CONSULTING GROUP CAPITAL MARKETS FUNDS, 485BPOS, 2000-07-26

CONSULTING GROUP CAPITAL MARKETS FUNDS
485BPOS, 2000-07-26

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Registration No. 33-40823
811-6318

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

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

Post-Effective Amendment No. 30 X

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940

Amendment No. 30 X

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

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

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

Christina T. Sydor
Consulting Group Capital Markets Funds
388 Greenwich Street, 22nd Floor
New York, New York 10013
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: Continuous

It is proposed that this filing will become effective:

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

XXX on July 28, 2000 pursuant to paragraph (b) of Rule 485

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

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

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

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

If appropriate, check the following box:

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

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

PART A

<PAGE>

[GRAPHIC]

Consulting Group
Capital Markets Funds

Multi-Strategy Market Neutral
Investments

Prospectus SALOMONSMITHBARNEY
July 28, 2000 ---------------------------
A member of citigroup [LOGO]

The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>

Table of Contents
<TABLE>
<S> <C>
Investments, Risks and Performance 2
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Investment Objective 2
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Principal Investments 2
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Principal Strategies 2
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Principal Risks of Investing in the Portfolio 4
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Performance 5
----------------------------------------------------------
Fees and Expenses 5
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More on the Portfolio's Investments and Related Risks 6
----------------------------------------------------------

The Manager 7
----------------------------------------------------------

Asset Allocation Programs 10
----------------------------------------------------------

Investment and Account Information 11
----------------------------------------------------------
Account Transactions 11
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Valuation of Shares 12
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Dividends and Distributions 12
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Taxes 12
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Financial Highlights 13
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Appendix A A-1
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Appendix B B-1
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</TABLE>
An investment in the Portfolio is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Multi-Strategy Market Neutral Investments
<PAGE>

Investments, Risks and Performance

Investment objective

Long-term capital appreciation.

Principal investments

The Portfolio invests primarily in securities of U.S. companies of various mar-
ket capitalizations. A portion of the Portfolio's assets may be invested in se-
curities of companies located outside the U.S. The manager allocates the assets
among subadvisers employing three portfolio management strategies:

. Convertible arbitrage

. Merger arbitrage

. Equity market neutral

Through these strategies, the Portfolio attempts to achieve capital apprecia-
tion from stock selection and other strategies rather than from general stock
market movements. Each of the strategies involves taking both long and short
positions in securities. The long positions generally increase in price in a
rising market (and decrease in a declining market). Short positions generally
incur losses in a rising market (and profit from market declines). Consequent-
ly, the long and short positions tend to cancel out the effect of general stock
market trends. Using convertible arbitrage or merger arbitrage, the Portfolio
seeks to profit either by identifying price differentials among related securi-
ties or inefficiencies in the market's pricing of certain securities. Using an
equity market neutral strategy, the Porfolio seeks to select undervalued stocks
for its long positions and overvalued stocks for its short positions. The Port-
folio's strategies are intended to produce favorable returns regardless of the
general trend in the market and to minimize the risks associated with investing
in the equity markets. However, there is no assurance that such favorable re-
turns will be achieved.

Principal strategies

Convertible Arbitrage. A portion of the Portfolio's assets are invested in ac-
cordance with a convertible arbitrage strategy, which is implemented by Calamos
Asset Management ("Calamos"). Convertible arbitrage consists of buying debt se-
curities, preferred stocks and other securities convertible into common stock
and hedging a portion of the equity risk inherent in these securities. This
hedging is achieved by selling short some or all of the common stock issuable
upon exercise of the convertible security. If the market price of the common
stock increases above the conversion price on the convertible security, the
price of the convertible security will increase. The Portfolio's increased lia-
bility on the short position would, in whole or in part, reduce this gain. If
the price of the common stock declines, any decline in the price of the con-
vertible security would offset the Portfolio's gain on the short position. The
Portfolio profits from this strategy by receiving interest and/or dividends on
the convertible security and by adjusting the amount of equity risk that is
hedged by short sales.

In selecting securities for the Portfolio, Calamos:

. analyzes the default risk on the convertible security using traditional
credit analysis

. employs fundamental equity analysis to determine the capital appreciation po-
tential of the common stock into which the security is convertible

. considers the risk/return potential of a convertible hedge strategy with re-
spect to the security

. considers the diversification of the Portfolio and other portfolio composi-
tion criteria

In its equity and credit analysis, Calamos considers:

. The issuer's financial soundness

. Interest and dividend coverage

. Earnings and cash-flow forecasts

. Quality of management

In determining the appropriate portion of the Portfolio's equity exposure to
hedge, Calamos considers:

. The general outlook for interest rates and equity markets

. The availability of stock to sell short

. Expected returns and volatility

Merger Arbitrage. A portion of the Portfolio's assets are allocated to Pegasus
Investments, Inc. ("Pegasus") to pursue a merger arbitrage strategy. Merger
arbitrage is designed to profit from the successful completion of announced
merger and acquisition transactions involving publicly owned companies. The
Portfolio does not speculate on unannounced transactions or where a definitive
agreement does not exist. A number of trading practices may be employed to
capture the potential profit of merger and acquisition transactions. Typically,
the Portfolio establishes merger arbitrage positions by purchasing the shares
of a target company at a discount to the value of the consideration offered in
the merger or tender offer (whether cash or securities). When the consideration
is shares of the acquiring company, the Portfolio may also sell short shares of
the acquiring company. The number of shares sold short generally is

Multi-Strategy Market Neutral Investments
<PAGE>

Investments, Risks and Performance, continued
based on the exchange ratio specified in the merger agreement. Hedging the
target shares against the consideration offered in the merger or tender offer
produces the merger arbitrage profit spread--effectively the discount to the
merger consideration at which the target company trades--which will be received
by the Portfolio upon the transaction closing. Such merger arbitrage positions
both establish defined trading profit spreads and also are intended to provide
an overall portfolio hedge against general market volatility. The merger
arbitrage spread is available because of:

. Market perception that the transaction may be delayed, renegotiated or can-
celled

. The time value of money, that is, the discount an investor is willing to ac-
cept when selling shares today instead of waiting for the merger and acquisi-
tion transaction to close

. Market, industry or company specific events which create trading opportuni-
ties during the course of a merger and acquisition transaction

Pegasus seeks to achieve high absolute returns on investments. At the same
time, Pegasus seeks to create a portfolio the market value of which
is not volatile compared to the general equities market and which is generally
not affected by overall movements in the U.S. equity markets. Pegasus intends
to maintain positions that are substantially hedged and diversified principally
among U.S. issuers involved in merger and acquisition transactions with respect
to which a definitive agreement has been signed and approved by the Board of
Directors of the companies involved. In selecting transactions in which to
invest, Pegasus focuses on preservation of capital and minimalization of risks.
Pegasus also evaluates among other things:

. The strategic rationale for the merger and acquisition transaction

. The terms, conditions and valuation of the transaction

. The financial and competitive business condition of the merging companies and
the industries in which they participate

. Regulatory, financing and business contingencies to the transaction

. Trading liquidity and downside risk assessment

. Its ability to diversify among specific transactions and industries

Equity Market Neutral. State Street Global Advisors ("SSGA") manages the por-
tion of the Portfolio's assets that are invested in accordance with an equity
market neutral strategy. Using this strategy, SSGA purchases stocks of compa-
nies it believes are undervalued and will outperform the equity markets. At the
same time, it sells short the stocks of companies it believes are overvalued
and will underperform the general market. The stocks purchased and sold short
frequently have similar characteristics such as capitalization and industry, so
that changes in price arising solely from general market movements may be ex-
pected to be offset by the long and short positions. Positive returns generally
occur when the Portfolio's stock selection strategy establishes long positions
which appreciate more than its short positions in a rising market and short po-
sitions which depreciate more than its long positions in a falling market.

In selecting stocks and short positions for the Portfolio, SSGA focuses upon a
stock's current relative value and the company's future earnings potential.
SSGA looks for the following to identify long and short positions for the Port-
folio:

. Valuations relative to book value, cash flow, sales and earnings

. Changes in earnings estimates relative to the price

. Whether there is a consensus among analysts

. Changes in individual earnings estimates

Short Sales

Each of the Portfolio's strate-
gies employs short sales to a
significant degree. In a short
sale, the Portfolio borrows se-
curities from a broker and sells
the borrowed securities. The
proceeds of the sale are gener-
ally used to secure the Portfo-
lio's obligation to the lending
broker and are invested in liq-
uid securities. Since the Port-
folio is obligated to return the
borrowed securities, the Portfo-
lio will benefit from a short
sale if the market price of the
security sold short declines in
value because the Portfolio
would have to pay less to re-
place the borrowed security. The
Portfolio will incur a loss if
the security increases in price
because the Portfolio would have
to pay more to replace the bor-
rowed security.

Multi-Strategy Market Neutral Investments
<PAGE>

Principal risks of investing in the Portfolio

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

Equity Securities. Although the Portfolio's strategies attempt to neutralize
the effect of general trends in the equity markets, your investment in the
Portfolio is subject to the risks associated with investing in equity securi-
ties generally. Equity securities, particularly common stocks, have histori-
cally generated higher average returns than fixed income securities but have
also experienced significantly more volatility in those returns. You could lose
money on your investment or the Portfolio might not perform as well as other
investments if any of the following occurs:

. Equity markets drop in price, experience significant volatility, or perform
poorly relative to fixed income investments

. An adverse event, such as an unfavorable earnings report, depresses the price
of a particular company's stock or reduces trading liquidity

. A subadviser is incorrect about the attractiveness, value or potential appre-
ciation or depreciation of a particular investment

Short Sales. Short sales are an integral part of each of the Portfolio's strat-
egies. Short sales involve risks, including:

. The Portfolio may incur a loss as a result of a short sale if the market
value of the borrowed security increases between the date of the short sale
and the date the Portfolio replaces the security

. The Portfolio may be unable to repurchase the borrowed security at a particu-
lar time or at an acceptable price. When the Portfolio is short a security,
the lender may terminate the loan at a time when the Portfolio is unable to
borrow the same security from another lender. When this happens the Portfolio
is required to close out its short position at the current market price

. Although the Portfolio's gain is limited to the amount received upon selling
a security short, its potential loss is unlimited

. The Portfolio might be unable to implement these strategies because of the
lack of attractive short sale opportunities

Merger Arbitrage. Generally, there may be a risk of insufficient merger arbi-
trage investment opportunities to implement this strategy in the event of a
significant reduction in public company merger and acquisition activity. In ad-
dition to risks generally associated with equity securities and short sales,
merger arbitrage involves the risk of loss in the event:

. A proposed transaction is not completed, is negatively renegotiated or is de-
layed and the price of the target company's securities declines. This failure
or delay may result from regulatory restrictions, negative competitive or fi-
nancial developments, the inability to obtain shareholder approval, the ab-
sence of financing or other transaction contingencies. Because the market
price of the target's securities will generally have risen significantly in
response to the proposed transaction, the corresponding market decline may be
substantial

. A merger transaction fails or its completion is significantly delayed, which
may cause the price of the stock of the acquiring company, which the Portfo-
lio has sold short, to increase significantly

Convertible Arbitrage. In addition to the risks associated with equity securi-
ties and short sales, convertible arbitrage also entails risks associated with
fixed income securities. These risks include:

. If interest rates go up, the prices of fixed income securities tend to de-
cline

. The issuer of a security owned by the Portfolio may default on its obligation
to pay principal and/or interest or its credit rating may be downgraded

All strategies. Each of the strategies is based to some extent on historical
correlations between the price movements of different securities. In some mar-
ket conditions, these historical correlations may not reflect current market
conditions and may cause a subadviser's judgments about the attractiveness of
particular securities or strategies to be incorrect. This may result in the
Portfolio incurring a loss or the Portfolio's net asset value being more vola-
tile than if these strategies were not used.

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

Multi-Strategy Market Neutral Investments
<PAGE>

Investments, Risks and Performance, continued

Performance

Because this Portfolio commenced operations on May 10, 1999, the Portfolio does
not yet have a sufficient operating history to generate the performance infor-
mation which other Portfolios of Consulting Group Capital Markets Funds (the
"Trust") show in bar and table form at this location of a Prospectus.

Year to date: 4.36% (through 2nd Quarter/2000) (excluding maximum annual
TRAK(R) fee)

Fees and Expenses

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

<TABLE>
<S> <C>
Shareholder fees None
(fees paid directly from your
investment)
Maximum annual TRAK(R) fee* 1.50%
Annual Portfolio operating expenses
(expenses that are deducted from
Portfolio assets)
Management fee 1.80%
Administration 0.20%
Other expenses 1.44%
-------
Total annual Portfolio operating
expenses 3.44%
Management fee waiver and dividend
expense from short sales** (1.54)%
-------
Net annual Portfolio operating
expenses 1.90%
=======
</TABLE>

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

** Management has agreed to waive a portion of the management fee. The fee
waiver will remain in effect until changed by the Board of Trustees.

Example

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

The example assumes:

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

. You redeem at the end of each period;

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

. The Portfolio's operating expenses remain the same.

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

<TABLE>
<CAPTION>
After 1 After 3 After 5 After 10
year years years years
<S> <C> <C> <C>
$497 $1,495 $2,494 $4,996
</TABLE>

Multi-Strategy Market Neutral Investments
<PAGE>

More on the Portfolio's Investments and Related Risks

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

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

Convertible Securities. Convertible securities include debt obligations and
preferred stock of an issuer which are convertible at a stated exchange rate
into common stock of the issuer. Convertible securities generally offer lower
interest or dividend 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 in-
terest rates decline. However, when the market price of the common stock under-
lying a convertible security exceeds the conversion price, the convertible se-
curity tends to reflect the market price of the underlying common stock. As the
market price of the underlying common stock declines, the convertible security
tends to trade increasingly on a yield basis, and thus may not decline in price
to the same extent as the underlying common stock. Convertible securities rank
senior to common stocks in an issuer's capital structure and consequently en-
tail less risk than the issuer's common stock.

Foreign Securities. Investments in securities of foreign entities and securi-
ties quoted or denominated in foreign currencies involve special risks. The
Portfolio may invest in foreign securities directly or in the form of deposi-
tary receipts. The risks of foreign investment include possible political and
economic instability and the possible imposition of exchange controls or other
restrictions on investments. If the Portfolio invests in securities denominated
or quoted in currencies other than the U.S. dollar, changes in foreign currency
rates relative to the U.S. dollar will affect the U.S. dollar value of the
Portfolio's assets.

Economic and Monetary Union (EMU) and the introduction of a single European
currency (the Euro), which began on January 1, 1999, may increase uncertainties
relating to investment in European markets. Among other things, EMU entails
sharing a single currency and official interest rate and adhering to limits on
government borrowing by participating countries. EMU is driven by the expecta-
tion of economic benefits; however, there are significant risks associated with
EMU. Monetary and economic union on this scale has not been attempted before,
and there is uncertainty whether participating countries will remain committed
to EMU in the face of changing economic conditions.

Defensive investing The Portfolio may depart from its principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions in all types of money market and short
term debt securities. The Portfolio's investment in these assets is managed by
SSB Citi Fund Management LLC ("SSB Citi").

Multi-Strategy Market Neutral Investments
<PAGE>

The Manager

The manager. The Consulting Group, a division of SSB Citi, serves as the man-
ager for the Portfolio. SSB Citi is a wholly-owned subsidiary of Salomon Smith
Barney Holdings Inc., which in turn is a wholly-owned subsidiary of Citigroup
Inc. Citigroup businesses produce a broad range of financial services--asset
management, banking and consumer finance, credit and charge cards, insurance,
investments, investment banking and trading--and use diverse channels to make
them available to consumer and corporate customers around the world. As manag-
er, the Consulting Group selects and oversees professional money managers who
are responsible for investing the assets of the Portfolio. The Consulting Group
was established to match the investment needs of institutional investors and
substantial individual investors with appropriate and well-qualified investment
advisers. Since 1973, the Consulting Group has grown to become one of the na-
tion's foremost organizations providing portfolio evaluation, asset allocation,
market analysis and investment adviser selection services.

The Portfolio is part of a series of portfolios which comprise the Trust.
The Trust is a series company that consists of the Portfolio and the following
additional portfolios which are offered in separate prospectuses, copies of
which can be obtained from any Salomon Smith Barney Financial Consultant:

. Government Money Investments

. Intermediate Fixed Income Investments

. Long-Term Bond Investments

. Municipal Bond Investments

. Mortgage Backed Investments

. High Yield Investments

. Multi-Sector Fixed Income Investments

. Balanced Investments

. Large Capitalization Value Equity Investments

. Large Capitalization Growth Investments

. Small Capitalization Value Equity Investments

. S & P 500 Index Investments

. Small Capitalization Growth Investments

. International Equity Investments

. International Fixed Income Investments

. Emerging Markets Equity Investments

The Evaluation Process

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

. level of expertise

. relative performance and
consistency of performance

. strict adherence to investment
discipline or philosophy

. personnel, facility and finan-
cial strength

. quality of service and commu-
nication.

Multi-Strategy Market Neutral Investments
<PAGE>

The subadvisers. The subadvisers are responsible for the day-to-day investment
operations of the Portfolio in accordance with the Portfolio's investment ob-
jectives and policies. The Portfolio's assets are allocated among three
subadvisers according to the following percentages: Pegasus Investments, Inc.--
33.3%, State Street Global Advisors--33.3%, Calamos Asset Management--33.3%.
Changes to this allocation greater than 10% of the Portfolio's assets will be
made by the Board of Trustees. The name and address of each subadviser, and the
name and background of each portfolio manager, is included in the box below.

CO-SUBADVISERS

PEGASUS INVESTMENTS, INC.

One Boston Place

Boston, Massachusetts 02108

PORTFOLIO MANAGERS

Paul B. Kopperl

Andrew D. Kopperl

Brian M.O. Kopperl and

Douglas E. Francis,

who are president, director, a
managing director and a manag-
ing director, respectively, of
Pegasus.

STATE STREET GLOBAL ADVISORS

Two International Place

Boston, Massachusetts 02110

PORTFOLIO MANAGERS

David A. Hanna

Peter B. Wiley

Jeffrey P. Adams and

Peter M. Stonberg,

each of whom is a principal of SSGA.

CALAMOS ASSET MANAGEMENT

1111 East Warrenville Road

Naperville, Illinois 60563

PORTFOLIO MANAGERS

John P. Calamos

Nicholas P. Calamos

John P. Calamos, Jr.,

who are the president and
chief investment officer, man-
aging director and vice presi-
dent, respectively, of
Calamos.

The subadviser selection process. The Consulting Group serves as the manager
for the Portfolio. Subject to the review and approval of the Portfolio's Trust-
ees, the Consulting Group is responsible for selecting, supervising and evalu-
ating subadvisers who manage the Portfolio's assets. The Consulting Group may
adjust the allocation of the Portfolio's assets among the subadvisers by up to
10%. Any adjustment affecting more than 10% of the Portfolio's assets will be
made by the Board of Trustees. The Consulting Group employs a rigorous evalua-
tion process to select those subadvisers that have distinguished themselves
through consistent and superior performance. The Consulting Group has retained
Hedge Fund Research, Inc. at its own expense to provide statistical and other
factual information with respect to the Portfolio's subadvisers and potential
subadvisers. The Consulting Group is also responsible for communicating perfor-
mance expectations and evaluations to the subadvisers and ultimately recom-
mending to the Board of Trustees whether a subadviser's contract should be re-
newed. The Consulting Group provides written reports to the Trustees regarding
the results of its evaluation and monitoring functions.

The Portfolio relies upon an exemptive order from the Securities and Exchange
Commission which permits the manager to select new subadvisers or replace ex-
isting subadvisers without first obtaining shareholder approval for the change.
The Trustees, including a majority of the "non-interested" Trustees, must con-
tinue to approve each new subadvisory contract. This allows the manager to act
more quickly to change subadvisers when it determines that a change is benefi-
cial to shareholders by avoiding the delay of calling and holding shareholder
meetings to approve each change. In accordance with the exemptive order, the
Portfolio will provide investors with information about each new subadviser and
its subadvisory contract within 90 days of the engagement of a new subadviser.

Management Fees. The Consulting Group receives fees from the Portfolio for its
services at an annual rate of 1.80% of its average daily net assets. For the
fiscal period ended March 31, 2000, the Consulting Group received a management
fee equal to 1.06% of the Portfolio's average daily net assets. In turn, the
Consulting Group pays the subadvisers a portion of this fee for their services.
For the fiscal period ended March 31, 2000, the Portfolio paid SSB Citi a fee
at an annual rate of 0.20% of the Portfolio's average daily net assets for ad-
ministration services.

Possible Conflict of Interest. The advisory fee paid by each portfolio in the
Trust to the manager and the por-

Multi-Strategy Market Neutral Investments
<PAGE>

The Manager, continued

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

Multi-Strategy Market Neutral Investments
<PAGE>

Asset Allocation Programs

Shares of the Portfolio are available to participants in advisory programs or
asset based fee programs sponsored by Salomon Smith Barney Inc., including the
TRAK(R) Personalized Investment Advisory Service, or other qualified investment
advisers approved by the Consulting Group. The advisory services provide in-
vestors with asset allocation recommendations, which are implemented through
the Portfolio.

Advisory services generally include:

. evaluating the investor's investment objectives and time horizon

. analyzing the investor's risk tolerance

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

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

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

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

Multi-Strategy Market Neutral Investments
<PAGE>

Investment and Account Information

Account Transactions

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

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

. There is no minimum on additional investments.

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

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

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

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

. Name of the Portfolio

. Account Number

. Dollar amount or number of shares to be purchased

. Signatures of each owner exactly as the account is registered

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

Redemption of Shares. You may sell shares of the Portfolio at net asset value
on any day the New York Stock Exchange is open by contacting your broker. All
redemption requests accepted by Salomon Smith Barney or an introducing broker
before 4:00 p.m. Eastern time on any day will be executed at that day's share
price. Orders accepted after 4:00 p.m. will be executed at the next day's
price. All redemption orders must be in good form, which may require commonly
required documentation to assure the safety of your account. If you discontinue
your Salomon Smith Barney advisory service, you must redeem your shares in the
Portfolio.

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

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

The Consulting Group may limit additional exchanges and/or purchases by a
shareholder if it determines that the shareholder is pursuing a pattern of fre-
quent exchanges. Excessive exchange transactions can adversely affect a Portfo-
lio's performance, hurting the Portfolio's other shareholders. If the Consult-
ing Group discovers a pattern of frequent exchanges, it will provide notice in
writing or by telephone to the shareholder at least 15 days before suspending
his or her exchange privilege. During the 15-day period the shareholder will be
required either to redeem his or her shares in the Portfolio

Multi-Strategy Market Neutral Investments
<PAGE>

or establish an allocation which the shareholder expects to maintain for a sig-
nificant period of time.

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

Valuation of shares

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

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

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

Dividends and distributions

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

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

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

<TABLE>
<CAPTION>
Transactions Federal Tax Status
------------------------------------------------------------------------------
<S> <C>
Sales or exchange of shares Usually capital gain
or loss; long-term
only if shares owned
more than one year
------------------------------------------------------------------------------
Distributions of long term Long-term capital
capital gain gain
------------------------------------------------------------------------------
Distributions of short term Ordinary income
capital gain
------------------------------------------------------------------------------
Dividends from net Ordinary income
investment income
------------------------------------------------------------------------------
Any of the above received by Not a taxable event
a tax-deferred retirement
account
------------------------------------------------------------------------------
</TABLE>

Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the Portfolio is about to declare a capital gain distribu-
tion or a taxable dividend because it will be taxable to you even though it may
actually be a return of a portion of your investment.

After the end of each year, you will receive a Form 1099 indicating your divi-
dends and distributions for the prior year, which are taxable as described
above even if reinvested, and your redemptions during that year. If you do not
provide the Portfolio with your correct taxpayer identification number and any
required certifications, you may be subject to backup withholding of 31% of the
Portfolio's distributions, dividends and redemption proceeds. Because each
shareholder's circumstances are different and special tax rules may apply, you
should consult your tax adviser about your investment in the Portfolio.

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

Multi-Strategy Market Neutral Investments
<PAGE>

Financial Highlights

The financial highlights tables are intended to help you understand the perfor-
mance of the Portfolio for the past 5 years (or since inception if less than 5
years). Certain information reflects financial results for a single share. To-
tal return represents the rate that a shareholder would have earned (or lost)
on a Portfolio share assuming reinvestment of all dividends and distributions.
The information in the following tables was audited by KPMG LLP, independent
auditors, whose report, along with the Portfolio's financial statements, is in-
cluded in the annual report (available upon request).

For a share of beneficial interest outstanding throughout the period ended
March 31:

<TABLE>
--------------------------------------------------------------------
<CAPTION>
2000(1)(2)
--------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $8.00
--------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.19
Net realized and unrealized gain 0.44
--------------------------------------------------------------------
Total Income From Operations 0.63
--------------------------------------------------------------------
Less Distributions From:
Net investment income (0.02)
Net realized gains (0.25)
--------------------------------------------------------------------
Total Distributions (0.27)
--------------------------------------------------------------------
Net Asset Value, End of Period $8.36
--------------------------------------------------------------------
Total Return++ 7.98%
--------------------------------------------------------------------
Net Assets, End of Period (000s) $32,583
--------------------------------------------------------------------
Ratios to Average Net Assets+:
Total expenses before dividend expense on short sales(3) 1.90%
Dividend expense from short sales 0.80
Total expenses 2.70
Net investment income 2.65
--------------------------------------------------------------------
Portfolio Turnover Rate 249%
--------------------------------------------------------------------
</TABLE>

(1) For the period from May 10, 1999 (commencement of operations) to March
31, 2000.

(2) Per share amounts have been calculated using the monthly average shares
method.

(3) The expense ratio and the per share decrease in net investment income
before fee waivers were as follows:

<TABLE>
<CAPTION>
Per Share Expense Ratio
Decrease to Net Without Fee Waiver
Investment and Dividend Expense
Income from Short Sales
--------------- --------------------
<S> <C> <C>
2000 $0.05 2.64%+
</TABLE>

++ Total return is not annualized, as it may not be representative of the
total return for the year.

+ Annualized.

Multi-Strategy Market Neutral Investments
<PAGE>

(This page is intentionally left blank.)
<PAGE>

APPENDIX A

Investment Indices

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A-1
<PAGE>

APPENDIX A

Investment Indices--(Continued)

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

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

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

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

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

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

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

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

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

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

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

Russell 1000 Index
The 1,000 largest U.S. companies by market capitalization, the smallest of
which has about $1.35 billion in market capitalization. The average market
capitalization for a company in this index is $12.10 billion.

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

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

Russell 2000 Index
Composed of the 2,000 smallest U.S. securities as determined by total market
capitalization, representing approximately 8.0% of the Russell 3000 Index. The
average market capitalization for a company in this index is $526.4 million,
with the largest being $1.35 billion.

A-2
<PAGE>

APPENDIX A

Investment Indices--(Continued)

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

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

Standard & Poor's 500 Index
Tracks the total return of 500 of the largest stocks (400 industrial, 40
utility, 20 transportation and 40 financial companies) in the United States,
which represent about 78% of the New York Stock Exchange's total market
capitalization. The return of each stock is weighted on the basis of the
stock's capitalization.

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

Wilshire Large Company Growth Equity Index
Focuses on the top 750 companies of the Wilshire 5000 in terms of market
capitalization. The smallest company's capitalization is $675 million. The
index excludes companies meeting one or more of the following criteria: less
than 5 years of operating history, high dividend payout, low price-to-book or
low return on equity.

Wilshire Large Company Value Equity Index
Focuses on the top 750 companies of the Wilshire 5000 in terms of market
capitalization. The smallest company's capitalization is $675 million. The
index excludes companies that do not rank favorably on a relative basis due to
their high P/E and price-to-book ratios, or low yield.

Wilshire Small Company Growth Equity Index
Focuses on companies that rank between 751-1,750 of the Wilshire 5000 in terms
of market capitalization. The smallest company's capitalization is $58 million.
The index excludes companies meeting one or more of the following criteria:
less than two years operating history, high yield, little or no earnings growth
or low beta.

Wilshire Small Company Value Equity Index
Focuses on companies that rank between 751-1,750 of the Wilshire 5000 in terms
of market capitalization. The smallest company's capitalization is $58 million.
The index excludes companies that do not rank favorably on a relative basis
because of their high price-to-earnings and price-to-book ratios, or low yield.

A-3
<PAGE>

APPENDIX B

The following are copies of the proposed and final exemptions from the Depart-
ment of Labor from certain provisions of the Employee Retirement Income Secu-
rity Act of 1974 relating to the purchase of shares and participation in TRAK
by certain retirement plans.

--------------------------------------------------------------------------------
[Application Nos. D-9337 and D-9415]

Smith Barney Shearson (SBS), Located in New York, NY

NEW AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemption to modify and replace prohibited
transaction exemption (PTE) 92-77 involving Shearson Lehman Brothers, Inc.
(Shearson Lehman).
--------------------------------------------------------------------------------
SUMMARY: This document contains a notice of pendency before the Department of
Labor (the Department) of a proposed individual exemption which, if granted,
would replace PTE 92-77 (55 FR 45833, October 5, 1992). PTE 92-77 permits the
purchase or redemption of shares by an employee benefit plan, an individual
retirement account (the IRA) or a retirement plan for a self-employed
individual (the Keogh Plan; collectively the Plans) in the Trust for TRAK
Investments (the Trust) established by Shearson Lehman, in connection with such
loans' participation in the TRAK Personalized Investment Advisory Service (the
TRAK Program). In addition, PTE 92-77 permits the provision, by the Consulting
Group Division of Shearson Lehman (the Consulting Group), of investment
advisory services to an independent fiduciary of a participating Plan (the
Independent Plan Fiduciary) which may result in such fiduciary's selection of a
portfolio (the Portfolio) in the TRAK Program for the investment of Plan
assets. These transactions are described in a notice of pendency that was
published in the Federal Register on April 3, 1992 at 57 FR 11514. PTE 92-77 is
effective as of April 3, 1992.
If granted, the proposed exemption would replace PTE 92-77, which as discussed
below, expired by operation of the law. The new proposed exemption would permit
the replacement of Shearson Lehman with a newly-merged entity known as "Smith
Barney Shearson, Inc." It would also permit the adoption of a daily-traded
collective investment fund (the GIC Fund) for Plans providing for participant
directed investments (the Section 404(c) Plans). The proposed exemption would
provide conditional relief that is identical to that provided by PTE 92-77. In
addition, the proposed exemption would affect participants and beneficiaries
of, and fiduciaries with respect to, Plans participating in the TRAK Program.

DATES: Written comments and requests for a public hearing should be received by
the Department on or before the expiration of 60 days from the publication of
this proposed exemption in the Federal Register. If granted, the proposed
exemption will be effective July 31, 1993 for transactions that are covered by
PTE 92-77. With respect to transactions involving the GIC Fund, the proposed
exemption will be effective as of the date the grant notice is published in the
Federal Register.

ADDRESSES: All written comments and requests for a public hearing (preferably,
three copies) should be sent to the Office of Exemption Determinations, Pension
and Welfare Benefits Administration, Room N-5849, U.S. Department of Labor, 200
Constitution Avenue, NW., Washington, DC 20210. Attention: Application Nos. D-
9337 and D-9415. The applications pertaining to the proposed exemption and the
comments received will be available for public inspection in the Public
Documents Room of the Pension and Welfare Benefits Administration. U.S.
Department of Labor, Room N-3307, 200 Constitution Avenue, NW., Washington, DC
20210.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency before the
Department of a proposed exemption that would replace PTE 92-77. PTE 92-77
provides an exemption from certain prohibited transaction restrictions of
section 406 of the Employee Retirement Income Security Act of 1974 (the Act)
and from the sanctions resulting from the application of section 4975 of the
Internal Revenue Code of 1986 (the Code), as amended, by reason of section
4975(c)(1) of the Code. The proposed exemption was requested in an application
filed by SBS pursuant to section 408(a) of the Act and section 4975(c)(2) of
the Code, and in accordance with the procedures (the Procedures) set forth in
29 CFR Part 2570, Subpart 3 (55 FR 32836, August 10, 1990). Effective December
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713,
October 17, 1978) transferred the authority of the Secretary of the Treasury to
issue exemptions of the type requested to the Secretary of Labor. Accordingly,
this proposed replacement exemption is being issued solely by the Department.

As stated briefly above, PTE 92-77 allows Shearson Lehman to make the TRAK
Program available to Plans that acquire shares in the Trust subject to certain
conditions. Specifically, PTE 92-77 provides exemptive relief from section
406(a) of the Act and the sanctions resulting from the application of section
4975 of the Code, by reason of section 4975(c)(1) (A) through (D) of the Code,
with respect to the purchase or redemption of shares in the Trust by Plans
investing therein. In addition, PTE 92-77 provides exemptive relief from the
restrictions of section 408(b)(1) and (b)(2) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by reason of
section 4975(c)(1)(E) of the Code, with respect to the provision, by the
Consulting Group of Shearson Lehman, of investment advisory services to an
Independent Plan Fiduciary of a Plan participating in the TRAK Program which
may result in such fiduciary's selection of a Portfolio in the TRAK Program for
the investment of Plan assets.

Subsequent to the granting of PTE 92-77, Shearson Lehman informed the
Department that it had signed an asset purchase agreement with Primerica
Corporation (Primerica) and Smith Barney Harris Upham & Company, Inc. (Smith
Barney), an indirect wholly owned subsidiary. The terms of the agreement
provided for the sale of substantially all of the assets of Shearson Lehman and
its Asset Management Divisions (collectively, the Shearson Divisions) to Smith
Barney./1/ The transaction was completed on July 31, 1993. As a result of the
transaction, most of the assets and business of the Shearson Divisions were
transferred to Smith Barney which, upon merger with Shearson Lehman, was
renamed "Smith Barney Shearson." (Smith Barney Shearson is denoted herein as
SBS.) Shearson Lehman received cash and an
-------
/1/ Shearson Lehman's other primary division, Lehman Brothers, which is
responsible for securities underwriting, financial advisory, investment and
merchant banking services and commodities trading as a principal and agent has
been retained by Shearson Lehman it has been renamed "Lehman Brothers Inc."

B-1
<PAGE>

interest-bearing note from SBS. As further consideration for the asset sale,
SBS agreed to pay future contingent amounts based upon the combined performance
of SBS and certain other Shearson Divisions acquired from Shearson Lehman.
Shearson Lehman also assigned to the American Express Company (American
Express) the right to receive 2.5 million shares of certain convertible
preferred stock issued by Primerica and a warrant. As consideration for the
assignment, American Express agreed to pay Shearson Lehman for the stock and
the warrant based on their value as of March 12, 1993, the date of the Asset
Purchase Agreement. At present, SBS offers the TRAK Program to investors
through one or more of its subsidiaries or divisions.

Since PTE 92-77 was granted, SBS informed the Department that it wished to
modify the exemption in order to improve the TRAK Program and make it more
responsive to the needs of investors. Specifically, SBS proposes to add to the
Portfolios currently available under the TRAK Program, the GIC Fund, which is
designed to invest primarily in guaranteed investment contracts (the GIC's),
synthetic GIC products and/or units of other GIC collective funds. The GIC Fund
will not differ in any material respects from the Government Money Investments
Portfolio which generally permits daily redemptions of its shares. In addition,
the GIC Fund will operate in a manner that is consistent with the requirements
of PTE 92-77. SBS believes it is important to offer the GIC Fund to Section
404(c) Plans because these Plans may prefer to offer participants this type of
investment option instead of the Government Money Investments Portfolio
presently offered to such Plans under the TRAK Program. Therefore, SBS requests
exemptive relief in order that the GIC Fund may be added to the Portfolios that
are available under the Trust.

The proposed GIC Fund will be a collective trust fund established and
maintained by Smith Barney Shearson Trust Company (SBS Trust), a wholly owned
subsidiary of Primerica. The GIC Fund will invest primarily in a portfolio of
GICs with varying maturities issued by highly-rated insurance companies, and/or
units of other collective funds invested in GICs. The GIC Fund may also invest
in asset-backed investment products designed to offer risk and return
characteristics similar to those of GICs (i.e., synthetic GIC products). In
addition, the GIC Fund may hold short-term, low risk securities where the
investment of all fund assets in GICs and/or units of other GIC collective
funds is not feasible.

SBS Trust will serve as the trustee of the GIC Fund. SBS Trust will employ a
sub-adviser (the Sub-Adviser) which is independent of SBS and its affiliates to
make recommendations on purchases of GICs and/or units of other GIC collective
funds. Currently, SBS Trust employs Morley Capital Management (Morley Capital)
of Lake Oswego, Oregon as the Sub-Adviser of the GIC Fund. SBS Trust will also
employ Boston Company Investors Services Group (ISG), a business group of The
Boston Company to provide custody and valuation services and The Shareholder
Services Group, Inc. (TSSG), an entity which is indirectly owned by American
Express, as transfer agent. Both ISG and TSSG are not affiliated with SBS.
SBS represents that the GIC Fund will not pay a management or other similar
fee to it or SBS Trust. (SBS Trust's fees for general trust services provided
to a Section 404(c) Plan is included in such plan's investment advisory or
"outside" fee.) A management fee may be paid to Morley Capital or any other
Sub-Adviser which is independent of SBS and its affiliates. The GIC Fund will
pay ISG, as custodian and provider of fund valuation services, a fee for such
services, and TSSG, as transfer agent, a fee of $8.50 to $9.50 per Section
404(c) Plan, plus out-of-pocket expenses. With respect to the fees paid to SBS
and its affiliates, the GIC Fund will not differ materially from the Government
Money Investments Portfolio in that it will not pay a management or other
similar fee to SBS or SBS Trust.
SBS will describe the GIC Fund, in the prospectus (the Prospectus) and
promotional materials it furnishes to Section 404(c) Plan participants who are
interested in investing in the GIC Fund. Such disclosures will reflect, in all
material respects, the information discussed above.
Because of the foregoing material changes to the factual representations
supporting PTE 92-77, the Department has determined that the prior exemption
was no longer effective as of July 31, 1993, the date Shearson Lehman sold the
assets described above to SBS. Thus, the Department is of the view that PTE 92-
77 would be unavailable for use by SBS and its subsidiaries with respect to the
subject transactions.
Accordingly, the Department has decided to publish a new exemption which, if
granted, would replace PTE 92-77. Under the replacement exemption, all
references to Shearson Lehman would be replaced with references to SBS. In
addition, the replacement exemption would incorporate the new GIC Fund, SBS
Trust, ISG and TSSG. Further, the replacement exemption would have an effective
date of July 31, 1993 for transactions described in PTE 92-77. With respect to
transactions involving the GIC Fund, the replacement exemption would become
effective as of the date of the grant of the notices of pendency.

Notice to Interested Persons
Notice of the proposed exemption will be mailed by first class mail to each
Plan which invests in the TRAK Program. The notice will contain a copy of the
notice of proposed exemption as published in the Federal Register and an
explanation of the rights of interested persons to comment on and/or request
such a hearing with respect thereto. Such notice will be sent to the above-
named parties within 30 days of the publication of the proposed exemption in
the Federal Register. Written comments and hearing request are due within 60
days of the publication of the proposed exemption in the Federal Register.

General Information
The attention of interested persons is directed to the following:
(1) This fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4973(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the Plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;
(2) Before an exemption can be granted under section 408(a) of the Act and
section 4975(c)(2) of the Code, the Department must find that the exemption is
administratively feasible, in the interest of the plan and of its participants
and beneficiaries and protective of the rights of participants and
beneficiaries of the plan; and
(3) The proposed exemption, if granted, will be supplemental to, and not in
derogation of, any other provisions of the

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Act and the Code, including statutory or administrative exemptions.
Furthermore, the fact that a transaction is subject to an administrative or
statutory exemption is not dispositive of whether the transaction is in fact a
prohibited transaction.
(4) In addition to transactions involving the GIC Fund, the proposed
exemption, if granted, will be applicable to the transactions previously
described in PTE 92-77 only if the conditions specified therein are met.

Written Comments and Hearing Requests
All interested persons are invited to submit written comments or requests for
a hearing on the proposed replacement exemption to the address above, within
the time period set forth above. All comments will be made a part of the
record. Comments and requests for a hearing should state the reasons for the
writer's interest in the proposed exemption. Comments received will be
available for public inspection with the referenced applications at the address
set forth above.

Proposed Exemption
Under the authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the Procedures cited above, the Department proposes
to replace PTE 92-77 as follows:

Section 1. Covered Transactions
(a) The restrictions of section 406(a) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1)(A) through (D) of the Code, shall not apply to the purchase or
redemption of shares by Plans in the SBS-established Trust in connection with
such Plans' participation in the TRAK Personalized Investment Advisory Service.

(b) The restrictions of action 406(b) of the Act and the sanctions resulting
from the application of section 4975 of the Code by reason of section
4975(c)(1)(E) and (F) of the Code, shall not apply to the provision, by the
Consulting Group, of investment advisory services to an Independent Plan
Fiduciary of a participating Plan which may result in such fiduciary's
selection of a Portfolio in the TRAK Program for the investment of Plan assets.
The proposed exemption is subject to the following conditions that are set
forth in Section II.

(b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.
(c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.
(d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.

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

(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such independent fiduciary.

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

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

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

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

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

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

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

(B) Upon written or oral request to SBS, a Statement of Additional Information
supplementing the Prospectus which describes the types of securities and other
instruments in which the Portfolios may invest, the investment policies and
strategies that the Portfolios may utilize and certain risks attendant to those
investments, policies and strategies.

(C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program.

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

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

(F) Copies of PTE 92-77 and documents pertaining to the proposed replacement
exemption.

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

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

(4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment

B-3
<PAGE>

manager or a named fiduciary, such Independent Plan Fiduciary is required to
acknowledge, in writing, receipt of such documents and represent to SBS that
such fiduciary is (a) independent of SBS and its affiliates, (b) capable of
making an independent decision regarding the investment of Plan assets and (c)
knowledgeable with respect to the Plan in administrative matters and funding
matters related thereto, and able to make an informed decision concerning
participation in the TRAK Program.

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

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

(2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.
(3) If required by the arrangement negotiated between the Consulting Group and
a section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocation, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.

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

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

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

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

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

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

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

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

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

Section III. Definitions
For purposes of this exemption:

(a) An "affiliate" of SBS includes--

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

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

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

(b) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of SBS and its affiliates and is either--

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

(2) A participant in a Keogh Plan.
(3) An individual covered under a self-directed IRA which invests in Trust
shares, or

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

Section IV. Effective Dates

This exemption will be effective as of July 31, 1993, except for transactions
involving the GIC Fund. The exemption will be effective upon its grant with
respect to the inclusion of the GIC Fund in the TRAK Program.

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

For a more complete statement of the facts and representations supporting the
Department's decision to grant PTE 92-77, refer to the proposed exemption and
grant notice which are cited above.

Signed at Washington, D.C. this 23rd day of March, 1994.

Ivan L. Strasfeld,

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

[FR Doc. 94-7271 Filed 3-28-94; 8:45 am]

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<PAGE>

--------------------------------------------------------------------------------
[Prohibited Transaction Exemption 94-50; Application Nos. D-9337 and D-9415]

Smith Barney, Inc. (SBI) Located in New York, NY

AGENCY: Pension and Welfare Benefits Administration.

ACTION: Grant of individual exemption to modify and replace prohibited
transaction exemption (PTE) 92-77 involving Shearson Lehman Brothers, Inc.
(Shearson Lehman).
--------------------------------------------------------------------------------
SUMMARY: This document contains an individual exemption which supersedes PTE
92-77 (57 FR 45833, October 5, 1992)./1/ This exemption permits the replacement
of Shearson Lehman with an entity known as "Smith Barney Inc."/2/ It also
allows SBI to adopt a daily-traded collective investment fund (the GIC Fund)
for Plans investing in the Consulting Group Capital Markets Funds (the Trust).
The exemption provides conditional relief that is identical to that provided by
PTE 92-77 and it will affect participants and beneficiaries of, and fiduciaries
with respect to, Plans participating in the Trust.

EFFECTIVE DATE: This exemption is effective July 31, 1993 for transactions that
are covered by PTE 92-77. With respect to transactions involving the GIC Fund,
the exemption is effective March 29, 1994.

SUPPLEMENTARY INFORMATION: On March 29, 1994, the Department of Labor (the
Department) published a notice of proposed exemption (the Notice) in the
Federal Register (59 FR 14680) that would replace PTE 92-77. PTE 92-77 provides
an exemption from certain prohibited transaction restrictions of section 406 of
the Employee Retirement Income Security Act of 1974 (the Act) and from the
sanctions resulting from the application of section 4975 of the Internal
Revenue Code of 1986 (the Code), as amended, by reason of section 4975(c)(1) of
the Code. The proposed exemption was requested in an application filed by SBI
pursuant to section 408(a) of the Act and section 4975(c)(2) of the Code, and
in accordance with the procedures (the Procedures) set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, August 10, 1990). Effective December 31, 1978,
section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17,
1978) transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor. Accordingly, this
replacement exemption is being issued solely by the Department.
The Notice gave interested persons an opportunity to comment on the proposed
exemption and to request a public hearing. The only written comments submitted
to the Department during the comment period were made by SBI. These comments
expressed SBI's substantive concerns about the Notice and offered suggestions
for clarifying certain language of the Notice. Discussed below are SBI's
comments and the Department's responses thereto. Also discussed is a comment
made by the Department.

SBI's Comments
SBI notes that there is an ambiguity regarding the effective date of the GIC
Fund. SBI represents that the Notice provides in the last paragraph under the
heading "Supplementary Information," that with respect to transactions
involving the GIC Fund, the exemption "would become effective as of the date of
the grant of the notice of pendency." However, under the captions EFFECTIVE
DATES and DATES, SBI explains that the Notice states that the exemption will be
effective "upon its grant," or "as of the date the grant notice is published."
Because it was the intention of the parties that the effective date for
transactions involving the GIC Fund would be March 29, 1994, the date of
publication of the Notice in the Federal Register, SBI requests that the
Department make the exemption retroactive to this date for the GIC Fund.
The Department has considered SBI's comment and has made the requested
modification.
SBI wishes to modify the exemption in order that it may offer the GIC Fund to
both fiduciary-directed Plans as well as Plans providing for participant-
directed investments (the Section 404(c) Plans). The Department believes this
comment has merit and that it would be potentially beneficial to participants
and beneficiaries since it provides different types of Plans participating in
the TRAK Program with the opportunity to invest in the GIC Fund.
SBI explains that in the preamble to the Notice there is a statement to the
effect that it will "describe the GIC Fund in a prospectus (the Prospectus) and
promotional materials that will be furnished to Section 404(c) Plan
participants." SBI represents that interests in the GIC Fund are not subject to
the registration and Prospectus delivery requirements of the Securities Act of
1933. Also, SBI points out that the conditions of PTE 92-77 require it to
deliver copies of the Trust Prospectus only to the Plan administrator and not
to the individual participants. Because it has no practical means of delivering
Prospectuses or other disclosures to participants, SBI indicates that the
responsibility for providing these materials to participants rests with the
Plan administrator. In this regard, SBI represents that the
disclosure information it will make available to all Plans proposing to invest
in the GIC Fund will include copies of the Trust Prospectus and a separate
description of the GIC Fund's investment objectives, policies and processes.
SBI explains that its description of the GIC Fund will be designed to provide a
participant with sufficient information in order that the participant can make
an informed investment decision.
The Department concurs with these comments.
In addition to principal comments discussed above, SBI has made certain
technical clarifications and updates to the Notice in the following areas:

(1) General.
a. Redesignations. SBI explains that effective December 31, 1993, Primerica
Corporation changed its name to "The Travelers Inc." and that effective May 9,
1994, the "Trust for TRAK Investments" was renamed "Consulting Group Capital
Markets Funds." Also effective June 1, 1994, "Smith Barney Shearson Inc." was
renamed "Smith Barney Inc."

(2) Supplementary Information.
a. Asset Sale Transaction. SBI explains that the transaction by which Smith
Barney Harris Upham & Company, Inc. (Smith Barney) acquired Shearson Lehman and
its Asset Management Divisions was an asset sale and not a merger. Accordingly,
SBI suggests that the fourth sentence of the third
-------
/1/ PTE 92-77 provides exemptive relief from section 406(a) of the Act and the
sanctions resulting from the application of section 4975 of the Code, by reason
of section 4975(c)(1) (A) through (D) of the Code, with respect to the purchase
or redemption of shares in the Trust for TRAK Investments (which has been
redesignated as the "Consulting Group Capital Markets Funds" and is referred to
herein as the Trust) by Plans investing therein. In addition, PTE 92-77
provides exemptive relief from the restrictions of section 406(b)(1) and (b)(2)
of the Act and the sanctions resulting from the application of section 4975 of
the Code, by reason of section 4975(c)(1)(E) of the Code, with respect to the
provision, by the Consulting Group of Shearson Lehman, of investment advisory
services to an Independent Plan Fiduciary of a Plan participating in the TRAK
Personalized Investment Advisory Service (the TRAK Program) which may result in
such fiduciary's selection of a Portfolio in the TRAK Program for the
investment of Plan assets.
/2/ Effective June 1, 1994, Smith Barney Shearson, Inc. (SBS) was renamed
"Smith Barney Inc." Hereinafter, SBS is referred to in this grant notice as
either "Smith Barney Inc." or "SBI."

B-5
<PAGE>

paragraph under the heading "Supplementary Information," read as follows: "As a
result of the transaction, most of the assets and business of the Shearson
divisions were transferred to Smith Barney, which was renamed "Smith Barney
Shearson Inc.' "
b. Fees Paid to Transfer Agent. SBI represents that in the seventh paragraph
under the heading "Supplementary Information," the Notice states that The
Shareholder Services Group (TSSG), as transfer agent, will charge a fee of
$8.50 to $9.50 per plan for its transfer agency services. While these are the
current expected fee levels, SBI notes that such fees may increase or decrease
in the future. Because TSSG is no longer an affiliate, SBI requests that the
paragraph be amended to provide that TSSG as transfer agent will receive a
reasonable fee for its services rather than specifying a precise dollar amount.

(3) General Conditions.
a. Written Disclosures. Section II(k)(1)(F) of the General Conditions of the
Notice states that SBI will provide copies of PTE 92-77 and documents
pertaining to the proposed replacement exemption to each Plan participating in
the TRAK Program. SBI wishes to clarify that the "documents pertaining to the
proposed replacement exemption" refer to copies of the Notice and, when issued,
the final exemption.
The Department concurs with the above supplemental clarifications to the
Notice that have been made by SBI and hereby incorporates these changes, as
well as the substantive changes also described above, by reference into the
Notice and, where applicable, into this final exemption.

Department's Comment
Section III of the Notice, which is captioned "Definitions," provides several
meanings of the term "Independent Plan Fiduciary" in subparagraph (b). For
purposes of the exemption, the term "Independent Plan Fiduciary" may include a
Plan administrator, a participant in a Keogh Plan, an individual covered under
a self-directed IRA or a trustee of a Title I Plan that does not permit
participant-directed investments as contemplated under section 404(c) of the
Act. However, due to an oversight, the definition does not extend to a
participant in a Section 404(c) Plan. Because the TRAK Program is being
marketed as an investment alternative to Section 404(c) Plans and the
individual participant of such Plan makes the decision on whether to invest
therein, the Department has amended the definition of the term "Independent
Plan Fiduciary" by providing a new subparagraph (b)(5) which includes a Section
404(c) Plan participant.
Accordingly, after consideration of the entire exemption record, including the
written comments, the Department has determined to grant the replacement
exemption as modified herein.

General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;
(2) In accordance with section 408(a) of the Act and section 4975(c)(2) of the
Code, the Department has found that the exemption is administratively feasible,
in the interest of the Plans and their participants and beneficiaries and
protective of the rights of participants and beneficiaries of the Plans; and
(3) The exemption is supplemental to, and not in derogation of, any other
provisions of the Act and the Code, including statutory or administrative
exemptions. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction.
(4) In addition to transactions involving the GIC Fund, the exemption is
applicable to the transactions previously described in PTE 92-77 only if the
conditions specified therein are met.

Exemption
Under the authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the Procedures cited above, the Department hereby
replaces PTE 92-77 as follows:

Section I. Covered Transactions
(a) The restrictions of section 406(a) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1)(A) through (D) of the Code, shall not apply to the purchase or
redemption of shares by Plans in the SBI-established Trust in connection with
such Plans' participation in the TRAK Personalized Investment Advisory Service.
(b) The restrictions of section 406(b) of the Act and the sanctions resulting
from the application of section 4975 of the Code by reason of section
4975(c)(1)(E) and (F) of the Code, shall not apply to the provision, by the
Consulting Group, of investment advisory services to an Independent Plan
Fiduciary of a participating Plan which may result in such fiduciary's
selection of a Portfolio in the TRAK Program for the investment of Plan assets.
The exemption is subject to the following conditions that are set forth in
Section II.

Section II. General Conditions
(a) The participation of Plans in the TRAK Program will be approved by an
Independent Plan Fiduciary. For purposes of this requirement, an employee,
officer or director of SBI and/or its affiliates covered by an IRA not subject
to Title I of the Act will be considered an Independent Plan Fiduciary with
respect to such IRA.
(b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.
(c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.
(d) The terms of each purchase or redemption of Trust shares remain at least
as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.
(e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.
(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such independent fiduciary.
(g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Section 404(c) Plan, the Consulting Group will
provide investment advice that is limited to the Portfolios made available
under the Plan.

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<PAGE>

(h) Any Sub-Adviser that acts for the Trust to exercise investment discretion
over a Portfolio will be independent of SBI and its affiliates.
(i) immediately following the acquisition by a Portfolio of any securities
that are issued by SBI and/or its affiliates, the percentage of that
Portfolio's net assets invested in such securities will not exceed one percent.
(j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and SBI Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.
(k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares.
(1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:
(A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, SBI and its subsidiaries and the compensation paid to such
entities./3/
(B) Upon written or oral request to SBI, a Statement of Additional Information
supplementing the Prospectus which describes the types of securities and other
instruments in which the Portfolios may invest, the investment policies and
strategies that the Portfolios may utilize and certain risks attendant to those
investments, policies and strategies.
(C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program.
(D) Upon written request of SBI, a copy of the respective investment advisory
agreement between the Consulting Group and the Sub-Advisers.
(E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by an SBI
Financial Consultant (the Financial Consultant) to eligible participants in
such Plan, of the services offered under the TRAK Program and the operation and
objectives of the Portfolios.
(F) Copies of PTE 92-77 and documents pertaining to the replacement exemption.
(2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this Section.
(3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to SBI that such fiduciary is (a) independent of SBI and its
affiliates and (b) knowledgeable with respect to the Plan in administrative
matters and funding matters related thereto, and able to make an informed
decision concerning participation in the TRAK Program.
(4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Plan Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to SBI that such fiduciary is
(a) independent of SBI and its affiliates, (b) capable of making an independent
decision regarding the investment of Plan assets and (c) knowledgeable with
respect to the Plan in administrative matters and funding matters related
thereto, and able to make an informed decision concerning participation in the
TRAK Program.
(l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:
(1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.
(2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.
(3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocations, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of Section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.
(4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.
(5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to SBI
and its affiliates and (b) the average brokerage commission per share paid by
each Portfolio to SBI and its affiliates, as compared to the average brokerage
commission per share paid by the Trust to brokers other than SBI and its
affiliates, both expressed as cents per share.
(m) SBI shall maintain, for a period of six years, the records necessary to
enable the persons described in paragraph (n) of this Section to determine
whether the conditions of this exemption have been met, except that (1) a
prohibited transaction will not be considered to have occurred if, due to
circumstances beyond the control of SBI and/or its affiliates, the records are
lost or destroyed prior to the end of the six year period, and (2) no party in
interest other than SBI shall be subject to the civil penalty that may be
assessed under section 502(i) of the Act, or to the taxes imposed by section
4975(a) and (b) of the Code, if the records are not maintained, or are not
available for
-------
/3/ The fact that certain transactions and fee arrangements are the subject of
an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of fees and expenses to be paid by the Plan
including the fees paid directly to SBI or to other third parties and paid
directly through the Trust to SBI.
B-7
<PAGE>

examination as required by paragraph (n) below.
(n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subsections (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section shall be unconditionally
available at their customary location during normal business hours by:
(A) Any duly authorized employee or representative of the Department or the
Internal Revenue Service;
(B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;
(C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and
(D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.
(2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of SBI or
commercial or financial information which is privileged or confidential.

Section III. Definitions
For purposes of this exemption:
(a) An "affiliate" of SBI includes--
(1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with SBI. (For purposes of
this subsection, the term "control" means the power to exercise a controlling
influence over the management or policies of a person other than an
individual.)
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.
(b) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of SBI and its affiliates and is either
(1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares of a Section 404(c) Plan,
(2) A participant in a Keogh Plan,
(3) An individual covered under a self-directed IRA which invests in Trust
shares,
(4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by Section 404(c) of the Act, or
(5) A participant in a Section 404(c) Plan.

Section IV. Effective Dates
This exemption will be effective as of July 31, 1993, except for transactions
involving the GIC Fund. The exemption will be effective March 29, 1994 with
respect to the inclusion of the GIC Fund in the TRAK Program.
The availability of this exemption is subject to the express condition that
the material facts and representations contained in the applications for
exemption are true and complete and accurately describe all material terms of
the transactions. In the case of continuing transactions, if any of the
material facts or representations described in the applications change, the
exemption will cease to apply as of the date of such change. In the event of
any such change, an application for a new exemption must be made to the
Department.
For a more complete statement of the facts and representations supporting the
Department's decision to grant PTE 92-77, refer to the proposed exemption and
grant notice which are cited above.
Signed at Washington, DC, this 16th day of June 1994.

Ivan L. Strasfeld,

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

[FR Doc. 94-15006 Filed 6-20-94; 8:45 am]
BILLING CODE 4510-28-P

B-8
<PAGE>

Federal Register: November 9, 1998 (Volume 63, Number 216)
Notices
Page 60391-60398
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

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

Pension and Welfare Benefits Administration [Application No. D-10574]

Notice of Proposed Individual Exemption to Amend Prohibited Transaction
Exemption (PTE) 94-50 Involving Salomon Smith, Barney Inc. (Salomon Smith
Barney) Located in New York, NY

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

ACTION: Notice of proposed individual exemption to modify PTE 94-50.
--------------------------------------------------------------------------------

SUMMARY: This document contains a notice of pendency before the Department of
Labor (the Department) of a proposed individual exemption which, if granted,
would amend PTE 94-50 (59 FR 32024, June 21, 1994), an exemption granted to
Smith Barney, Inc. (Smith Barney), the predecessor of Salomon Smith Barney.
PTE 94-50 relates to the operation of the TRAK Personalized Investment Advisory
Service product (the TRAK Program) and the Trust for TRAK Investments
(subsequently renamed the Trust for Consulting Group Capital Markets Funds)
(the Trust). If granted, the proposed exemption would affect participants and
beneficiaries of and fiduciaries with respect to employee benefit plans (the
Plans) participating in the TRAK Program.

EFFECTIVE DATE: If granted, the proposed amendments will be effective as of
November 9, 1998.

DATES: Written comments and requests for a public hearing should be received by
the Department on or before December 24, 1998.

ADDRESSES: All written comments and requests for a public hearing (preferably,
three copies) should be sent to the Office of Exemption Determinations, Pension
and Welfare Benefits Administration, Room N-5649, U.S. Department of Labor, 200
Constitution Avenue, N.W., Washington, D.C. 20210, Attention: Application No.
D-10574. The application pertaining to the proposed exemption and the comments
received will be available for public inspection in the Public Documents Room
of the Pension and Welfare Benefits Administration, U.S. Department of Labor,
Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency before the
Department of a proposed exemption that would amend PTE 94-50. PTE 94-50
provides an exemption from certain prohibited transaction restrictions of
section 406 of the Employee Retirement Income Security Act of 1974 (the Act)
and from the sanctions resulting from the application of section 4975 of the
Internal Revenue Code of 1986 (the Code), as amended, by reason of section
4975(c)(1) of the Code. Specifically, PTE 94-50 provides exemptive relief from
the restrictions of section 406(a) of the Act and the sanctions resulting from
the application of section 4975 of the Code, by reason of section 4975(c)(1)(A)
through (D) of the Code, for the purchase or redemption of shares in the Trust
by an employee benefit plan, an individual retirement account (the IRA), or a
retirement plan for a self-employed individual (the Keogh Plan). PTE 94-50 also
provides exemptive relief from the restrictions of section 406(b) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(E) and (F) of the Code, with respect to the
provision, by the Consulting Group of Smith Barney (the Consulting Group), of
investment advisory services to independent fiduciaries of participating Plans
(the Independent Plan Fiduciaries) that might result in such fiduciary's
selection of an investment portfolio (the Portfolio) under the TRAK Program for
the investment of Plan assets./1/

[Page 60392]
Besides the transactions described above, PTE 94-50 permitted Smith Barney to
add a daily-traded collective investment fund (the GIC Fund) to the existing
Fund Portfolios and to describe the various entities operating the GIC Fund.
Further, PTE 94-50 replaced references to Shearson Lehman with references to
Smith Barney. PTE 94-50 is effective as of July 31, 1993 for the transactions
described in PTE 92-77 and effective as of March 29, 1994 with respect to
transactions involving the GIC Fund.
As of December 31, 1997, the TRAK Program held assets that were in excess of
$8.4 billion. Of those assets, approximately $1.7 billion were held in 540,
401(k) Plan accounts and approximately 57,100 employee benefit plan and
IRA/Keogh-type accounts. At present, the Trust consists of 13 Portfolios that
are managed by the Consulting Group and advised by one or more unaffiliated
sub-advisers selected by Salomon Smith Barney.
Salomon Smith Barney has informed the Department of certain changes, which are
discussed below, to the facts underlying PTE 94-50. These modifications include
(1) corporate mergers that have changed the names of the parties described in
PTE 94-50 and would permit broader distribution of TRAK-related products, (2)
the implementation of a recordkeeping reimbursement offset system (the
Recordkeeping Reimbursement Offset Procedure) under the TRAK Program, and (3)
the institution of an automated reallocation option (the Automatic Reallocation
Option) under the TRAK Program for which Salomon Smith Barney has requested
administrative exemptive relief from the Department.
The proposed exemption has been requested in an application filed on behalf of
Salomon Smith Barney pursuant to section 408(a) of the Act and section
4975(c)(2) of the Code, and in accordance with the procedures set forth in 29
CFR Part 2570, Subpart B (55 FR 32836, August 10, 1990). Effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October
17, 1978) transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor. Accordingly, the
-------
/1/ On October 5, 1992, the Department granted PTE 92-77 at 55 FR 45833. PTE
92-77 permitted Shearson Lehman Brothers, Inc. (Shearson Lehman) to make the
TRAK Program available to Plans that acquired shares in the Trust. In this
regard, PTE 92-77 permitted Plans to purchase or redeem shares in the Trust and
allowed the Consulting Group to provide investment advisory services to an
Independent Fiduciary of a Plan which might result in such fiduciary's
selection of a Portfolio in the TRAK Program for the investment of Plan assets.
Subsequent to the granting of PTE 92-77, on July 31, 1993, Smith Barney
acquired certain assets of Shearson Lehman associated with its retail business,
including the TRAK Program, and applied for and received a new exemption (PTE
94-50) for the ongoing operation of the TRAK Program. Essentially, PTE 94-50
amended and replaced PTE 92-77. However, because of certain material factual
changes to the representations supporting PTE 92-77, the Department determined
that the exemption was no longer effective for use by Smith Barney and its
subsidiaries as of the date of the asset sale.

B-9
<PAGE>

proposed exemption is being issued solely by the Department.
1. The Corporate Mergers. Salomon Smith Barney states that in November 1997, a
subsidiary of the Travelers Group Inc. (the Travelers Group), the parent of
Smith Barney, acquired all of the shares of Salomon Brothers, Inc. (Salomon).
Subsequent to the acquisition, Salomon and Smith Barney were operated as
separately-registered broker-dealers and as sister corporations with a common
parent. On September 1, 1998, Salomon was merged with and into Smith Barney,
with Smith Barney remaining as the surviving corporation. As a result of the
merger, the corporate name of Smith Barney has been changed to "Salomon Smith
Barney Inc."
Salomon Smith Barney also states that in April 1998, the Travelers Group and
Citicorp Inc. (Citicorp) announced a stock merger whereby Citicorp would be
merged with and into a subsidiary of the Travelers Group. As a result of the
merger, the Travelers Group would become a bank holding company and change its
name to "Citigroup Inc." (Citigroup).
Salomon Smith Barney represents that the purpose of the merger is to create
more distribution channels for TRAK products. In this regard, registered
broker-dealers associated with Citigroup will be permitted to market the TRAK
Program under a different product name. However, Salomon Smith Barney explains
that the terms and conditions of PTE 94-50 and this amendment will be complied
with by the parties involved.
The merger, which occurred on October 8, 1998, required that the affected
parties obtain approval from the Federal Reserve Board under the Bank Holding
Company Act (the BHC Act). Under the BHC Act, the Federal Reserve Board does
not authorize bank holding companies, such as Citigroup, to be affiliated with
companies that organize, sponsor, control or distribute United States open-end
mutual funds. As a bank holding company, Citigroup is required to engage an
independent party to provide certain distribution services in connection with
the marketing of mutual fund shares) for all United States, publicly-traded
mutual funds for which any subsidiary of the Travelers Group/Citigroup acts as
a distributor. Salomon Smith Barney notes that although the Funds participating
in the TRAK Program will be affected by this change, no Plan will be required
to pay distribution fees to the independent distributors.
On October 15, 1998, Salomon Smith Barney was merged with and into Pendex Real
Estate Corp. (Pendex), a shell corporation domiciled in New York. Pendex, the
survivor of the merger, was then renamed "Salomon Smith Barney Inc." Upon
completion of this merger, Salomon Smith Barney became a New York corporation.
2. Recordkeeping Reimbursement Offset Procedure. Salomon Smith Barney states
that the Board of Trustees (the Board) of the Funds approved, but has not yet
implemented, a recordkeeping reimbursement offset procedure under which a Plan
participating in the TRAK Program would be permitted to reduce its investment
fees and expenses. The
reimbursement amount would be paid solely by the Funds as a means of being
competitive with other mutual funds offering similar reimbursements to
investors.
In May 1998, the Board approved a recordkeeping reimbursement amount of $12.50
for each investment position held by a participant. (In other words, a
participant holding positions in three different Funds would be eligible to
receive a total annual reimbursement of $37.50). In addition, the Board
resolved that after applying such reimbursement to recordkeeping expenses
charged by recordkeepers of the Plans, any excess reimbursement amount would be
applied to reduce other fees and expenses/2/ payable by participating Plans,
including, but not limited to, the Plan-level investment advisory fee payable
to the Consulting Group for asset allocation recommendations (the Outside Fee),
after the appropriate offset has been applied (the Net Outside Fee)./3/ If
implemented, Salomon Smith Barney explains that the Funds would pay the
appropriate reimbursement amount directly to the recordkeeper of the Plan. The
affected Plan would then be required to pay only the balance of the fee, which
is generally charged on a quarterly basis, after the excess reimbursement
amount has been deducted.
The Recordkeeping Reimbursement Offset Procedure would work as follows:
Assume that Plan A has $1 million in assets invested in the TRAK Program and
100 participants. Assume further that Plan A pays its recordkeeper $20 per
participant per year in Annual Fees totaling $2,000 per year or

[Page 60393]
$500 per quarter and $12 per participant per year in Other Fees, totaling
$1,200 per year or $300 per quarter. In addition, Plan A pays the Consulting
Group a total annual net investment advisory fee (i.e., the Net Outside Fee) of
$8,500.
At the end of each calendar quarter, Plan A's recordkeeper will determine the
actual number of Fund positions held by the Plan A participants and calculate
the resulting reimbursement amount. If Plan A had 300 participant positions at
the end of the quarter, the Plan's total recordkeeping reimbursement amount
would be 300 x $3.125 (the annual amount of $12.50
divided by 4) or $937.50. That amount would be credited as follows:

Application of Reimbursement to Recordkeeping Fees
<TABLE>
<S> <C>
Quarterly Portion of Annual Fees...................................... $ 500.00
Quarterly Portion of Other Fees....................................... 300.00
--------
Total Quarterly Recordkeeping Fees.................................... 800.00
Credit for Reimbursement.............................................. (937.50)
Excess Reimbursement.................................................. (137.50)
--------
</TABLE>
Because the reimbursement amount exceeds the recordkeeping fees due for the
quarter, the Plan does not owe any recordkeeping fee for that period.
Therefore, the recordkeeper will not bill the Plan.

Application of Excess Reimbursement to the Net Outside Fee
<TABLE>
<S> <C>
Quarterly Net Outside Fee............................................ $2,125.00
Excess Reimbursement................................................. (137.50)
---------
Total.............................................................. 1,987.50
---------
</TABLE>

The recordkeeper will advise the Consulting Group that it is entitled to bill
the Plan for the $1,987.50 balance of its investment advisory fee (i.e., the
Net Outside Fee).
Upon participation in the TRAK Program, an Independent Plan Fiduciary selects
a recordkeeper for the Plan, from a list of recordkeepers which maintain
computer links to the Funds under the TRAK Program. Salomon Smith Barney states
that of the 23 recordkeepers currently providing services to TRAK Program
investors, only one, Smith Barney Plan Services, is an

-------
/2/ In addition to annual recordkeeping fees (the Annual Fees) payable by a
Plan participating in the TRAK Program, it is represented that a Plan might be
required to pay recordkeeping fees associated with certain particular services
(the Other Fees) such as initial plan set-up and conversion, preparation of
annual filings, enrollment, special statement preparation and audit.
/3/ Salomon Smith Barney is offsetting, quarterly, against the Outside Fee,
such amount as is necessary to assure that the Consulting Group retains not
more than 20 basis points (as an Inside Fee) from any Portfolio on investment
assets attributable to any Plan.

B-10
<PAGE>

affiliate. Because the reimbursement rate and the timing of the offset of the
excess reimbursement amount against fees will be the same regardless of the
identity of the recordkeeper and the Independent Plan Fiduciary is responsible
for the selection of this particular recordkeeper, Salomon Smith Barney
believes its affiliation with Smith Barney Plan Services does not appear to
present additional potential abuses under section 406(b)(1) or 406(b)(3) of the
Act in its capacity as an investment adviser in recommending investment in the
Funds to Independent Plan Fiduciaries.

Salomon Smith Barney notes that the reasoning in the Frost National Bank
Advisory Opinion (ERISA Advisory Opinion 97-15A, May 22, 1997) (the Frost
Opinion), is relevant to this situation. Therefore, it has not requested
administrative exemptive relief from the Department. Salomon Smith Barney
explains that in the Frost Opinion, the bank offered a comprehensive program of
administrative and investment services to Plan investors. Under this program,
the Department opined that section 406(b)(1) and 406(b)(3) of the Act would not
be violated if the bank received payments for services from mutual funds while
recommending mutual fund investments to plans provided such payments were fully
disclosed and then offset to reduce other plan expenses, with any excess
payments made to the plans. Salomon Smith Barney further explains that in the
Frost Opinion any benefit from payments made by the mutual funds benefitted the
plans and not the bank.

With respect to the TRAK Program, Salomon Smith Barney represents that the
reimbursement rates adopted by the Funds will be fully disclosed to Independent
Plan Fiduciaries and the offset of the excess reimbursement amount against a
Plan's expenses will be accomplished in a manner to ensure that the Plans
obtain the full benefit of the reimbursement to reduce their recordkeeping and
other Plan expenses. Salomon Smith Barney submits that the reasoning in the
Frost Opinion would apply equally to the proposed reimbursement of expenses
under the TRAK Program. Therefore, Salomon Smith Barney does not believe any
change in the scope of the exemption is necessary./4/

3. The Automatic Reallocation Option. Salomon Smith Barney wishes to modify
the TRAK Program to institute an automated reallocation feature whereby an
Independent Plan Fiduciary could elect to have his or her current asset
allocation adjusted automatically whenever the Consulting Group changes the
recommended asset allocation model (the Allocation Model) followed by such Plan
or participant./5/ Therefore, Salomon Smith Barney proposes to amend General
Condition II(f) of PTE 94-50 which requires that any recommendation or
evaluation offered by the Consulting Group be implemented only upon the express
direction of the Independent Plan Fiduciary. With the exception of the
requested changes to General Condition II(f) of PTE 94-50, all of the existing
conditions of PTE 94-50 will continue to apply to the TRAK Program.
As noted above, General Condition II(f) of PTE 94-50 provides that any
recommendation or evaluation by the Consulting Group to an Independent Plan
Fiduciary will be implemented only at the express direction of such fiduciary.
Accordingly, under the current exemption, whenever asset allocation advice is
modified by the Consulting Group, Salomon Smith Barney states that its
Financial Consultants are required to contact the Independent Plan Fiduciary of
each Plan who has chosen the Allocation Model, and obtain such fiduciary's
consent to modification of the asset allocation applied to the Plan's account.
Salomon Smith Barney notes that many TRAK Program investors have expressly
indicated that they expect reallocations to take place in the ordinary course
of the provision of investment advisory services offered by the Consulting
Group. However, these investors do not understand why they need to be contacted
in each instance

[Page 60394]
for this purpose. In addition, Salomon Smith Barney explains that the case-by-
case contact and reallocation involves delay in implementing the change at the
client's express direction, putting similarly-situated investors into the new
Allocation Models at different times.
To resolve these problems, Salomon Smith Barney proposes to offer TRAK Program
investors an Automatic Reallocation Option. Because Salomon Smith Barney
recognizes that the Automatic Reallocation Option is outside the scope of PTE
94-50, it requests a modification of the existing terms of PTE 94-50 to the
extent necessary to allow it to offer this alternative to investors. If the
exemptive relief is granted, Salomon Smith Barney represents that it will fully
disclose the nature of the Automatic Reallocation Option to the Independent
Plan Fiduciary of each existing client Plan in a written notice (the
Announcement) and permit the fiduciary to elect the Automatic Reallocation
Option by responding in writing. The Announcement will describe the intended
operation of the Automatic Reallocation Option and how future changes to the
Allocation Model selected on behalf of the Plan will be implemented. In order
to implement the Automatic Reallocation Option for new TRAK Program investors,
the Independent Plan Fiduciary will be required to check a box on the form of
Investment Advisory contract with Salomon Smith Barney (or on a separate
document designed for this purpose for those investors who have already
executed such an agreement with Salomon Smith Barney). By checking the box, the
Independent Plan Fiduciary will indicate its consent to and authorization of
actions to be taken by Salomon Smith Barney to reallocate automatically the
asset allocation in the Plan account whenever the Consulting Group modifies the
particular asset allocation recommendation which the Plan or participant has
chosen. Such election will continue in effect until revoked or terminated by
the Plan, in writing.
In operation, Salomon Smith Barney represents that the Automatic Reallocation
Option will work as follows:
(a) The Consulting Group will release a modified version of the Allocation
Model for the Plan account based upon its amended recommendation.

-------
/4/ In this proposed exemption, the Department expresses no opinion on whether
the Frost Opinion is applicable to the recordkeeping reimbursement procedure
described above. In this regard, the Department notes that, under the facts
presented in the Frost Opinion, Frost would offset the fees received from the
mutual funds on a dollar-for-dollar basis against the trustee fees that the
plan was otherwise obligated to pay Frost.
-------
/5/ Salomon Smith Barney notes that the Automatic Reallocation Option is to be
distinguished from "rebalancing" which occurs after the passage of time from
the original allocation decision and changes a participant's investment mix to
bring the actual allocation among investment alternatives back in line with the
participant's original allocation choices. For example, Salomon Smith Barney
states that a Plan participant receives a written quarterly review that sets
forth information concerning the participant's investments and includes a chart
comparing the original asset allocation recommendation and the actual
percentage distribution of investments held in the portfolio. Salomon Smith
Barney explains that under the chart is the following legend:
TRAK is a non-discretionary investment advisory service. All investment
decisions rest with you, the participant. Therefore, you are strongly urged to
adhere to the Consulting Group's asset allocation recommendations. Please call
your Financial Consultant should a change in allocation be warranted due to a
significant difference between the portfolio originally recommended by the
Consulting Group and your allocation or due to a change in your objectives.
Salomon Smith Barney further explains that the Financial Consultant is
expected to contact participants at least annually to encourage a comparison of
the holdings in the portfolio against the Consulting Group's original
recommendation. Barney proposes to amend General Condition II(f) of PTE 94-50
which requires that any recommendation or evaluation offered by the Consulting
Group be implemented only upon the express direction of the Independent Plan
Fiduciary. With the exception of the requested changes to General Condition
II(f) of PTE 94-50, all of the existing conditions of PTE 94-50 will continue
to apply to the TRAK Program.

B-11
<PAGE>

(b) On the day such modification is released, the Consulting Group will adjust
the Plan account to fit the new Allocation Model and to reflect current market
conditions./6/ Such adjustments will be effected through a series of purchases
and redemptions of Portfolio shares to increase or decrease the relative
investment in the various Portfolios by the Plan account.
(c) The reallocation of the Plan account will be effected on the same business
day as the release of the new Allocation Model by the Consulting Group, except
to the extent market conditions and orderly purchase and redemption procedures
may delay such processing. For purposes of calculating the percentage changes
in its asset allocation recommendation underlying the Automatic Reallocation
Option for a Plan investor's account, the Consulting Group will use the net
asset values at the close of business on the preceding trading day. However,
the execution of trades to give effect to the changed percentages will occur on
the next trading day at the then-current net asset values.
(d) Participants in the TRAK Program will receive trade confirmations of the
reallocation transactions. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper./7/ For example, if the recordkeeper notifies Section 404(c) Plan
participants (i.e., Independent Plan Fiduciaries) in writing after each trade,
such participants will be notified of reallocation transactions in this manner.
If, however, the recordkeeper notifies Section 404(c) Plan participants of
trading activity in a quarterly statement, the reallocation activity would be
included there.
In addition to the trade confirmations which Salomon Smith Barney will provide
to all Plan investors except Section 404(c) Plans, disclosure of the
reallocation transactions will appear in the next regular client statement.
Such transactions will be reflected as a series of purchase and redemption
transactions that will shift assets among the Portfolios in accordance with the
Allocation Model as modified by the Consulting Group.
(e) If, however, the reallocation to be made in response to the Consulting
Group's recommendation exceeds an increase or decrease of more than 10 percent
in the absolute percentage allocated to any one investment medium (e.g., a
suggested increase in a 15 percent allocation to greater than 25 percent or a
decrease of such 15 percent allocation to less than 5 percent), Salomon Smith
Barney will not automatically adjust a Plan account. Under such circumstances,
Salomon Smith Barney will send out a written notice (the Notice) to the
Independent Plan Fiduciary for each affected Plan, describing the proposed
reallocation and the date on which such allocation is to be instituted (the
Effective Date).
(f) The Notice will be mailed with the presumption of delivery within three
business days to permit timely notification and adequate response time for the
Independent Plan Fiduciary. The Notice will instruct the fiduciary that he or
she will need to do nothing if such fiduciary decides to have his or her Plan
account automatically reallocated on the Effective Date. If, on the other hand,
the Independent Plan Fiduciary does not wish to follow the Consulting Group's
revised asset allocation recommendation, the Notice will instruct the
Independent Plan Fiduciary to inform a Financial Consultant, in writing, at
least 30 calendar days prior to the proposed Effective Date that the fiduciary
wishes to "opt out" of the new Allocation Model./8/
(g) If the Independent Plan Fiduciary "opts out," his or her Plan account will
not be changed on the Effective Date.

[Page 60395]
Under such circumstances, the Allocation Model will remain at its current level
or at such other level as the Independent Plan Fiduciary designates. However,
the Automatic Reallocation Option, will remain in effect for future changes in
such participant's Allocation Model.
(h) The Independent Plan Fiduciary will always have the ability to elect,
terminate or reinstitute the Automatic Reallocation Option or to otherwise
adjust an Allocation Model, in any way, by providing reasonably prompt notice
to a Financial Consultant. Upon request by the Independent Plan Fiduciary, the
Financial Consultant will send the appropriate form.
Salomon Smith Barney states that it is not possible to predict the frequency
of reallocations because these changes are dictated by the Consulting Group's
analysis of market conditions. However, since November 1991, Salomon Smith
Barney represents that asset allocation changes of the type that would trigger
automatic reallocations have been instituted by the Consulting Group on ten
occasions. Eight of these changes were of a magnitude of 10 percentage points
or less. The other two changes were 15 percent changes and impacted only
approximately one percent and 3 percent, respectively, of the total number of
clients participating in the TRAK Program at the time./9/
Salomon Smith Barney also states that the reallocation called for under the
Automatic Reallocation Option will be effected by a dollar- for-dollar
liquidation and purchase of the required amounts in the respective Plan
accounts. Because of the billing of Plan accounts participating in the TRAK
Program is leveled with respect to the compensation received by Salomon Smith
Barney and by the Financial Consultant involved in an account, Salomon Smith
Barney states that the implementation of the Automatic Reallocation Option will
be revenue-neutral. In addition, Salomon Smith Barney represents that neither
the Plan nor the participants will pay any additional fees for electing to use
the Automatic Reallocation Option./10/

-------
/6/ Salomon Smith Barney notes that there are 12 standard Allocation Models
and that two similarly-situated Plan participants who receive the same
recommendation from the Consulting Group will receive the same reallocation.
/7/ Under these circumstances, Salomon Smith Barney will advise the
recordkeeper of the proposed reallocation of the account of a Section 404(c)
Plan participant as soon as the Consulting Group has determined that a change
to an asset allocation recommendation is going to be made. The communication
may initially be made orally because the recordkeeper must then promptly modify
its system to effect the necessary changes to a participant's account on the
effective date of the new recommendation. The oral communication is customarily
followed by a full written description of the changes within two business days
of the verbal update.
As noted above, a Section 404(c) Plan participant who has elected the
Automatic Reallocation Option would receive a trade confirmation from the
recordkeeper of the resulting changes to the positions in his or her account,
if that is the notification procedure agreed to for the Plan. Also as noted
above, transactions occurring upon automatic reallocation and the underlying
recommendation changes will be disclosed in the "Participant Quarterly Review."
-------
/8/ The Notice will be mailed with the presumption of delivery within three
business days so that the 30 day calendar period will not commence until the
third business day following the mailing. In addition, the Effective Date of
the Automatic Reallocation Option will occur no sooner than the business day
following the thirtieth calendar day. To avoid any misunderstandings or
miscalculations by the Independent Plan Fiduciary, Salomon Smith Barney
represents that it will conspicuously state, in the Notice, the last date for
its receipt of the Independent Plan Fiduciary's written response.
-------
/9/ While there is no minimum percentage threshold that will trigger the
Automatic Reallocation Option, other than the historical ranges specified
above, Salomon Smith Barney notes that there may be future market circumstances
that may justify an asset allocation adjustment of a lesser amount. Because the
Consulting Group will only adjust asset allocation recommendations to reflect
current market conditions, Salomon Smith Barney anticipates that triggers for
the Automatic Reallocation Option will continue to be only market-related. As
is currently the situation, Salomon Smith Barney represents that a Plan
investor may, at any time and for any reason, contact a Financial Consultant to
request a modification of an existing Allocation Model.
/10/ General Condition II(c) of PTE 94-50 as well as this proposal states that
no Plan will pay a fee or commission by reason of the acquisition or redemption
of shares in the Trust. Since the fees paid to Salomon Smith Barney are based
upon net asset values of investments and not transactions, a change of
investment allocations and the net purchases and redemptions used to effect
such changes do not change the payable fees.

B-12
<PAGE>

Thus, on the basis of the foregoing, General Condition II(f) has been revised
to read as follows:
(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--
(1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be automatically
reallocated whenever the Consulting Group modifies the particular asset
allocation recommendation which the Independent Plan Fiduciary has chosen. Such
Election shall continue in effect until revoked or terminated by the
Independent Plan Fiduciary, in writing.
(2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and redemption procedures may delay such processing through a
series of purchase and redemption transactions to shift assets among the
affected Portfolios.
(3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
least 30 calendar days prior to the proposed Effective Date that such fiduciary
does not wish to follow such revised asset allocation recommendation, the
Allocation Model will remain at the current level, or at such other level as
the Independent Plan Fiduciary then expressly designates, in writing. If the
Independent Plan Fiduciary does not affirmatively "opt out" of the new
Consulting Group recommendation, in writing, prior to the proposed Effective
Date, such new recommendation will be automatically effected by a dollar-for-
dollar liquidation and purchase of the required amounts in the respective
account.
(4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section 404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney
will mail trade confirmations on the next business day after the reallocation
trades are executed. In the case of Section 404(c) Plan participants,
notification will depend upon the notification provisions agreed to by the Plan
recordkeeper.

Notice to Interested Persons

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

General Information

The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption under section
408(a) of the Act and section 4975(c)(2) of the Code does not relieve a
fiduciary or other party in interest or disqualified person from certain other
provisions of the Act and the Code, including any prohibited transaction
provisions to which the exemption does not apply and the general fiduciary
responsibility provisions of section 404 of the Act, which require, among other
things, a fiduciary to discharge his or her duties respecting the plan solely
in the interest of the participants and beneficiaries of the plan and in a
prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it
affect the requirements of section 401(a) of the Code that the plan operate for
the exclusive benefit of the employees of the employer maintaining the plan and
their beneficiaries;
(2) The proposed exemption, if granted, will not extend to transactions
prohibited under section 406(b)(3) of the

[Page 60396]
Act and section 4975(c)(1)(F) of the Code;
(3) Before an exemption can be granted under section 408(a) of the Act and
section 4975(c)(2) of the Code, the Department must find that the exemption is
administratively feasible, in the interest of the plan and of its participants
and beneficiaries and protective of the rights of participants and
beneficiaries of the plan;
(4) This proposed exemption, if granted, will be supplemental to, and not in
derogation of, any other provisions of the Act and the Code, including
statutory or administrative exemptions. Furthermore, the fact that a
transaction is subject to an administrative or statutory exemption is not
dispositive of whether the transaction is in fact a prohibited transaction; and
(5) This proposed exemption, if granted, is subject to the express condition
that the Summary of Facts and Representations set forth in the notice of
proposed exemption relating to PTE 92-77, as amended by PTE 94-50 and this
notice, accurately describe, where relevant, the material terms of the
transactions to be consummated pursuant to this exemption.

Written Comments and Hearing Requests

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

Proposed Exemption

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

B-13
<PAGE>

Section I. Covered Transactions

A. If the exemption is granted, the restrictions of section 406(a) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, shall not apply, to
the purchase or redemption of shares by an employee benefit plan, an individual
retirement account (the IRA), or a retirement plan for self-employed
individuals (the Keogh Plan)/11/ in the Trust for Consulting Group Capital
Market Funds (the Trust), established by Salomon Smith Barney, in connection
with such Plans' participation in the TRAK Personalized Investment Advisory
Service product (the TRAK Program).
B. If the exemption is granted, the restrictions of section 406(b) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(E) and (F) of the Code, shall not apply, to the
provision, by the Consulting Group, of (1) investment advisory services or (2)
an automatic reallocation option (the Automatic Reallocation Option) to an
independent fiduciary of a participating Plan (the Independent Plan Fiduciary),
which may result in such fiduciary's selection of a portfolio (the Portfolio)
in the TRAK Program for the investment of Plan assets.
This proposed exemption is subject to the following conditions that are set
forth below in Section II.

Section II. General Conditions

(a) The participation of Plans in the TRAK Program will be approved by an
Independent Plan Fiduciary. For purposes of this requirement, an employee,
officer or director of Salomon Smith Barney and/or its affiliates covered by an
IRA not subject to Title I of the Act will be considered an Independent Plan
Fiduciary with respect to such IRA.
(b) The total fees paid to the Consulting Group and its affiliates will
constitute no more than reasonable compensation.
(c) No Plan will pay a fee or commission by reason of the acquisition or
redemption of shares in the Trust.
(d) The terms of each purchase or redemption of Trust shares shall remain at
least as favorable to an investing Plan as those obtainable in an arm's length
transaction with an unrelated party.
(e) The Consulting Group will provide written documentation to an Independent
Plan Fiduciary of its recommendations or evaluations based upon objective
criteria.
(f) Any recommendation or evaluation made by the Consulting Group to an
Independent Plan Fiduciary will be implemented only at the express direction of
such Independent Plan Fiduciary, provided, however, that--
(1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be automatically
reallocated whenever the Consulting Group modifies the particular asset
allocation recommendation which the Independent Plan Fiduciary has chosen. Such
Election shall continue in effect until revoked or terminated by the
Independent Plan Fiduciary in writing.
(2) Except as set forth below in paragraph II(f)(3), at the time of a change
in the Consulting Group's asset allocation recommendation, each account based
upon the asset allocation model (the Allocation Model) affected by such change
would be adjusted on the business day of the release of the new Allocation
Model by the Consulting Group, except to the extent that market conditions, and
order purchase and redemption procedures may delay such processing through a
series of purchase and redemption transactions to shift assets among the
affected Portfolios.
(3) If the change in the Consulting Group's asset allocation recommendation
exceeds an increase or decrease of more than 10 percent in the absolute
percentage allocated to any one investment medium (e.g., a suggested increase
in a 15 percent allocation to greater than 25 percent, or a decrease of such 15
percent allocation to less than 5 percent), Salomon Smith Barney will send out
a written notice (the Notice) to all Independent Plan Fiduciaries whose current
investment allocation would be affected, describing the proposed reallocation
and the date on which such allocation is to be instituted (the Effective Date).
If the Independent Plan Fiduciary notifies Salomon Smith Barney, in writing, at
least 30 calendar days prior to the proposed Effective Date that such fiduciary
does not wish to follow such revised asset allocation recommendation, the
Allocation Model will remain at the current level, or at such other level as
the Independent Plan Fiduciary then expressly designates, in writing. If the
Independent Plan Fiduciary does not affirmatively "opt out" of the new
Consulting Group recommendation, in writing, prior to the proposed Effective
Date, such new recommendation will be automatically effected by a dollar-for-
dollar liquidation and purchase of the required amounts in the respective
account.
(4) An Independent Plan Fiduciary will receive a trade confirmation of each
reallocation transaction. In this regard, for all Plan investors other than
Section

[Page 60397]
404(c) Plan accounts (i.e., 401(k) Plan accounts), Salomon Smith Barney will
mail trade confirmations on the next business day after the reallocation trades
are executed. In the case of Section 404(c) Plan participants, notification
will depend upon the notification provisions agreed to by the Plan
recordkeeper.
(g) The Consulting Group will generally give investment advice in writing to
an Independent Plan Fiduciary with respect to all available Portfolios.
However, in the case of a Plan providing for participant-directed investments
(the Section 404(c) Plan), the Consulting Group will provide investment advice
that is limited to the Portfolios made available under the Plan.
(h) Any sub-adviser (the Sub-Adviser) that acts for the Trust to exercise
investment discretion over a Portfolio will be independent of Salomon Smith
Barney and its affiliates.
(i) Immediately following the acquisition by a Portfolio of any securities
that are issued by Salomon Smith Barney and/or its affiliates, the percentage
of that Portfolio's net assets invested in such securities will not exceed one
percent.
(j) The quarterly investment advisory fee that is paid by a Plan to the
Consulting Group for investment advisory services rendered to such Plan will be
offset by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio (with the exception of
the Government Money Investments Portfolio and the GIC Fund Portfolio for which
the Consulting Group and the Trust will retain no investment management fee)
which contains investments attributable to the Plan investor.
(k) With respect to its participation in the TRAK Program prior to purchasing
Trust shares,

-------
/11/ The employee benefit plan, the IRA and the Keogh Plan are collectively
referred to herein as the Plans.

B-14
<PAGE>

(1) Each Plan will receive the following written or oral disclosures from the
Consulting Group:
(A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, Salomon Smith Barney and its subsidiaries and the
compensation paid to such entities./12/
(B) Upon written or oral request to Salomon Smith Barney, a Statement of
Additional Information supplementing the Prospectus which describes the types
of securities and other instruments in which the Portfolios may invest, the
investment policies and strategies that the Portfolios may utilize and certain
risks attendant to those investments, policies and strategies.
(C) A copy of the investment advisory agreement between the Consulting Group
and such Plan relating to participation in the TRAK Program and, if applicable,
informing Plan investors of the Automatic Reallocation Option.
(D) Upon written request of Salomon Smith Barney, a copy of the respective
investment advisory agreement between the Consulting Group and the Sub-
Advisers.
(E) In the case of a Section 404(c) Plan, if required by the arrangement
negotiated between the Consulting Group and the Plan, an explanation by a
Salomon Smith Barney Financial Consultant (the Financial Consultant) to
eligible participants in such Plan, of the services offered under the TRAK
Program and the operation and objectives of the Portfolios.
(F) A copy of PTE 94-50 as well as the proposed exemption and the final
exemption pertaining to the exemptive relief described herein.
(2) If accepted as an investor in the TRAK Program, an Independent Plan
Fiduciary of an IRA or Keogh Plan, is required to acknowledge, in writing,
prior to purchasing Trust shares that such fiduciary has received copies of the
documents described above in subparagraph (k)(1) of this Section.
(3) With respect to a Section 404(c) Plan, written acknowledgement of the
receipt of such documents will be provided by the Independent Plan Fiduciary
(i.e., the Plan administrator, trustee or named fiduciary, as the recordholder
of Trust shares). Such Independent Plan Fiduciary will be required to represent
in writing to Salomon Smith Barney that such fiduciary is (a) independent of
Salomon Smith Barney and its affiliates and (b) knowledgeable with respect to
the Plan in administrative matters and funding matters related thereto, and
able to make an informed decision concerning participation in the TRAK Program.
(4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such Independent Plan Fiduciary is required to acknowledge, in
writing, receipt of such documents and represent to Salomon Smith Barney that
such fiduciary is (a) independent of Salomon Smith Barney and its affiliates,
(b) capable of making an independent decision regarding the investment of Plan
assets and (c) knowledgeable with respect to the Plan in administrative matters
and funding matters related thereto, and able to make an informed decision
concerning participation in the TRAK Program.
(l) Subsequent to its participation in the TRAK Program, each Plan receives
the following written or oral disclosures with respect to its ongoing
participation in the TRAK Program:
(1) The Trust's semi-annual and annual report which will include financial
statement for the Trust and investment management fees paid by each Portfolio.
(2) A written quarterly monitoring statement containing an analysis and an
evaluation of a Plan investor's account to ascertain whether the Plan's
investment objectives have been met and recommending, if required, changes in
Portfolio allocations.
(3) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly, detailed investment performance monitoring
report, in writing, provided to an Independent Plan Fiduciary of such Plan
showing, Plan level asset allocations, Plan cash flow analysis and annualized
risk adjusted rates of return for Plan investments. In addition, if required by
such arrangement, Financial Consultants will meet periodically with Independent
Plan Fiduciaries of Section 404(c) Plans to discuss the report as well as with
eligible participants to review their accounts' performance.
(4) If required by the arrangement negotiated between the Consulting Group and
a Section 404(c) Plan, a quarterly participant performance monitoring report
provided to a Plan participant which accompanies the participant's benefit
statement and describes the investment performance of the Portfolios, the
investment performance of the participant's individual investment in the TRAK
Program, and gives market commentary and toll-free numbers that will enable the
participant to obtain more information about the TRAK Program or to amend his
or her investment allocations.
(5) On a quarterly and annual basis, written disclosures to all Plans of the
(a) percentage of each Portfolio's brokerage commissions that are paid to
Salomon Smith Barney and its affiliates and (b)

[Page 60398]
the average brokerage commission per share paid by each Portfolio to Salomon
Smith Barney and its affiliates, as compared to the average brokerage
commission per share paid by the Trust to brokers other than Salomon Smith
Barney and its affiliates, both expressed as cents per share.
(m) Salomon Smith Barney shall maintain, for a period of six years, the
records necessary to enable the persons described in paragraph (n) of this
Section to determine whether the conditions of this exemption have been met,
except that (1) a prohibited transaction will not be considered to have
occurred if, due to circumstances beyond the control of Salomon Smith Barney
and/or its affiliates, the records are lost or destroyed prior to the end of
the six year period, and (2) no party in interest other than Salomon Smith
Barney shall be subject to the civil penalty that may be assessed under section
502(i) of the Act, or to the taxes imposed by section 4975(a) and (b) of the
Code, if the records are not maintained, or are not available for examination
as required by paragraph (n) below.
(n)(1) Except as provided in section (2) of this paragraph and notwithstanding
any provisions of subsections (a)(2) and (b) of section 504 of the Act, the
records referred to in paragraph (m) of this Section II shall be
unconditionally available at their customary location during normal business
hours by:
(A) Any duly authorized employee or representative of the Department or the
Service;
(B) Any fiduciary of a participating Plan or any duly authorized
representative of such fiduciary;

-------
/12/ The fact that certain transactions and fee arrangements are the subject
of an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of fees and expenses to be paid by the Plan,
including the fees paid directly to Salomon Smith Barney or to other third
parties and/or indirectly through the Trust to Smith Barney.

B-15
<PAGE>

(C) Any contributing employer to any participating Plan or any duly authorized
employee representative of such employer; and
(D) Any participant or beneficiary of any participating Plan, or any duly
authorized representative of such participant or beneficiary.
(2) None of the persons described above in subparagraphs (B)-(D) of this
paragraph (n) shall be authorized to examine the trade secrets of Salomon Smith
Barney or commercial or financial information which is privileged or
confidential.

Section III. Definitions

For purposes of this proposed exemption:
(a) The term "Salomon Smith Barney" means Salomon Smith Barney Inc. and any
affiliate of Salomon Smith Barney, as defined in paragraph (b) of this Section
III.
(b) An "affiliate" of Salomon Smith Barney includes--
(1) Any person directly or indirectly through one or more intermediaries,
controlling, controlled by, or under common control with Salomon Smith Barney.
(For purposes of this subsection, the term "control" means the power to
exercise a controlling influence over the management or policies of a person
other than an individual.)
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an officer,
director or a 5 percent partner or owner.
(c) An "Independent Plan Fiduciary" is a Plan fiduciary which is independent
of Salomon Smith Barney and its affiliates and is either--
(1) A Plan administrator, sponsor, trustee or named fiduciary, as the
recordholder of Trust shares under a Section 404(c) Plan;
(2) A participant in a Keogh Plan;
(3) An individual covered under a self-directed IRA which invests in Trust
shares;
(4) A trustee, investment manager or named fiduciary responsible for
investment decisions in the case of a Title I Plan that does not permit
individual direction as contemplated by Section 404(c) of the Act; or
(5) A participant in a Plan, such as a Section 404(c) Plan, who is permitted
under the terms of such Plan to direct, and who elects to direct the investment
of assets of his or her account in such Plan.

Section IV. Effective Dates

If granted, this proposed exemption will be effective as of June 21, 1994 with
respect to the transactions described in Section I.A. and B.(1). With respect
to Section I.B.(2) and Section II(f)(1)-(4) of the General Conditions, this
proposed exemption will be effective November 9, 1998.
The availability of this proposed exemption is subject to the express
condition that the material facts and representations contained in the
application for exemption are true and complete and accurately describe all
material terms of the transactions. In the case of continuing transactions, if
any of the material facts or representations described in the applications
change, the exemption will cease to apply as of the date of such change. In the
event of any such change, an application for a new exemption must be made to
the Department.
For a more complete statement of the facts and representations supporting the
Department's decision to grant PTEs 92-77 and PTE 94-50, refer to the proposed
exemptions and the grant notices which are cited above.

Signed at Washington, D.C., this 4th day of November, 1998.

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

[FR Doc. 98-29964 Filed 11-6-98; 8:45 am]

BILLING CODE 4510-29-P
B-16
<PAGE>

Federal Register: April 5, 1999 (Volume 64, Number 64)
Notices
Page 16486-16493
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05ap99-118]
--------------------------------------------------------------------------------
DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-15; Exemption Application No. D-10574]

Grant of Individual Exemption To Amend Prohibited Transaction

Exemption (PTE) 94-50 Involving Salomon Smith Barney Inc.

Salomon Smith Barney Located in New York, NY

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

ACTION: Grant of individual exemption to modify PTE 94-50.

--------------------------------------------------------------------------------

SUMMARY: This document contains a final exemption before the Department of
Labor (the Department) which would amend PTE 94-50 (59 FR 32024, June 21,
1994), an exemption granted to Smith Barney, Inc. (Smith Barney), the
predecessor of Salomon Smith Barney. PTE 94-50 relates to the operation of the
TRAK Personalized Investment Advisory Service product (the TRAK Program) and
the Trust for TRAK Investments (subsequently renamed the Trust for Consulting
Group Capital Markets Funds) (the Trust). These transactions are described in a
notice of pendency that was published in the Federal Register on November 9,
1998 at 63 FR 60391.

EFFECTIVE DATE: This exemption is effective as of July 31, 1993 with respect to
the transactions described in Section I.A. and B.(1). of this grant notice. It
is also effective as of March 29, 1994 for transactions involving a daily-
traded collective investment fund (the GIC Fund) that was added to the TRAK
Program pursuant to PTE 94-50. With respect to Section I.B(2) and Section
II(f)(1)-(4) of the General Conditions of this grant notice, which set forth
the amendments to PTE 94-50, this exemption is effective as of November 9,
1998.

SUPPLEMENTARY INFORMATION: On November 9, 1998, the Department published, at 63
FR 60391, a notice of proposed exemption in the Federal Register that would
amend PTE 94-50. PTE 94-50 provides an exemption from certain prohibited
transaction restrictions of section 406 of the Employee Retirement Income
Security Act of 1974 (the Act) and from the sanctions resulting from the
application of section 4975 of the Internal Revenue Code of 1986 (the Code), as
amended, by reason of section 4975(c)(1) of the Code. Specifically, PTE 94-50
provides exemptive relief from the restrictions of section 406(a) of the Act
and the sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, for the purchase or
redemption of shares in the Trust by an employee benefit plan, an individual
retirement account, or a retirement plan for a self-employed individual
(collectively, the Plans). PTE 94-50 also provides exemptive relief from the
restrictions of section 406(b) of the Act and the sanctions resulting from the
application of section 4975 of the Code, by reason of section 4975(c)(1)(E) and
(F) of the Code, with respect to the provision, by the Consulting Group of
Smith Barney (the Consulting Group), of investment advisory services to
independent fiduciaries of participating Plans (the Independent Plan
Fiduciaries) that might result in such fiduciary's selection of an investment
portfolio under the TRAK Program for the investment of Plan assets.

Besides the transactions described above, PTE 94-50 permitted Smith Barney to
add a daily-traded collective investment fund (i.e., the GIC Fund) to the
existing Fund Portfolios and to describe the various entities operating the GIC
Fund. Further, PTE 94-50 replaced references to Shearson Lehman with references
to Smith Barney. PTE 94-50 is effective as of July 31, 1993 for the
transactions described in PTE 92-77 and effective as of March 29, 1994 with
respect to transactions involving the GIC Fund.

Salomon Smith Barney has informed the Department of certain changes to the
facts underlying PTE 94-50. These modifications include (1) Corporate mergers
that have changed the names of the parties described in PTE 94-50 and would
permit broader distribution of TRAK-related products, (2) the implementation of
a recordkeeping reimbursement offset system (the Recordkeeping Reimbursement
Offset Procedure) under the TRAK Program, and (3) the institution of an
automated reallocation option (the Automatic Reallocation Option) under the
TRAK Program for which Salomon Smith Barney has requested administrative
exemptive relief from the Department. The proposed exemption was requested in
an application filed on behalf of Salomon Smith Barney pursuant to section
408(a) of the Act and section 4975(c)(2) of the Code, and in accordance with
the procedures (the Procedures) set forth in 29 CFR Part 2570, Subpart B (55 FR
32836, August 10, 1990). Effective December 31, 1978, section 102 of
Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 1978) transferred
the authority of the Secretary of the Treasury to issue exemptions of the type
requested to the Secretary of Labor. Accordingly, this exemption is being
issued solely by the Department.

The proposed exemption gave interested persons an opportunity to comment on
the notice of pendency and to request a public hearing. During the comment
period, the Department received three written comments and no requests for a
hearing in response to the notice. Two comments were submitted by Plan
participants investing in the TRAK Program. The third comment, which is
intended to clarify and

[[Page 16487]]

modify the proposed exemption, was submitted by Salomon Smith Barney.

Following is a discussion of the comments received, the responses provided by
Salomon Smith Barney, and the Department's determinations regarding the
comments.

Participant Comments

The first commenter objects to the proposed exemption because he is under the
impression that the new services that will be
-------
/1/ On October 5, 1992, the Department granted PTE 92-77 at 55 FR 45833. PTE
92-77 permitted Shearson Lehman Brothers, Inc. (Shearson Lehman) to make the
TRAK Program available to Plans that acquired shares in the Trust. In this
regard, PTE 92-77 permitted Plans to purchase or redeem shares in the Trust and
allowed the Consulting Group to provide investment advisory services to an
Independent Fiduciary of a Plan which might result in such fiduciary's
selection of a Portfolio in the TRAK Program for the investment of Plan assets.
-------
Subsequent to the granting of PTE 92-77, on July 31, 1993, Smith Barney
acquired certain assets of Shearson Lehman associated with its retail business,
including the TRAK Program, and applied for and received a new exemption (PTE
94-50) for the ongoing operation of the TRAK Program. Essentially, PTE 94-50
amended and replaced PTE 92-77. However, because of certain material factual
changes to the representations supporting PTE 92-77, the Department determined
that the exemption was no longer effective for use by Smith Barney and its
subsidiaries as of the date of the asset sale.

B-17
<PAGE>

offered to TRAK Program investors by Salomon Smith Barney will result in
increased fees paid to consultants and investment advisers by the Funds. The
commenter also does not believe that there will be a corresponding increase in
the growth of the Funds.

Salomon Smith Barney represents that although it is not clear which provisions
in the proposed exemption have elicted the comment, it points out that the
comment relates more or less to the underlying Fund portfolios rather than to
the TRAK Program.

As to the commenter's first area of concern, Salomon Smith Barney explains
that the proposed Automatic Reallocation Option is a service that is to be
provided at no additional cost to the investor and it does not affect the
calculation of the investment advisory fee. In addition, Salomon Smith Barney
represents that it does not have a basis to respond to the inclusion of
"consultants" in this comment. With respect to the commenter's concern about
growth prospects, Salomon Smith Barney states that no investment vehicle can
assure investors future performance.

The second commenter states that while he has no objection to Salomon Smith
Barney's implementation of the Automatic Reallocation Option, he would like to
see the requirement for clear explanations of the choices and the implications
of such choices. The commenter also suggests that Salomon Smith Barney provide
a clear path for revocation of the Automatic Reallocation Option, whereby a
Plan investor's choice would have to be reaffirmed periodically.

In response to this comment, Salomon Smith Barney states that the text of the
announcement referred to in the preamble (the Preamble) at 60394 provides
participants with the same information that the commenter requests. However, as
an alternative to the commenter's suggestion of a reaffirmation mechanism,
Salomon Smith Barney represents that it will include a footnote in the
"Participant Quarterly Review" indicating that the participant is currently
using the Automatic Reallocation Option and stating that such participant can
cancel this service at any time. Salomon Smith Barney proposes to place the
footnote after the legend quoted in Footnote 5 of the Preamble. The additional
language would read as follows:

You have elected to have your TRAK Portfolio automatically reallocated at such
time as the Consulting Group recommends a change to the Allocation Model you
are following. If, at any time, you choose to discontinue this service, please
contact your Financial Consultant for instructions.

Salomon Smith Barney believes the participant will then be consistently
reminded of his or her option to discontinue the Automatic Reallocation Option.

Salomon Smith Barney's Comments

1. Corporate Mergers

Salomon Smith Barney wishes to clarify that on page 60392 of the Preamble, in
the first sentence of the paragraph captioned "Corporate Mergers," the phrase
"Salomon Inc., the ultimate parent of" should be inserted after the phrase
"acquired all the shares of." Also, in this section, Salomon Smith Barney
wishes to modify the first sentence of the third paragraph to clarify that one
of the purposes of the merger, rather than the "sole" purpose of the merger,
was to create additional distribution channels for the TRAK Program.

In response to this comment, the Department concurs with the requested
modifications and has made the suggested changes.

2. Recordkeeping Reimbursement Offset Procedure

Salomon Smith Barney has informed the Department that although it has not yet
implemented the Recordkeeping Reimbursement Offset Procedure in a manner that
will reduce the net outside fee (the Net Outside Fee), at the present time, it
has in place a recordkeeping reimbursement program that reduces recordkeeping
expenses only, at an annual rate of $8.50 per participant position. Salomon
Smith Barney states that this annualized rate has been approved by the Funds'
Board of Trustees and that, of the $8.50 amount, $0.50 per participant position
represents a sub-transfer agency fee for the costs associated with the
application of the reimbursement process (the Processing Fee). Currently,
Salomon Smith Barney states that its affiliate, Smith Barney Corporate Trust
Company, is retaining this Processing Fee.

Salomon Smith Barney has provided an example showing the manner in which the
recordkeeping reimbursement amount is determined by the Funds at the $8.50
level using some of the numbers set forth in the example given in the Preamble
on pages 60392 and 60393. The example assumes that all positions are eligible
for reimbursement because positions in the Government Money Investments
Portfolio and the Stable Value (GIC) Fund Portfolio are not eligible for
recordkeeping reimbursement.

Assume that Plan A has $1 million in assets invested in the TRAK Program and
100 participants. Assume further that Plan A pays its recordkeeper $20 per
participant per year in Annual Fees totaling $2,000 per year or $500 per
quarter and $12 per participant per year in Other Fees, totaling $1,200 per
year or $300 per quarter. Assume also that the Plan pays the recordkeeper an
annual Processing Fee of $150.

At the end of each calendar quarter, Plan A's recordkeeper would determine the
actual number of Fund positions held by the Plan A participants and calculate
the resulting reimbursement amount that would be paid by the Funds. If Plan A
had 300 participant positions at the end of the quarter, the Plan's total
recordkeeping reimbursement amount to be paid by the Funds would be 300 x $2
(the annual amount of $8 divided by 4) or $600.

The Processing Fee paid by the Plan to the recordkeeper for the quarter would
be 300 x $0.125 (the annual amount of $0.50 divided by 4) or $37.50. This
Processing Fee would, in turn, also be credited back to the Plan by the Funds.

Application of Reimbursement to Recordkeeping Fees

<TABLE>
<S> <C>
Quarterly Portion of Annual Fees..................................... $ 500.00
Quarterly Portion of Other Fees/2/ .................................. 300.00
Processing Fee....................................................... 37.50
--------
Total Quarterly Recordkeeping Fees................................... $ 837.50
Credit for Reimbursement............................................. $(600.00)
Credit for Processing Fee............................................ $ (37.50)
--------
Total Reimbursement............................................... $(637.50)
Net Amount of Recordkeeping Fees Payable by the Plan................. $ 200.00
Net Amount of Recordkeeping Fees Payable by the Funds................ 637.50
--------
Total Quarterly Recordkeeping Fees................................ $ 837.50
</TABLE>

Since the recordkeeping reimbursement program currently in place applies only
to the payment of expenses related to recordkeeping, there would never be an
"excess reimbursement" according to Salomon Smith Barney. Therefore, the Total
Reimbursement amount would reflect the lesser of the amount calculated as in
the example above, or the actual

[[Page 16488]]

costs billed. If the Total Reimbursement
-------

/2/ Assumes "Other Fees" are paid by the Plan during the quarter.

B-18
<PAGE>

calculation had exceeded the Total Quarterly Recordkeeping Fees, Salomon Smith
Barney states that the maximum reimbursement amount would be limited to the
Total Quarterly Recordkeeping Fees.

On page 60392 of the Preamble, the second paragraph of the section describing
the Recordkeeping Reimbursement Offset Procedure states that in May 1998, the
Board of Trustees of the Funds approved a recordkeeping reimbursement amount of
$12.50 for each investment position held by a participant. Salomon Smith Barney
notes that the recordkeeping reimbursement amount may be changed by the Board
of Trustees of the Funds from time to time. Therefore, it requests that the
description of the TRAK Program define the reimbursement amount as "such annual
dollar amount per eligible position as shall be set by the Board of Trustees of
the Funds from time to time." Salomon Smith Barney has also informed the
Department that, of the $12.50 annual reimbursement amount approved by the
Board of Trustees of the Funds, $0.50 is being retained by Smith Barney
Corporate Trust Company as a Processing Fee.

The Department does not object to making the foregoing clarifications to the
description of the Recordkeeping Reimbursement Offset Procedure in the
Preamble. However, because Smith Barney Corporate Trust Company is retaining
$0.50 per participant position as a Processing Fee, the Department requested
that Salomon Smith Barney revise the calculations in the example appearing on
pages 60392 and 60393 of the Preamble. In addition to these changes, Salomon
Smith Barney suggested that the following disclaimer language preface the
example in order to avoid investor confusion:

Salomon Smith Barney has provided the following numbers solely for ease of
calculation and not as typical or representative of the operation of the TRAK
product in any particular client circumstance.

Moreover, Salomon Smith Barney notes that because a Plan participating in the
TRAK Program may be required to pay a recordkeeper "Other Fees" in addition to
annual recordkeeping fees, both of which may be billed on a quarterly basis, it
wishes to clarify that "Other Fees" may arise only at certain times of the year
and that it does not wish to imply by the example that "Other Fees" are
regularly billed quarterly in all instances.

In light of these changes, the revised example is set forth as follows:

Salomon Smith Barney has provided the following numbers solely for ease of
calculation and not as typical or representative of the operation of the TRAK
product in any particular client circumstance. Therefore, the Recordkeeping
Reimbursement Offset Procedure would work as follows:

At the end of each calendar quarter, Plan A's recordkeeper would determine the
actual number of Fund positions held by the Plan A participants and calculate
the resulting reimbursement amount. If Plan A had 300 participant positions at
the end of the quarter, the Plan's total recordkeeping reimbursement amount
would be 300 x $3 (the annual amount of $12 divided by 4) or $900. In addition,
the Processing Fee paid to the recordkeeper for the quarter would be 300 x
$0.125 (the annual amount of $0.50 divided by 4) or $37.50.

At the end of each calendar quarter, Plan A's recordkeeper would determine the
actual number of Fund positions held by the Plan A participants and calculate
the resulting reimbursement amounts to be paid by the Funds. If Plan A had 300
participant positions at the end of the quarter, the Plan's total recordkeeping
reimbursement amount would be 300 x $3 (the annual amount of $12 divided by 4)
or $900. To this amount would be added the $37.50 Processing Fee paid to the
recordkeeper during the quarter. Such amounts would be credited as follows:

Application of Reimbursement to Recordkeeping Fees
<TABLE>
<S> <C>
Quarterly Portion of Annual Fees/3/ ................................. $ 500.00
Quarterly Portion of Other Fees...................................... 300.00
Processing Fee....................................................... 37.50
Total Quarterly Recordkeeping Fees................................... $ 837.50
Credit for Reimbursement............................................. $(900.00)
Credit for Processing Fee............................................ (37.50)
--------
Total Reimbursement............................................... $(937.50)
--------
Excess Reimbursement................................................. $(100.00)
</TABLE>

Because the Total Reimbursement amount exceeds the Total Quarterly
Recordkeeping Fees, the Plan does not owe any recordkeeping fees for that
period. Therefore, the recordkeeper would not bill the Plan. Instead, the Funds
would pay the recordkeeper the $837.50 amount due.

Application of Excess Reimbursement to the Net Outside Fee

<TABLE>
<S> <C>
Quarterly Net Outside Fee............................................ $2,125.00
Excess Reimbursement................................................. (100.00)
Net Outside Fee Paid by the Plan..................................... $2,025.00
Net Outside Fee Paid by the Funds.................................... 100.00
---------
Total Quarterly Net Outside Fee................................... $2,125.00
---------
</TABLE>
In the program as proposed, the Funds have agreed that any Excess
Reimbursement amount remaining after the payment of the Total Quarterly
Recordkeeping Fees would be paid by the Funds to reduce the Plan's investment
advisory fee obligations. Therefore, the $100 Excess Reimbursement amount would
be applied against the Plan's Quarterly Net Outside Fee. Under such
circumstances, the recordkeeper would advise the Consulting Group that it is
entitled to bill the Plan for the $2,025.00 balance of the Consulting Group's
Net Outside Fee. In turn, the Funds would pay the $100 amount attributable to
the Excess Reimbursement to the Consulting Group./4/

Also, on page 60392 of the Preamble, in the second paragraph of the section
describing the Recordkeeping Reimbursement Offset Procedure, it states that a
participant holding positions in three different Funds would be eligible to
receive a total annual reimbursement of $37.50. In light of the change to the
allocation of the $12.50 reimbursement amount (i.e., $12.00 per participant
position and $0.50 payable to Smith Barney Corporate Trust Company as a
Processing Fee), Salomon Smith Barney wishes to clarify that the participant
would receive a "total annual offset of $36.00" rather than a "total annual
reimbursement of $37.50."

Finally, on page 60392 of the Preamble, in the last sentence of the second
paragraph describing the Recordkeeping Reimbursement Offset Procedure, it
states that an affected Plan will be required to pay only the balance of the
[Net Outside] fee, which is generally charged on a quarterly
-------
/3/ Assumes "Other Fees" are paid by the Plan during the quarter.
-------
/4/ It should be noted that the existence or the amount of the excess will not
alter the amount of the recordkeeping or advisory fees. Instead, the
reimbursement calculations will determine the proportion of payment by the
Funds of the Plan's fee obligations.

B-19
<PAGE>

basis, after the excess reimbursement amount has been deducted. Salomon Smith
Barney wishes to point out that because some recordkeepers choose to bill the
initial quarterly installment of the recordkeeping fee in full and then apply
the recordkeeping reimbursement amount for each quarter to the next quarter's

[[Page 16489]]

fees, it suggests that the Department delete the clause stating "and the timing
of the offset of the excess reimbursement amount against the fees," appearing
on page 60393 of the Preamble in the second sentence of the first full
paragraph following the example. The Department concurs with the modifications
to the Preamble.

3. Footnote 3

On page 60392 of the Preamble, Footnote 3 states that Salomon Smith Barney is
offsetting, quarterly, against the Outside Fee, such amount as is necessary to
assure that the Consulting Group retains not more than 20 basis points (as an
Inside Fee) from any Portfolio on investment assets attributable to any Plan.
For purposes of clarification, Salomon Smith Barney requests that the
Department add the following parenthetical exception at the end of the footnote
after the word "Plan":

(except the Government Money Investments Portfolio and the Stable Value (GIC)
Fund Portfolio, as to which no investment management fee is retained).

In response, the Department concurs with this clarification. On page 60393 of
the Preamble, the second sentence of the first paragraph following the example
states that 23 recordkeepers currently provide services to TRAK Program
investors. Salomon Smith Barney explains that since a Plan designates its own
recordkeeper, the number "23" is subject to change. Therefore, Salomon Smith
Barney suggests the deletion of this number and the Department concurs with
this clarification.

4. Investor Contact/Superfluous Language

On page 60393 of the Preamble, Footnote 5 distinguishes the Automatic
Reallocation Option from rebalancing of a participant's account and it
instructs a TRAK Program participant to contact his or her Financial Consultant
should a change in an investment allocation be warranted. Footnote 5 also
states that a Financial Consultant is expected to initiate contact with Plan
participants at least annually to encourage a comparison of the holdings in the
Plan participant's portfolio against the Consulting Group's recommendation.
Salomon Smith Barney wishes to inform the Department that in the case of
retirement plans covering multiple participants, this contact typically may
take the form of regular written communications between the Financial
Consultant and the Plan investor.

Moreover, the Department has stricken the last two sentences of Footnote 5,
which due to a printing error, contain superfluous language also appearing on
page 60393 of the Preamble, in the second and third sentences of the first
paragraph under the description of the Automatic Reallocation Option.

5. Footnote 6

On page 60394 of the Preamble, Footnote 6 states, in pertinent part, that
there are 12 standard asset allocation models (the Allocation Models). Salomon
Smith Barney explains that because it is constantly in the process of refining
the basis for its asset allocation advice, the number of standard Allocation
Models is expected to change as a result of such product modifications. To
avoid an ongoing obligation to alter this number, Salomon Smith Barney suggests
that the reference to the number "12" be deleted. Therefore, the Department has
modified the Preamble, accordingly.

6. Condition (f)

On page 60395 of the Preamble and page 60396 of the operative language of the
proposed exemption, Section II(f)(3) of the General Conditions contains a
notice provision that requires an Independent Plan Fiduciary to give Salomon
Smith Barney at least 30 calendar days prior written notice of its intention to
"opt out" of a new asset allocation model. Salomon Smith Barney wishes to
clarify that an Independent Plan Fiduciary has a period of at least 30 calendar
days during which to provide Salomon Smith Barney with written notice.
Therefore, Salomon Smith Barney proposes that the notice period be described as
"at any time within the period of 30 calendar days" prior to the Effective
Date.

In response to this comment, the Department has made the change suggested by
Salomon Smith Barney.

7. Deletion of the Last Sentence of Paragraph (g)

On pages 60394 and 60395 of the Preamble, paragraph (g) states that if the
Independent Plan Fiduciary "opts out," his or her Plan account will not be
changed on the Effective Date. Paragraph (g) also states that, under such
circumstances, the Allocation Model will remain at its current level or at such
other level as the Independent Plan Fiduciary designates. However, the
Automatic Reallocation Option will remain in effect for future changes in such
participant's Allocation Model.

Salomon Smith Barney explains that once a participant has opted out of the
Automatic Reallocation Option, the participant's account is left at its current
"non-conforming" allocation levels and it no longer resembles a Consulting
Group Allocation Model. Because the Automatic Reallocation Option, in effect,
terminates upon a participant's "opting out," Salomon Smith Barney requests the
deletion of the last sentence of paragraph (g).

In response to this comment, the Department has made the requested deletion to
paragraph (g).

8. General Information

On page 60395 of the proposed exemption, in the section captioned "General
Information," paragraph (2) states that the proposed exemption, if granted,
will not extend to transactions prohibited under section 406(b)(3) of the Act
and section 4975(c)(1)(F) of the Code. The Department wishes to point out that
the exemption will extend to transactions that are prohibited under section
406(b) of the Act and section 4975(c)(1)(E) and (F) of the Code and it has
modified the final exemption, accordingly.

9. Scope of the Term "Employee Benefit Plans"

Salomon Smith Barney requests that the exemption cover transactions in the
TRAK Program that are entered into not only by qualified plans that meet the
requirements of section 401(k) of the Code, but also by any individual account
pension plan that may be subject to Title I of the Act and established under
section 403(b) of the Code (the Section 403(b) Plan). To the extent that
participants in Section 403(b) Plans invest their contributions in shares of
the Funds, Salomon Smith Barney and its affiliates would like to make the TRAK
Program available to them.

The Department concurs with this comment and, on page 60396 of the proposed
exemption, it has revised Section I.A. of the operative language by deleting
the word "or" preceding the phrase "a retirement plan for self-employed
individuals (the Keogh Plan)" and adding

B-20
<PAGE>

the phrase "or an individual account pension plan that is subject to the
provisions of Title I of the Act and established under section 403(b) of the
Code (the Section 403(b) Plan)." In addition, the Department has revised
Footnote 11 of the proposed exemption to include a reference to the term
"Section 403(b) Plan" after the term "Keogh Plan." Further, on page 60398 of
the proposed exemption, the Department has

[[Page 16490]]

revised Section III(c)(3) of the Definitions as follows:

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

For further information regarding the comments or other matters discussed
herein, interested persons are encouraged to obtain copies of the exemption
application file (Exemption Application No. D-10574) the Department is
maintaining in this case. The complete application file, as well as all
supplemental submissions received by the Department are made available for
public inspection in the Public Documents Room of the Pension and Welfare
Benefits Administration, Room N-5638, U.S. Department of Labor, 200
Constitution Avenue, N.W., Washington, D.C. 20210.

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

General Information

The attention of interested persons is directed to the following:

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

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

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

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

(5) This is subject to the express condition that the Summary of Facts and
Representations set forth in the notice of proposed exemption relating to PTE
92-77, as amended by PTE 94-50 and this notice, accurately describe, where
relevant, the material terms of the transactions to be consummated pursuant to
this exemption.

Exemption

Under the authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the Procedures set forth above, the Department
hereby amends PTE 94-50 as follows:

Section I. Covered Transactions

A. The restrictions of section 406(a) of the Act and the sanctions resulting
from the application of section 4975 of the Code, by reason of section
4975(c)(1) (A) through (D) of the Code, shall not apply, to the purchase or
redemption of shares by an employee benefit plan, an individual retirement
account (the IRA), a retirement plan for self- employed individuals (the Keogh
Plan), or an individual account pension plan that is subject to the provisions
of Title I of the Act and established under section 403(b) of the Code (the
Section 403(b) Plan)/5/ in the Trust for Consulting Group Capital Market Funds
(the Trust), established by Salomon Smith Barney, in connection with such
Plans' participation in the TRAK Personalized Investment Advisory Service
product (the TRAK Program).

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

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

Section II. General Conditions

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

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

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

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

(1) If such Independent Plan Fiduciary shall have elected in writing (the
Election), on a form designated by Salomon Smith Barney from time to time for
such purpose, to participate in the Automatic Reallocation Option under the
TRAK Program, the affected Plan or participant account will be
-------
/5/ The employee benefit plan, the IRA, the Keogh Plan and the Section 403(b)
Plan are collectively referred to herein as the Plans.

B-21
<PAGE>

automatically reallocated whenever the Consulting Group modifies the particular
asset allocation recommendation which the Independent Plan Fiduciary has
chosen. Such Election shall continue in effect until revoked or terminated by
the Independent Plan Fiduciary in writing.

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

[[Page 16491]]

redemption procedures may delay such processing through a series of purchase
and redemption transactions to shift assets among the affected Portfolios.

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

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

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

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

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

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

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

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

(A) A copy of the Prospectus for the Trust discussing the investment
objectives of the Portfolios comprising the Trust, the policies employed to
achieve these objectives, the corporate affiliation existing between the
Consulting Group, Salomon Smith Barney and its subsidiaries and the
compensation paid to such entities./6/

(B) Upon written or oral request to Salomon Smith Barney, a Statement of
Additional Information supplementing the Prospectus which describes the types
of securities and other instruments in which the Portfolios may invest, the
investment policies and strategies that the Portfolios may utilize and certain
risks attendant to those investments, policies and strategies.

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

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

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

(F) A copy of PTE 94-50 as well as the proposed exemption and the final
exemption pertaining to the exemptive relief described herein.

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

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

(4) With respect to a Plan that is covered under Title I of the Act, where
investment decisions are made by a trustee, investment manager or a named
fiduciary, such
-------
/6/ The fact that certain transactions and fee arrangements are the subject of
an administrative exemption does not relieve the Independent Plan Fiduciary
from the general fiduciary responsibility provisions of section 404 of the Act.
In this regard, the Department expects the Independent Plan Fiduciary to
consider carefully the totality of fees and expenses to be paid by the Plan,
including the fees paid directly to Salomon Smith Barney or to other third
parties and/or indirectly through the Trust to Smith Barney.

B-22
<PAGE>

Independent Plan Fiduciary is required to acknowledge, in writing, receipt of
such documents and represent to Salomon Smith Barney that such fiduciary is (a)
independent of Salomon Smith Barney and its affiliates, (b) capable of making
an independent decision regarding the investment of Plan assets and (c)
knowledgeable with respect to the Plan in administrative matters and funding
matters related thereto, and able to make an informed decision concerning
participation in the TRAK Program.

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

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

(2) A written quarterly monitoring statement containing an analysis and an
evaluation of a

[[Page 16492]]

Plan investor's account to ascertain whether the Plan's investment objectives
have been met and recommending, if required, changes in Portfolio allocations.

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

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

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

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

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

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

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

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

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

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

Section III. Definitions

For purposes of this exemption,

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

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

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

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

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

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

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

(2) A participant in a Keogh Plan;

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

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

Section IV. Effective Dates

This exemption is effective as of July 31, 1993 with respect to the
transactions described in Section I.A. and B.(1). of this grant notice. It is
also effective as of March 29, 1994 for transactions involving a daily-traded
collective investment fund that was added to the TRAK Program pursuant to PTE
94-50. With respect to Section I.B(2) and Section II(f)(1)-(4) of the General
Conditions of this grant notice, which set forth the amendments to PTE 94-50,
this exemption is effective as of November 9, 1998.

B-23
<PAGE>

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

For a more complete statement of the facts and representations supporting the
Department's decision to grant the case of continuing transactions, if any of
the material facts or representations described in the application change, the
exemption will cease to apply as of the date of such change. In the event of
any such change, an application for a new exemption must be made to the
Department.

For a more complete statement of the facts and representations supporting the
Department's decision to grant this exemption, refer to the proposed exemption
and PTEs 92-77 and 94-50 which are cited above.

[[Page 16493]]

Signed at Washington, DC, this 30th day of March, 1999.

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

[FR Doc. 99-8226 Filed 4-2-99; 8:45 am]
BILLING CODE 4510-29-P

B-24
<PAGE>

[GRAPHIC]

For More Information

If you want more information about the Portfolio or the other portfolios that
comprise the Trust, the following resources are available upon request.

Annual and Semiannual Reports

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

Statement of Additional Information

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

Investment Professional

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

Investors can get free copies of reports and SAIs, request other information and
discuss their questions about the Portfolio by contacting their Financial
Consultant, or the Consulting Group at:

The Consulting Group
222 Delaware Avenue
Wilmington, Delaware 19801

Telephone: 1-212-816-8725

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

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

Investment Company Act File No. 811-06318

SALOMONSMITHBARNEY
---------------------------
A member of citigroup [LOGO]

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

(R)2000 Salomon Smith Barney Inc. TK2090 7/00

PART B

STATEMENT OF ADDITIONAL INFORMATION

CONSULTING GROUP CAPITAL MARKETS FUNDS
MULTI-STRATEGY MARKET NEUTRAL INVESTMENTS

July 28, 2000

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 28, 2000, 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

Objectives and Policies of the
Portfolio

2
Certain Securities, Investment
Techniques and Risk Factors

2
Management of the Trust
19
Purchase of Shares
23
Redemption of Shares
23
Redemptions in Kind
24
Net Asset Value
24
Determination of Performance
27
Taxes
29
Distributor
33
Custodian, Transfer Agent and
Sub-Transfer Agent
33
Financial Statements
33

OBJECTIVES AND POLICIES OF THE PORTFOLIO

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.

CERTAIN SECURITIES, INVESTMENT TECHNIQUES AND RISK FACTORS

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
subadvisers or any of their affiliates act as an investment
adviser or distributor.

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 subadviser 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"). EMU began on January 1,
1999 when 11 European countries adopted a single currency --
the Euro. EMU may create new economic opportunities for
investors, such as lower interest rates, easier cross-border
mergers, acquisitions and similar restructurings, more
efficient distribution and product packaging and greater
competition. Budgetary decisions remain in the hands of
each participating country, but are 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 within
the Euro zone. EMU and the introduction of the Euro,
however, present unique risks and uncertainties for
investors in EMU-participating countries, including: (i)
monetary and economic union on this scale has never before
been attempted; (ii) there is uncertainty whether
participating countries will remain committed to EMU in the
face of changing economic conditions; (iii) instability
within EMU may increase the volatility of European markets
and may adversely affect the prices of securities of
European issuers in the Portfolio; (iv) there is uncertainty
concerning the fluctuation of the Euro relative to non-Euro
currencies during the transition period from January 1, 1999
to December 31, 2000, and beyond; and (v) there is no
assurance that interest rate, tax and labor regimes of EMU-
participating countries will converge over time. These and
other factors may cause market disruption and could
adversely affect European securities and currencies held by
the Portfolio.

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
subadviser. 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
subadvisers 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 subadviser.
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 subadviser 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 SSB Citi Fund Management LLC ("SSB Citi"
or the "manager") (successor to SSBC Fund Management Inc.)
and/or subadvisers. 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
subadviser'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 subadviser's
ability to predict correctly movements in the direction of
the securities markets generally, which ability may require
different skills and techniques than predicting changes in
the prices of individual securities. Moreover, futures and
options contracts may only be closed out by entering into
offsetting transactions on the exchange where the position
was entered into (or a linked exchange), and as a result of
daily price fluctuation limits there can be no assurance
that an offsetting transaction could be entered into at an
advantageous price at any particular time. Consequently,
the Portfolio may realize a loss on a futures contract or
option that is not offset by an increase in the value of its
portfolio securities that are being hedged or the Portfolio
may not be able to close a futures or options position
without incurring a loss in the event of adverse price
movements.

The Portfolio will incur brokerage costs whether or
not its hedging is successful and will be required to post
and maintain "margin" as a good-faith deposit against
performance of its obligations under futures contracts and
under options written by the Portfolio. Futures and options
positions are marked to the market daily and the Portfolio
may be required to make subsequent "variation" margin
payments depending upon whether its positions increase or
decrease in value. In this context margin payments involve
no borrowing on the part of the Portfolio.

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 subadviser, acting under the
supervision of the Board of Trustees, reviews on an ongoing
basis the value of the collateral and the creditworthiness
of those non-bank dealers with whom the Portfolio enters
into repurchase agreements. The Portfolio will not invest
in a repurchase agreement maturing in more than seven days
if the investment, together with illiquid securities held by
the Portfolio, exceeds 15% of the Portfolio's total assets.
In entering into a repurchase agreement, the Portfolio bears
a risk of loss 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 subadviser.
The subadvisers 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
subadvisers' 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 subadviser 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 SSB Citi. The Portfolio also may hold a
portion of its assets in money market instruments or cash in
amounts designed to pay expenses, to meet anticipated
redemptions or pending investment in accordance with its
objectives and policies. Any temporary investments may be
purchased on a when-issued basis. The Portfolio's
investment in any other short-term debt instruments would be
subject to the Portfolio's investment objectives and
policies, and to approval by the Trust's Board of Trustees.

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 subadviser(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 a
subadviser, investments of the type that the Portfolio may
make also may be made by those other accounts. When the
Portfolio and one or more other accounts managed by a
subadviser are prepared to invest in, or desire to dispose
of, the same security, available investments or
opportunities for sales will be allocated in a manner
believed by the subadviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or
received by the Portfolio or the size of the position
obtained or disposed of by the Portfolio.

Transactions on U.S. stock exchanges and some foreign
stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among
different brokers. On most foreign exchanges, commissions
are generally fixed. No stated commission is generally
applicable to securities traded in U.S. over-the-counter
markets, but the underwriters include an underwriting
commission or concession and the prices at which securities
are purchased from and sold to dealers include a dealer's
mark-up or mark-down. U.S. Government Securities generally
are purchased from underwriters or dealers, although certain
newly issued U.S. Government Securities may be purchased
directly from the U.S. Treasury or from the issuing agency
or instrumentality.

In selecting brokers or dealers to execute
securities transactions on behalf of the Portfolio, its
subadviser seeks the best overall terms available. In
assessing the best overall terms available for any
transaction, the subadviser will consider the factors it
deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition
and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In addition, each
Advisory Agreement between the Trust and the subadviser
authorizes the subadviser, in selecting brokers or dealers
to execute a particular transaction, and in evaluating the
best overall terms available, to consider the brokerage and
research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) provided to
the Portfolio and/or other accounts over which the
subadviser or its affiliates exercise investment discretion.
The fees under the investment management agreement and the
subadvisory agreements, respectively, are not reduced by
reason of the Portfolio's subadvisers 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 subadviser, the use of an affiliated
broker-dealer is likely to result in price and execution at
least as favorable as those of other qualified broker-
dealers, and if, in the transaction, the affiliated broker-
dealer charges the Portfolio a fair and reasonable rate.
The Portfolio will not purchase any security, including U.S.
Government Securities or Obligations, during the existence
of any underwriting or selling group relating thereto of
which Salomon Smith Barney is a member, except to the extent
permitted by the SEC.

The Portfolio may use Salomon Smith Barney and other
affiliated broker-dealers as a commodities broker in
connection with entering into futures contracts and options
on futures contracts if, in the judgment of the subadviser,
the use of an affiliated broker-dealer is likely to result
in price and execution at least as favorable as those of
other qualified broker-dealers, and if, in the transaction,
the affiliated broker-dealer charges the Portfolio a fair
and reasonable rate. Salomon Smith Barney has agreed to
charge the Portfolio commodity commissions at rates
comparable to those charged by Salomon Smith Barney to its
most favored clients for comparable trades in comparable
accounts.

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

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

$222,192
$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 period ended March 31,
2000, the portfolio turnover was 249%.

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 subadviser 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.

MANAGEMENT OF THE TRUST

Trustees and 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 79). Consultant to
companies in the financial services industry; Director of
PIMCO Advisers L.P.; Brinson Partners; Nicholas-Applegate
(each a registered investment adviser); Legend Properties, a
real estate management company; Banyan Realty Trust; 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, Trustee (Age 78). 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 73). 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 68). Attorney.
Director or Trustee of 13 investment companies associated
with Citigroup. His address is 277 Park Avenue, New York,
New York 10172.
Arrmon E. Kamesar, Trustee (Age 73). 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 67).
Managing Director of Salomon Smith Barney, President of SSB
Citi and Travelers Investment Adviser, Inc. ("TIA"). Mr.
McLendon also serves as Chairman, Co-Chairman or Director of
78 investment companies associated with Citigroup. His
address is 7 World Trade Center, New York, New York 10048.
Lewis E. Daidone, Senior Vice President and Treasurer
(Age 42). Managing Director of Salomon Smith Barney;
Director and Senior Vice President of SSB Citi and TIA. Mr.
Daidone 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.

Frank L. Campanale, Investment Officer (Age 47).
President and Chief Executive Officer of Salomon Smith
Barney's Consulting Group. Prior to 1996, National Sales
Director for Consulting Group. His address is 222 Delaware
Avenue, Wilmington, Delaware 19801.

LeRoy T. Pease, CFA, Investment Officer (Age 41).
First Vice President of Salomon Smith Barney Consulting
Group. Prior to 1996, Chief Investment Officer of EMT Group
and manager for Investment Strategy for Bell Atlantic,
Philadelphia, Pennsylvania. His address is 222 Delaware
Avenue, Wilmington, Delaware 19801.

Christina T. Sydor, Secretary (Age 49). Managing
Director of Salomon Smith Barney; General Counsel and
Secretary of SSB Citi and TIA. Ms. Sydor serves as
Secretary of 61 investment companies associated with
Citigroup. Her address is 388 Greenwich Street, New York
New York 10013.

Irving David, Controller (Age 38). Director of
Salomon Smith Barney and Controller or Assitant Treasurer of
43 investment companies associated with Citigroup. Prior to
March, 1994, Assistant Treasurer of First Investment
Management Company. His address is 125 Broad Street, New
York New York 10004.

As of July 18, 2000, the Trustees and officers as a
group owned less than 1% of the outstanding common stock of
the Trust.

Remuneration

No director, officer or employee of Salomon Smith
Barney, SSB Citi or any of their affiliates will receive any
compensation from the Trust for serving as an officer or
Trustee of the Trust. The Trust pays each Trustee who is not
a director, officer or employee of Salomon Smith Barney, the
manager, any subadviser, SSB Citi or any of their affiliates
a fee of $32,000 per annum plus $1,000 per meeting attended.
The Trust reimburses the Trustees for travel and out-of-
pocket expenses to attend meetings of the board. For the
calendar year ended December 31, 1999, such fees and
expenses totaled $21,924.

For the fiscal period ended March 31, 2000, 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
$247
None
$50,600
2
Martin Brody
176
None
138,600
21
H. John Ellis
305
None
50,600
2
Armon E. Kamesar
305
None
52,600
2
Stephen E. Kaufman
305
None
110,650
13
*As of December 31, 1999
** "interested" Trustee

Manager; Subadvisers; Administrator

The manager serves as investment manager to the Trust
pursuant to an investment management agreement ("Management
Agreement"). Each subadviser serves as investment subadviser
to the Portfolio pursuant to separate written agreements
with the Portfolio ("Advisory Agreements"), SSB Citi serves
as administrator to the Portfolio pursuant to a written
agreement ("Administration Agreement").

The Portfolio bears its own expenses, which generally
include all costs not specifically borne by the the
subadvisers, and SSB Citi. Included among the Portfolio's
expenses are: costs incurred in connection with the
Portfolio's organization; investment management and
administration fees; fees for necessary professional and
brokerage services; fees for any pricing service; the costs
of regulatory compliance; and costs associated with
maintaining the Trust's legal existence and shareholder
relations. As administrator, SSB Citi generally oversees
all aspects of the Trust's administration and operations
including furnishing the Trust with statistical and research
data, clerical help, accounting, data processing,
bookkeeping, internal auditing and legal services and
certain other services required by the Trust, prepares
reports to the Trust's shareholders and prepares tax
returns, reports to and filings with the SEC and state blue
sky authorities. The Portfolio pays SSB Citi a fee for these
services that is computed daily and paid monthly at the
annual rate of 0.20% of the value of the Portfolio's average
daily net assets.

Under the Management Agreement, the Portfolio pays SSB Citi
a fee, calculated daily and paid monthly, based on the rates
applied to the value of each Portfolio's average daily net
assets. In addition, SSB Citi pays each subadviser, based on
the rates applied to the Portfolio's average daily net
assets on a monthly basis. The applicable management fee,
advisory fee paid by SSB Citi to each subadviser and the
names of the subadviser are indicated below:

Annual
Subadviser Management
Subadvisers Fee Fee

Calamos Asset Management 1.00% 1.80%

Pegasus Investments, Inc. 1.20 1.80

State Street Global Advisors 1.00 1.80

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

2000

Management Fee

Administration Fee

$399,404

$44,227

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. For the
fiscal period ended March 31, 2000, SSB Citi waived $165,662
of its management fees.

SSB Citi was incorporated on March 12, 1968 under the
laws of Delaware and converted to a Delaware limited company
in 1999. SSB Citi is a registered investment adviser. SSB
Citi (through its predecessor entities) renders investment
advice to investment company clients that had aggregate
assets under management as of June 30, 2000 of approximately
$130 billion. The Consulting Group, a division of SSB Citi,
has extensive experience in providing investment subadviser
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 August 31, 1999, the Consulting Group provided services
with respect to over $125 billion in client assets
representing more than 216,974 separate accounts under a
variety of programs designed for individual and
institutional investors.

SSB Citi and the subadvisers 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 subadvisers 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 subadviser 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 subadvisers for the
Portfolio and thereafter monitoring subadvisers' performance
through quantitative and qualitative analysis as well as
periodic in-person, telephonic and written consultations
with subadvisers. In evaluating prospective subadvisers,
the manager considers, among other factors, each
subadviser's level of expertise; relative performance and
consistency of performance over a minimum period of five
years; level of adherence to investment discipline or
philosophy, personnel facilities and financial strength; and
quality of service and client communications. The manager
has responsibility for communicating performance
expectations and evaluations to subadvisers and ultimately
recommending to the Board of Trustees whether subadvisers'
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 subadviser, custodian, transfer agent or
administrator.

Investors should be aware that the manager may be
subject to a conflict of interest when making decisions
regarding the retention and compensation of particular
subadvisers. However, the manager's decisions, including
the identity of the subadviser and the specific amount of
the manager's compensation to be paid to the subadviser are
subject to review and approval by a majority of the Board of
Trustees and separately by a majority of the Trustees who
are not affiliated with the manager or any of its
affiliates.

Investors should also be aware that through Smith
Barney Advisory Services the Consulting Group serves as
investment adviser to each participant in such service and
receives a fee from each participant that does not vary
based on the portfolios of the Trust recommended for the
participant's investments. At the same time, the Consulting
Group serves as the Trust's manager with responsibility for
identifying, retaining, supervising and compensating each
portfolio's subadviser and receives a fee from each
portfolio of the Trust. The portion of such fee that is
retained by the manager varies based on the portfolio
involved. Consequently, the Consulting Group, when making
asset allocation recommendations for participants in Smith
Barney Advisory Services, may be presented with a conflict
of interest as to the specific portfolios of the Trust
recommended for investment. The Consulting Group, however,
is subject to and intends to comply fully with standards of
fiduciary duty that require that it act solely in the best
interest of the participant when making investment
recommendations.

The Trust has received an exemption (the "Exemption")
from certain provisions of the 1940 Act which would
otherwise require the manager to obtain formal shareholder
approval prior to engaging and entering into investment
advisory agreements with subadvisers. The Exemption is
based on among other things: (1) the manager will select,
monitor, evaluate and allocate assets to the subadviser and
ensure that the subadvisers 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 subadviser and
its investment advisory contract within 90 days of the
engagement of a new subadviser; (4) the Trust will disclose
in its prospectus the terms of the Exemption; and (5) the
Trustees, including a majority of the "non-interested"
Trustees, must approve each investment advisory contract in
the manner required under the 1940 Act. Any changes to the
Management Agreement between the Trust and the manager still
require shareholder approval.

Code of Ethics

Pursuant to Rule 17j-1 of the 1940 Act, 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,
2001.

Organization of the Trust

The Trust has been organized as an unincorporated
business trust under the laws of the Commonwealth of
Massachusetts pursuant to a Master Trust Agreement dated
April 12, 1991, as amended from time to time (the "Trust
Agreement").

In the interest of economy and convenience,
certificates representing shares in the Trust are not
physically issued. PNC Bank, N.A., the Trust's custodian,
maintains a record of each shareholder's ownership of Trust
shares. Shares do not have cumulative voting rights, which
means that holders of more than 50% of the shares voting for
the election of Trustees can elect all Trustees. Shares are
transferable, but have no preemptive, conversion or
subscription rights. Shareholders generally vote on a trust-
wide basis, except with respect to continuation of the
Advisory Agreements, in which case shareholders vote by 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 18, 2000, the following shareholders own of
record or beneficially 5% or more of shares of a Portfolio
of the Trust:

SB Holdings Inc.
388 Greenwich Street
New York, NY 10013
owned 1,937,528.270 shares (48.22%)

Alliance Development Fund Inc.
Trak-Mkt Neutral
Attn: Cheri Matas
5225 N. Academy Blvd.
Suite 200
Colorado Springs, CO 80918-4003
owned 213,430.289shares (5.31%)

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(r) Personalized Investment Advisory Service
("TRAK") sponsored by Salomon Smith Barney is one such
advisory service. Under the TRAK program the Consulting
Group in its capacity as investment adviser to participants
in TRAK generally directly provides to investors asset
allocation recommendations and related services with respect
to the portfolios based on an evaluation of an investor's
investment objective and risk tolerances. Shares of the
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 subadvisers 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 SSB Citi on each day, Monday through Friday,
except days on which the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and
Christmas, and on the preceding Friday when one of those
holidays falls on a Saturday or on the subsequent Monday
when one of those holidays falls on a Sunday. On those
days, securities held by the Portfolio may nevertheless be
actively traded and the value of the Portfolio's shares
could be significantly affected.

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 SSB Citi after consultation
with an independent pricing service. When, in the judgment
of the pricing service, quoted bid prices are available and
are representative of the bid side of the market, these
investments are valued at the mean between the quoted bid
and ask prices. Investments for which no readily obtainable
market quotations are available, in the judgment of the
pricing service, are carried at fair value as determined by
the pricing service. The procedures of the pricing service
are reviewed periodically by the officers of the Trust under
the general supervision and responsibility of the Board of
Trustees. An option 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, SSB Citi 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 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:

From May
10, 1999
through
March 31,
2000

7.98%

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 May
10, 1999
through
March 31,
2000

6.55%

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
Internal Revenue Code of 1986, as amended (the "Code"), by
complying with certain requirements regarding the sources
and distribution of its income and the diversification of
its assets. Provided that the Portfolio (i) 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

PNC Bank, National Association ("PNC") 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, PNC 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, PNC 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. PNC 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 one of the Portfolio's
sub-transfer agents. 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, 2000 is incorporated herein by reference in its
entirety. The Annual Report was filed on May 26, 2000,
Accession Number 950130-00-3195.

Shearson Lehman Brothers, Inc. (Shearson Lehman), Located in New
York,
NY [Application No. D-8723]

Proposed Exemption

Section I. Covered Transactions

The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2)
4975(c)(2) of the Code and in accordance with the procedures set
forth
in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10,
1990).
If the exemption is granted, the restrictions of section 406(a) of
the
Act and the sanctions resulting from the application of section
4975
of the Code, by reason of section 4975(c)(1)(A) through (D) shall
not apply to the proposed purchase or redemption of shares by an
employee benefit plan, an individual retirement account (the IRA)
or a
retirement plan for a self-employed individual (the Keogh Plan;
collectively, the Plans) in the Shearson Lehman-established Trust
for
TRAK Investments (the Trust) in connection with such Plans'
participation in the TRAK Personalized Investment Advisory Service
(the TRAK Program). In addition, the restrictions of section
406(b)(1)
and (b)(2) of the Act and the sanctions resulting from the
application
of section 4975 of the Code by reason of section 4975(c)(1)(E)
shall not apply to the provision, by the Consulting Group Division
of
Shearson Lehman (the Consulting Group), of investment advisory
services to an independent fiduciary of a participating Plan (the
Independent Plan Fiduciary) which may result in such fiduciary's
selection of a portfolio grouping (the Portfolio-Type) in the TRAK
Program for the investment of Plan assets.

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

Section II. General Conditions

(1) The participation of Plans in the TRAK Program will be
approved by
a Plan fiduciary which is independent of Shearson Lehman.

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

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

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

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

(6) Any recommendation or evaluation made by the Consulting Group
to
an Independent Plan Fiduciary will be implemented only at the
express
direction of such independent fiduciary.

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

(8) Any sub-adviser (the Sub-Adviser) that is appointed by the
Consulting Group to exercise investment discretion over a
Portfolio
will be independent of Shearson Lehman and its affiliates.

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

(10) The quarterly investment advisory fee that is paid by a Plan
to
the Consulting Group for investment advisory services rendered to
such
Plan will be offset by such amount as is necessary to assure that
the
Consulting Group retains no more than 20 basis points from any
Portfolio which contains investments attributable to the Plan
investor.

(11) The Consulting Group will not retain an investment advisory
or
management fee from the Government Money Investments Portfolio.

(12) With respect to its participation in the TRAK Program prior
to
purchasing Trust shares.

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

(1) A copy of the prospectus (the Prospectus) for the Trust
discussing
the investment objectives of the Portfolios comprising the Trust,
the
policies employed to achieve these objectives, the corporate
affiliation existing between the Consulting Group, Shearson Lehman
and
its subsidiaries and the compensation paid to such entities.

(2) Upon written or oral request to Shearson Lehman, a Statement
of
Additional Information supplementing the Prospectus which
describes
the types of securities and other instruments in which the
Portfolios
may invest, the investment policies and strategies that the
Portfolios
may utilize and certain risks attendant to those investments,
policies
and strategies.

(3) A copy of the investment advisory agreement between the
Consulting
Group and such Plan relating to participation in the TRAK Program.

(4) A copy of the respective investment advisory agreement between
the
Consulting Group and the Sub-Advisers upon written request to
Shearson
Lehman.

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

(b) If accepted as an investor in the TRAK Program, an Independent
Plan Fiduciary of an IRA or Keogh Plan, will be required to
acknowledge, in writing, prior to purchasing Trust shares that
such
fiduciary has received copies of such documents.

(c) With respect to a Section 404(c) Plan, written acknowledgement
of
the receipt of such documents will be provided by the Independent
Plan
Fiduciary (i.e., the plan administrator, trustee or named
fiduciary,
as the recordholder of Trust shares). Such Independent Plan
Fiduciary
will be required to represent in writing to Shearson Lehman that
such
fiduciary is (1) independent of Shearson Lehman and its affiliates
and
(2) knowledgeable with respect to the Plan in administrative
matters
and funding matters related thereto, and able to make an informed
decision concerning participation in the TRAK Program.

(d) With respect to a Plan that is covered under title I of the
Act,
where investment decisions are made by a trustee, investment
manager
or a named fiduciary, such Independent Plan Fiduciary will be
required
to acknowledge, in writing, receipt of such documents and
represent to
Shearson Lehman that such fiduciary is (1) independent of Shearson
Lehman and its affiliates, (2) capable of making an independent
decision regarding the investment of Plan assets and (3)
knowledgeable
with respect to the Plan in administrative matters and funding
matters
related thereto, and able to make an informed decision concerning
participation in the TRAK Program.

(13) Each Plan will receive the following written or oral
disclosures
with respect to its ongoing participation in the TRAK Program.

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

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

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

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

(e) On a quarterly and annual basis, written disclosures to all
Plans
of the (1) percentage of each Portfolio's brokerage commissions
that
are paid to Shearson Lehman and its affiliates and (2) the average
brokerage commission per share paid by each Portfolio to Shearson
Lehman and its affiliates, as compared to the average brokerage
commission per share paid by the Trust to brokers other than
Shearson
Lehman and its affiliates, both expressed as cents per share.

(14) Shearson Lehman shall maintain, for a period of six years,
the
records necessary to enable the persons described in paragraph
(15) of
this section to determine whether the conditions of this exemption
have been met, except that (a) a prohibited transaction will not
be
considered to have occurred if, due to circumstances beyond the
control of Shearson Lehman and/or its affiliates, the records are
lost
or destroyed prior to the end of the six year period, and (b) no
party
in interest other than Shearson Lehman shall be subject to the
civil
penalty that may be assessed under section 502(1) of the Act, or
to
the taxes imposed by section 4975(a) 4975(a) and 4975(b) (b) of
the
Code, if the records are not maintained, or are not available for
examination as required by paragraph (15) below.

(15) (a) Except as provided in section (b) of this paragraph and
notwithstanding any provisions of subsections (a)(2) and (b) of
section 504 of the Act, the records referred to in paragraph (14)
of
this section shall be unconditionally available at their customary
location during normal business hours by:

(1) Any duly authorized employee or representative of the
Department
or the Internal Revenue Service (the Service);

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

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

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

(b) None of the persons described above in subparagraphs (2)-(4)
of
this paragraph (15) shall be authorized to examine the trade
secrets
of Shearson Lehman or commercial or financial information which is
privileged or confidential.

The availability of this exemption is subject to the express
condition
that the material facts and representations contained in the
application are true and complete, and that the application
accurately
describes all material facts which are the subject of this
exemption.

Summary of Facts and Representations

1. Shearson Lehman, whose principal executive offices are located
in
New York, New York, is a wholly owned subsidiary of Shearson
Lehman
Brothers Holdings, Inc. (Shearson Holdings). Shearson Holdings is
one
of the leading full-line securities firms servicing institutions,
governments and individual investors in the United States and
throughout the world. Shearson Holdings conducts its principal
businesses through two divisions--Shearson Lehman Brothers
(referred
to herein as Shearson Lehman) and Lehman Brothers. Shearson Lehman
is
responsible for individual investor services and asset management
while Lehman Brothers is responsible for securities underwriting,
financial advisory, investment and merchant banking services and
securities and commodities trading as principal and agent.
Shearson
Holdings is a member of all principal securities and commodities
exchanges in the United States and the National Association of
Securities Dealers, Inc. In addition, it holds memberships or
associate memberships on several principal foreign securities and
commodities exchanges.

Shearson Holdings was incorporated in Delaware on December 29,
1983.
The American Express Company owns 100 percent of Shearson
Holdings'
issued and outstanding common stock, which represents 92 percent
of
its issued and outstanding voting stock. The 8 percent remaining
shares of Shearson Holdings' issued and outstanding voting stock
is
preferred stock which is owned by Nippon Life Insurance Company.
Although Shearson Holdings is not an operating company and, as
such,
it maintains no assets under management, as of December 31, 1991,
Shearson Lehman and its subsidiaries rendered investment advisory
services with respect to $91 billion in assets.

2. On April 12, 1991, Shearson Lehman formed the Trust, a no load,
open- end, diversified management investment company registered
under
the Investment Company Act of 1940, as amended. The Trust is
organized
as a Massachusetts business trust and it has an indefinite
duration.
As of January 17, 1992, the Trust had net assets of $132,608,001.

The Trust consists of twelve different portfolios which range from
Government Money Investments to International Fixed Income
Investments
and which pay monthly or annual dividends to investors. The
Portfolios
currently have a per share value ranging from $0 per share for
Balanced Investments to $9.45 per share for Small Capitalization
Growth Equity Investments. The composition of the Portfolios
covers a
spectrum of investments which include U.S. Government-related
securities of equity or debt securities issued by foreign or
domestic
corporations. The Portfolios are further categorized under four
major
Portfolio-Types. (1)

3. Shares in the Trust are offered by Shearson Lehman, as
distributors, at no load, to participants in the TRAK Program.(2)
Although investors in the Trust currently consist of institutions
and
individuals, it is proposed that prospective investors will
include
plans for which Shearson Lehman may or may not currently maintain
investment accounts. A majority of these Plans will be IRAs or
Keogh
Plans. In addition, it is proposed that Plans for which Shearson
Lehman or an affiliate serves as a prototype sponsor and/or a
nondiscretionary trustee or custodian be permitted to invest in
the
Trust. (3)

As for voting rights, Shearson Lehman states that they are
accorded to
recordholders of Trust shares. Shearson Lehman notes that a
recordholder of Trust shares may determine to seek the submission
of
proxies by Plan participants and vote Trust shares accordingly. In
the
case of individual account plans such as Section 404(c) Plans,
Shearson Lehman notes that most Plans will pass-through the vote
to
participants on a pro-rata basis.

The applicant represents that the initial purchase of shares in
the
Trust by a Plan may give rise to a prohibited transaction where
Shearson Lehman or an affiliate has a party in interest
relationship
with the Plan. Shearson Lehman also acknowledges that a prohibited
transaction could arise upon a subsequent purchase or redemption
of
shares in the Trust by a participating Plan inasmuch as the party
in
interest relationship between Shearson Lehman and the Plan may
have
been established at that point. Accordingly, Shearson Lehman has
requested prospective exemptive relief from the Department with
respect to the purchase and redemption of shares in the Trust by
participating Plans which it does not sponsor or have
discretionary
investment authority over the Plan's assets which would be
invested in
Trust shares.(4) Such shares will be held in a brokerage account
maintained by the Plan with Shearson Lehman. No commissions or
fees
will be paid with respect to such transactions.

According to the applicant, the minimum initial investment in the
Trust is set at $20,000, and may be reduced periodically to
$10,000.
Effectively, therefore, a Plan with less than $20,000 in assets
($10,000 when the minimum has been reduced) would not be able to
participate in the TRAK Program. The minimum investment in a
Portfolio
is $100.

4. Overall responsibility for the management and supervision of
the
Trust and the Portfolios rests with the Trust's Board of Trustees
(The
Trustees) which is comprised of twelve members. The Trustees
approve
all significant agreements involving the Trust and the persons and
companies that provide services to the Trust and the Portfolios.
Three
of the Trustees and all of the Trust's executive officers are
affiliated with Shearson Lehman and/or its affiliates. The nine
remaining Trustees are not affiliated with Shearson Lehman.

5. Boston Advisors, located in Boston, Massachusetts, is a wholly
owned subsidiary of The Boston Company, a financial services
holding
company which is, in turn, wholly owned by Shearson Lehman. Boston
Advisors provides investment management, investment advisory
and/or
administrative services to investment companies with total assets
in
excess of $83 billion as of July 31, 1991. Boston Advisors serves
as
the Trust's administrator. In particular, Boston Advisors
calculates
the net asset value (5) of the Portfolios' shares and manages all
aspects of the Portfolios' administration and operation. In
addition,
Boston Advisors is responsible for managing each Portfolio's
temporary
investments in money market instruments, as well as making
arrangements for, and managing collateral received with respect
to,
the lending of securities by each Portfolio.

6. Organized within Shearson Lehman, is the Consulting Group,
which is
located in Wilmington, Delaware. The Consulting Group serves as
the
investment manager of the Trust and the underlying Portfolios.
Although the Consulting Group has not previously served as
investment
manager for a registered investment company, it and its related
division, the Consulting Services Division of Shearson Lehman
(Consulting Services), have over eighteen years of experience in
evaluating investment advisers for individual and institutional
investors. Together the Consulting Group and Consulting Services
provide various financial consulting services to over 30,000
accounts,
representing more than $30 billion in client assets. Account sizes
range from institutional accounts in excess of $1 billion to
individual accounts with $100,000 minimum investments. As of July
31,
1991, the Consulting Group rendered advisory services with respect
to
assets with a value in excess of $42.7 billion.

7. Under its investment management agreement, the Consulting Group
is
required to make recommendations to the Trustees regarding (a) the
investment policies of each Portfolio and (b) the selection and
retention of certain Sub-Advisers which exercise investment
discretion
over each Portfolio.(6) In addition, through the TRAK Program, the
Consulting Group provides investors with non-binding, generalized
asset allocation recommendations with respect to such investors'
investments in the Portfolios. For example, the Consulting Group
evaluates an investor's risk tolerances and financial goals,
provides
investment advice as to the appropriate mix of investment types
designed to balance the investor's risk tolerances as part of a
long-term investment strategy and provides the investor with
advice
about implementing its investment decisions through the Trust.
However, the applicant states that the Consulting Group does not
have
any discretionary authority or control with respect to the
allocation
of an investor's assets among the Portfolios.

In the case of an IRA, a Keogh Plan or a Title I Plan, the
applicant
represents that all of the Consulting Group's recommendations and
evaluations will be presented to a Plan fiduciary which is
independent
of Shearson Lehman and will be implemented only if accepted and
acted
upon by such Independent Plan Fiduciary. In the case of a Section
404(c) Plan, Shearson Lehman represents that participants in such
Plan
will be presented with the Consulting Group's recommendations and
evaluations only to the extent agreed to by Shearson Lehman and
the
Plan sponsor. Shearson Lehman expects that some sponsors of
Section
404(c) Plans will elect to have the Consulting Group's
recommendations
and evaluations passed-through to participants, while others will
elect to have the Independent Plan Fiduciary responsible for
selecting
the Portfolios made available to Plan participants receive such
advice. (7)

However, if investment advisory services are provided directly to
a
participant in a Section 404(c) Plan, the applicant explains (as
also
described herein above) that a Financial Consultant will provide a
participant with pre-enrollment meetings and ongoing
communications
regarding the TRAK Program. In addition, the applicant notes that
the
Consulting Group will recommend long term investment allocations
to
the participant and provide the participant with a written,
quarterly
performance monitoring report.

8. As stated above, the Consulting Group is responsible for
selecting
the Sub-Advisers which provide discretionary advisory services
with
respect to the investment of the assets of the individual
Portfolios
on the basis of their "able" performance in their respective areas
of
expertise in asset management. The applicant represents that there
are
presently eleven Sub- Advisers, all of which are independent of,
and
will remain independent of, Shearson Lehman and/or its
affiliates.(8)
The Sub-Advisers are registered investment advisers under the
Investment Adviser's Act of 1940. They maintain their principal
executive offices in the eastern and western regions of the United
States. As of June 30, 1991, the Sub-Advisers had assets under
management ranging from $62 million to $51 billion.

9. In order for a Plan to participate in the TRAK Program,
Shearson
Lehman or the Consulting Group will provide an Independent Plan
Fiduciary with a copy of the Trust Prospectus discussing the
investment objectives of the Portfolios comprising the Trust, the
policies employed to achieve these objectives, the corporate
affiliation existing between the Consulting Group, Shearson Lehman
and
its subsidiaries and the compensation paid to such entities. In
addition, upon written or oral request to Shearson Lehman, the
Independent Plan Fiduciary will be given a Statement of Additional
Information supplementing the Prospectus which describes the types
of
securities and other instruments in which the Portfolios may
invest,
the investment policies and strategies that the Portfolios may
utilize
and certain risks attendant to those investments, policies and
strategies.(9) Further, each Plan will be given a copy of the
investment
advisory agreement between the Consulting Group and such Plan
relating
to participation in the TRAK Program, and upon written request to
Shearson Lehman, with a copy of the respective investment advisory
agreement between the Consulting Group and the Sub-Advisers.

With respect to a Section 404(c) Plan, Financial Consultants
affiliated with Shearson Lehman will explain the services offered
under the TRAK Program to eligible Section 404(c) Plan
participants as
well as the operation and objectives of the Portfolios, if
required by
the arrangement negotiated between the Consulting Group and the
Plan.(10)

If accepted as a Trust investor, an Independent Plan Fiduciary
will be
required by Shearson Lehman to acknowledge, in writing, prior to
purchasing Trust shares that such fiduciary has received copies of
the
aforementioned documents. With respect to a Plan that is covered
by
Title I of the Act (e.g., a defined contribution plant), where
investment decisions will be made by a trustee, investment manager
or
a named fiduciary, Shearson Lehman will require (except if relying
on
Class PTE 77-3) that such Independent Plan Fiduciary acknowledge
in writing receipt of such documents and represent to Shearson
Lehman
that such fiduciary is (a) independent of Shearson Lehman and its
affiliates, (b) capable of making an independent decision
regarding
the investment of Plan assets and (c) knowledgeable with respect
to
the Plan in administrative matters and funding matters related
thereto, and able to make an informed decision concerning
participation in the TRAK Program.

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

10. The books of the Trust will be audited annually by independent
public accountants selected by the Trustees and approved by the
investors. All investors will receive copies of an audited
financial
report no later than 60 days after the close of each Trust fiscal
year. The books and financial records of the Trust will be open
for
inspection by any investor, as well as the Department and the
Service,
at all times during regular business hours.

11. As noted under the TRAK Program, the Consulting Group will
provide
the Independent Plan Fiduciary with asset allocation advice
related to
the Portfolios. In this regard, the applicant states that the
Consulting Group's asset allocation advice will not focus on
recommendations that a Plan's assets be allocated to a specific
Portfolio. Rather, the applicant represents that the Consulting
Group
will recommend only that Plan assets be allocated among particular
types of Portfolios (e.g., Growth, Fixed Income, etc.)

After the selection of specific Portfolios by an Independent Plan
Fiduciary, the Consulting Group will continue to render general
Portfolio-Type selection advice to Plans or Plan fiduciaries
relating
to asset allocations among the selected Portfolios. However, in
the
case of a Section 404(c) Plan in which at least three to five
Portfolios may be selected by the Plan sponsor, the Consulting
Group's
initial asset allocation advice will be limited to the suggested
Portfolio-Types offered under the Plan. The Consulting Group may
also
work with the Independent Plan Fiduciary to identify and draft
investment objectives, select investment categories or actual
Portfolios to be offered to Plan participants, if such fiduciary
is
the recipient of the Consulting Group's asset allocation advice,
or
recommend appropriate long-term investment allocations to an
individual participant, if the participant receives such advice.

12. The Consulting Group will also identify a Plan's risk
tolerances
and investment objectives, the performance of each Portfolio in
which
assets are invested, and recommend, in writing, an appropriate
allocation of assets among the Portfolio-Types that conform to
these
tolerances and objectives. The Consulting Group will not have the
authority to implement its advice or recommendations and will not
participate in the deliberations regarding the decision by an
investor
of whether or not to act upon such advice. As noted earlier, the
applicant represents that the decision of a Plan to invest in the
TRAK
Program will be made by an unrelated Plan fiduciary acting on the
basis of his or her own investigation into the advisability of
participating in the TRAK Program.

13. The Consulting Group will provide, at least quarterly,
monitoring
reports to a Title I, IRA or Keogh Plan containing an analysis and
evaluation of the Plan's account to ascertain whether the
investor's
objectives are being met and recommending, when appropriate,
changes
in the allocation among the Portfolios.

If required by the arrangement negotiated with the Independent
Plan
Fiduciary, the Consulting Group will provide an Independent Plan
Fiduciary of a Section 404(c) Plan with a written, detailed
investment
performance monitoring report, that will contain Plan level asset
allocations showing the performance of the Plan's investment
vehicles
and the performance of relevant indices for evaluating the
performance
of each Portfolio, a Plan cash flow analysis and annualized risk
adjusted rates of return for Plan investment vehicles. Such report
will be provided on a quarterly basis.

In addition, to the extent required by the arrangement negotiated
with
the Consulting Group, a Section 404(c) Plan participant will
receive a
written, quarterly performance monitoring report with his or her
quarterly benefit statement which includes the investment
performance
of the Portfolios, the investment performance for the
participant's
account, and specifies market commentary and toll-free numbers for
such participant to call Shearson Lehman in order to obtain more
information about the TRAK Program or to amend the participant's
investment allocations. Further, if required by such arrangement,
a
Financial Consultant will meet periodically with an Independent
Plan
Fiduciary of a Section 404(c) Plan to review and discuss the
investment performance monitoring report. The Financial Consultant
may
also meet periodically with an eligible participant to review the
performance of the participant's account. The applicant notes that
this intermittent contact will not prevent the participant from
contacting the Financial Consultant at any time to inquire about
his
or her participation in the TRAK Program.

Finally, on a quarterly and annual basis, the Consulting Group
will
provide written disclosures to all Plans with respect to (1) the
percentage of each Trust Portfolio's brokerage commissions that
are
paid to Shearson Lehman and its affiliates and (2) the average
brokerage commission per share paid by each Portfolio to Shearson
Lehman as compared to the average brokerage commission per share
paid
by each Portfolio to brokers other than Shearson Lehman and its
affiliates, both expressed as cents per share.

14. Shares of a Portfolio will be redeemed by Shearson Lehman, at
no
charge, and generally on a daily basis (weekends and holidays
excepted) when the Portfolio calculates its net asset value.
Redemption requests received in proper form prior to the close of
trading on the NYSE will be affected at the net asset value per
share
determined on that day. Redemption requests received after the
close
of regular trading on the NYSE will be effected at the net asset
value
at the close of business of the next day, except on weekends or
holidays when the NYSE is closed. A Portfolio is required to
transmit
redemption proceeds for credit to an investor's account with
Shearson
Lehman or to an "introducing" broker (11) within 7 days after
receipt of
the redemption request. In the case of an IRA or Keogh Plan
investor,
Shearson Lehman will not hold redemption proceeds as free credit
balances and will, in the absence of receiving investment
instructions, place all such assets in a money market fund that is
not
affiliated with Shearson Lehman. In the case of Plans that are
covered
by title I of the Act, the redemption proceeds will be invested by
Shearson Lehman in accordance with the investment directions of
the
Independent Plan Fiduciary responsible for the management of the
Plan's assets. With respect to a Section 404(c) Plan, the
treatment of
such investment assets will depend upon the arrangement for
participant investment instructions selected by the Plan sponsor.
(12) In
the event that the Independent Plan Fiduciary does not give other
investment directions, such assets will be swept weekly into a
money
market fund that is not affiliated with Shearson Lehman for the
benefit of the Plan.

Due to the high costs of maintaining small accounts, the Trust may
also redeem an account having a current value of $7,500 or less,
after
the investor has been given at least 30 days in which to increase
the
account balance to more than the $7,500 amount. Proceeds of an
involuntary redemption will be deposited in the investor's
brokerage
account unless Shearson Lehman is otherwise instructed.

15. Shares of a Portfolio may be exchanged by an investor with
another
investor in the TRAK Program without payment of any exchange fee
for
shares of another Portfolio at their respective net asset values.
However, Portfolio shares are not exchangeable with shares of
other
funds within the Shearson Lehman Group of funds or portfolio
families.

16. With respect to brokerage transactions that are entered into
under
the TRAK Program for a Portfolio, such transactions may be
executed
through Shearson-Lehman and other affiliated broker-dealers, if in
the
judgment of the Sub-Adviser, the use of such broker-dealer is
likely
to result in price and execution at least as favorable, and at a
commission charge at least as comparable to those of other
qualified
broker-dealers. In addition, Shearson Lehman may not execute
transactions for a Portfolio on the floor of any national
securities
exchange but it may effect transactions by transmitting orders to
other brokers for execution. In this regard, Shearson Lehman is
required to pay fees charged by those persons performing the floor
brokerage elements out of the brokerage compensation it receives
from
a Portfolio.

17. Each Portfolio bears its own expenses, which generally include
all
costs that are not specifically borne by the Consulting Group, the
Sub-Advisers or Boston Advisors. Included among a 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.
No
Portfolio, however, will impose sales charges on purchases,
reinvested
dividends, deferred sales charges, redemption fees, nor will any
Portfolio incur distribution expenses.

18. The total fees that are paid to the Consulting Group and its
affiliates will constitute no more than reasonable compensation.
In
this regard, for its asset allocation and related services, the
Consulting Group charges an investor a quarterly investment
advisory
fee. This "outside fee" is negotiated between the Consulting Group
and
the investor and it varies up to an annual maximum of 1.50 percent
of
the net asset value of the investor's Trust shares computed each
quarter based on the value determined on the last calendar day of
the
previous calendar quarter. The outside fee is charged directly to
an
investor and it is not affected by the allocation of assets among
the
Portfolios nor by whether an investor follows or ignores the
Consulting Group's advice. (13) For Plan investors, the outside
fee for a
calendar quarter will be reduced by an amount equal to, for all
Portfolios in which Plan assets are invested (a) the value of Plan
assets invested in a Portfolio on the last calendar day of the
previous calendar quarter (or the value of an initial investment
in
the Portfolio, as of the day such initial investment is made
during
the calendar quarter) multiplied by (b) a reduction factor (the
Reduction Factor) which is described in below, multiplied by (c) a
fraction, the numerator of which is the number of days in the
period
for which the outside fee is being assessed and the denominator of
which is the actual number of days in the calendar year of which
that
period is a part. For subsequent investments or redemptions
aggregating to more than $5,000, the pro-rated fee for credit for
the
balance of the quarter will be calculated on the basis of the net
percentage of the outside fee paid for the quarter during which
the
subsequent investment or redemption is made.

In addition, for investment management and related services
provided
to the Trust, the Consulting Group is paid, from each Portfolio, a
management fee which computed daily and paid monthly at an annual
rate
ranging from .15 percent to .70 percent of the value of the
Portfolio's average daily net assets depending upon the
Portfolio's
objective. From these management fees, the Consulting Group
compensates the Sub-Adviser. This "inside fee," which is the
difference between the individual Portfolio's total management fee
and
the fee paid by the Consulting Group to the Sub-Adviser, varies
from
20 to 30 basis points depending on the Portfolio (except for the
Government Money Investments Portfolio which, for competitive
purposes, pays a management fee equal to the Sub-Adviser's fee).
Each
Portfolio also pays Boston Advisors a management fee that is
computed
daily and paid monthly for the services it performs as
administrator
to the Trust at an annual fixed rate of .20 percent of the value
of
the Portfolio's average daily net assets. Such fee is also
included in
the total management fee.

The management fees that are paid at the Portfolio level to Boston
Advisors, the Consulting Group and the Sub-Advisers are set forth
in
the table below. For purposes of the table, Boston Advisors is
referred to as "BA", the Consulting Group as "CG" and the Sub-
Advisers
as "SA." As noted in the table, the sum of the management fees
paid by
a Portfolio to Boston Advisors plus the fees retained by the
Consulting Group and the Sub-Advisers equals the total management
fee
paid by that Portfolio.

SA
CG
Total Total fee retained
retained
management BA fee SA/CG fee
fee
Portfolio fee (percent) (percent) (percent)
(percent)
Government money
investments 0.35 0.20 0.15 0.15
0.00
Intermediate fixed
income investments .60 .20 .40 .20
.20
Total return fixed
income investments .60 .20 .40 .20
.20
Municipal bond
investments .60 .20 .40 .20
.20
Mortgage backed
investments .70 .20 .50 .25
.25
Balanced investments .80 .20 .60 .30
.30
Large capitalization
value equity
investments .80 .20 .60 .30
.30
Large capitalization
growth investments .80 .20 .60 .30
.30
Small capitalization
value equity
investments .80 .20 .60 .30
.30
Small capitalization
growth investments .80 .20 .60 .30
.30
International equity
investments .90 .20 .70 .40
.30
International fixed
income investments .70 .20 .50 .25
.25

Shearson Lehman proposes to offset, quarterly, against the outside
fee
such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio on
investment
of assets attributable to any Plan.(14) In this way, the aggregate
of
the inside fees and the outside fees retained by the Consulting
Group
will remain constant regardless of the distribution of a Plan's
assets
among the Portfolio.

Shearson Lehman has developed the following example to demonstrate
how
the fee offset mechanism would work:

Assume that as of March 31, 1992, the average daily value of Trust
Portfolio shares held by a Plan investor was $1,000. Investment
assets
attributable to the Plan were distributed among five Trust
Portfolios:
(1) Government Money Investments in which the Plan made a $50
investment and from which the Consulting Group would not retain an
inside fee; (2) Total Return Fixed Income Investments in which the
Plan made a $200 investment and the Consulting Group would retain
an
inside fee of .20 percent; (3) Small Capitalization Growth
Investments
in which the Plan made a $250 investment and the Consulting Group
would be entitled to receive an inside fee of .30 percent; (4)
Large
Capitalization Growth Investments in which the Plan made a $250
investment and the Consulting Group would retain an inside fee of
.30
percent; and (5) International Equity Investments in which the
Plan
made a $250 investment and the Consulting Group would be entitled
to
receive an inside fee of .30 percent.

Assume that the Plan investor pays the maximum annual outside fee
of
1.50 percent so that the total outside fee for the calendar
quarter
April 1 through June 30, prior to the fee offset would be ($1,000)
1.50% (.25) = $3.75.

Under the proposed fee offset, the outside fee charged to the Plan
must be reduced by a Reduction Factor to ensure that the
Consulting
Group retains an inside fee of no more than .20% from each of the
Portfolios on investment assets attributable to the Plan. The
following table shows the Reduction Factor as applied to each of
the
Portfolios comprising the Trust:

CG
retained Fee
Reduction
fee offset
factor
Portfolio (percent) (percent)
(percent)
Government money investments 0.00 0.20
0.00
Intermediate fixed income investments .20 .20
.00
Total return fixed income investments .20 .20
.00
Municipal bond investments .20 .20
.00
Mortgage backed investments .25 .20
.05
Balanced investments .30 .20
.10
Large capitalization value equity
investments .30 .20
.10
Large capitalization growth investments .30 .20
.10
Small capitalization value equity
investments .30 .20
.10
Small Capitalization growth investments .30 .20
.10
International equity investments .30
.20
.10
International fixed income investments .25 .20
.05

Under the proposed fee offset, a Reduction Factor of .10% is
applied
against the quarterly outside fee with respect to the value of
Plan
assets that have been invested in Portfolios (3), (4) and (5)
only. As
noted above Portfolios (1) and (2) do not involve a Reduction
Factor
because the fee retained by the Consulting Group for these
Portfolios
does not exceed 20 basis points. Therefore, the quarterly offset
for
the plan investor is computed as follows: (.25)

[($250) .10%+($250) .10%+($250) .10%] = $0.1875.

In the foregoing example, the Plan investor, like all other
investors
in the TRAK Program, would receive a statement for its TRAK
account on
or about April 15, 1992. This statement would show the outside fee
to
be charged for the calendar quarter April 1, through June 30
(i.e.,
$3.75-$0.1875 = $3.5625). The Plan investor would be asked to pay
the
outside fee for that quarter by May 3, 1992 (i.e., the third day
of
the second month of the calendar quarter). If the outside fee were
not
paid by that date, Shearson Lehman would debit the account of the
Plan
investor (as with other investors) for the amount of the outside
fee
(pursuant to the authorization contained in the TRAK Investment
Advisory Agreement, and as described in the Statement of
Additional
Information appended to the Prospectus).(15)

Because the Consulting Group will retain no inside fee with
respect to
assets invested in the Government Money Investment Portfolio,
Shearson
Lehman notes that a potential conflict may exist by reason of the
variance in net inside fees among the Government Money Investments
Portfolio and the other Portfolios. Shearson Lehman also
recognizes
that this factor could result in the Consulting Group's
recommendation
of a higher-fee generating Portfolio- Type to an investing Plan.
To
address this potential conflict, Shearson Lehman will disclose to
all
participants in the TRAK Program that the Consulting Group will
retain
no inside fee for assets invested in the Government Money
Investments
Portfolio.

19. In summary, it is represented that the proposed transactions
will
meet the statutory criteria for an exemption under section 408(a)
of
the Act because: (a) The investment of a Plan's assets in the TRAK
Program will be made and approved by a Plan fiduciary which is
independent of Shearson Lehman and its affiliates such that
Independent Plan Fiduciaries will maintain complete discretion
with
respect to participating in the TRAK Program; (b) Independent Plan
Fiduciaries will have an opportunity to redeem their shares in the
Trust in such fiduciaries' individual discretion; (c) no Plan will
pay
a fee or commission by reason of the acquisition or redemption of
shares in the Trust; (d) prior to making an investment in TRAK,
each
Independent Plan Fiduciary will receive offering materials and
disclosures from either Shearson Lehman or the Consulting Group
which
disclose all material facts concerning the purpose, structure,
operation and investment in the TRAK Program; (e) the Consulting
Group
will provide written documentation to an Independent Plan
Fiduciary of
its recommendations or evaluations, including the reasons and
objective criteria forming the basis for such recommendations or
evaluations; (f) any sub-Adviser that is appointed by the
Consulting
Group to exercise investment discretion over a Portfolio will
always
be independent of Shearson Lehman and its affiliates; (g) the
annual
investment advisory fee that is paid by a Plan to the Consulting
Group
for investment advisory services rendered to such Plan will be
offset
by such amount as is necessary to assure that the Consulting Group
retains no more than 20 basis points from any Portfolio on
investment
assets attributable to the Plan investor; (h) the Consulting Group
or
Shearson Lehman will make periodic written disclosures to
participating Plans with respect to the financial condition of the
TRAK Program, the total fees that it and its affiliates will
receive
from such Plan investors and the value of the Plan's interest in
the
TRAK Program; and (i) on a quarterly and annual basis, the
Consulting
Group will provide written disclosures to all Plans with respect
to
(1) the percentage of each Trust Portfolio's brokerage commissions
that are paid to Shearson Lehman and its affiliates and (2) the
average brokerage commission per share paid by each Portfolio to
Shearson Lehman as compared to the average brokerage commission
per
share paid by each Portfolio to brokers other than Shearson Lehman
and
its affiliates, both expressed as cents per share.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the
Department,
telephone (202) 523-8881. (This is not a toll-free number.)

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption
under
section 408(a) of the Act and/or section 4975(c)(20) 4975(c)(20)
of
the Code does not relieve a fiduciary or other party in interest
of
disqualified person from certain other provisions of the Act
and/or
the Code, including any prohibited transaction provisions to which
the
exemption does not apply and the general fiduciary responsibility
provisions of section 404 of the Act, which among other things
require
a fiduciary to discharge his duties respecting the plan solely in
the
interest of the participants and beneficiaries of the plan and in
a
prudent fashion in accordance with section 404(a)(1)(b) of the
act,
nor does it affect the requirement of section 401(a) 401(a) of
the
Code that the plan must operate for the exclusive benefit of the
employees of the employer maintaining the plan and their
beneficiaries;

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

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

(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations
contained in each application are true and complete, and that each
application accurately describes all material terms of the
transaction
which is the subject of the exemption.

Signed at Washington, DC, this 31st day of March 1992.

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

[FR Doc. 92-7712 Filed 4-2-92; 8:45 am] BILLING CODE 4510 4510-
29-M

Footnotes

1 Because a Portfolio is not precluded from investing in
securities
that are issued by Shearson Lehman or its affiliates, Shearson
Lehman
represents that, as a limitation, the percentage of that
Portfolio's
net assets invested in these securities will never exceed one
percent.

2 According to the Statement of Additional Information which
accompanies the Prospectus for the TRAK Program, shares in the
Trust
are not certificated for reasons of economy and convenience.
Boston
Safe Deposit and Trust Company, the Trust's custodian, however,
maintains a record of each investor's ownership of shares.
Although
Trust shares are transferable and accord voting rights to their
owners, they do not confer pre-emptive rights (i.e., the privilege
of
a shareholder to maintain a proportionate share of ownership of a
company by purchasing a proportionate share of any new stock
issues).
Shearson Lehman represents that in the context of an open-end
investment company, that continuously issues and redeems shares, a
pre- emptive right would make the normal operations of the Trust
impossible. Therefore, such right is precluded in the charter
documents of the Trust's Master Trust Agreement as well as those
of
other open-end investment companies.

3 The Department notes that the general standards of fiduciary
conduct
promulgated under the Act would apply to the participation in the
TRAK
Program by an Independent Plan Fiduciary. Section 404 of the Act
requires that a fiduciary discharge his duties respecting a plan
solely in the interest of the plan's participants and
beneficiaries
and in a prudent fashion. Accordingly, an Independent Plan
Fiduciary
must act prudently with respect to the decision to enter into the
TRAK
Program with the Consulting Group as well as with respect to the
negotiation of services that will be performed thereunder and the
compensation that will be paid to Shearson Lehman and its
affiliates.
The Department expects that an Independent Plan Fiduciary, prior
to
entering in the TRAK Program, to understand fully all aspects of
such
arrangement following disclosure by Shearson Lehman of all
relevant
information.

4 The applicant represents that employee benefit plans for are
maintained by Shearson Lehman may purchase or redeem shares in the
Trust under the provisions of Prohibited Transaction Exemption
(PTE)
77-3 (42 FR 18734, April 8, 1977). The applicant further
represents
that, although the exemptive relief proposed above would not
permit
Shearson Lehman or an affiliate, while serving as a Plan fiduciary
with discretionary authority over the management of a Plan's
assets,
to invest a Plan's assets in the Trust shares, a purchase or
redemption of Trust shares under such circumstances will comply
with
the terms and conditions of class PTE 77-4 (42 FR 18732, April
8, 1977). The Department expresses no opinion herein as to whether
such transactions will comply with the terms and conditions of
PTEs
77-3 and 77-4.

5 Each Portfolio's net asset value per share is calculated by
Boston
Advisors on each weekday, except on days on which the New York
Stock
Exchange (the NYSE) is closed. In general, the net asset value for
securities is determined as of the close of trading on the NYSE or
a
foreign exchange by dividing the value of a Portfolio net assets
by
the total number of its shares outstanding. Typically, a
Portfolio's
investments are valued at market value. However, in the absence of
a
market value, Portfolio investments are valued at fair market
value as
determined by, or under the direction of, the Trustees.

6 Subject to the supervision and direction of the Trustees,
the
Consulting Group was required to perform initial "due diligence"
on
prospective Sub-Advisers for each Portfolio and thereafter to
monitor
each Sub-Adviser's performance through qualitative and
quantitative
analysis as well as through periodic, in person, telephonic and
written consultations. The Consulting Group is also required to
communicate its performance expectations and evaluations to the
Sub-Advisers and ultimately recommend whether a Sub-Adviser's
contract
should be renewed, modified or terminated. In this regard, the
Consulting Group is further obligated to provide written reports
to
the Trustees of its evaluation and monitoring functions.

7 If the Independent Plan Fiduciary of a Section 404(c) Plan
is the
recipient of the Consulting Group's investment advice, the
applicant
explains that the Consulting Group will work with the Independent
Plan
Fiduciary by identifying and drafting investment objectives,
selecting
investment categories or actual Portfolios to be offered to Plan
participants. In addition to these services (and as described
above),
the applicant explains that the Consulting Group will provide an
Independent Plan Fiduciary with a detailed investment performance
monitoring report on a quarterly basis. Furthermore, a Financial
Consultant affiliated with Shearson Lehman will meet periodically
with
the Independent Plan Fiduciary to discuss the investment
performance
monitoring report.

8 Although there are presently twelve Portfolios comprising
the Trust,
there are only eleven Sub-Advisers. One Sub-Adviser, Standish,
Ayer
and Wood, Inc., advises both the Government Money Investments
Portfolio and the Intermediate Fixed Income Investments Portfolio.

9 In the case of a Section 404(c) Plan, the applicant
represents that
the Plan administrator, trustee or named fiduciary, as the
recordholder of Trust shares, will make available the Trust's
Prospectus to Section 404(c) Plan participants. In addition,
Shearson
Lehman will make available to such Independent Plan Fiduciaries
sufficient quantities of Prospectuses for this purpose, as well as
provide Statements of Additional Information to any party upon
request.

10 The Department is expressing no opinion as to whether the
information provided under the TRAK Program is sufficient to
enable a
participant to exercise independent control over assets in his or
her
account as contemplated by section 404(c) of the Act.

11 According to the applicant, Shearson Lehman provides
clearance,
settlement and other back office services to other broker-dealers.
The
applicant notes that Shearson Lehman may also provide
confirmations
and account statements to clients of brokers who have "introduced"
clients to Shearson Lehman such as The Robinson Humphrey Company,
Inc.
a wholly-owned broker-dealer subsidiary of Shearson Lehman.

12 Shearson Lehman explains that, under one alternative, Plan
participants who give instructions to redeem shares of a Portfolio
must give corresponding instructions to reinvest proceeds in
another
investment vehicle made available under the Plan, thus ensuring
that a
participant's investment assets are continually invested. Under a
second alternative which is described above, Shearson Lehman
represents that participants will not be required to give
corresponding instructions and all investment assets for which no
investment instructions have been given will be swept into a money
market fund that is not affiliated with Shearson Lehman. In this
regard, the Department is expressing no opinion regarding whether
any
of the arrangements described above comply with the requirements
of
section 404(c) of the Act.

13 The applicant represents that the outside fee is not imposed
on
accounts of employees of American Express and its subsidiaries,
including Shearson Lehman, accounts of their immediate families
and
IRAs and certain employee pension benefit plans for these persons.
The
applicant states that this fee is waived to encourage employees to
invest in Shearson Lehman. With respect to IRAs or Plans
maintained by
Shearson Lehman and its affiliates, the applicant asserts that
such
waiver would be required by PTE 77-3.

14 Shearson Lehman asserts that it chose 20 basis points as the
maximum
net fee retained for management services rendered to the
Portfolios
because this amount represents the lowest percentage management
fee
charged by Shearson Lehman among the Portfolios (excluding the
Government Money Investments Portfolio for which Shearson Lehman
charges no management fee).

15 The applicant explains that the foregoing example
illustrates the
fact that the outside fee and the fee offset are computed
contemporaneously and that Plan investors will get the benefit of
the
fee offset contemporaneously upon the payment of the outside fee.
Because the inside fee is paid monthly and the fee offset is
computed
quarterly, the applicant also explains that Shearson Lehman does
not
receive the benefit of a "float" as a result of such calculations
because the fee offset will always be realized no later than the
time
that the outside fee is paid (i.e., on or about the third day of
the
second month of the calendar quarter). Since the inside fee is
paid at
the end of each calendar month, the applicant further explains
that
Plan investors will realize the full benefit of the offset before
the
time that the inside fee is paid for the second and third months
of
the calendar quarter.

DOL Prohibited Transaction Exemption 92-77

Final Exemption 92-77

10/05/1992

[57 FR 45833, October 5, 1992]

Shearson Lehman Brothers, Inc. (Shearson Lehman), Located in New
York,
NY

[Prohibited Transaction Exemption 92-77; Exemption Application No.
D-8723]

Exemption

Section I. Covered Transactions

The restrictions of section 406(a) of the Act and the sanctions
resulting from the application of section 4975 of the Code, by
reason of section 4975(c)(1) (A) through (D) shall not apply to
the
proposed purchase or redemption of shares by an employee benefit
plan,
an individual retirement account (the IRA) or a retirement plan
for a
self-employed individual (the Keogh Plan; collectively, the Plans)
in
the Shearson Lehman-established Trust for TRAK Investments (the
Trust)
in connection with such Plans' participation in the TRAK
Personalized
Investment Advisory Service (the TRAK Program). In addition, the
restrictions of section 406 (b)(1) and (b)(2) of the Act and the
sanctions resulting from the application of section 4975 of the
Code by reason of section 4975(c)(1)(E) shall not apply to the
provision, by the Consulting Group Division of Shearson Lehman
(the
Consulting Group), of investment advisory services to an
independent
fiduciary of a participating Plan (the Independent Plan Fiduciary)
which may result in such fiduciary's selection of a portfolio
grouping
(the Portfolio-Type) in the TRAK Program for the investment of
Plan
assets.

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

Section II. General Conditions

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

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

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

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

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

(6) Any recommendation or evaluation made by the Consulting Group
to
an Independent Plan Fiduciary will be implemented only at the
express
direction of such independent fiduciary.

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

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

(11) The Consulting Group will not retain an investment advisory
or
management fee from the Government Money Investments Portfolio.

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

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

(1) A copy of the prospectus (The Prospectus) for the Trust
discussing
the investment objectives of the Portfolios comprising the Trust,
the
policies employed to achieve these objectives, the corporate
affiliation existing between the Consulting Group, Shearson Lehman
and
its subsidiaries and the compensation paid to such entities.

(3) A copy of the investment advisory agreement between the
Consulting
Group and such Plan relating to participation in the TRAK Program.

(4) Upon written request of Shearson Lehman, copy of the
respective
investment advisory agreement between the Consulting Group and the
Sub- Advisers.

(c) With respect to a Section 404(c) Plan, written acknowledgement
of
the receipt of such documents will be provided by the Independent
Plan
Fiduciary (i.e., the Plan administrator, trustee or named
fiduciary,
as the recordholder of Trust shares). Such Independent Plan
Fiduciary
will be required to represent in writing to Shearson Lehman that
such
fiduciary is (1) independent of Shearson Lehman and its affiliates
and
(2) knowledgeable with respect to the Plan in administrative
matters
and funding matters related thereto, and able to make an informed
decision concerning participation in the TRAK Program.

(d) With respect to a Plan that is covered under Title I of the
Act,
where investment decisions are made by a trustee, investment
manager
or named fiduciary, and Independent Plan Fiduciary will be
required to
acknowledge, in writing, receipt of such documents and represent
to
Shearson Lehman that such fiduciary is (1) independent of Shearson
Lehman and its affiliates, (2) capable of making an independent
decision regarding the investment of Plan assets and (3)
knowledgeable
with respect to the Plan in administrative matters and funding
matters
related thereto, and able to make an informed decision concerning
participation in the TRAK Program.

(13) Each Plan will receive the following written or oral
disclosures
with respect to its ongoing participation in the TRAK Program:

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

(14) Shearson Lehman shall maintain, for a period of six years,
the
records necessary to enable the persons described in paragraph
(16) of
this section to determine whether the conditions of this exemption
have been met, except that (a) a prohibited transaction will not
be
considered to have occurred if, due to circumstances beyond the
control of Shearson Lehman and/or its affiliates, the records are
lost
or destroyed prior to the end of the six year period, and (b) no
party
in interest other than Shearson Lehman shall be subject to the
civil
penalty that may be assessed under section 502(i) of the Act, or
to
the taxes imposed by section 4975 (a) and (b) of the Code, if the
records are not maintained, or are not available for examination
as
required by paragraph (15) below.

(15)(a) Except as provided in section (b) of this paragraph and
notwithstanding any provisions of subsections (a)(2) and (b) of
section 504 of the Act, the records referred to in paragraph (14)
of
this section shall be unconditionally available at their customary
location during normal business hours by:

(1) Any duly authorized employee or representative of the
Department
or the Internal Revenue Service (the Service);

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

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

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

Section III. Definitions

For purposes of this exemption:

(1) An "affiliate" of Shearson Lehman includes--

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

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

(2) An "Independent Plan Fiduciary" is a Plan fiduciary which is
independent of Shearson Lehman and its affiliates and is either

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

(b) A participant in a Keogh Plan,

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

For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption,
refer to
the notice of proposed exemption (the Notice) published on April
3,
1992 at 57 FR 11514.

EFFECTIVE DATE: This exemption is effective as of April 3, 1992.

Written Comments

The Department received one comment letter with respect to the
Notice
and no requests for a public hearing. The letter, which was
submitted
by Shearson Lehman, addresses certain clarifications to the
Notice,
including clarifications to the General Conditions and the Summary
of
Facts and Representations. Discussed below are the changes
suggested
by Shearson Lehman and the Department's responses thereto. In
addition, the Department has made several clarifying changes to
the
final exemption which are also discussed below.

With respect to the General Conditions that are set forth in
Section
II of the Notice, Shearson Lehman wishes to make several
clarifications. In this regard, Shearson Lehman notes that, in
general, in the case of IRAs that are maintained by employees of
Shearson Lehman or its affiliates, such employees should be
considered
"Independent Plan Fiduciaries." In addition, Shearson Lehman
requests
that Condition (1) should read as follows in order that it will
conform to the other General Conditions:

The participation of plans in the TRAK Program will be approved by
an
Independent Plan Fiduciary.

To clarify that Sub-Advisers act for the Trust after having been
approved by the Trust in accordance with the terms of section 15
(a)
and (c) of the Investment Company Act of 1940, as amended (the
1940
Act), or any exemption granted by the Securities and Exchange
Commission, Shearson Lehman recommends that Condition (8) of the
General Conditions be modified to read as follows:

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

In the case of a Plan covering one or more employees of the Plan
sponsor (such as a Section 404(c) Plan), Shearson Lehman notes
that
Condition (10) requires only that the investment advisory fee paid
by
the Plan be offset in the manner described in the condition (i.e.,
the
offset will be determined based on the aggregate investment of the
Plan accounts). Shearson Lehman represents that it does not have
control over how the Plan, for internal expenses, allocates the
offset
among individual accounts. As long as the fee is offset at the
Plan
level, Shearson Lehman represents that it cannot be construed to
have
any economic incentive to provide investment allocation advice
favoring one Portfolio over another.

Shearson Lehman observes that several of the General Conditions
refer
to "Shearson Lehman and its affiliates" but the Notice does not
define
the term "affiliate." After giving due consideration to this
comment,
the Department has determined to add a new Section III to the
exemption titled "Definitions" in which the terms "affiliate," and
"Independent Plan Fiduciary" are defined as follows:

An "affiliate" of Shearson Lehman includes (a) any person directly
or
indirectly through one or more intermediaries, controlling,
controlled
by, or under common control with Shearson Lehman (For purposes of
this
subsection, the term "control" means the power to exercise a
controlling influence over the management or policies of a person
other than an individual.) (b) any officer, director or partner in
such person, and (c) any corporation or partnership of which such
person is an officer, director or a 5 percent partner or owner.

An "Independent Plan Fiduciary" is a Plan fiduciary which is
independent of Shearson Lehman and its affiliates and is either
(a) a
Plan administrator, trustee or named fiduciary, as the
recordholder of
Trust shares of a Section 404(c) Plan, (b) a participant in a
Keogh
Plan, (c) an individual covered under a self-directed IRA which
invests in Trust shares, or (d) a trustee, investment manager or
named
fiduciary responsible for investment decisions in the case of a
Title
I Plan that does not permit individual direction as contemplated
by
section 404(c) of the Act.

With respect to modifications to the Summary of Facts and
Representations, Shearson Lehman represents that the first
paragraph
of Item 1 of the Notice which was based on the application for
exemption confuses the descriptions of Shearson Holdings, Shearson
Lehman and Shearson Lehman Brothers. Accordingly, Shearson Lehman
requests that the third, fourth and fifth sentences of that
paragraph
be amended to read as follows:

Shearson Holdings conducts its principal businesses through two
divisions of Shearson Lehman--Shearson Lehman Brothers and Lehman
Brothers. Shearson Lehman Brothers is responsible for individual
investor services and asset management while Lehman Brothers is
responsible for securities underwriting, financial advisory,
investment and merchant banking services and securities and
commodities trading as principal and agent. Shearson Lehman is a
member of all principal securities and commodities exchanges in
the
United States and the National Association of Securities Dealers,
Inc.

Shearson Lehman also wishes to update the second sentence of the
second paragraph under Item 2 of the Notice by noting that the
Balanced Investments Portfolio is expected to be offered in July
1992
at an initial per share value of $8.00.

In order that Footnote 1 of the Notice more closely tracks the
language of Condition (9), Shearson Lehman suggests the following
modification:

Because a Portfolio is not precluded from investing in securities
that
are issued by Shearson Lehman or its affiliates, Shearson Lehman
represents that, as a limitation, immediately following the
acquisition by a Portfolio of any securities that are issued by
Shearson Lehman and/or its affiliates, the percentage of that
Portfolio's net assets invested in such securities will not exceed
one
percent.

Since Shearson Lehman cannot assure that Section 404(c) Plans
participating in the TRAK Program will pass through voting rights
to
participants on a pro rata basis, it recommends that the second
paragraph of Footnote 2 of the Notice be amended to read as
follows:

In the case of individual account plans such as Section 404(c)
Plans,
Shearson Lehman believes that most Plans will pass-through the
vote to
participants on a pro rata basis.

Shearson Lehman also represents that it may serve as prototype
sponsor
for Plans participating in the TRAK Program. Therefore, the third
sentence of the second paragraph under Item 3 of the Notice should
be
amended by adding the following language:

Accordingly, Shearson Lehman has requested prospective exemptive
relief from the Department with respect to the purchase and
redemption
of shares in the Trust by participating Plans which it does not
sponsor (other than only as prototype sponsor) or have
discretionary
investment authority over the Plan's assets which would be
invested in
Trust shares.

To clarify that Plans for which Shearson Lehman has a pre-existing
relationship will be able to participate in TRAK, Shearson Lehman
asks
that the second sentence of Footnote 4 be amended to read as
follows:

The applicant further represents that, although the exemptive
relief
proposed above would not permit Shearson Lehman or an affiliate,
while
serving as a Plan fiduciary with discretionary authority over the
management of a Plan's assets, to invest in Trust shares those
assets
over which it exercises discretionary authority, a purchase or
redemption of Trust shares under such circumstances would be
permissible if made in compliance with the terms and conditions of
Class Prohibited Transaction Exemption (PTE) 77-4 (42 FR 18732,
April
8, 1977).

Shearson Lehman represents that the Trust's Board of Directors
consists of seven members, four of whom are not affiliated with
Shearson Lehman and three of whom are affiliated with Shearson
Lehman,
all in accordance with the provisions of section 10(b) of the 1940
Act. Accordingly, Shearson Lehman recommends that Item 4 of the
Notice
be amended to read as follows:

Overall responsibility for the management and supervision of the
Trust
and the Portfolios rests with the Trust's Board of Trustees (the
Trustees) which currently is comprised of seven members. The
Trustees
approve all significant agreements involving the Trust and the
persons
and companies who provide services to the Trust and the
Portfolios.
Three of the Trustees and all of the Trust's executive officers
are
affiliated with Shearson Lehman and/or its affiliates. The four
remaining Trustees are not affiliated with Shearson Lehman.

Because the applicant now represents that not all services
described
in Footnote 7 of the Notice will be provided to every Section
404(c)
Plan, Shearson Lehman believes that an updated, clarifying
paragraph
should be added to the footnote which would read as follows:

The applicant notes that not all of the services described in the
preceding two paragraphs will be provided to every Section 404(c)
Plan. The services provided to each Plan will depend on the
arrangement negotiated between Shearson Lehman and the Independent
Plan Fiduciary.

Shearson Lehman represents that it cannot assure that the Plan
administrator, trustee or named fiduciary of a Section 404(c) Plan
will make available a copy of the Trust Prospectus to each
participant. Therefore, it requests that Footnote 9 of the Notice
be
amended to read as follows:

In the case of a Section 404(c) Plan, the applicant represents
that
the Plan administrator, trustee or named fiduciary, as the
recordholder of Trust shares, will receive a copy of the Trust
Prospectus. If requested by such Plan administrator, trustee or
named
fiduciary, Shearson Lehman will make available to such Independent
Plan Fiduciary sufficient quantities of Prospectuses for a
distribution to Plan participants, as well as provide Statements
of
Additional Information to any party upon request.

Item 15 of the Notice inadvertently states that investors in the
TRAK
Program may exchange Portfolio shares with one another. Shearson
Lehman wishes to clarify that the first sentence of Item 15 should
be
amended to read as follows:

Shares of a Portfolio may be exchanged by an investor, without any
exchange fee, for shares of another Portfolio at their respective
net
asset values.

Shearson Lehman states that PTE 77-3 applies only to employee
benefit plans and is, therefore, inapplicable to IRAs maintained
by
employees of Shearson Lehman or its affiliates. In addition,
Shearson
Lehman states that it does not currently charge an outside fee for
such IRA accounts but it may do so in the future. Accordingly,
Shearson Lehman recommends that the first and last sentences of
Footnote 13 of the Notice be amended to read as follows:

The applicant represents that the outside fee is not currently
imposed
on accounts of American Express and its subsidiaries, including
Shearson Lehman, accounts of their immediate families and IRAs and
certain employee pension benefit plans for these persons * * *
With
respect to employee pension benefit plans maintained by Shearson
Lehman or its affiliates for their employees, the applicant
asserts
that such waiver would be required by PTE 77-3.

With respect to the TRAK fee structure described in the Notice in
Item
18 and the accompanying example, Shearson Lehman wishes to make
two
clarifications. First, because the TRAK fee and corresponding fee
offset for a calendar quarter are based on the "net asset value"
of
Trust Portfolio shares at the end of the immediately preceding
calendar quarter rather than the "average daily value" of Trust
Portfolio shares, Shearson Lehman requests that the first sentence
of
the example be amended to read as follows:

Assume that as of March 31, 1992, the net asset value of Trust
Portfolio shares held by a Plan investor was $1,000.

Second, Shearson Lehman has updated its submission by representing
that the last parenthetical of the last paragraph of the example
should not refer to the "Statement of Additional Information" but
should instead refer to the "TRAK Program Description." Therefore,
Shearson Lehman recommends that the parenthetical read as follows:

(pursuant to the authorization contained in the TRAK Investment
Advisory Agreement, and as described in the TRAK Program
Description
appended to the Prospectus).

Finally, Shearson Lehman suggests that Clause (e) under Item 19
should
be modified to track the language of Condition (5) as follows:

the Consulting Group will provide written documentation to an
Independent Plan Fiduciary of its recommendations or evaluations
based
on objective criteria.

The Department has reviewed the clarifications and amendments as
described above, and concurs with these changes. Accordingly, upon
consideration of the entire record, including the written comment
received, the Department has determined to grant the exemption
subjectto the aforementioned changes.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the
Department,
telephone (202) 523-8881. (This is not a toll-free number.)

PART C

Item 23. Exhibits

(a)(1) Master Trust Agreement is incorporated by reference to
Registrant's Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission (the "Commission") on May
24, 1991 (the "Registration Statement").

(a)(2) Amendment No. 1 to Master Trust Agreement is
incorporated by reference to the Registration Statement.

(a)(3) Amendment No. 2 to Master Trust Agreement is
incorporated by reference to Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A as
filed with the Commission on July 22, 1991 ("Pre-Effective
Amendment No. 1").

(a)(4) Amendment No. 3 to Master Trust Agreement is
incorporated by reference to Post-Effective Amendment
No. 6 ("Post-Effective Amendment No. 6") to the Registration
Statement on Form N-1A filed on March 18, 1994.

(b)(1) By-Laws are incorporated by reference to the
Registration Statement.

(b)(2) Amended and Restated By-Laws are incorporated by
reference to Pre-Effective Amendment No. 1.

(d)(1) Investment Management Agreement dated July 30, 1993
between the Registrant and The Consulting Group, a division of Smith,
Barney Advisers, Inc., is incorporated by reference to Post-Effective
Amendment No. 3 ("Post-Effective Amendment No. 3") to the
Registration Statement on Form N-1A filed with the Commission
on October 29, 1993.

(d)(2) Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Smith Affiliated Capital
Corp.
relating to Registrant's Municipal Bond Investments Portfolio is
incorporated by reference to Post-Effective Amendment No. 3.

(d)(3) Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Atlantic Portfolio Analytics
&
Management, Inc. relating to Registrant's Mortgage Backed Investments
Portfolio is incorporated by reference to Post-Effective Amendment No.
3.

(d)(4) Investment Advisory Agreement dated January 4, 1999
between Mutual Management Corp. and Seix Investment Advisors Inc.
relating to Registrant's Balanced Investments Portfolio is
incorporated by reference to Post-Effective Amendment No. 28 ("Post-
Effective Amendment No. 28") to the Registration Statement on Form N-
1A filed with the Commission
on December 23, 1999.

(d)(4) Investment Advisory Agreement dated January 4, 1999
between Mutual Management Corp. and Laurel Capital Advisors, LLP
relating to Registrant's Balanced Investments Portfolio is
incorporated by reference to Post-Effective Amendment No. 28.

(d)(6) Investment Advisory Agreement dated April 1, 1999
between SSBC Fund Management Inc. (formerly Smith, Barney Advisers,
Inc.)
and Standish, Ayer & Wood, Inc.
relating to Registrant's Intermediate Fixed Income Investments
Portfolio
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(7) Investment Advisory Agreement dated July 30, 1993
between Smith, Barney Advisers, Inc. and Julius Baer Investment
Management
Inc. relating to Registrant's International Fixed Income Investments
Portfolio is incorporated by reference to Post-Effective Amendment No.
3.

(d)(8) Investment Advisory Agreement dated April 1, 1998
between Mutual Management Corp. and NFJ Investment Group Inc. relating
to Registrant's Small Capitalization Value Equity Investments
Portfolio is incorporated by reference to Post-Effective Amendment
No.27.

(d)(9) Investment Advisory Agreement dated October 1, 1998 between
Mutual Management Corp. (Formerly Smith Barney Mutual Funds
Management Inc.) and The Boston Company
Asset Management LLC relating to Registrant's Large Capitalization
Value
Equity Investments Portfolio is incorporated by reference to Post-
Effective Amendment No. 28.

(d)(10) Investment Advisory Agreement dated March 10, 1995
between Smith Barney Mutual Funds Management Inc. and Parametric
Portfolio Associates, Inc. relating to Registrant's Large
Capitalization Value Equity Investments Portfolio is to be filed by
amendment.

(d)(11) Investment Advisory Agreement
dated January 11, 1999 between Mutual Management Corp. and Provident
Investment Counsel relating to Registrant's Large Capitalization
Growth
Investments Portfolio is incorporated by reference to Post-Effective
Amendment No. 28.

(d)(12) Investment Advisory Agreement dated October 1, 1998
between Mutual Management Corp. and Standish, Ayer & Wood, Inc.
relating to Registrant's Government Money Investments Portfolio is
incorporated by reference to Post-Effective Amendment No. 28.

(d)(13) Investment Advisory Agreement dated October 1, 1998
between Mutual Management Corp. and Oechsle International Advisors
L.P. relating to Registrant's International Equity Investments
Portfolio is
incorporated by reference to Post-Effective Amendment No. 28.

(d)(14) Investment Advisory Agreement dated March 3, 1994
between Smith, Barney Advisers, Inc. and John Govett & Company, Ltd.
relating to Registrant's Emerging Markets Equity Investments Portfolio
is incorporated by reference to Post-Effective Amendment No. 6.

(d)(15) Administration Agreement dated June 2, 1994 between the
Registrant and Smith, Barney Advisers, Inc. is incorporated by
reference to Post-Effective Amendment No. 16.

(d)(16) Investment Advisory Agreement dated October 1, 1999 between
SSB
Citi Fund Management LLC. (formerly Mutual Management Corp. and SSBC
Fund
Management Inc.) and Western Asset Management Company relating to
Long-Term Bond Investments is incorporated by reference to
Post-Effective Amendment No. 27.

(d)(17) Investment Advisory Agreement dated June, 1997 between
Smith Barney Mutual Funds Management Inc. and Wall Street Associates
relating to Small Capitalization Growth Investments is incorporated
by reference to Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A filed.

(d)(18) Investment Advisory Agreement dated November 18,1997 between
Smith Barney Mutual Funds Management Inc. and Westpeak Investment
Advisors, LP relating to Small Capitalization Growth Investments is
Incorporated by reference to Post-Effective Amendment No. 19 to the
Registration
Statement on Form N-1A filed.

(d)(19) Investment Advisory Agreement dated April 1, 1998 between
Mutual Management Corp. and Mellon Capital Management Corporation
relating to Small Capitalization Value Equity Investments is
incorporated by reference to Post-Effective Amendment No. 28.

(d)(20) Investment Advisory Agreement dated April 1, 1998 between
Mutual Management Corp. and Mellon Capital Management Corporation
relating to Small Capitalization Growth Investments is incorporated by
reference to Post-Effective Amendment No. 28.

(d)(21) Investment Advisory Agreement dated April 1, 1998 between
Mutual Management Corp. and Barclays Global Fund Advisors relating to
Large Capitalization Growth Investments is incorporated by reference
to
Post-Effective Amendment No. 27.

(d)(22) Investment Advisory Agreement dated January 11, 1999 between
Mutual Management Corp. and Barclays Global Fund Advisors relating to
Large Capitalization Value Equity Investments is incorporated by
reference to Post-Effective Amendment No.27.

(d)(23) Investment Advisory Agreement dated April 1, 1998 between
Mutual Management Corp. and David L. Babson & Co. Inc. relating to
Small Capitalization Value Equity Investments is incorporated by
reference to Post-Effective Amendment No. 28.

(d)(24) Investment Advisory Agreement dated June 15, 1998 between
Mutual Management Corp. and Alliance Capital Management L.P. relating
to Large Capitalization Value Equity Investments is incorporated by
reference to Post-Effective Amendment No. 28.

(d)(25) Investment Advisory Agreement dated October 1, 1998 between
Mutual Management Corp. and State Street Global Advisors relating to
International Equity Investments is incorporated by reference to Post-
Effective Amendment No. 28.

(d)(25) Investment Advisory Agreement dated July 15, 1998 between
Mutual Management Corp. and State Street Global Advisors relating to
Emerging Markets Equity Investments is incorporated by reference to
Post-Effective Amendment No. 28.

(d)(26) Investment Advisory Agreement dated August 3, 1998 between
Mutual Management Corp. and Baring Asset Management, Inc. relating to
Emerging Markets Equity Investments is incorporated by reference to
Post-Effective Amendment No. 28.

(d)(27) Investment Advisory Agreement dated April 15, 1999
between SSBC Fund Management Inc. (formerly Mutual Management Corp.)
and Pegasus Investments, Inc.
relating to Registrant's Multi-Strategy Market Neutral Investments is
incorporated by reference to Post-Effective Amendment No. 27.

(d)(28) Investment Advisory Agreement dated April 15, 1999
between SSBC Fund Management Inc. (formerly Mutual Management Corp.)
and State Street Global Advisors
relating to Registrant's Multi-Strategy Market Neutral Investments
is
incorporated by reference to Post-Effective Amendment No. 27.

(d)(29) Investment Advisory Agreement dated April 15, 1999
between SSBC Fund Management Inc. (formerly Mutual Management Corp.)
and Calamos Asset Management
relating to Registrant's Multi-Strategy Market Neutral Investments is
incorporated by reference to Post-Effective Amendment No. 27.

(d)(30) Investment Advisory Agreement dated October 1 , 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management
Inc.
and Mutual Management Corp.) and Standish, Ayer & Wood, Inc.
relating to Registrant's Multi-Sector Fixed Income Investments
is incorporated by reference to Post-Effective Amendment No.27.

(d)(31) Investment Advisory Agreement dated October 1, 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management
Inc.
and Mutual Management Corp.) and National Asset Management Corp.
relating to Registrant's Multi-Sector Fixed Income Investments
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(32) Investment Advisory Agreement dated October 1, 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management
Inc.
and Mutual Management Corp.) and Atlantic Portfolio Analytics and
Management
Inc. relating to Registrant's Multi-Sector Fixed Income Investments
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(33) Investment Advisory Agreement dated October 1, 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management
Inc.
and Mutual Management Corp.) and Alliance Capital Management, L.P.
relating to Registrant's Multi-Sector Fixed Income Investments
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(34) Investment Advisory Agreement dated October 1 , 1999
between SSB Citi Fund Management LLC (formerly SSBC Fund Management
Inc.
and Mutual Management Corp.) and Barclays Global Fund Advisors
relating to Registrant's S & P 500 Index Investments
is incorporated by reference to Post-Effective Amendment No. 27.

(d)(35) Investment Advisory Agreement dated April 1, 1999
between SSBC Fund Management Inc. (formerly Mutual Management Corp.)
and Chartwell Investment Partners relating to Registrant's Large
Capitalization Value Equity Investments Portfolio is incorporated by
reference to
Post-Effective Amendment No. 27.

(d)(36) Investment Advisory Agreement dated April 1, 1999 between
SSBC Fund Management Inc. (formerly Mutual Management Corp.) and Kern
capital Management LLC relating to Small Capitalization Growth
Investments is incorporated by reference to Post-Effective Amendment
No.27.

(d)(37) Investment Advisory Agreement dated April 1, 1999 between
SSBC Fund Management Inc. (formerly Mutual Management Corp.) and
Marvin & Palmer Associates relating to International Equity
Investments is incorporated
by reference to Post-Effective Amendment No.27.

(d)(38) Investment Advisory Agreement dated April 1, 1999
between SSBC Fund Management Inc. and Pacific Investment Management
Co.
relating to Registrant's Intermediate Fixed Income Investments
Portfolio
is incorporated by reference to Post-Effective Amendment No. 27.

(e)(1) Distribution Agreement dated July 30, 1993 between the
Registrant and Smith Barney Shearson Inc. is incorporated by reference
to
Post-Effective Amendment No. 3.

(e)(2) Form of Distribution Agreement between the Registrant
and CFBDS Inc. is incorpotated by reference to
Post-Effective Amendment No.23.

(e)(3) Form of Distribution Agreement between the Registrant
and Salomon Smith Barney Inc. is filed herein.

(f) Not Applicable.

(g)(1) Custody Agreements between the Registrant and PNC
Bank and Morgan Guaranty and Trust Company dated March
3, 1995 and August 24, 1995, respectively, are incorporated by
reference to
Post-Effective Amendment No. 13 to the Registration Statement
on Form N-1A as filed on November 2, 1995.

(g) (2) Custody Agreement between the Registrant and Chase Manhattan
Bank dated December 6, 1996 is to be filed by amendment.

(h) (1) Transfer Agency and Registrar Agreement between the
Registrant and The Shareholder Services Group, Inc., dated September
26, 1993, is incorporated by reference to Post-Effective Amendment No.
4 to the
Registration Statement on Form N-1A, as filed on
December 30, 1993.

(h) (2) Form of Transfer Agency Agreement between the Registrant and
Smith Barney Private Trust Company (Currently known as Citi Fiduciary
Trust Company) is filed herein.

(h) (3) Form of Sub-Transfer Agency Agreement between the First Data
Investor Services Group Inc. (Currently known as PFPC Global Fund
Services) and Smith Barney Private Trust Company (Currently known as
Citi Fiducaiary Trust Company)is filed herein.

(i) Opinion of Willkie Farr & Gallagher, including Consent,
is incorporated by reference to Post-Effective Amendment
No. 13 to the Registration Statement on Form N-1A filed
on November 2, 1995.

(j) Auditors' Consent is filed herein.

(k) Not Applicable.

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

(m) Not Applicable.

(n) Financial Data Schedule is filed herein.

(o) Not Applicable.

(p)(1)Code of Ethics-North America is filed herein.

(p)(2)Code of Ethics of Sub-Advisers will be filed by amendment.

Item 24. Persons Controlled by or Under Common Control with
Registrant

None.

Item 25. Indemnification

Incorporated by reference to Pre-Effective Amendment
No. 2 to the Registration Statement on Form N-1A as filed on
January 7, 1993.

Item 26(a) Business and Other Connections of Investment
Advisors

Investment Manager - The Consulting Group

The Consulting Group and its predecessor have been in
the investment counseling business since 1973. The Consulting Group
is a division of SSB Citi Fund Management LLC ("SSB Citi")(formerly known
as SSBC Fund Management Inc.), which was incorporated in 1968 under the
laws of the State of Delaware. On September 21, 1999, SSB Citi was
converted into a Delaware Limited Liability Company. SSB Citi is
a wholly owned subsidiary of Salomon Smith Barney Holdings Inc.,
which is in turn a wholly owned subsidiary of Citigroup Inc.

The list required by this Item 26 of officers and
directors of SSB Citi and the Consulting Group, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors during the past
two fiscal years, is incorporated by reference to Schedules A and D of Form ADV
filed by SSB Citi on behalf of the Consulting Group pursuant to the Advisers
Act (SEC File No. 801-8314).

Item 26.(b) Business and Other Connections of Advisors

Advisors - Standish, Ayer & Wood, Inc.

Standish, Ayer & Wood, Inc. ("SAW") serves as
investment advisor to Intermediate Fixed Income Investments, Multi-
Sector Fixed Income Investments and Government
Money Investments. SAW is registered as a commodity trading adviser
with the
National Futures Association. SAW has been registered as an
investment
advisor under the Advisers Act since 1940. SAW provides investment
advisory
services to individuals and institutions. SAW's principal executive
offices are located at One Financial Center, Boston, Massachusetts
02111.

The list required by this Item 26 of officers and
directors of SAW, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by
reference to Schedules A and D of Form ADV filed by SAW pursuant to
the
Advisers Act (SEC File No. 801-584).

Advisors - Smith Affiliated Capital Corp.

Smith Affiliated Capital Corp. ("SACC") serves as
investment advisor to Municipal Bond Investments. SACC has been
registered as an investment advisor under the Advisers Act since 1982.
SACC provides
investment advisory services to individuals and institutions, and is a
general partner of, and investment advisor to, a limited partnership
primarily investment in municipal bonds. SAW's principal executive
offices are located at 880 Third Avenue, New York, New York 10022.

The list required by this Item 26 of officers and
directors of SACC, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by
reference to Schedules A and D of Form ADV filed by SACC pursuant to
the
Advisers Act (SEC File No. 801-17037).

Advisors - Utendahl Capital Management CFI (Formerly Atlantic
Portfolio Analytics & Management, Inc.)

Utendahl Capital Management CFI ("Utendahl")
serves as investment advisor to Mortgage Backed Investments and Multi-
Sector Fixed Income Investments. Utendahl has been registered as an
investment advisor under the Advisers Act
since 1984. Utendahl serves as an investment advisor to institutions.
Utendahl's principal executive offices are located at 201 East Pine
Street, Suite 600, Orlando, Florida 32801.

The list required by this Item 26 of officers and
directors of Utendahl, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Utendahl
pursuant to the Advisers Act (SEC File No. 801-24775).

Advisors - Western Asset Management Company

Western Asset Management Company ("Western")
serves as investment advisor to Long-Term Bond Investments and Multi-
Sector Fixed Income Investments. Western has been registered as an
investment advisor under the Advisers Act
since 1971. Western serves as an investment advisor to institutions
and retail clients. Western's principal executive offices are located
at 117 East Colorado Blvd., Pasadena, CA 91105.

The list required by this Item 26 of officers and
directors of Western, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Western
pursuant to the Advisers Act (SEC File No. 801-8162).

Advisors - Pacific Investment Management Company

Pacific Investment Management Company ("PIMCO")
serves as an investment advisor to Intermediate Fixed Income
Investments. PIMCO has been registered as an investment advisor under
the Advisers Act
since 1971. PIMCO serves as an investment advisor to institutions
and retail clients. PIMCO's principal executive offices are located at
840 Newport Center Drive, Suite 300, Newport Beach, CA 92660.

The list required by this Item 26 of officers and
directors of PIMCO, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by PIMCO
pursuant to the Advisers Act (SEC File No. 801-48187).

Advisors - Chartwell Investment Partners

Chartwell Investment Partners ("Chartwell")
serves as investment advisor to fLArge Capitalization Value Equity
Investments. Chartwell has been registered as an investment advisor
under the Advisers Act since 1997. Chartwell serves as an investment
advisor to institutions. Chartwell's principal executive offices are
located at 1235 Westlakes Drive, Suite330, Berwyn, PA 19312.

The list required by this Item 26 of officers and
directors of Chartwell, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Chartwell
pursuant to the Advisers Act (SEC File No. 801-54124).

Advisors - The Boston Company Asset Management LLC

The Boston Company Asset Management LLC ("TBCAM") serves as
co-investment advisor to Large Capitalization Value Equity
Investments. TBCAM has been registered as an investment advisor under the
Advisers Act since 1970. TBCAM's principal executive offices are located
at One Boston Place, Boston, Massachusetts 02108.

The list required by this Item 26 of officers and
directors of TBCAM, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by TBCAM
pursuant to the Advisers Act (SEC File No.801-6829).

Advisors - Parametric Portfolio Associates, Inc.

Parametric Portfolio Associates, Inc. ("PPA") serves as
co-investment advisor to Large Capitalization Value Equity
Investments.
PPA has been registered as an investment advisor under the Advisers
Act since 1987. PPA provides investment advisory services to a number of
individual and institutional clients. PPA's principal executive
offices are located at 7310 Columbia Center, 701 Fifth Avenue, Seattle,
Washington 98104-7090.

The list required by this Item 26 of officers and
directors of PPA, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by
reference to Schedules A and D of Form ADV filed by PPA pursuant to
the
Advisers Act (SEC File No. 801-29855).

Advisors - Barclays Global Fund Advisors

Barclays Global Fund Advisors ("Barclays") serves as an
investment advisor to Large Capitalization Value Equity Investments,
Large Capitalization Growth Investments and S&P 500 Index Investments.
Barclays is registered as an investment advisor under the Advisers
Act. Barclays provides investment advisory services to a number of
individual and institutional clients. Barclays' principal executive
offices are located at 45 Fremont Street, San Francisco, CA 94105.

The list required by this Item 26 of officers and
directors of Barclays, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Barclays
pursuant to the Advisers Act (SEC File No. 801-22609).

Advisors - Provident Investment Counsel, Inc.

Provident Investment Counsel, Inc. ("PIC") serves as
investment advisor to Large Capitalization Growth Investments. PIC
has been registered as an investment advisor under the Advisers Act
since 1951. PIC provides investment advisory services to individual
and institutional clients. PIC's principal executive offices are located
at 300 North Lake Avenue, Pasadena, California 91101.

The list required by this Item 26 of officers and
directors of PIC, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by PIC
pursuant to the Advisers Act (SEC File No. 801-11303).

Advisors - Mellon Capital Management Corporation

Mellon Capital Management Corporation ("Mellon") serves as an
investment advisor to Small Capitalization Value Equity Investments
and Small Capitalization Growth Investments. Mellon is registered as
an investment advisor under the Advisors Act. Mellon provides
investment advisory services to a number of institutional clients.
Mellon's principal executive offices are located at 595 Market Street,
Suite 3000, San Francisco, CA 94105.

The list required by this Item 26 of officers and
directors of Mellon, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Mellon
pursuant to the Advisers Act (SEC File No. 801-19785).

Advisors - NFJ Investment Group, Inc.

NFJ Investment Group, Inc. ("NFJ") serves as co-
investment advisor to Small Capitalization Value Equity Investments.
NFJ has been registered as an investment advisor under the Advisors
Act since 1989. NFJ provides investment advisory services to a number
of individual and institutional clients. NFJ's principal executive
offices are located at 2121 San Jacinto Street, Suite 1440, Dallas,
Texas 75201.

The list required by this Item 26 of officers and
directors of NFJ, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by NFJ
pursuant to the Advisers Act (SEC File No. 801-42814).

Advisors - Wall Street Associates

Wall Street Associates ("WSA") will serve as
co-investment advisor to Small Capitalization Growth Investments. WSA
has been registered as an investment advisor under the Advisers Act
since 1987. WSA is the investment adviser of various institutional
clients. WSA's principal executive offices are located at 1200 Prospect Street,
Suite 100, LaJolla, CA 92037.

The list required by this Item 26 of officers and
directors of WSA, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedule A and D of Form ADV filed by WSA
pursuant to the Advisers Act (SEC File No.801-30019).

Advisors - Westpeak Investment Advisors, LP

Westpeak Investment Advisors, LP("WSA") will serve as
co-investment advisor to Small Capitalization Growth Investments.
Westpeak has been registered as an investment advisor under the
Advisers Act since 1991. Westpeak is the investment adviser of various
institutional clients. Westpeak's principal executive offices are
located at 1011 Walnut Street,
Suite 400, Boulder, CO 80302.

The list required by this Item 26 of officers and
directors of Westpeak, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedule A and D of Form ADV filed by Westpeak
pursuant to the Advisers Act (SEC File No.801-39554).

Advisors - Kern Capital Management LLC

Kern Capital Management LLC ("Kern") serves as an investment
advisor to Small Capitalization Growth Investments. Kern has been
registered as an investment advisor under the Advisers Act since 1997.
Kern is the investment adviser of various institutional and retail
clients. Kern's principal executive offices are located at 114 West 47th
Street, Suite 1926,New York, NY 10036.

The list required by this Item 26 of officers and
directors of Kern, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedule A and D of Form ADV filed by Kern
pursuant to the Advisers Act (SEC File No.801-54766).

Advisors - Oechsle International Advisors, L.P.

Oechsle International Advisors, L.P. ("OIA") serves as
investment advisor to International Equity Investments. OIA has been
registered as an investment advisor under the Advisers Act since 1986.
OIA provides investment advisory services to a number of individual and
institutional clients. OIA's principal executive offices are located
at One International Place, Boston, Massachusetts 02110.

The list required by this Item 26 of officers and
directors of OIA, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by OIA
pursuant to the Advisers Act (SEC File No. 801-28111).

Advisors - State Street Global Advisors

State Street Global Advisors ("SSGA") serves as an
investment advisor to International Equity Investments, Emerging
Markets Equity Investments and Multi-Strategy Market Neutral
Investments. SSGA provides investment advisory services to a number of
individual and institutional clients. SSGA's principal executive
offices are located at Two International Place, Boston, Massachusetts
02110.

The list required by this Item 26 of officers and
directors of SSGA, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to _____.

Advisors - Julius Baer Investment Management Inc.

Julius Baer Investment Management Inc. ("JBIM") serves
as investment advisor to International Fixed Income Investments. JBIM
has been registered as an investment advisor under the Advisers Act
since 1984. Directly and through Julius Baer Securities Inc., JBIM
provides investment advisory services to a wide variety of individual
and institutional clients, including registered investment companies.
JBIM's principal executive offices are located at 330 Madison Avenue, New
York, New York 10017.

The list required by this Item 26 of officers and
directors of JBIM together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by JBIM
pursuant to the Advisers Act (SEC File No. 801-18766).

Advisors - Baring Asset Management, Inc.

Baring Asset Management, Inc. ("Baring") serves as an
investment advisor to Emerging Markets Equity Investments. Baring has
been registered as an investment advisor under the Advisers Act since 1967.
Baring is the investment adviser of various institutional clients.
Baring's principal executive offices are located at 125 High Street, Boston, MA
02110.

The list required by this Item 26 of officers and
directors of Baring, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is incorporated
by reference to Schedule A and D of Form ADV filed by Baring pursuant to
the Advisers Act (SEC File No.801-4611).

Advisors - Alliance Capital Management L.P.

Alliance Capital Management L.P. ("Alliance") will serve as
investment advisor to High Yield Investments and Multi-Sector Fixed
Income Investments. Alliance has been
registered as an investment advisor under the Advisers Act since 1971.
Alliance is the investment adviser of various institutional and
individual clients. Alliance's principal executive offices are located at 1345
Avenue of the Americas, New York, New York .

The list required by this Item 26 of officers and
directors of Alliance, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedule A and D of Form ADV filed by Alliance
pursuant to the Advisers Act (SEC File No.801-32361).

Advisors - Laurel Capital Advisors, LLP

Laurel Capital Advisors, LLP ("Laurel") serves as an
investment advisor to Balanced Investments. Laurel has been
registered as an investment advisor under the Advisers Act since 1990.
Laurel is the investment adviser of various institutional and
individual clients. Babson's principal executive offices are located
at One Mellon Bank Center,
Suite 151-3925, Pittsburgh, PA 15258.

The list required by this Item 26 of officers and
directors of Laurel, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedule A and D of Form ADV filed by Laurel
pursuant to the Advisers Act (SEC File No.801-37598).

Advisors - Seix Investment Advisors

Seix Investment Advisors ("Seix") serve as an
investment advisor to Balanced Investments. Seix has been registered
as an investment advisor under the Advisers Act since 1992. Seix is
the investment adviser of various institutional clients. Seix's
principal executive offices are located at 300 Tice Blvd., Woodcliff
Lake, NJ 07675.

The list required by this Item 26 of officers and
directors of Seix, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedule A and D of Form ADV filed by Seix
pursuant to the Advisers Act (SEC File No.801-42070).

Advisors - Pegasus Investments, Inc.

Pegasus Investments, Inc. ("Pegasus") serves as an
investment advisor to Multi-Strategy Market Neutral Investments.
Pegasus has been registered as an investment advisor under the
Advisers Act since 1999. Pegasus is the investment adviser of various
institutional clients. Pegasus's principal executive offices are
located at One Boston Place, Boston, Massachusetts 02108.

The list required by this Item 26 of officers and
directors of Pegasus, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is
incorporated by reference to Schedule A and D of Form ADV filed by Pegasus
pursuant to the Advisers Act (SEC File No.801-___).

Advisors - Calamos Asset Management

Calamos Asset Management ("Calamos") serves as an
investment advisor to Multi-Strategy Market Neutral Investments.
Calamos has been registered as an investment advisor under the
Advisers Act since 1977. Pegasus is the investment adviser of various
retail and institutional clients. Calamos's principal executive
offices are located at 1111 East Warrenville Road, Naperville,
Illinois 60563.

The list required by this Item 26 of officers and
directors of Calamos, together with information as to any other
business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two years, is
incorporated by reference to Schedule A and D of Form ADV filed by
Calamos pursuant to the Advisers Act (SEC File No.801-29688).

Item 27. Principal Underwriters

(a)

Salomon Smith Barney, Inc., ("Salomon Smith Barney")
the Registrant's Distributor,
is also the distributor for the following Smith Barney
funds: Concert Investment Series,
Greenwich Street Series Fund, Smith Barney
Adjustable Rate Government Income Fund, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation Fund
Inc., Smith Barney Arizona Municipals Fund Inc., Smith
Barney California Municipals Fund Inc., Smith Barney Concert
Allocation Series Inc., Smith Barney Equity Funds, Smith
Barney Fundamental Value Fund Inc., Smith Barney Funds,
Inc., Smith Barney Income Funds, Smith Barney Institutional
Cash Management Fund, Inc., Smith Barney Investment Funds
Inc., Smith Barney Investment Trust, Smith Barney Managed
Governments Fund Inc., Smith Barney Managed Municipals Fund Inc.,
Smith Barney Massachusetts Municipals Fund,
Smith Barney Money Funds, Inc., Smith Barney Muni Funds, Smith
Barney Municipal Money Market Fund, Inc., Smith Barney New
Jersey Municipals Fund Inc., Smith Barney Oregon Municipals
Fund Inc., Smith Barney Principal Return Fund,
Smith Barney Sector Series Inc., Smith Barney
Small Cap Blend Fund, Inc., Smith Barney Telecommunications
Trust, Smith Barney Variable Account Funds, Smith Barney
World Funds, Inc., Travelers Series Fund Inc., and various
series of unit investment trusts.

(b) The information required by
this Item 27 with respect to each director, officer and partner
of Salomon Smith Barney is incorporated by reference
to Schedule A of FORM BD filed by Salomon Smith Barney pursuant to
the Securities Exchange Act of 1934 (SEC File No. 812-8510).

Item 28. Location of Accounts and Records

Consulting Group Capital Markets Funds
222 Delaware Avenue
Wilmington, Delaware 19801

SSB Citi Fund Management LLC
388 Greenwich Street
New York, New York 10013

PNC Bank, National Association
17th and Chestnuts Streets
Philadelphia, Pennsylvania

The Chase Manhattan Bank
Chase MetroTech Center
Brooklyn, NY 11245

Salomon Smith Barney Inc.
388 Greenwich Street, 22nd Floor
New York, New York 10013
and
125 Broad Street
New York, New York 10004

Citi Fiduciary Trust Company
125 Broad Street
New York, New York 10004

PFPC Global Fund Services
P. O. Box 9699
Providence, RI 02940-9699

Item 29. Management Services

Not Applicable.

Item 30. Undertakings

Not Applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended (the"1933 Act") and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the 1933 Act and the Registrant has duly caused this Post-
Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, this Post-Effective Amendment, and where
applicable, the true and lawful attorney-in-fact, thereto duly
authorized, in the City of New York and State of New York on the 26th
day of July 2000.

CONSULTING GROUP CAPITAL MARKETS FUNDS

BY /s/ Heath B. McLendon
(Heath B. McLendon, Chief Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the date
indicated.

Signature Title Date

/s/ Heath B. McLendon
Trustee and Chairman of the Board July 26, 2000
Heath B. McLendon (Chief Executive Officer)

/s/ Lewis E. Daidone
Senior Vice President and Treasurer July 26, 2000
Lewis E. Daidone (Chief Financial and Accounting
Officer)

/s/ Walter E. Auch, Sr.*
Walter E. Auch, Sr., Trustee July 26, 2000

/s/ H. John Ellis**
H. John Ellis, Trustee

/s/ Armon E. Kamesar, Trustee, July 26, 2000
Armon E. Kamesar

/s/ Martin Brody*
Martin Brody, Trustee, July 26, 2000

/s/ Stephen E. Kaufman*
Stephen E. Kaufman, Trustee, July 26, 2000

* Signed pursuant to power of attorney filed October 29, 1993 as an
exhibit
to Post-Effective Amendment No. 3.

/s/ Heath B. McLendon
Heath B. McLendon July 26, 2000

** Signed pursuant to power of attorney filed herein.

POWER OF ATTORNEY

I, the undersigned, hereby severally constitute and appoint
Heath B. McLendon, Christina T. Sydor, Lewis E. Daidone and
Barbara Allen and each of them singly, my true and lawful
attorneys, with full power to them and each of them to sign for
me, and in my hands and in the capacities indicated below, any and
all Amendments to Consulting Group Capital Markets Funds's
Registration Statement and to file the same, with all exhibits
thereto, and other documents therewith, with the Securities and
Exchange Commission, granting unto said attorneys and each of
them, acting alone, full authority and power to do and perform
each and every act and thing requisite or necessary to be done in
the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys or any of them may lawfully do or cause to be done by
virtue thereof.

WITNESS my hands on the date set forth below.

Pursuant to the requirements of the Securities Act of 1933,
as amended, this Amendment to the Registration Statement and the
above Power of Attorney has been signed below by the following
person in the capacities and as of the date indicated.

Signature:
Title:
Date:

/s/ H. John Ellis
H. John Ellis

Trustee

March 1, 2000