------
Automotive -- 1.6%
2,300 Cummins Engine Co., Inc............................... 114,569
900 Ford Motor Co......................................... 45,168
5,300 Meritor Automotive Inc. .............................. 110,637
1,500 Navistar International Corp. ......................... 69,750
1,900 Snap-On Inc. ......................................... 61,750
- --------------------------------------------------------------------------------
401,874
- --------------------------------------------------------------------------------
Banking -- 4.5%
3,146 BankBoston Corp. ..................................... 136,459
1,400 Chase Manhattan Corp. ................................ 105,525
2,788 CNB Bancshares, Inc. ................................. 147,764
5,400 F & M Bancorp Inc. of Wisconsin....................... 187,650
3,000 Fleet Financial Group Inc. ........................... 109,875
1,600 PNC Bank Corp. ....................................... 84,300
8,445 Premier Bancshares Inc. .............................. 147,787
1,500 UST Corp. ............................................ 46,125
3,480 Western Bancorp....................................... 134,415
- --------------------------------------------------------------------------------
1,099,900
- --------------------------------------------------------------------------------
Banks - Money Center -- 1.6%
8,454 First Security Corp. ................................. 201,048
700 J.P. Morgan & Co. Inc. ............................... 79,975
2,800 UnionBanCal Corp. .................................... 101,500
- --------------------------------------------------------------------------------
382,523
- --------------------------------------------------------------------------------
Beverages -- 0.4%
1,300 Anheuser-Busch Co., Inc. ............................. 91,083
- --------------------------------------------------------------------------------
Broadcasting -- TV, Cable & Radio -- 1.8%
8,264 Century Communications Corp., Class A Shares*......... 377,046
2,400 Infinity Broadcasting Corp.* ......................... 70,350
- --------------------------------------------------------------------------------
447,396
- --------------------------------------------------------------------------------
Building Materials -- 2.3%
2,000 American Standard Co.* ............................... 76,750
3,000 Lone Star Industries, Inc. ........................... 149,626
11,000 MacMillan Bloedel Ltd. ............................... 172,562
4,500 Sherwin-Williams Co. ................................. 94,218
1,700 USG Corp. ............................................ 80,750
- --------------------------------------------------------------------------------
573,906
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1999
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Business Publishing -- 0.3%
3,200 Reynolds & Reynolds Co., Class A Shares.............. $ 65,200
- -------------------------------------------------------------------------------
Chemicals -- 1.0%
1,100 FMC Corp* ........................................... 53,076
43 Rohm & Haas Co. ..................................... 1,585
5,300 Solutia, Inc. ....................................... 94,737
5,600 W.R. Grace & Co.*.................................... 89,950
- -------------------------------------------------------------------------------
239,348
- -------------------------------------------------------------------------------
Commercial Services -- 0.5%
4,300 The Servicemaster Co. ............................... 69,069
2,300 Viad Corp. .......................................... 67,850
- -------------------------------------------------------------------------------
136,919
- -------------------------------------------------------------------------------
Communications - Equipment -- 0.9%
9,259 Saville Systems PLC ADR.............................. 135,992
1,700 Tellabs, Inc. ....................................... 96,793
- -------------------------------------------------------------------------------
232,785
- -------------------------------------------------------------------------------
Computer Software -- 1.7%
500 America Online, Inc. ................................ 52,000
1,000 BMC Software, Inc.*.................................. 71,564
1,200 Cisco Systems, Inc. ................................. 82,275
1,600 Computer Associates International, Inc. ............. 98,000
600 Network Solutions Inc. .............................. 55,125
3,600 Sterling Software, Inc.* ............................ 72,000
- -------------------------------------------------------------------------------
430,964
- -------------------------------------------------------------------------------
Computers -- 2.6%
3,800 American Management Systems Inc.* ................... 97,494
1,600 Apple Computer, Inc.* ............................... 101,300
10,000 Data General Corp. .................................. 210,625
500 International Business Machines Corp. ............... 60,687
1,000 Lexmark International Group, Inc., Class A Shares.... 80,500
1,900 Unisys Corp.* ....................................... 85,737
- -------------------------------------------------------------------------------
636,343
- -------------------------------------------------------------------------------
Consumer Non-Durables -- 0.4%
1,400 Best Buy Co., Inc. .................................. 86,888
- -------------------------------------------------------------------------------
Consumer Products -- 0.9%
3,000 Premark International Inc. .......................... 151,500
3,200 Tupperware Corp. .................................... 64,800
- -------------------------------------------------------------------------------
216,300
- -------------------------------------------------------------------------------
Consumer Services -- 0.9%
2,600 Lancaster Colony Corp. .............................. 83,200
1,363 Tyco International Ltd. ............................. 140,758
- -------------------------------------------------------------------------------
223,958
- -------------------------------------------------------------------------------
Drugs & Health Care -- 1.2%
1,600 Amgen Inc. .......................................... 130,400
1,100 Bristol-Myers Squibb Co. ............................ 74,250
1,000 Johnson & Johnson.................................... 91,875
- -------------------------------------------------------------------------------
296,525
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1999
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
Electronics -- 1.6%
2,800 Altera Corp........................................... $ 121,450
800 Avnet, Inc. .......................................... 33,600
1,700 EMC Corp. ............................................ 121,445
1,400 Texas Instruments Inc. ............................... 115,150
- --------------------------------------------------------------------------------
391,645
- --------------------------------------------------------------------------------
Electronics - Semiconductor -- 1.6%
3,630 AFC Cable Systems Inc.*............................... 154,275
5,731 Unitrode Corp.*....................................... 240,703
- --------------------------------------------------------------------------------
394,978
- --------------------------------------------------------------------------------
Entertainment -- 0.8%
1,800 Carnival Corp. ....................................... 78,300
4,000 Harrah's Entertainment Inc.*.......................... 111,000
- --------------------------------------------------------------------------------
189,300
- --------------------------------------------------------------------------------
Finance -- 0.9%
1,600 Countrywide Credit Industries, Inc.................... 51,600
1,600 PaineWebber Group, Inc. .............................. 58,000
3,100 SouthTrust Corp. ..................................... 111,213
- --------------------------------------------------------------------------------
220,813
- --------------------------------------------------------------------------------
Financial Services -- 1.6%
2,000 Ambac Financial Group, Inc. .......................... 94,750
1,200 AXA Financial, Inc. .................................. 66,975
2,800 Metris Cos. Inc. ..................................... 82,425
3,000 MGIC Investment Corp. ................................ 143,250
40 Radian Group, Inc. ................................... 1,730
- --------------------------------------------------------------------------------
389,130
- --------------------------------------------------------------------------------
Food Processing -- 0.5%
2,700 Dean Foods Co......................................... 117,619
- --------------------------------------------------------------------------------
Food Wholesalers -- 0.7%
5,200 SUPERVALU, Inc. ...................................... 113,425
2,800 U.S. Foodservice...................................... 50,400
- --------------------------------------------------------------------------------
163,825
- --------------------------------------------------------------------------------
Foods -- 1.1%
3,900 IBP, Inc. ............................................ 96,283
5,800 International Home Foods, Inc.* ...................... 101,500
1,600 Tricon Global Restaurants, Inc.* ..................... 65,500
- --------------------------------------------------------------------------------
263,283
- --------------------------------------------------------------------------------
Foods & Beverages -- 0.2%
1,700 Keebler Foods Co.*.................................... 50,788
- --------------------------------------------------------------------------------
Health Care -- 0.6%
3,300 Trigon Healthcare, Inc.*.............................. 95,288
800 Wellpoint Health Networks Inc.* ...................... 45,600
- --------------------------------------------------------------------------------
140,888
- --------------------------------------------------------------------------------
Hotels/Motels -- 0.9%
6,985 Promus Hotel Corp.*................................... 227,450
- --------------------------------------------------------------------------------
Housing & Home Furnishings -- 0.4%
5,700 Shaw Industries Inc. ................................. 90,488
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1999
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
Insurance -- 1.2%
64 Aegon N.V., American Registered Shares................ $ 5,539
2,400 Hartford Life, Inc., Class A Shares................... 118,200
1,000 Orion Capital Corp. .................................. 47,375
2,850 The PMI Group Inc. ................................... 116,493
- --------------------------------------------------------------------------------
287,607
- --------------------------------------------------------------------------------
Investment Company -- 0.2%
1,000 Lehman Brothers Holdings Inc. ........................ 58,312
- --------------------------------------------------------------------------------
Machinery - Diversified -- 1.3%
1,600 Applied Materials, Inc.*.............................. 124,600
2,200 Trinity Industries, Inc. ............................. 67,925
3,300 York International Corp. ............................. 118,594
- --------------------------------------------------------------------------------
311,119
- --------------------------------------------------------------------------------
Media Group -- 0.3%
1,800 The New York Times Co., Class A Shares................ 67,500
- --------------------------------------------------------------------------------
Medical Products & Supplies -- 0.9%
1,200 Boston Scientific Corp. .............................. 29,625
4,000 Perclose Inc.* ....................................... 186,250
- --------------------------------------------------------------------------------
215,875
- --------------------------------------------------------------------------------
Natural Gas -- 1.6%
3,000 Consolidated Natural Gas Co.@ ........................ 187,125
5,000 Sonat Inc. ........................................... 198,437
- --------------------------------------------------------------------------------
385,562
- --------------------------------------------------------------------------------
Pharmaceutical -- 4.6%
6,450 ALZA Corp.*........................................... 276,140
5,047 Centocor, Inc.* ...................................... 295,564
900 IDEC Pharmaceuticals Corp.* .......................... 84,629
4,900 IVAX Corp.*........................................... 80,850
3,600 Mylan Laboratories Inc. .............................. 66,150
7,400 Roberts Pharmaceutical Corp.* ....................... 223,850
2,200 Schering-Plough Corp. ................................ 95,975
- --------------------------------------------------------------------------------
1,123,158
- --------------------------------------------------------------------------------
Printing -- 1.0%
6,406 World Color Press Inc. ............................... 238,623
- --------------------------------------------------------------------------------
Publishing -- 1.4%
1,900 Central Newspapers, Inc., Class A Shares.............. 84,550
1,200 Knight-Ridder, Inc. .................................. 65,850
2,400 Tribune Co. .......................................... 119,400
1,800 Valassis Communications, Inc. ........................ 79,087
- --------------------------------------------------------------------------------
348,887
- --------------------------------------------------------------------------------
Real Estate -- 0.9%
14,500 Berkshire Realty Co. ................................. 174,000
6,000 Host Marriott Corp. .................................. 57,000
- --------------------------------------------------------------------------------
231,000
- --------------------------------------------------------------------------------
Recreation -- 0.4%
4,100 Brunswick Corp. ...................................... 101,987
- --------------------------------------------------------------------------------
Retail -- 4.0%
20 Albertson's Inc. ..................................... 792
1,600 Dayton Hudson Corp. .................................. 96,100
1,700 Federated Department Stores, Inc.*.................... 74,269
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1999
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
<C> <S> <C>
- ------------------------------------------------------------------------------
Retail -- 4.0% (continued)
2,600 The Great Atlantic & Pacific Tea Co., Inc. .......... $ 78,812
1,600 Home Depot, Inc. .................................... 109,800
1,900 Kroger Co. .......................................... 41,918
6,400 Ross Stores, Inc. ................................... 128,800
1,700 Tandy Corp. ......................................... 87,868
4,000 TJX Cos. Inc. ....................................... 112,250
4,100 Toys "R" Us, Inc.*................................... 61,500
2,200 Wal-Mart Stores, Inc. ............................... 104,637
2,000 Zale Corp.*.......................................... 76,625
- ------------------------------------------------------------------------------
973,371
- ------------------------------------------------------------------------------
Savings & Loan Associatons -- 1.2%
4,500 Peoples Heritage Financial Group, Inc. .............. 74,812
1,244 Reliance Bancorp Inc. ............................... 46,805
7,476 St. Paul Bancorp Inc................................. 171,013
- ------------------------------------------------------------------------------
292,630
- ------------------------------------------------------------------------------
Telecommunications -- 4.7%
2,800 ADC Telecommunications, Inc.*........................ 117,425
50 Global Crossing Ltd.* ............................... 1,325
1,500 Lucent Technologies Inc. ............................ 97,313
3,200 MediaOne Group, Inc. ................................ 218,600
7,594 Omnipoint Corp. ..................................... 424,314
400 QUALCOMM, Inc. ...................................... 75,675
4,000 U.S. West Inc. ...................................... 228,250
- ------------------------------------------------------------------------------
1,162,902
- ------------------------------------------------------------------------------
Telecommunications Equipment -- 0.6%
3,987 Excel Switching Corp. ............................... 143,033
- ------------------------------------------------------------------------------
Telephone -- 2.5%
1,019 ALLTEL Corp. ........................................ 71,712
1,529 Ameritech Corp. ..................................... 102,729
2,000 BellSouth Corp. ..................................... 90,000
2,200 CenturyTel, Inc. .................................... 89,375
13,561 iMALL Inc.*.......................................... 253,421
- ------------------------------------------------------------------------------
607,237
- ------------------------------------------------------------------------------
Television -- 1.8%
11,993 King World Productions, Inc.*........................ 449,737
- ------------------------------------------------------------------------------
Travel Services -- 0.2%
1,500 Sabre Holdings Inc.*................................. 64,500
- ------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $16,093,030)............. 16,020,012
- ------------------------------------------------------------------------------
PREFERRED STOCK -- 8.6%
- ------------------------------------------------------------------------------
Automotive -- 1.0%
3,500 Tower Automotive Capital Trust, 6.75% Exchangeable
6/30/18............................................. 141,967
3,000 United Rentals Inc., 6.50% Exchangeable 8/1/28....... 109,125
- ------------------------------------------------------------------------------
251,092
- ------------------------------------------------------------------------------
Building Materials -- 0.7%
4,200 Owens Corning, 6.50% Exchangeable 5/10/25............ 164,325
- ------------------------------------------------------------------------------
Computer Software -- 1.0%
3,000 PSINet Inc., Series C, 6.75% Exchangeable 12/31/49... 120,750
3,000 Verio Inc., 6.75% Exchangeable 12/31/49.............. 129,375
- ------------------------------------------------------------------------------
250,125
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1999
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
Electronics -- 0.6%
2,400 Pioneer Standard Electric, 6.75% Exchangeable
3/31/28............................................ $ 133,500
- -------------------------------------------------------------------------------
Energy -- 1.8%
2,800 AES Trust, 5.50% Exchangeable 9/30/12............... 160,650
3,500 CalEnergy Capital Trust, 6.50% Exchangeable 9/1/27.. 148,750
2,375 Pogo Trust, 6.50% Exchangeable 6/1/29............... 125,134
- -------------------------------------------------------------------------------
434,534
- -------------------------------------------------------------------------------
Food Services -- 0.2%
1,300 Avado Financing, 3.50% Exchangeable 3/1/27.......... 38,837
- -------------------------------------------------------------------------------
Insurance -- 0.5%
3,200 Frontier Insurance Co., 6.25% Exchangeable
10/15/26........................................... 118,800
- -------------------------------------------------------------------------------
Medical Products & Supplies -- 0.5%
3,500 Owens & Minor Trust, 5.375% Exchangeable 4/13/13.... 120,750
- -------------------------------------------------------------------------------
Petroleum -- 1.0%
2,500 Newfield Financial Trust, 6.50% Exchangeable
8/15/29............................................ 136,250
2,600 Tosco Financing Trust, 5.75% Exchangeable 12/15/26.. 119,600
- -------------------------------------------------------------------------------
255,850
- -------------------------------------------------------------------------------
Telecommunications -- 0.1%
1,400 Metromedia International Group, 7.25% Exchangeable
12/31/49........................................... 34,475
- -------------------------------------------------------------------------------
Transportation -- 1.2%
2,900 Arkansas Best Corp., Series A, $2.875 Exchangeable
12/31/49........................................... 121,800
1,750 CNF Trust, Series A, 5.00% Exchangeable 6/1/12...... 93,625
1,800 Union Pacific Capital Trust, 6.25% Exchangeable
4/1/28............................................. 82,800
- -------------------------------------------------------------------------------
298,225
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (Cost -- $2,259,820).......... 2,100,513
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE CONVERTIBLE BONDS -- 17.7%
- -------------------------------------------------------------------------------
Advertising -- 0.8%
$ 150,000 Lamar Advertising, 5.250% due 9/15/06............... 189,562
- -------------------------------------------------------------------------------
Auto Trucks & Parts -- 1.3%
225,000 Standard Motor Products, 6.750% due 7/15/09......... 198,843
140,000 Magna International Inc., 4.875% due 2/15/05........ 127,050
- -------------------------------------------------------------------------------
325,893
- -------------------------------------------------------------------------------
Broadcasting -- 0.7%
260,000 Jacor Communications Inc., zero coupon due 2/9/18... 160,225
- -------------------------------------------------------------------------------
Computer - Software -- 3.5%
140,000 Activision, Inc., 6.750% due 1/1/05................. 156,275
80,000 Affil Computer Services, Inc., 4.000% due 3/15/05... 91,200
100,000 Amazon.com, Inc., 4.750% due 2/1/09................. 115,125
150,000 BEA Systems, Inc., 4.000% due 6/15/05............... 214,594
100,000 Safeguard Scientifics, Inc., 5.000% due 6/15/06+.... 110,500
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
<C> <S> <C>
- ------------------------------------------------------------------------------
Computer - Software -- 3.5% (continued)
$ 40,000 Siebel Systems, Inc., 5.500% due 9/15/06+........... $ 40,150
130,000 VerticalNet, Inc., 5.250% due 9/27/04+.............. 135,362
- ------------------------------------------------------------------------------
863,206
- ------------------------------------------------------------------------------
Diversified Manufacturing -- 0.7%
185,000 Mark IV Industries, Inc., 4.750% due 11/1/04........ 159,562
- ------------------------------------------------------------------------------
Electrical -- 1.6%
170,000 EMCOR Group Inc., 5.750% due 4/1/05................. 157,675
100,000 Sanmina Corp., 4.250% due 5/1/04.................... 111,250
200,000 Solectron Corp., zero coupon due 1/27/19+........... 123,000
- ------------------------------------------------------------------------------
391,925
- ------------------------------------------------------------------------------
Finance -- 0.9%
100,000 Ameritrade Holding Corp., 5.750% due 8/1/04+........ 73,250
165,000 Financial Federal Corp., 4.500% due 5/1/05.......... 142,312
- ------------------------------------------------------------------------------
215,562
- ------------------------------------------------------------------------------
Machinery - Diversified -- 0.4%
130,000 Robbins & Myers, Inc., 6.500% due 9/1/03............ 105,137
- ------------------------------------------------------------------------------
Medical Services & Supplies -- 1.4%
130,000 Affymertrix, Inc., 5.000% due 10/1/06+.............. 124,150
120,000 Aviron, 5.750% due 4/1/05........................... 110,100
200,000 Wellpoint Health Networks Inc., zero coupon due
7/2/19............................................. 117,000
- ------------------------------------------------------------------------------
351,250
- ------------------------------------------------------------------------------
Miscellaneous -- 0.7%
100,000 CUC International, 3.000% due 2/15/02............... 92,500
100,000 Net B@nk, Inc., 4.750% due 6/1/04................... 84,500
- ------------------------------------------------------------------------------
177,000
- ------------------------------------------------------------------------------
Oilfield Services -- 1.1%
50,000 Pride International, Inc., 6.250% due 2/15/06....... 58,937
225,000 Seacor Holdings, 5.375% due 11/15/06................ 216,843
- ------------------------------------------------------------------------------
275,780
- ------------------------------------------------------------------------------
Pharmaceuticals -- 1.1%
100,000 Alpharma Inc., 3.000% due 6/1/06.................... 120,625
280,000 Elan International Ltd., zero coupon due 12/14/18... 160,650
- ------------------------------------------------------------------------------
281,275
- ------------------------------------------------------------------------------
Publishing -- 0.4%
100,000 Mail-Well Inc., 5.000% due 11/1/02.................. 97,000
- ------------------------------------------------------------------------------
Retail -- 1.7%
100,000 Action Performance Cos., Inc., 4.750% due 4/1/05.... 69,625
120,000 Genesco Inc., 5.500% due 4/15/05.................... 103,050
100,000 Michaels Stores, Inc., 6.750% due 1/15/03........... 96,500
150,000 Pier 1 Imports, Inc., 5.750% due 10/1/03............ 147,750
- ------------------------------------------------------------------------------
416,925
- ------------------------------------------------------------------------------
Telecommunications -- 1.4%
140,000 MRV Communications, Inc., 5.000% due 6/15/03........ 146,300
200,000 Telefonos de Mexico SA, 4.250% due 6/15/04.......... 189,750
- ------------------------------------------------------------------------------
336,050
- ------------------------------------------------------------------------------
TOTAL CORPORATE CONVERTIBLE BONDS (Cost --
$4,362,858)....................................... 4,346,352
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1999
<TABLE>
<CAPTION>
SHARES CONTRACT VALUE
<C> <S> <C>
- ------------------------------------------------------------------------------
PURCHASED OPTIONS* -- 1.4%
- ------------------------------------------------------------------------------
Banks -- 0.2%
UST Corp.:
5,000 Call @ $25, Expire 1/22/00.......................... $ 30,625
1,500 Call @ $22.5, Expire 1/22/00........................ 12,750
- ------------------------------------------------------------------------------
43,375
- ------------------------------------------------------------------------------
Banks - Commercial -- 0.2%
2,000 First American Corp. Call @ $35 Expire 12/18/99..... 16,250
Republic of New York Corp.:
300 Call @ $55, Expire 12/18/99......................... 2,963
2,700 Call @ $65, Expire 12/18/99......................... 7,425
400 Call @ $55, Expire 1/22/00.......................... 4,050
1,500 Call @ $60, Expire 1/22/00.......................... 9,750
- ------------------------------------------------------------------------------
40,438
- ------------------------------------------------------------------------------
Communications - Equipment -- 0.0%
4,800 Saville Systems PLC ADR Call @ $12.5, Expire
11/20/99........................................... 10,800
- ------------------------------------------------------------------------------
Computers -- 0.0%
1,000 Platinum Technology Inc. Call @ $25, Expire
12/18/99........................................... 4,250
- ------------------------------------------------------------------------------
Energy -- 0.2%
Atlantic Richfield Co.:
1,600 Call @ $65, Expire 1/22/00.......................... 37,800
1,500 Call @ $75, Expire 1/22/00.......................... 22,500
- ------------------------------------------------------------------------------
60,300
- ------------------------------------------------------------------------------
Food Processing -- 0.1%
Hannaford Brothers Co.:
600 Call @ $60, Expire 4/22/00.......................... 7,800
1,900 Call @ $70, Expire 4/22/00.......................... 10,688
- ------------------------------------------------------------------------------
18,488
- ------------------------------------------------------------------------------
Insurance -- 0.3%
Orion Capital Corp.:
8,300 Call @ $40, Expire 2/19/00.......................... 69,513
700 Call @ $45, Expire 2/19/00.......................... 2,625
- ------------------------------------------------------------------------------
72,138
- ------------------------------------------------------------------------------
Natural Gas -- 0.2%
2,200 Consolidated Natural Gas Co. Call @ $60, Expire
1/22/00............................................ 8,525
3,300 Sonat Inc. Call @ $30, Expire 10/16/99.............. 31,350
- ------------------------------------------------------------------------------
39,875
- ------------------------------------------------------------------------------
Real Estate Investment Trust -- 0.0%
2,900 Trinet Corp. Realty Trust, Inc. Call @ $35, Expire
12/18/99........................................... 362
- ------------------------------------------------------------------------------
Telecommunications -- 0.0%
2,000 SkyTel Communications, Inc. Call @ $15, Expire
1/22/00............................................ 7,000
- ------------------------------------------------------------------------------
Telephone Services -- 0.1%
Ameritech Corp.:
1,100 Call @ $60, Expire 10/16/99......................... 7,975
1,100 Call @ $60, Expire 1/22/00.......................... 10,175
- ------------------------------------------------------------------------------
18,150
- ------------------------------------------------------------------------------
Waste Management -- 0.1%
7,400 Browning Ferris Industries, Inc. Call @ $40, Expire
12/18/99........................................... 35,150
- ------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS (Cost -- $384,772).......... 350,326
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.9%
$1,700,000 J. P. Morgan Securities Inc., 5.250% due 9/1/99;
Proceeds at maturity -- $1,700,248;
(Fully collateralized by U.S. Treasury Inflation
Index Bonds, 3.375% to 3.875% due 1/15/07 to 1/15/09;
Market value -- $1,732,950; (Cost -- $1,700,000)..... $ 1,700,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $24,800,480**).... $ 24,517,203
- --------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
@ Security is segregated by Custodian for written options.
+ Security is exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
12
<PAGE>
Statement of Assets and Liabilities (unaudited______________September)30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $24,800,480)...................... $24,517,203
Cash............................................................. 161,928
Receivable for open short sales.................................. 17,891,077
Receivable for securities sold................................... 111,744
Dividends and interest receivable................................ 69,517
Receivable for Fund shares sold.................................. 37,240
Receivable from Manager.......................................... 22,997
- -------------------------------------------------------------------------------
Total Assets..................................................... 42,811,706
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for open short sales..................................... 16,980,902
Payable for securities purchased................................. 1,510,313
Written options.................................................. 174,588
Dividends payable................................................ 21,537
Payable for short sales closed................................... 17,752
Accrued expenses................................................. 73,725
- -------------------------------------------------------------------------------
Total Liabilities................................................ 18,778,817
- -------------------------------------------------------------------------------
Total Net Assets.................................................. $24,032,889
- -------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest....................... $ 2,849
Capital paid in excess of par value.............................. 23,126,153
Accumulated net investment loss.................................. (295)
Accumulated net realized gain on investments, options and short
sale transactions............................................... 261,305
Net unrealized appreciation of investments, options and short
sale transactions............................................... 642,877
- -------------------------------------------------------------------------------
Total Net Assets.................................................. $24,032,889
- -------------------------------------------------------------------------------
Shares Outstanding................................................ 2,849,099
- -------------------------------------------------------------------------------
Net Asset Value, per share (and redemption price)................. $8.44
- -------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Statement of Operations (unaudited)_________For the Period Ended September 30,
1999(a)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................ $119,826
Dividends........................................................... 75,455
Less: Dividend expense on short sales............................... (58,673)
- --------------------------------------------------------------------------------
Total Investment Income............................................. 136,608
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2)............................................ 97,611
Shareholder communications.......................................... 35,781
Administration fees (Note 2)........................................ 14,288
Registration fees................................................... 13,460
Audit and legal..................................................... 12,758
Custody............................................................. 6,000
Shareholder and system servicing fees............................... 5,766
Trustees' fees...................................................... 1,142
Pricing service fees................................................ 300
Other............................................................... 952
- --------------------------------------------------------------------------------
Total Expenses...................................................... 188,058
Less: Management and administration fee waivers (Note 2)............ (51,155)
- --------------------------------------------------------------------------------
Net Expenses........................................................ 136,903
- --------------------------------------------------------------------------------
Net Investment Loss.................................................. (295)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS
AND SHORT SALE TRANSACTIONS (NOTES 3, 5 AND 7):
Realized Gain From:
Security transactions (excluding short-term securities)............. 58,306
Purchased options................................................... (55,840)
Written options..................................................... 145,042
Short sale transactions............................................. 113,797
- --------------------------------------------------------------------------------
Net Realized Gain................................................... 261,305
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments, Options and
Short Sale Transactions:
Beginning of period................................................. --
End of period....................................................... 642,877
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation............................. 642,877
- --------------------------------------------------------------------------------
Net Gain on Investments, Options and Short Sales..................... 904,182
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations............................... $903,887
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period from May 10, 1999 (commencement of operations) to September
30, 1999.
See Notes to Financial Statements.
14
<PAGE>
Statement of Changes in Net Assets (unaudited_____For)the Year Ended September
30, 1999(a)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
OPERATIONS:
Net investment loss.............................................. $ (295)
Net realized gain................................................ 261,305
Increase in net unrealized appreciation.......................... 642,877
- --------------------------------------------------------------------------------
Increase in Net Assets from Operations........................... 903,887
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ --
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders.................................... --
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares................................. 27,236,778
Net asset value of shares issued for reinvestment of dividends... --
Cost of shares reacquired........................................ (4,107,776)
- --------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions.............. 23,129,002
- --------------------------------------------------------------------------------
Increase in Net Assets............................................ 24,032,889
NET ASSETS:
Beginning of period.............................................. --
- --------------------------------------------------------------------------------
End of period*................................................... $24,032,889
- --------------------------------------------------------------------------------
* Includes accumulated net investment loss of: $(295)
- --------------------------------------------------------------------------------
</TABLE>
(a)For the period from May 10, 1999 (commencement of operations) to September
30, 1999.
See Notes to Financial Statements.
15
<PAGE>
Notes to Financial Statements (unaudited)
1. Significant Accounting Policies
Multi-Strategy Market Neutral Investments ("Portfolio"), a separate
investment Fund of Consulting Group Capital Markets Funds ("Fund"), a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company. The
Fund consists of this Fund and sixteen separate investment portfolios:
Government Money Investments, High Yield Investments, Intermediate Fixed Income
Investments, Long-Term Bond Investments, Municipal Bond Investments, Mortgage
Backed Investments, Balanced Investments, Large Capitalization Value Equity
Investments, Large Capitalization Growth Investments, Small Capitalization
Value Equity Investments, Small Capitalization Growth Investments,
International Equity Investments, International Fixed Income Investments,
Emerging Markets Equity Investments, S&P 500 Investments and Multi-Strategy
Fixed Income Investments. The financial statements and financial highlights for
the other Funds are presented in a separate shareholder report.
The significant accounting policies consistently followed by the Portfolio
are: (a) security transactions are accounted for on trade date; (b) securities
traded on national securities markets are valued at the closing prices on such
markets or, if there were no sales during the day, at current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when a significant occurrence subsequent to the time a value was so
established is likely to have significantly changed the value then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees; securities traded in the
over-the-counter market are valued on the basis of the bid price at the close
of business on each day; certain debt securities of U.S. issuers (other than
U.S. government securities and short-term investments) are valued at the mean
between the quoted bid and ask prices; U.S. government agencies and obligations
are valued at the mean between the bid and ask prices; (c) securities maturing
within 60 days are valued at cost plus accreted discount, or minus amortized
premium, which approximates value; (d) dividend income is recorded on the ex-
dividend date except that foreign dividends are recorded on the ex-dividend
date or as soon as practical after the Fund determines the existence of a
dividend declaration after exercising reasonable due diligence; and interest
income is recorded on an accrual basis; (e) gains or losses on the sale of
securities are calculated by using the specific identification method;
(f) dividends and distributions to shareholders are recorded on the ex-dividend
date; (g) the accounting records of the Fund are maintained in U.S. dollars.
All assets and liabilities denominated in foreign currencies are translated
into U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities and income
and expenses are translated at the rate of exchange quoted on the respective
date that such transactions are recorded. Differences between income or expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank; (h) the Portfolio intends to comply with the requirements of
the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; (i) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles; and (j) estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from operations when
financial statements are prepared. Changes in the economic environment,
financial markets and any other parameters used in determining these estimates
could cause actual results to differ.
In addition, the portfolio may from time to time enter into futures contracts
in order to hedge market risk. Also, the Portfolio may enter into forward
exchange contracts in order to hedge against foreign currency risk. These
contracts are marked to market daily, by recognizing the difference between the
contract exchange rate and the current market rate as an unrealized gain or
loss. Realized gains or losses are recognized when contracts are settled.
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
The Fund has entered into an investment management agreement ("Management
Agreement") with SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon
Smith Barney Holdings Inc. ("SSBH"). The Consulting Group ("Manager"), a
division of SSBC provides investment evaluation services with respect to the
investment advisors of the Fund. SSBC has entered into an investment advisory
agreement with each advisor selected for the Portfolio (collectively,
"Advisors").
16
<PAGE>
Notes to Financial Statements (unaudited) (continued)
Under the Management Agreement, the Portfolio pays SSBC a fee, calculated
daily and paid monthly, based on the rates applied to the value of the
Portfolio's average daily net assets. In addition, SSBC pays each Advisor,
based on the rates applied to the Portfolio's average daily net assets on a
monthly basis. The applicable management fee and advisory fee paid by SSBC to
each Advisor are indicated below:
<TABLE>
<CAPTION>
Annual
Advisory Management
Advisors Fee Fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Calamos Asset Management.................................... 1.00% 1.80%
Pegasus Investments, Inc.................................... 1.20 1.80
State Street Global Advisors................................ 1.00 1.80
- --------------------------------------------------------------------------------
</TABLE>
SSBC also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets of the
Portfolio. This fee is calculated daily and paid monthly.
For the period ended September 30, 1999, the manager waived $6,830 of its
administration fee and $44,325 of its management fee.
For the period ended September 30, 1999, Salomon Smith Barney Inc. ("SSB"),
another subsidiary of SSBH and its affiliates, received brokerage commissions
of approximately $17,912.
All officers and one Trustee of the Fund are employees of SSB.
3. Investments
During the period ended September 30, 1999, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Purchases........................................................... $35,971,670
- --------------------------------------------------------------------------------
Sales............................................................... 11,072,159
- --------------------------------------------------------------------------------
</TABLE>
At September 30, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
Gross unrealized appreciation..................................... $ 1,266,795
Gross unrealized depreciation..................................... (1,550,072)
- -------------------------------------------------------------------------------
Net unrealized depreciation....................................... $ (283,277)
- -------------------------------------------------------------------------------
</TABLE>
4. Futures Contracts
Initial margin deposits made upon entering into futures contracts are
recognized as assets. Securities equal to the initial margin amount are
segregated by the custodian in the name of the broker. Additional securities
are also segregated up to the current market value of the futures contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to market" on
a daily basis to reflect the market value of the contract at the end of each
day's trading. Variation margin payments are made or received and recognized as
assets due from or liabilities due to broker, depending upon whether unrealized
gains or losses are incurred. When the contract is closed, the Portfolio
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transactions and the Portfolio's basis in the
contract.
The Portfolio enters into such contracts to hedge a portion of its portfolio.
The Portfolio bears the market risk that arises from changes in the value of
the financial instruments and securities indices (futures contracts) and the
credit risk should a counterparty fail to perform under such contracts.
At September 30, 1999, the Portfolio had no open futures contracts.
5. Option Contracts
Premiums paid when put or call options are purchased by the Portfolio,
represent investments, which are marked-to-market daily. When a purchased
option expires, the Portfolio will realize a loss in the amount of the premium
paid. When the Portfolio enters into a closing sales transaction, the Fund will
realize a gain or loss
17
<PAGE>
Notes to Financial Statements (unaudited) (continued)
depending on whether the proceeds from the closing sales transaction are
greater or less than the premium paid for the option. When the Portfolio
exercises a put option, it will realize a gain or loss from the sale of the
underlying security and the proceeds from such sale will be decreased by the
premium originally paid. When the Portfolio exercises a call option, the cost
of the security which the Portfolio purchases upon exercise will be increased
by the premium originally paid.
At September 30, 1999, the Portfolio had 22 purchased call options with a
total cost of $384,772.
When a Portfolio writes a call or put option, an amount equal to the premium
received by the Portfolio is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Portfolio realizes a
gain equal to the amount of the premium received. When the Portfolio enters
into a closing purchase transaction, the Portfolio realizes a gain or loss
depending upon whether the cost of the closing transaction is greater or less
than the premium originally received, without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised the proceeds of the
security sold will be increased by the premium originally received. When a
written put option is exercised, the amount of the premium originally received
will reduce the cost of the security which the Portfolio purchased upon
exercise. When written index options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium
originally paid. The Portfolio enters into options for hedging purposes. The
risk in writing a covered call option is that the Portfolio gives up the
opportunity to participate in any increase in the price of the underlying
security beyond the exercise price. The risk in writing a put option is that
the Portfolio is exposed to the risk of loss if the market price of the
underlying security declines.
The following covered call option transactions occurred during the period
ended September 30, 1999:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
- ------------------------------------------------------------------------------
<S> <C> <C>
Options written during the period ended September 30,
1999.................................................... 51,300 $ 503,777
Options cancelled in closing purchase transactions....... (17,000) (216,137)
Options exercised........................................ (11,200) (97,073)
- ------------------------------------------------------------------------------
Options written, outstanding at September 30, 1999 23,100 $ 190,567
- ------------------------------------------------------------------------------
</TABLE>
The following table represents the covered call option written contracts open
at September 30, 1999:
<TABLE>
<CAPTION>
Strike
Number of Contracts Expiration Price Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
2,000 ADC Telecommunication, Inc.................... 11/20/99 $35.00 $ 16,500
3,700 AmSouth Bancorporation........................ 12/18/99 17.50 24,050
1,400 BP Amoco PLC.................................. 1/22/00 80.00 41,825
1,300 BP Amoco PLC.................................. 1/22/00 90.00 29,900
7,400 Browning Ferris Industries, Inc............... 12/18/99 45.00 925
3,300 El Paso Corp.................................. 10/16/99 30.00 33,413
600 MCI WorldCom, Inc............................. 1/22/00 75.00 3,450
1,400 SBC Communications Inc........................ 1/22/00 45.00 11,375
1,400 SBC Communications Inc........................ 10/16/99 45.00 9,100
600 Texas Instruments Inc......................... 10/16/99 77.50 4,050
- -------------------------------------------------------------------------------
Total Covered Call Options Written
(Premiums received -- $190,567)....................................... $174,588
- -------------------------------------------------------------------------------
</TABLE>
6. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell
the securities to the sellers at a future date (generally, the next business
day) at an agreed-upon higher repurchase price. The Fund requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
18
<PAGE>
Notes to Financial Statements (unaudited) (continued)
7. Short Sales of Securities
A short sale is a transaction in which the Portfolio sells securities it does
not own (but has borrowed) in anticipation of a decline in the market price of
the securities. To complete a short sale, the Portfolio may arrange through a
broker to borrow the securities to be delivered to the buyer. The proceeds
received by the Portfolio for the short sale are retained by the broker until
the Portfolio replaces the borrowed securities. In borrowing the securities to
be delivered to the buyer, the Portfolio becomes obligated to replace the
securities borrowed at their market price at the time of replacement, whatever
that price may be.
As of September 30, 1999, the Portfolio had the following open short sale
transactions:
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
14,540 Abbott Laboratories ....................................... $ 534,345
625 Action Performance Cos., Inc.*............................. 13,164
3,800 Activision Inc.*........................................... 66,975
3,334 ADC Telecommunications, Inc.*.............................. 139,820
4,975 Adelphia Communications Corp., Class A Shares*............. 292,592
4,700 Advanced Micro Devices, Inc.*.............................. 80,781
1,750 AES Corp.*................................................. 103,250
1,500 Affiliated Computer Services, Inc., Class A Shares*........ 60,937
650 Affymetrix Inc.*........................................... 63,984
2,600 AFLAC Inc. ................................................ 108,875
1,556 Albertson's, Inc. ......................................... 61,559
2,100 Alpharma, Inc., Class A Shares ............................ 74,156
850 Amazon.com, Inc. .......................................... 67,947
1,750 Ameritrade Holding Corp.*.................................. 32,156
3,500 Arkansas Best Corp. ....................................... 43,312
7,612 At Home Corp. ............................................. 315,422
4,212 AT&T Corp. ................................................ 183,222
3,100 Automatic Data Processing, Inc. ........................... 138,337
4,700 AutoZone, Inc.*............................................ 131,894
2,350 Avado Brands Inc. ......................................... 13,219
3,100 Aviron*.................................................... 75,175
2,200 The Bank of New York Co. Inc. ............................. 73,562
1,600 Barnes & Noble, Inc.*...................................... 41,600
4,364 BB&T Corp. ................................................ 141,259
4,300 Bea Systems, Inc.*......................................... 151,844
2,100 Beckman Coulter, Inc. ..................................... 94,762
2,700 Becton, Dickinson & Co. ................................... 75,769
1,900 Black & Decker Corp. ...................................... 86,806
5,200 Cabletron Systems, Inc.*................................... 81,575
2,100 Campbell Soup Co. ......................................... 82,162
1,800 Caterpillar Inc. .......................................... 98,662
7,944 CBS Corp. ................................................. 367,410
4,250 Cendant Corp.*............................................. 75,437
3,100 Ceridian Corp. ............................................ 77,112
2,500 The Charles Schwab Corp. .................................. 84,219
7,410 Charter One Financial, Inc. ............................... 171,361
2,600 CheckFree Holdings Corp.*.................................. 106,925
3,100 Chiron Corp.*.............................................. 85,831
9 Chittenden Corp. .......................................... 248
1,300 CIENA Corp.*............................................... 47,450
1,100 CIGNA Corp. ............................................... 85,525
2,900 Cincinnati Financial Corp. ................................ 108,841
7,044 Citizens Banking Corp. of Michigan ........................ 184,024
5 CK Witco Corp. ............................................ 73
1,600 Clear Channel Communications, Inc.*........................ 127,800
2,800 CNA Financial Corp.*....................................... 98,000
1,750 CNF Transportation, Inc. .................................. 65,187
2,000 The Coca-Cola Co. ......................................... 96,125
2,200 Coca-Cola Enterprises Inc. ................................ 49,637
3,500 Compaq Computer Corp. ..................................... 80,281
1,097 Conoco Inc. ............................................... 30,030
1,900 Dana Corp. ................................................ 70,537
</TABLE>
19
<PAGE>
Notes to Financial Statements (unaudited) (continued)
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
2,100 Deere & Co. ............................................... $ 81,244
1,141 E.I. du Pont de Nemours & Co. ............................. 69,458
128 Eastern Enterprises ....................................... 5,944
600 Eastman Kodak Co. ......................................... 45,262
5,020 El Paso Energy Corp. ...................................... 199,859
1,550 Elan Corp. PLC ADR ........................................ 52,022
2,654 EMC Corp. ................................................. 189,595
4,100 Emcor Group Inc.*.......................................... 78,925
1,800 Emerson Electric Co. ...................................... 113,737
2,462 Fifth Third Bancorp ....................................... 149,797
2,200 Financial Federal Corp.*................................... 41,525
90 Firstar Corp. ............................................. 2,306
3,712 Fleet Financial Group Inc. ................................ 135,952
2,200 Fluor Corp. ............................................... 88,550
4,800 Frontier Insurance Group Inc. ............................. 42,000
1,800 GATX Corp. ................................................ 55,912
700 General Electric Co. ...................................... 82,994
1,100 General Motors Corp. ...................................... 69,231
1,700 General Motors Corp., Class H Shares*...................... 97,325
2,500 Genesco Inc.*.............................................. 31,250
2,900 Gillette Co. .............................................. 98,419
1,800 Goodyear Tire & Rubber Co. ................................ 86,625
2,000 Harcourt General Inc. ..................................... 83,250
1,200 HCR Manor Care, Inc. ...................................... 20,625
2,100 Hershey Foods Corp. ....................................... 102,244
7,000 Hilton Hotels Corp. ....................................... 69,125
6,000 Hollinger International Inc. .............................. 71,250
2,500 HON INDUSTRIES Inc. ....................................... 48,125
2,800 i2 Technologies, Inc.*..................................... 108,675
250 Illinois Tool Works Inc. .................................. 18,641
1,400 Immunex Corp.*............................................. 60,725
11,358 Infinity Broadcasting Corp.*............................... 332,931
1,200 Intermedia Communications, Inc.*........................... 26,100
2,200 International Flavors & Fragrances Inc. ................... 75,900
2,900 ITT Industries, Inc. ...................................... 92,256
2,200 J.C. Penney Co. ........................................... 75,625
2,900 J.D. Edwards & Co.*........................................ 60,084
2,595 Johnson & Johnson ......................................... 238,416
3,400 Keane, Inc.*............................................... 77,562
2,700 Kellogg Co. ............................................... 101,081
6,900 Kmart Corp.*............................................... 80,644
3,750 Lamar Advertising Co.*..................................... 185,625
1,800 Level 3 Communications, Inc.*.............................. 93,994
2,900 The Limited, Inc. ......................................... 110,925
2,600 Lockheed Martin Corp. ..................................... 84,987
2,233 Lucent Technologies Inc. .................................. 144,866
225 Magna International Inc., Class A Shares .................. 11,180
2,650 Mail-Well, Inc.*........................................... 36,769
2,500 Mandalay Resort Group*..................................... 49,375
4,200 Manor Care Inc.*........................................... 72,188
1,650 Mark IV Industries, Inc. .................................. 32,588
2,500 Masco Corp. ............................................... 77,500
2,500 McDonald's Corp. .......................................... 107,500
2,800 Medtronic, Inc. ........................................... 99,400
3,500 Mellon Bank Corp.*......................................... 118,125
4,300 Metro-Goldwyn-Mayer Inc. .................................. 75,250
1 Metromedia Fiber Network, Inc. ............................ 5
1,900 Metromedia International Group Inc.*....................... 7,838
900 Michaels Stores, Inc.*..................................... 26,550
1,200 Micron Technology Inc.*.................................... 79,875
1,750 MidAmerican Energy Holdings Co. ........................... 51,625
800 Minnesota Mining and Manufacturing Co. .................... 76,850
</TABLE>
20
<PAGE>
Notes to Financial Statements (unaudited) (continued)
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
4,800 Mirage Resorts Inc.*....................................... $ 67,500
2,400 MRV Communications Inc.* .................................. 56,850
2,700 National Commerce Bancorporation. ......................... 59,316
2,500 NCR Corp. ................................................. 82,656
1,200 Net B@nk Inc. ............................................. 26,550
1,750 Newfield Exploration Co. .................................. 57,641
1,800 Nike, Inc. Class B Shares.................................. 102,375
4,100 Nordstrom, Inc. ........................................... 110,700
2,487 North Fork Bancorporation, Inc. ........................... 48,497
1,000 Northern Trust Corp. ...................................... 83,500
2,300 Oracle Corp. .............................................. 104,650
4,700 Owens & Minor Inc. ........................................ 45,238
1,900 Owens Corning*............................................. 41,206
4,400 Pall Corp. ................................................ 102,025
1,600 Panamsat Corp.* ........................................... 57,800
3,000 Pfizer Inc. ............................................... 107,813
2,400 Pharmacia & Upjohn Inc. ................................... 119,100
9,000 Pier 1 Imports, Inc. ...................................... 60,750
5,000 Pioneer Standard Electronics, Inc. ........................ 72,188
3,000 Pogo Producing Co. ........................................ 62,250
2,800 Polaroid Corp. ............................................ 72,800
1,300 PPG Industries Inc. ....................................... 78,000
2,850 Pride International Inc.* ................................. 40,434
700 The Progressive Corp. ..................................... 57,181
1,925 PSINet Inc.* .............................................. 69,240
7,759 Quebecor Printing Inc. .................................... 177,972
5,400 Qwest Communications International Inc. ................... 159,638
1,500 Raytheon Co. .............................................. 74,438
2,800 Rite Aid Corp. ............................................ 38,675
1,950 Robbins & Meyers, Inc. .................................... 30,225
1,800 SAFECO Corp. .............................................. 50,400
700 Safeguard Scientifics, Inc. ............................... 47,600
3,200 Saks Inc.* ................................................ 48,600
675 Sanmina Corp.* ............................................ 52,228
272 SBC Communications, Inc. .................................. 13,889
1,675 SEACOR SMIT Inc.*.......................................... 85,844
2,400 Seagate Technology, Inc.* ................................. 73,950
1,400 Seagram Co. Ltd. .......................................... 63,700
1,300 Sepracor Inc.* ............................................ 98,150
5,600 Shire Pharmaceuticals Group PLC ADR*....................... 161,350
225 Siebel Systems, Inc. ...................................... 14,991
1,450 Solectron Corp. ........................................... 104,128
2,000 Speedway Motorsports, Inc.* ............................... 86,625
1,200 Sprint Corp. .............................................. 89,475
4,150 Standard Motor Products, Inc. ............................. 80,666
3,000 The Stanley Works.......................................... 75,563
1,300 Suntrust Banks, Inc. ...................................... 85,475
4,000 Synovus Financial Corp. ................................... 74,750
1,800 SYSCO Corp. ............................................... 63,113
2,100 T. Rowe Price Associates, Inc. ............................ 57,619
3,300 Tektronix, Inc. ........................................... 110,550
1,310 Telefonos De Mexico SA ADR, Series L....................... 93,337
2,307 Texas Instruments Inc. .................................... 189,751
1,000 Textron, Inc. ............................................. 77,375
2,000 Tosco Corp. ............................................... 50,500
3,000 Total System Services Inc. ................................ 48,000
3,500 Tower Automotive, Inc. .................................... 69,344
2,100 TRW Inc. .................................................. 104,475
7,489 U.S. Bancorp............................................... 226,074
525 Union Pacific Corp. ....................................... 25,233
6,800 United Asset Management Corp. ............................. 130,900
1,650 United Rentals, Inc.* ..................................... 35,888
</TABLE>
21
<PAGE>
Notes to Financial Statements (unaudited) (continued)
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
<C> <S> <C>
1 UnumProvident Corp. ....................................... $ 6
1,800 Verio Inc. ................................................ 55,800
1,700 Verticalnet, Inc. ......................................... 62,900
6,282 VoiceStream Wireless Corp.*................................ 387,717
700 Wachovia Corp. ............................................ 55,038
3,500 Walgreen Co. .............................................. 88,813
3,800 The Walt Disney Co.* ...................................... 98,325
550 Wellpoint Health Networks Inc.* ........................... 31,350
3,100 Weyerhaeuser Co. .......................................... 178,638
2,800 Winn - Dixie Stores Inc. .................................. 83,125
900 WinStar Communications, Inc.* ............................. 35,156
1,300 Wm. Wrigley Jr. Co. ....................................... 89,456
2,500 Xerox Corp. ............................................... 104,844
3,766 Zions Bancorp.............................................. 207,601
- --------------------------------------------------------------------------------
Total Open Short Sales (Cost -- $17,891,077)............... $16,980,902
- --------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
8. Shares of Beneficial Interest
At September 30, 1999, the Portfolio had an unlimited number of shares of
beneficial interest authorized with a par value of $0.001 per share.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Period Ended
September 30, 1999+
----------------------
Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold............................................. 3,340,357 $27,236,778
Shares issued on reinvestment........................... -- --
Shares reacquired....................................... (491,258) (4,107,776)
- --------------------------------------------------------------------------------
Net Increase............................................ 2,849,099 $23,129,002
- --------------------------------------------------------------------------------
</TABLE>
+For the period from May 10, 1999 (commencement of operations) to September 30,
1999.
22
<PAGE>
Financial Highlights
For a share of beneficial interest outstanding throughout the period ended
September 30:
<TABLE>
<CAPTION>
1999(/1/)
- ---------------------------------------
<S> <C>
Net Asset Value, Begin-
ning of Period.......... $8.00
- ---------------------------------------
Income (Loss) From Opera-
tions:
Net investment
loss(/2/).............. (0.00)*
Net realized and
unrealized gain ....... 0.44
- ---------------------------------------
Total Income From Opera-
tions................... 0.44
- ---------------------------------------
Less Distributions From:
Net investment income... --
- ---------------------------------------
Total Distributions...... --
- ---------------------------------------
Net Asset Value, End of
Period.................. $8.44
- ---------------------------------------
Total Return++........... 5.50%
- ---------------------------------------
Net Assets, End of Period
(000s).................. $24,033
- ---------------------------------------
Ratios to Average Net As-
sets+:
Expenses(/2/)........... 1.87%
Loss.................... (0.00)**
- ---------------------------------------
Portfolio Turnover Rate.. 61%
- ---------------------------------------
</TABLE>
(1) For the period from May 10, 1999 (commencement of operations) to September
30, 1999 (unaudited).
(2) The expense ratio and the per share increase in net investment loss before
fee waivers were as follows:
<TABLE>
<CAPTION>
Per Share
Increase to Net Expense Ratio
Investment Loss Without Fee Waiver
--------------- ------------------
<S> <C> <C>
1999...................................... $0.02 2.57%+
</TABLE>
* Amount represents less than $0.01 per share.
** Amount represents less than 0.01%.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
23
<PAGE>
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<PAGE>
This report is submitted for the general information of the shareholders of
Consulting Group Capital Markets Funds.
It is not authorized for distribution to prospective investors unless
accompanied or preceded by a current Prospectus for the Trust which contains
information concerning the Trust's investment policies, charges and expenses as
well as other pertinent information.
TK 2122 11/99 Consulting Group Capital Markets Funds . 222
Delaware Avenue . Wilmington, Delaware . 19801
