<PAGE>
SMITH BARNEY
CONCERT SERIES INC.
[ART]
P R O S P E C T U S
FEBRUARY 5, 1996
Prospectus begins on page one
[LOGO]
Smith Barney
Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS FEBRUARY 5, 1996
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Concert Series Inc. (the "Concert Series" or "Series") offers
five professionally managed investment portfolios (each, a "Portfolio"). Each
Portfolio seeks to achieve its objective by investing in a number of other
Smith Barney Mutual Funds.
The High Growth Portfolio seeks capital appreciation.
The Growth Portfolio seeks long-term growth of capital.
The Balanced Portfolio seeks a balance of growth of capital and income.
The Conservative Portfolio seeks income and, secondarily, long-term growth of
capital.
The Income Portfolio seeks high current income.
This Prospectus sets forth concisely certain information about the Concert
Series and each of the Portfolios that prospective investors will find helpful
in making an investment decision. Investors are encouraged to read this Pro-
spectus carefully and retain it for future reference.
Additional information about each of the Portfolios is contained in a State-
ment of Additional Information dated February 5, 1996, as amended or
supplemented from time to time, that is available upon request and without
charge by calling or writing the Concert Series at the telephone number or
address set forth above or by contacting a Smith Barney Financial Consultant.
The Statement of Additional Information has been filed with the Securities
and Exchange Commission (the "SEC") and is incorporated by reference into this
Prospectus in its entirety.
SMITH BARNEY INC.
Distributor
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Investment Manager
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE>
Smith Barney Concert Series Inc.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
- --------------------------------------------------
WHY INVEST IN THE CONCERT SERIES 10
- --------------------------------------------------
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES 10
- --------------------------------------------------
RISK FACTORS AND SPECIAL CONSIDERATIONS 12
- --------------------------------------------------
PORTFOLIO TURNOVER 13
- --------------------------------------------------
INVESTMENT RESTRICTIONS 14
- --------------------------------------------------
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS 14
- --------------------------------------------------
VALUATION OF SHARES 25
- --------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 25
- --------------------------------------------------
PURCHASE OF SHARES 26
- --------------------------------------------------
EXCHANGE PRIVILEGE 34
- --------------------------------------------------
REDEMPTION OF SHARES 37
- --------------------------------------------------
MINIMUM ACCOUNT SIZE 39
- --------------------------------------------------
PERFORMANCE 39
- --------------------------------------------------
MANAGEMENT OF THE CONCERT SERIES 40
- --------------------------------------------------
DISTRIBUTOR 41
- --------------------------------------------------
ADDITIONAL INFORMATION 42
- --------------------------------------------------
APPENDIX A-1
- --------------------------------------------------
</TABLE>
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the
Concert Series or the Distributor. This Prospectus does not constitute an offer
by the Concert Series or the Distributor to sell or a solicitation of an offer
to buy any of the securities offered hereby or securities of any Underlying
Smith Barney Fund in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction.
- -------------------------------------------------------------------------------
2
<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the Prospec-
tus. See "Table of Contents."
INVESTMENT OBJECTIVES The Concert Series is an open-end, non-diversified man-
agement investment company that currently offers five professionally managed
investment portfolios. The High Growth Portfolio seeks to provide capital
appreciation. The Growth Portfolio seeks to provide long-term growth of capi-
tal. The Balanced Portfolio seeks to provide a balance of growth of capital and
income. The Conservative Portfolio seeks to provide income and, secondarily,
long-term growth of capital. The Income Portfolio seeks to provide high current
income. Each Portfolio seeks to achieve its investment objective by investing
in a diverse mix of "Underlying Smith Barney Funds", which consist of open-end
management investment companies or series thereof for which Smith Barney Inc.
("Smith Barney") now or in the future acts as principal underwriter or for
which Smith Barney, Smith Barney Mutual Funds Management Inc. ("SBMFM") or
Smith Barney Strategy Advisers Inc. ("SBSA") now or in the future acts as
investment adviser. In addition, each Portfolio may invest its short-term cash
in repurchase agreements. Investors may choose to invest in one or more of the
Portfolios based on their personal investment goals, risk tolerance and finan-
cial circumstances. See "Investment Objectives and Management Policies."
ALTERNATIVE PURCHASE ARRANGEMENTS Each Portfolio offers several classes of
shares ("Classes") to investors designed to provide them with the flexibility
of selecting an investment best suited to their needs. The general public is
offered three Classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of sales charges and rate of expenses
to which they are subject. A fourth Class of shares, Class Y shares, is offered
only to investors meeting an initial investment minimum of $5,000,000. See
"Purchase of Shares" and "Redemption of Shares."
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.00% with respect to the High Growth Portfolio, the
Growth Portfolio and the Balanced Portfolio and up to 4.50% with respect to the
Conservative Portfolio and the Income Portfolio. The initial sales charge may
be reduced or waived for certain purchases. Purchases of Class A shares which,
when combined with current holdings of Class A shares offered with a sales
charge, equal or exceed $500,000 in the aggregate, will be made at net asset
value with no initial sales charge, but will be subject to a contingent
deferred sales charge ("CDSC") of 1.00% on redemptions made within 12 months of
purchase. See "Prospectus Summary--Reduced or No Initial Sales Charge." Class A
shares are subject to an annual service fee of 0.25% of the average daily net
assets of the Class.
Class B Shares. Class B shares of the High Growth Portfolio, the Growth Port-
folio and the Balanced Portfolio are offered at net asset value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by 1.00% each year
after the date of purchase to zero. Class B shares of the Conservative Portfo-
lio and the Income Portfolio are offered at net asset value subject to a maxi-
mum CDSC of 4.50% of redemption proceeds, declining by 0.50% the first year
after purchase and 1.00% each year thereafter to zero. The CDSC may be waived
for certain redemptions. Class B shares of the High Growth Portfolio, the
Growth Portfolio and the Balanced Portfolio are subject to an annual service
fee of 0.25% and an annual distribution fee of 0.75% of the average daily net
assets of the Class. Class B shares of the Conservative Portfolio and the
Income Portfolio are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.50% of the average daily net assets of the Class. The
Class B shares' distribution fee may cause that Class to have higher expenses
and pay lower dividends than Class A shares.
3
<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
Class B Shares Conversion Feature. Class B shares will convert automatically
to Class A shares, based on relative net asset value, eight years after the
date of the original purchase. Upon conversion, these shares will no longer be
subject to an annual distribution fee. In addition, a certain portion of Class
B shares that have been acquired through the reinvestment of dividends and dis-
tributions ("Class B Dividend Shares") will be converted at that time. See
"Purchase of Shares--Deferred Sales Charge Alternatives."
Class C Shares. Class C shares are sold at net asset value with no initial
sales charge; however, investors pay a CDSC of 1.00% if they redeem Class C
shares within 12 months of purchase. The CDSC may be waived for certain redemp-
tions. Class C shares of the High Growth Portfolio, the Growth Portfolio and
the Balanced Portfolio are subject to an annual service fee of 0.25% and an
annual distribution fee of 0.75% of the average daily net assets of the Class.
Class C shares of the Conservative Portfolio and the Income Portfolio are sub-
ject to an annual service fee of 0.25% and an annual distribution fee of 0.45%
of the average daily net assets of the Class. The Class C shares' distribution
fee may cause that Class to have higher expenses and pay lower dividends than
Class A shares. Purchases of Class C shares, which when combined with current
holdings of Class C shares of a Portfolio equal or exceed $500,000 in
the aggregate, should be made in Class A shares at net asset value with no
sales charge, and will be subject to a CDSC of 1.00% on redemptions made
within 12 months of purchase.
Class Y Shares. Class Y shares are available only to investors meeting an
initial investment minimum of $5,000,000. Class Y shares are sold at net asset
value with no initial sales charge or CDSC. They are not subject to any service
or distribution fees.
In deciding which Class of Portfolio shares to purchase, investors should
consider the following factors, as well as any other relevant facts and circum-
stances:
Intended Holding Period. The decision as to which Class of shares is more
beneficial to an investor depends on the amount and intended length of his or
her investment. Shareholders who are planning to establish a program of regular
investment may wish to consider Class A shares; as the investment accumulates
shareholders may qualify for reduced sales charges and the shares are subject
to lower ongoing expenses over the term of the investment. As an alternative,
Class B and Class C shares are sold without any initial sales charge so the
entire purchase price is immediately invested in a Portfolio. Any investment
return on these additional invested amounts may partially or wholly offset the
higher annual expenses of these Classes. Because a Portfolio's future return
cannot be predicted, however, there can be no assurance that this would be the
case.
Finally, investors should consider the effect of the CDSC period and any con-
version rights of the Classes in the context of their own investment
time frame. For example, while Class C shares have a shorter CDSC period than
Class B shares, they do not have a conversion feature, and therefore, are
subject to an ongoing distribution fee. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks.
Investors investing a minimum of $5,000,000 must purchase Class Y shares,
which are not subject to an initial sales charge, CDSC or service or
distribution fees. The maximum purchase amount for Class A shares is
$4,999,999, Class B shares is $249,999 and Class C shares is $499,999
. There is no maximum purchase amount for Class Y shares.
Reduced or No Initial Sales Charge. The initial sales charge on Class A
shares may be waived for certain eligible purchasers, and the entire purchase
price will be immediately invested in a Portfolio. In addi-
4
<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
tion, Class A share purchases which, when combined with current holdings of
Class A shares offered with a sales charge, equal or exceed $500,000 in the
aggregate, will be made at net asset value with no initial sales charge, but
will be subject to a CDSC of 1.00% on redemptions made within 12 months of pur-
chase. The $500,000 aggregate investment may be met by adding the purchase to
the net asset value of all Class A shares offered with a sales charge held in
funds sponsored by Smith Barney listed under "Exchange Privilege." Class A
share purchases also may be eligible for a reduced initial sales charge. See
"Purchase of Shares." Because the ongoing expenses of Class A shares may be
lower than those for Class B and Class C shares, purchasers eligible to pur-
chase Class A shares at net asset value or at a reduced sales charge should
consider doing so.
Smith Barney Financial Consultants may receive different compensation for
selling each Class of shares. Investors should understand that the purpose of
the CDSC on the Class B and Class C shares is the same as that of the initial
sales charge on the Class A shares.
See "Purchase of Shares" and "Management of the Concert Series" for a com-
plete description of the sales charges and service and distribution fees for
each Class of shares and "Valuation of Shares," "Dividends, Distribution and
Taxes" and "Exchange Privilege" for other differences between the Classes of
shares.
SMITH BARNEY 401(K) PROGRAM Investors may be eligible to participate in the
Smith Barney 401(k) Program, which is generally designed to assist plan spon-
sors in the creation and operation of the retirement plans under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as other
types of participant directed, tax-qualified employee benefit plans (collec-
tively, "Participating Plans"). Class A, Class B, Class C and Class Y shares
are available as investment alternatives for Participating Plans. See "Purchase
of Shares--Smith Barney 401(k) Program."
PURCHASE OF SHARES Shares may be purchased through a brokerage account main-
tained with Smith Barney . Shares may also be purchased through a
broker that clears securities transactions through Smith Barney on a
fully disclosed basis (an "Introducing Broker") or an investment dealer in
the selling group. In addition, certain investors, including qualified
retirement plans and certain other institutional investors, may purchase
shares directly from the Concert Series through the Series' transfer agent,
First Data Investor Services Group, Inc. ("First Data"), a subsidiary of
First Data Corporation. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors in Class A, Class B and Class C shares may open
an account by making an initial investment of at least $1,000 for each account
in each class (except for Systematic Investment Plan accounts), or
$250 for an individual retirement account ("IRA") or a Self-Employed
Retirement Plan. Investors in Class Y shares may open an account for an
initial investment of $5,000,000. Subsequent investments of at least $50 may
be made for all Classes. For participants in retirement plans qualified under
Section 403(b)(7) or Section 401(a) of the Code, the minimum initial
investment requirement for Class A, Class B and Class C shares and the
subsequent investment requirement for all Classes is $25. The minimum initial
investment requirement for Class A, Class B and Class C shares and the
subsequent investment requirement for all Classes through the Systematic
Investment Plan described below is $50. See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN Each Portfolio offers shareholders a Systematic
Investment Plan under which they may authorize the automatic placement of a
purchase order each month or quarter for Portfolio shares in an amount of at
least $50. See "Purchase of Shares."
5
<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares" and "Re-
demption of Shares."
MANAGEMENT OF EACH PORTFOLIO SBMFM serves as each Portfolio's investment manag-
er. SBMFM is a wholly owned subsidiary of Smith Barney Holdings Inc. ("Hold-
ings"). Holdings is a wholly owned subsidiary of Travelers Group Inc.
("Travelers"), a diversified financial services holding company engaged,
through its subsidiaries, principally in four business segments: Investment
Services, Consumer Finance Services, Life Insurance Services and Property &
Casualty Insurance Services.
SBMFM serves as the investment adviser of each of the Underlying Smith Barney
Funds (other than Smith Barney Premium Total Return Fund). SBSA, a wholly owned
subsidiary of SBMFM, serves as investment adviser to Smith Barney Premium Total
Return Fund . See "Management of the Concert Series."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
Class of certain other funds of the Smith Barney Mutual Funds, including the
Underlying Smith Barney Funds held by the Portfolios, at the respective net
asset values next determined, plus any applicable sales charge differential.
See "Exchange Privilege."
VALUATION OF SHARES Net asset value of each Portfolio for the prior day gener-
ally will be quoted daily in the financial section of most newspapers and is
also available from a Smith Barney Financial Consultant. See "Valuation of
Shares."
DIVIDENDS AND DISTRIBUTIONS The Concert Series intends to pay dividends from
net investment income monthly on shares of the Income Portfolio, quarterly on
shares of the Conservative Portfolio and the Balanced Portfolio and
annually on shares of the High Growth Portfolio and the Growth Portfolio.
Distributions of net realized capital gains, if any, are paid annually for
each Portfolio. See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a Class
will be reinvested automatically, unless otherwise specified by an investor, in
additional shares of the same Class at current net asset value. Shares acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution rein-
vestments will become eligible for conversion to Class A shares on a pro rata
basis. See "Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS The assets of each Portfolio are
invested in certain Underlying Smith Barney Funds, so each Portfolio's invest-
ment performance is directly related to the investment performance of the
Underlying Smith Barney Funds held. The ability of each Portfolio to meet its
investment objective is directly related to the ability of the Underlying Smith
Barney Funds held to meet their objectives as well as the allocation among
those Underlying Smith Barney Funds by SBMFM. There can be no assurance that
the investment objective of any Portfolio or any Underlying Smith Barney Fund
will be achieved.
The value of the Underlying Smith Barney Funds' investments, and thus the net
asset value of both those Underlying Smith Barney Funds' and the Portfolios'
shares, will fluctuate in response to changes in market and economic condi-
tions, as well as the financial condition and prospects of issuers in which the
Underlying Smith Barney Funds invest. For a description of the risks involved
in an investment in the Portfolios, see "Investment Objectives and Management
Policies," "Description of the Underlying Smith Barney Funds" and the Appendix
to this Prospectus.
6
<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
EACH PORTFOLIO'S EXPENSES The following expense tables list the costs and
expenses an investor will incur as a shareholder of each Portfolio, based on
the maximum sales charge or maximum CDSC that may be incurred at the time of
purchase or redemption and estimates of each Portfolio's operating expenses for
its first full year of operation.
<TABLE>
<CAPTION>
APPLICABLE TO THE HIGH GROWTH PORTFOLIO,
THE GROWTH PORTFOLIO AND THE BALANCED PORTFOLIO
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales charge
imposed on purchases (as
a percentage of offering
price) 5.00% None None None
Maximum CDSC (as a
percentage of original
cost or redemption
proceeds, whichever is
lower) None* 5.00% 1.00% None
- -----------------------------------------------------------------------------
ANNUAL PORTFOLIO
OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET
ASSETS)
Management fee 0.35% 0.35% 0.35% 0.35%
12b-1 fee** 0.25 1.00 1.00 --
Other expenses*** None None None None
- -----------------------------------------------------------------------------
TOTAL PORTFOLIO OPERATING
EXPENSES 0.60% 1.35% 1.35% 0.35%
- -------------------------------------------------------------------------------
<CAPTION>
APPLICABLE TO THE CONSERVATIVE PORTFOLIO
AND THE INCOME PORTFOLIO
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales charge
imposed on purchases (as
a percentage of offering
price) 4.50% None None None
Maximum CDSC (as a
percentage of original
cost or redemption
proceeds, whichever is
lower) None* 4.50% 1.00% None
- ------------------------------------------------------------------------------
ANNUAL PORTFOLIO
OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET
ASSETS)
Management fee 0.35% 0.35% 0.35% 0.35%
12b-1 fee** 0.25 0.75 0.70 --
Other expenses*** None None None None
- ------------------------------------------------------------------------------
TOTAL PORTFOLIO OPERATING
EXPENSES 0.60% 1.10% 1.05% 0.35%
- ---------------------------------------------------------------------------
</TABLE>
* Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge equal or exceed $500,000 in the
aggregate, will be made at net asset value with no sales charge, but
will be subject to a CDSC of 1.00% on redemptions made within 12 months.
** Upon conversion of Class B shares to Class A shares, such shares will no
longer be subject to a distribution fee. Class C shares do not have a con-
version feature and, therefore, are subject to an ongoing distribution fee.
As a result, long-term shareholders of Class C shares may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
*** Under the Asset Allocation and Administration Agreement with each Portfo-
lio, SBMFM bears all expenses of each Class of each Portfolio other than
the management fee, the 12b-1 fee and extraordinary expenses.
The sales charges and CDSCs set forth in the above tables are the maximum
charges imposed on purchases or redemptions of each of the Portfolios'
shares and investors may actually pay lower or no charges, depending on
the amount purchased and, in the case of Class B, Class C and certain Class A
shares, the length of time the shares are held and whether the shares are
held through the Smith Barney 401(k) Program. See "Purchase of Shares" and
"Redemption of Shares." Smith Barney receives an annual 12b-1 service fee of
0.25% of the value of average daily net assets of Class A shares of each
Portfolio . Smith Barney also receives with respect to Class B and Class C
shares of the High Growth Portfolio, the Growth Portfolio and the Balanced
Portfolio an annual 12b-1 fee of 1.00% of the value of average daily
7
<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
net assets of the respective Classes, consisting of a 0.75% distribution fee
and a 0.25% service fee. For Class B shares of the Conservative Portfolio and
the Income Portfolio, Smith Barney receives an annual 12b-1 fee of 0.75% of the
value of average daily net assets of that Class, consisting of a 0.50% distri-
bution fee and a 0.25% service fee. For Class C shares of the Conservative
Portfolio and the Income Portfolio, Smith Barney receives an annual 12b-1 fee
of 0.70% of the value of average daily net assets of that Class, consisting of
a 0.45% distribution fee and a 0.25% service fee.
The Portfolios will invest only in Class Y shares of the Underlying Smith
Barney Funds and, accordingly, will not pay any sales load or 12b-1 service or
distribution fees in connection with their investments in shares of the Under-
lying Smith Barney Funds. The Portfolios, however, will indirectly bear their
pro rata share of the fees and expenses incurred by the Underlying Smith Barney
Funds that are applicable to Class Y shareholders. The investment
returns of each Portfolio, therefore, will be net of the expenses of the Unde-
rlying Smith Barney Funds in which it is invested. The following chart shows
the expense ratios applicable to Class Y shareholders of each Underlying Smith
Barney Fund held by a Portfolio, based on estimated operating expenses for
its current fiscal year:
<TABLE>
<CAPTION>
UNDERLYING SMITH BARNEY FUND EXPENSE RATIO
- -------------------------------------------------------------
<S> <C>
Smith Barney Aggressive Growth Fund Inc. 0.92%
Smith Barney Appreciation Fund Inc. 0.69%
Smith Barney Equity Funds
Smith Barney Growth and Income Fund 0.87%
Smith Barney Fundamental Value Fund Inc. 0.90%
Smith Barney Funds, Inc.
Equity Income Portfolio 0.67%
Short-Term U.S. Treasury Securities Portfolio 0.54%
Smith Barney Income Funds
Smith Barney High Income Fund 0.81%
Smith Barney Utilities Fund 0.74%
Smith Barney Premium Total Return Fund 0.83%
Smith Barney Convertible Fund 0.92%
Smith Barney Diversified Strategic Income Fund 0.79%
Smith Barney Investment Funds Inc.
Smith Barney Managed Growth Fund 0.95%
Smith Barney Special Equities Fund 0.86%
Smith Barney Government Securities Fund 0.64%
Smith Barney Investment Grade Bond Fund 0.76%
Smith Barney Managed Governments Fund Inc. 0.74%
Smith Barney Money Funds , Inc.
Cash Portfolio 0.46%
Smith Barney World Funds, Inc.
International Equity Portfolio 0.98%
Emerging Markets Portfolio 1.40%
International Balanced Portfolio 1.07%
Global Government Bond Portfolio 0.95%
- -------------------------------------------------------------
</TABLE>
Based on a weighted average of the Class Y expense ratios of Underlying
Smith Barney Funds in which a particular Portfolio is expected to invest at
the commencement of investment operations , the approximate expense
ratios are expected to be as follows: High Growth Portfolio, Class A 1.51%,
Class B 2.26%,Class C 2.26% and Class Y 1.26%; Growth Portfolio, Class A
1.45%, Class B 2.20%, Class C 2.20% and Class Y 1.20%; Balanced Portfolio,
Class A 1.38%, Class B 2.13%, Class C 2.13% and Class Y 1.13%; Conservative
Portfolio, Class A 1.36%, Class B 1.86%, Class C 1.81% and Class Y 1.11%; and
Income Portfolio, Class A 1.30%, Class B 1.80%, Class C 1.75% and Class Y
1.05%. The expense ratios may be higher or lower depending on the allocation of
the Underlying Smith Barney Funds within a Portfolio.
8
<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
EXAMPLE The following example is intended to assist an investor in understand-
ing the various costs that an investor in each of the Portfolios will bear
directly or indirectly. The example assumes payment by each Portfolio of oper-
ating expenses at the levels set forth in the table above and of its pro rata
share of the Class Y expenses of the Underlying Smith Barney Funds (also
as set forth above) in which a Portfolio is expected to invest at the
commencement of investment operations. This example should not be considered
a representation of future expenses. Actual expenses may be greater or
lesser than those shown above.
<TABLE>
<CAPTION>
AN INVESTOR WOULD PAY AN INVESTOR WOULD PAY
THE FOLLOWING EXPENSES ON A THE FOLLOWING EXPENSES ON
$1,000 INVESTMENT, ASSUMING THE SAME INVESTMENT, ASSUMING
(1) 5.00% ANNUAL RETURN AND THE SAME ANNUAL RETURN
(2) REDEMPTION AT THE END BUT WITHOUT A REDEMPTION AT
OF EACH TIME PERIOD: THE END OF EACH TIME PERIOD:
-------------------------- --------------------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Growth Portfolio
Class A $65 $ 95 $65 $95
Class B 73 101 23 71
Class C 33 71 23 71
Class Y 13 40 13 40
Growth Portfolio
Class A $64 $ 94 $64 $94
Class B 72 99 22 69
Class C 32 69 22 69
Class Y 12 38 12 38
Balanced Portfolio
Class A $63 $ 92 $63 $92
Class B 72 97 22 67
Class C 32 67 22 67
Class Y 12 36 12 36
Conservative Portfolio
Class A $58 $ 86 $58 $86
Class B 64 88 19 58
Class C 28 57 18 57
Class Y 11 35 11 35
Income Portfolio
Class A $58 $ 84 $58 $84
Class B 63 87 18 57
Class C 28 55 18 55
Class Y 11 33 11 33
- --------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Smith Barney Concert Series Inc.
WHY INVEST IN THE CONCERT SERIES
The proliferation of mutual funds over the last several years has left many
investors in search of a simple means to manage their long-term investments.
With new investment categories emerging each year and with each mutual fund
reacting differently to political, economic and business events, many investors
are forced to make complex investment decisions in the face of limited experi-
ence, time and personal resources. The Portfolios are designed to meet the
needs of investors who prefer to have their asset allocation decisions made by
professional money managers, are looking for an appropriate core investment for
their retirement portfolio and appreciate the advantages of broad diversifica-
tion. The Portfolios may be most appropriate for long-term investors planning
for retirement, particularly investors in tax-advantaged retirement accounts
including IRAs, 401(k) corporate employee savings plans, 403(b) non-profit
organization savings plans, profit-sharing and money-purchase pension plans,
and other corporate pension and savings plans.
The Concert Series will be managed so that each Portfolio can serve as a com-
plete investment program or as a core part of a larger portfolio. Each of the
Portfolios invests in a select group of Underlying Smith Barney Funds suited to
the Portfolio's particular investment objective. The allocation of assets among
Underlying Smith Barney Funds within each Portfolio is determined by SBMFM
according to fundamental and quantitative analysis. Because the assets will be
adjusted only periodically and only within pre-determined ranges that will
attempt to ensure broad diversification, there should not be any sudden large-
scale changes in the allocation of a Portfolio's investments among Underlying
Smith Barney Funds. The Concert Series is not designed as a market timing vehi-
cle, but rather as a simple and conservative approach to helping investors meet
retirement and other long-term goals.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Concert Series is an open-end, non-diversified, management investment
company that currently offers five managed investment portfolios. Each Portfo-
lio seeks to achieve its investment objective by investing within specified
ranges among Underlying Smith Barney Funds, as well as in repurchase agree-
ments. Initially, each Portfolio will invest in the Underlying Smith Barney
Funds listed below.
The investment manager for each Portfolio, SBMFM, will allocate investments
for each Portfolio among Underlying Smith Barney Funds based on its outlook
for the economy, financial markets and the relative performance of the
Underlying Smith Barney Funds. The allocation among the Underlying Smith
Barney Funds will be made within investment ranges established by the Board of
Directors of the Concert Series which designate minimum and maximum
percentages for each of the Underlying Smith Barney Funds.
The High Growth Portfolio's investment objective is to seek capital apprecia-
tion. The Growth Portfolio's investment objective is to seek long-term growth
of capital. The Balanced Portfolio's investment objective is to seek a balance
of growth of capital and income. The Conservative Portfolio's investment objec-
tive is to seek income and, secondarily, long-term growth of capital. The
Income Portfolio's investment objective is to seek high current income. Each
Portfolio's investment objective is fundamental and may be changed only with
the approval of a majority of the Portfolio's outstanding shares. There can be
no assurance that any Portfolio's investment objective will be achieved.
In investing in Underlying Smith Barney Funds, the Portfolios seek to main-
tain different allocations between equity funds and fixed income funds (includ-
ing money market funds) depending on a Portfolio's investment objective. Allo-
cating investments between equity funds and fixed income funds permits each
10
<PAGE>
Smith Barney Concert Series Inc.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES (CONTINUED)
Portfolio to attempt to optimize performance consistent with its investment
objective. The tables below illustrate the initial equity/fixed income fund
allocation targets and ranges for each Portfolio:
Equity/Fixed Income Fund Range (Percent of Each Portfolio's Net Assets)
<TABLE>
<CAPTION>
TYPE OF FUND TARGET RANGE
- ---------------------------------------
<S> <C> <C>
High Growth Portfolio
Equity 90% 80%-100%
Fixed Income 10% 0%- 20%
Growth Portfolio
Equity 70% 60%- 80%
Fixed Income 30% 20%- 40%
Balanced Portfolio
Equity 50% 40%- 60%
Fixed Income 50% 40%- 60%
Conservative Portfolio
Equity 30% 20%- 40%
Fixed Income 70% 60%- 80%
Income Portfolio
Equity 10% 0%- 20%
Fixed Income 90% 80%-100%
- ---------------------------------------
</TABLE>
The Portfolios invest their assets in the Underlying Smith Barney Funds
listed below within the ranges indicated.
Investment Range (Percent of Each Portfolio's Net Assets)
<TABLE>
<CAPTION>
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
UNDERLYING SMITH BARNEY FUND PORTFOLIOPORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Smith Barney Aggressive
Growth Fund Inc. 10-30% 0-15% -- -- --
Smith Barney Appreciation
Fund Inc. 0-20% 10-30% 0-20% -- --
Smith Barney Equity
Funds:
Smith Barney Growth and
Income Fund 0-20% 0-20% 5-20% -- --
Smith Barney Fundamental
Value Fund Inc. 0-20% 10-30% 0-20% -- --
Smith Barney Funds, Inc.:
Equity Income Portfolio -- 0-20% 5-20% 5-20% 0-15%
Short-Term U.S. Treasury
Securities Portfolio -- 0-15% 5-20% 5-20% 5-30%
Smith Barney Income
Funds:
Smith Barney High Income
Fund 0-20% 5-20% 0-15% 0-20% 0-20%
Smith Barney Utilities
Fund -- 0-20% 5-20% 5-20% 0-15%
Smith Barney Premium
Total Return Fund -- -- 5-20% 5-25% 0-15%
Smith Barney Convertible
Fund -- -- 5-20% 5-15% 0-15%
Smith Barney Diversified
Strategic Income Fund -- -- 5-25% 10-30% 10-30%
Smith Barney Investment
Funds Inc.:
Smith Barney Managed
Growth Fund 0-20% 10-30% 0-15% -- --
Smith Barney Special
Equities Fund 10-30% 0-15% -- -- --
Smith Barney Government
Securities Fund 0-15% 0-20% 0-20% 5-20% 5-20%
Smith Barney Investment
Grade Bond Fund 0-15% 0-15% -- -- 0-15%
Smith Barney Managed
Governments Fund Inc. -- 0-15% 5-20% 5-25% 5-30%
Smith Barney Money Funds,
Inc.:
Cash Portfolio 0-20% 0-20% 0-25% 0-30% 0-30%
Smith Barney World Funds,
Inc.:
International Equity
Portfolio 10-25% 5-20% 0-15% 0-10% 0-10%
Emerging Markets
Portfolio 0-20% -- -- -- --
International Balanced
Portfolio 0-15% 0-10% 0-10% 0-10% 0-10%
Global Government Bond
Portfolio 0-15% 0-15% 0-15% 0-20% 0-20%
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Smith Barney Concert Series Inc.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES (CONTINUED)
The Underlying Smith Barney Funds have been selected to represent a broad
spectrum of investment options for the Portfolios. The equity/fixed income
ranges and the investment ranges are based on the degree to which the Under-
lying Smith Barney Funds selected are expected in combination to be appropri-
ate for a Portfolio's particular investment objective. If, as a result of
appreciation or depreciation, the percentage of a Portfolio's assets invested
in an Underlying Smith Barney Fund exceeds or is less than the applicable per-
centage limitations set forth above, SBMFM will consider, in its discretion,
whether to reallocate the assets of the Portfolio to comply with the foregoing
percentage limitations. THE PARTICULAR UNDERLYING SMITH BARNEY FUNDS IN WHICH
EACH PORTFOLIO MAY INVEST, THE EQUITY/FIXED INCOME FUND TARGETS AND RANGES AND
THE INVESTMENT RANGES APPLICABLE TO EACH UNDERLYING SMITH BARNEY FUND MAY BE
CHANGED FROM TIME TO TIME BY THE CONCERT SERIES' BOARD OF DIRECTORS WITHOUT
THE APPROVAL OF THE PORTFOLIO'S SHAREHOLDERS.
Each Portfolio can invest a certain portion of its cash reserves in repur-
chase agreements. Each Portfolio may also invest its cash reserves in the Cash
Portfolio of Smith Barney Money Funds , Inc. A reserve position
provides flexibility in meeting redemptions, expenses and the timing of new
investments, and serves as a short-term defense during periods of unusual
volatility.
For information about the investment objectives of each of the Underlying
Smith Barney Funds and the investment techniques and the risks
involved in the Underlying Smith Barney Funds, please refer to "Description
of the Underlying Smith Barney Funds", the Appendix to this Prospectus, the
Statement of Additional Information and the prospectus for each of the
Underlying Smith Barney Funds.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Non-Diversified Investment Company. The Concert Series is a "non-diversi-
fied" investment company for purposes of the Investment Company Act of
1940, as amended (the "1940 Act"), because it invests in the securities of a
limited number of mutual funds. However, the Underlying Smith Barney Funds
themselves are diversified investment companies (with the exception of the
Global Government Bond Portfolio, the International Balanced Portfolio and the
Emerging Markets Portfolio). The Concert Series intends to qualify as a
diversified investment company for the purposes of Subchapter M of the
Code.
Investing in Underlying Smith Barney Funds. The investments of each Portfo-
lio are concentrated in the Underlying Smith Barney Funds, so each Portfolio's
investment performance is directly related to the investment performance of
the Underlying Smith Barney Funds held by it. The ability of each Portfolio to
meet its investment objective is directly related to the ability of the Under-
lying Smith Barney Funds to meet their objectives as well as the allocation
among those Underlying Smith Barney Funds by SBMFM. There can be no assurance
that the investment objective of any Portfolio or any Underlying Smith Barney
Fund will be achieved.
Affiliated Persons. SBMFM, the investment manager of the Portfolios, and the
officers and directors of the Concert Series presently serve as investment
adviser, officers and directors, respectively, of many of the Underlying Smith
Barney Funds. Therefore, conflicts may arise as these persons fulfill
their fiduciary responsibilities to the Portfolios and the Underlying Smith
Barney Funds.
Investment Practices of Underlying Smith Barney Funds. In addition to their
principal investments, certain Underlying Smith Barney Funds may invest a por-
tion of their assets in foreign securities; enter into forward currency trans-
actions; lend their portfolio securities; enter into stock index, interest
rate and currency futures contracts, and options on such contracts; engage in
options transactions; make short sales;
12
<PAGE>
Smith Barney Concert Series Inc.
RISK FACTORS AND SPECIAL CONSIDERATIONS (CONTINUED)
purchase zero coupon bonds and payment-in-kind bonds; purchase restricted and
illiquid securities; enter into forward roll transactions; purchase securities
on a when-issued or delayed delivery basis; enter into repurchase or reverse
repurchase agreements; borrow money; and engage in various other investment
practices.
High Yield Securities. Each of the Portfolios also may invest in an Under-
lying Smith Barney Fund that invests primarily in high yield, high
risk securities, commonly referred to as junk bonds. As a result, the
Portfolios may be subject to some of the risks resulting from high yield
investing. Further, each of the Portfolios may invest in Underlying Smith
Barney Funds that invest in medium grade bonds. If these bonds are downgraded,
the Portfolios will consider whether to increase or decrease their investment
in the affected Underlying Smith Barney Fund. Lower quality debt instruments
generally offer a higher current yield than that available from higher grade
issues, but typically involve greater risk. Lower rated and comparable
unrated securities are especially subject to adverse changes in general
economic conditions, to changes in the financial condition of their issuers,
and to price fluctuation in response to changes in interest rates. During
periods of economic downturn or rising interest rates, issuers of these
instruments may experience financial stress that could adversely affect their
ability to make payments of principal and interest and increase the
possibility of default. Further information on these investment policies and
practices can be found under "Description of the Underlying
Smith Barney Funds," in the Appendix to this Prospectus and in the Statement of
Additional Information as well as the prospectus of each Underlying Smith Bar-
ney Fund.
Concentration. Each Portfolio other than the High Growth Portfolio may invest
in an Underlying Smith Barney Fund that concentrates its investments in the
utilities industry. Under certain unusual circumstances, this could result in
those Portfolios being indirectly concentrated in this industry. If this were
to occur, the relevant Portfolios would consider whether to maintain or change
their investment in that Underlying Smith Barney Fund.
Market and Economic Factors. The Portfolios' share prices and yields will
fluctuate in response to various market and economic factors related to both
the stock and bond markets. All Portfolios may invest in mutual funds that in
turn invest in international securities and thus are subject to additional
risks of these investments, including changes in foreign currency exchange
rates and political risk.
PORTFOLIO TURNOVER
Each Portfolio's turnover rate is not expected to exceed 25% annually. A
Portfolio may purchase or sell securities to: (a) accommodate purchases and
sales of its shares; (b) change the percentages of its assets invested in each
of the Underlying Smith Barney Funds in response to market conditions; and (c)
maintain or modify the allocation of its assets between equity and fixed income
funds and among the Underlying Smith Barney Funds within the percentage limits
described above.
The turnover rates of the Underlying Smith Barney Funds have ranged from 16%
to 292% during their most recent fiscal years. There can be no assurance that
the turnover rates of these funds will remain within this range during subse-
quent fiscal years. Higher turnover rates may result in higher expenses being
incurred by the Underlying Smith Barney Funds.
13
<PAGE>
Smith Barney Concert Series Inc.
INVESTMENT RESTRICTIONS
In addition to the investment objectives of each Portfolio, the Concert
Series has adopted restrictions with respect to each Portfolio that may not be
changed without approval of a majority of the Portfolio's outstanding shares.
The fundamental investment restrictions imposed by the Concert Series prohibit
each Portfolio from, among other things: (i) borrowing money except from banks
for temporary or emergency purposes, including the meeting of redemption
requests in an amount not exceeding 33 1/3% of the value of the Portfolio's
total assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing is made and (ii)
making loans to others, except through the purchase of portfolio securities
consistent with its investment objective and policies and through the
entering into repurchase agreements.
Certain other investment restrictions, including fundamental restrictions as
well as restrictions that may be changed without a shareholder vote, adopted by
the Concert Series are described in the Statement of Additional Information.
Investment restrictions of the Underlying Smith Barney Funds in which the Port-
folios invest may be more or less restrictive than those adopted by
the Concert Series.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS
The following is a concise description of the investment objectives and prac-
tices for each of the Underlying Smith Barney Funds in which the Portfolios may
invest. There can be no assurance that the investment objectives of the Under-
lying Smith Barney Funds will be met. Additional information regarding the
investment practices of the Underlying Smith Barney Funds is located in the
Appendix to this Prospectus, in the Statement of Additional Information and in
the prospectus of each of the Underlying Smith Barney Funds. No offer is made
in this Prospectus of any of the Underlying Smith Barney Funds.
EQUITY FUNDS The following Underlying Smith Barney Funds are funds that invest
primarily in equity securities.
Smith Barney Aggressive Growth Fund Inc. seeks capital appreciation by
investing primarily in common stock of companies the Fund's investment adviser
believes are experiencing, or have the potential to experience, growth in earn-
ings that exceed the average earnings growth rate of companies whose securities
are included in the Standard & Poor's Daily Price Index of 500 Common Stocks
(the "S&P 500"), a weighted index that measures the aggregate change in
market value of 400 industrials, 60 transportation stocks and utility
companies and 40 financial issues. SBMFM focuses its stock selection
for the Fund on a diversified group of small- or medium-sized emerging growth
companies that have passed their "start-up" phase and show positive earnings
and the prospect of achieving significant profit gains in the two to three
years after the Fund acquires their stocks. These companies generally may be
expected to benefit from new technologies, techniques, products or services
or cost-reducing measures, and may be affected by changes in management,
capitalization or asset deployment, government regulations or other external
circumstances.
Although SBMFM anticipates that the assets of the Fund ordinarily will be
invested primarily in common stocks of U.S. companies, the Fund may invest in
convertible securities, preferred stocks, securities of foreign issuers, war-
rants and restricted securities. The Fund also is authorized to borrow up to 33
1/3% of its total assets less liabilities for leveraging purposes. Securities
of the kinds of companies in which the Fund invests may be subject to signifi-
cant price fluctuation and above average risk.
Smith Barney Appreciation Fund Inc. seeks long-term appreciation of share-
holders' capital. The Fund attempts to achieve its investment objective by
investing primarily in equity securities (consisting of
14
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
common stocks, preferred stocks, warrants, rights and securities convertible
into common stocks that are believed to afford attractive
opportunities for investment appreciation. The core holdings of the Fund are
blue chip companies that are dominant in their industries; however, at
the same time, the Fund may hold securities of companies with prospects of
sustained earnings growth and/or companies with a cyclical earnings record if
it is felt these offer attractive investment opportunities. Typically, the
Fund invests in middle- and larger-sized companies, though it does invest in
smaller companies whose securities may reasonably be expected to appreciate.
The Fund's investments are spread broadly among different industries. The
Fund may hold issues traded over-the- counter as well as those listed on one
or more national securities exchanges, and the Fund may make investments in
foreign securities although management intends to limit such investments to
10% of the Fund's assets.
Smith Barney Fundamental Value Fund Inc.'s investment objective is long-term
capital growth. Current income is a secondary objective. The Fund seeks to
achieve its primary objective by investing in a diversified portfolio of common
stocks and common stock equivalents and, to a lesser extent, in bonds and other
debt instruments. The Fund's investment emphasis is on securities that
are undervalued in the marketplace and, accordingly, have above-average
potential for capital growth. In general, the Fund invests in securities of
companies that are temporarily unpopular among investors but which
SBMFM regards as possessing favorable prospects for earnings growth and/or
improvements in the value of their assets and, consequently, as having a
reasonable likelihood of experiencing a recovery in market price.
Smith Barney Special Equities Fund, an investment portfolio of Smith Barney
Investment Funds Inc., seeks long-term capital appreciation by investing in
equity securities (common stocks or securities that are convertible into or
exchangeable for such stocks, including warrants) that SBMFM believes
to have superior appreciation potential. The Fund invests primarily in equity
securities of secondary growth companies, generally not within the S&P 500,
as identified by SBMFM. These companies may not have reached a fully mature
stage of earnings growth, since they may still be in the developmental stage,
or may be older companies that appear to be entering a new stage of
more rapid earnings progress due to factors such as management change or deve-
lopment of new technology, products or markets. A significant number of these
companies may be in technology areas, including health care related sectors,
and may have annual sales of less than $300 million. The Fund may also choose
to invest in some relatively unseasoned stocks, i.e., securities issued by
companies whose market capitalization is under $100 million. Investing in
smaller, newer issuers generally involves greater risk than investing in
larger, more established issuers.
Smith Barney Managed Growth Fund, an investment portfolio of Smith Barney
Investment Funds Inc., has as its investment objective long term growth of cap-
ital. The Fund attempts to achieve its objective by investing primarily in
undervalued or out of favor common stock and other securities, including debt
securities that are convertible into common stock and that
are currently price depressed. Such securities might typically be valued at
the low end of their 52-week trading range. Although under normal
circumstances the Fund's portfolio will primarily consist of these securities,
the Fund may also invest in preferred stocks and warrants when SBMFM perceives
an opportunity for capital growth from such securities.
The Equity Income Portfolio, an investment portfolio of Smith Barney Funds,
Inc., seeks current income and long-term growth of capital. The Fund invests
primarily in common stocks offering a current return from dividends and will
also normally include some interest-paying debt obligations (such as U.S. gov-
ernment obligations, investment grade bonds and debentures) and high quality
short-term debt obligations (such as commercial paper and repurchase agreements
collateralized by U.S. government securities with broker/dealers or other
financial institutions, including the Fund's custodian) and may also purchase
15
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
preferred stocks and convertible securities. Temporary defensive investments or
a higher percentage of debt securities may be held when deemed advisable by
SBMFM, the Fund's adviser. In the selection of common stock investments, empha-
sis is generally placed on issues with established dividend records as well as
potential for price appreciation. From time to time, however, a portion of the
assets may be invested in non-dividend paying stocks. The Fund may make invest-
ments in foreign securities, though management currently intends to limit such
investments to 5% of the Fund's assets, and an additional 10% of its assets may
be invested in American Depository Receipts ("ADRs") representing shares
in foreign securities that are traded in U.S. securities markets.
Smith Barney Growth and Income Fund, an investment portfolio of Smith Barney
Equity Funds, seeks long-term capital growth and income by investing in income
producing equity securities, including dividend-paying common stocks, securi-
ties that are convertible into common stocks and warrants. Consistent with data
used in developing and maintaining quantitative investment criteria developed
by SBMFM to evaluate investment decisions, the Fund expects to invest primarily
in domestic companies of varying sizes, generally with capitalizations exceed-
ing $250 million in a wide range of industries. The Fund may also invest up to
20% in the securities of foreign issuers, including ADRs or European Depository
Receipts. Under normal market conditions, the Fund will invest substantially
all, but not less than 65%, of its assets in equity securities. The Fu-
nd may invest the remainder of its assets in high grade money market
instruments in order to develop income, as well as in corporate bonds and mor-
tgage related securities that are rated investment grade or are deemed by
SBMFM to be of comparable quality and in U.S. government securities.
Smith Barney Premium Total Return Fund, an investment portfolio of Smith Bar-
ney Income Funds, seeks to provide shareholders with total return, consisting
of long-term capital appreciation and income, by investing primarily in a
diversified portfolio of dividend-paying common stocks. The Fund also purchases
put and call options and writes covered put and call options on securities it
holds and on stock indexes primarily as a hedge to reduce investment risk.
Because the Fund seeks total return by emphasizing investments in dividend-pay-
ing common stocks, it will not have as much investment flexibility as total
return funds that may pursue their objective by investing in both inco-
me and equity stocks without such an emphasis. The Fund also may invest up to
10% of its assets in: (a) securities rated less than investment grade by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P") or unrated securities of comparable quality; (b) interest-paying
debt securities, such as U.S. government securities; and (c) other securities,
including convertible bonds, convertible preferred stock and warrants.
The Emerging Markets Portfolio, an investment portfolio of Smith Barney World
Funds, Inc., seeks long term capital appreciation on its assets through a port-
folio invested primarily in securities of emerging country issuers (consisting
of dividend and non-dividend paying common stocks, preferred stocks, convert-
ible securities and rights and warrants to such securities). The Fund will also
invest in debt securities having a high potential for capital appreciation,
especially in countries where direct equity investment is not permitted. Under
normal conditions, at least 70% of the Fund's assets will be invested in equity
securities. For purposes of its investment objective, the Fund considers as
"emerging" all countries other than the United States, Canada, Ireland, the
United Kingdom, Sweden, Norway, Finland, Denmark, Holland, Germany,
Switzerland, Belgium, France, Italy, Spain and Japan. The Fund is a non-
diversified portfolio, but will generally invest its assets broadly among
countries and will normally have at least 65% of its assets invested in
issuers in not less than three different countries.
16
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
The Fund also may invest in debt securities of issuers in countries having
smaller capital markets. Capital appreciation in debt securities may arise as
a result of a favorable change in relative foreign exchange rates, in relative
interest rate levels, or in the creditworthiness of issuers. The Fund will not
seek to benefit from anticipated short-term fluctuations in currency exchange
rates. The Fund may invest in debt securities with relatively high yields (as
compared to other debt securities meeting the Fund's investment criteria),
notwithstanding that the Fund may not anticipate that such securities will
experience substantial capital appreciation. The Fund also may invest in debt
securities issued or guaranteed by foreign governments (including foreign
states, provinces and municipalities) or their agencies and instrumentalities,
issued or guaranteed by supranational organizations or issued by foreign cor-
porations or financial institutions.
The International Equity Portfolio, an investment portfolio of Smith Barney
World Funds, Inc., seeks a total return on its assets from growth of capital
and income. Under normal market conditions, the Fund invests at least 65% of
its assets in a diversified portfolio of equity securities consisting of divi-
dend and non-dividend paying common stock, preferred stock, convertible debt
and rights and warrants to such securities and up to 35% of the Fund's assets
in bonds, notes and debt securities (consisting of securities issued in the
Eurocurrency markets or obligations of the U.S. or foreign governments and
their political subdivisions) of established non-U.S. issuers. Investments may
be made for capital appreciation or for income or any combination of both for
the purpose of achieving a higher overall return than might otherwise be
obtained solely from investing for growth of capital or for income. There is
no limitation on the percent or amount of the Fund's assets that may be
invested for growth or income and, therefore, from time to time the investment
emphasis may be placed solely or primarily on growth of capital or solely or
primarily on income. The Fund may borrow up to 25% of the value of its assets
for investment purposes, which involves certain risk considerations.
The Fund will generally invest its assets broadly among countries and
will normally have represented in the portfolio business activities in not less
than three different countries. The Fund will normally invest at least 65% of
its assets in companies organized or governments located in any area of the
world other than the U.S. However, under unusual economic or market conditions
as determined by the investment adviser, for defensive purposes the Fund may
temporarily invest all or a major portion of its assets in U.S. government
securities or in debt or equity securities of companies incorporated in and
having their principal business activities in the U.S.
FIXED INCOME FUNDS The following Underlying Smith Barney Funds invest primar-
ily in fixed income securities, including the money market fund in
which each Portfolio may invest and which may serve as the cash
reserve portion of each Portfolio.
Smith Barney High Income Fund, an investment portfolio of the Smith Barney
Income Funds, seeks to provide shareholders with high current income. Although
growth of capital is not an investment objective of the Fund, SBMFM may con-
sider potential for growth as one factor, among others, in selecting invest-
ments for the Fund. The Fund will seek high current income by investing, under
normal circumstances, at least 65% of its assets in high risk, high-yielding
corporate bonds, debentures and notes denominated in U.S. dollars or foreign
currencies. Up to 40% of the Fund's assets may be invested in fixed-income
obligations of foreign issuers, and up to 20% of its assets may be invested in
common stock or other equity-related securities, including convertible securi-
ties, preferred stock, warrants and rights. Securities purchased by the Fund
generally will be rated in the lower rating categories of recognized rating
agencies, as low as Caa by Moody's or D by S&P, or in unrated securities that
SBMFM deems of comparable quality. However, the Fund will not purchase securi-
ties rated lower than B by both Moody's and S&P unless,
17
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
immediately after such purchase, no more than 10% of its total assets are
invested in such securities. The Fund may hold securities with higher ratings
when the yield differential between low-rated and higher-rated securities nar-
rows and the risk of loss may be reduced substantially with only a relatively
small reduction in yield. The Fund also may invest in higher-rated securities
when SBMFM believes that a more defensive investment strategy is appropriate
in light of market or economic conditions.
Smith Barney Investment Grade Bond Fund, an investment portfolio of Smith
Barney Investment Funds Inc., seeks to provide as high a level of current
income as is consistent with prudent investment management and preservation of
capital. Except when in a temporary defensive investment position, the Fund
intends to maintain at least 65% of its assets invested in bonds. The Fund
seeks to achieve its objective by investing in any of the following securi-
ties: corporate bonds rated Baa or better by Moody's or BBB or better by S&P;
U.S. government securities; commercial paper issued by domestic corporations
and rated Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P, or, if not rat-
ed, issued by a corporation having an outstanding debt issue rated Aa or bet-
ter by Moody's or AA or better by S&P; negotiable bank certificates of deposit
and bankers' acceptances issued by domestic banks (but not their foreign
branches) having total assets in excess of $1 billion; and high-yielding com-
mon stocks and warrants. A reduction in the rating of a security does not
require the sale of the security by the Fund.
Smith Barney Government Securities Fund, an investment portfolio of Smith
Barney Investment Funds Inc., seeks high current return by investing in obli-
gations of, or guaranteed by, the U.S. government, its agencies or instrumen-
talities (including, without limitation, Treasury bills and bonds, mortgage
participation certificates issued by the Federal Home Loan Mortgage Corpora-
tion ("FHLMC") and mortgage-backed securities issued by the Government
National Mortgage Association ("GNMA"). The Fund may invest up to 5% of its
net assets in U.S. government securities for which the principal repayment at
maturity, while paid in U.S. dollars, is determined by reference to the
exchange rate between the U.S. dollar and the currency of one or more foreign
countries. In addition, the Fund may borrow money (up to 25% of its total
assets) to increase its investments, thereby leveraging its portfolio and
exaggerating the effect on net asset value of any increase or decrease in the
market value of the Fund's securities. Except when in a temporary defensive
investment position, the Fund intends to maintain at least 65% of its assets
invested in U.S. government securities (including futures contracts and
options thereon and options relating to U.S. government securities).
The Short-Term U.S. Treasury Securities Portfolio, an investment
portfolio of Smith Barney Funds, Inc., seeks current income, preservation of
capital and liquidity. The Fund seeks to achieve its objective by investing its
assets in U.S. Treasury securities backed by the full faith and credit of the
U.S. government. Shares of the Fund are not issued, insured or guaranteed, as
to value or yield, by the U.S. government or its agencies or instrumenta-
lities. In an effort to minimize fluctuations in market value of its portfolio
securities, the Fund is expected to maintain a dollar-weighted average maturity
of approximately three years. Pending direct investment in U.S. Treasury debt
securities, the Fund may enter into repurchase agreements secured by such
securities in an amount up to 10% of the value of its total assets. The Fund
may, to a limited degree, engage in short-term trading to attempt to take adva-
ntage of short-term market variations, or may dispose of a portfolio security
prior to its maturity if it believes such disposition advisable or it needs
to generate cash to satisfy redemptions.
Smith Barney Managed Governments Fund Inc. seeks high current income consis-
tent with liquidity and safety of capital. The Fund invests substantially all
of its assets in U.S. government securities and, under normal circumstances,
the Fund is required to invest at least 65% of its assets in such securities.
The
18
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
Fund's portfolio of U.S. government securities consists primarily of mortgage-
backed securities issued or guaranteed by GNMA, the Federal National Mortgage
Association ("FNMA") and FHLMC. Assets not invested in such mortgage-backed
securities are invested primarily in direct obligations of the United States
Treasury and other U.S. government securities. The weighted average maturity of
the Fund's portfolio will vary from time to time and the Fund may invest in
U.S. government securities of all maturities: short-term, intermediate-term and
long-term. The Fund may invest without limit in securities of any issuer of
U.S. government securities, and may invest up to an aggregate of 15% of its
total assets in securities with contractual or other restrictions on resale and
other instruments that are not readily marketable (such as repurchase agree-
ments with maturities in excess of seven days). The Fund may invest up to 5% of
its net assets in U.S. government securities for which the principal repayment
at maturity, while paid in U.S. dollars, is determined by reference to the
exchange rate between the U.S. dollar and the currency of one or more foreign
countries.
Smith Barney Diversified Strategic Income Fund, an investment portfolio of
Smith Barney Income Funds, seeks high current income primarily through invest-
ment in fixed-income securities. The Fund attempts to achieve its objective by
allocating and reallocating its assets primarily among various types of fixed-
income securities selected by Greenwich Street Advisors (a division of SBMFM)
based on its analysis of economic and market conditions and the relative risks
and opportunities of particular securities. The types of fixed-income securi-
ties among which the Fund's assets will be primarily allocated are: obligations
issued or guaranteed as to principal and interest by the United States govern-
ment; mortgage-related securities issued by various governmental and non-gov-
ernmental entities; domestic and foreign corporate securities; and foreign gov-
ernment securities. Under normal conditions, at least 65% of the Fund's assets
will be invested in fixed-income securities, which includes non-convertible
preferred stocks. The Fund generally will invest in intermediate- and long-term
fixed-income securities with the result that, under normal market conditions,
the weighted average maturity of the Fund's securities is expected to be
between five and 12 years.
Mortgage-related securities in which the Fund may invest include mortgage
obligations collateralized by mortgage loans or mortgage pass-through certifi-
cates. Mortgage-related securities held by the Fund generally will be rated no
lower than Aa by Moody's or AA by S&P or, if not rated, of equivalent invest-
ment quality as determined by Greenwich Street Advisors. The Fund may invest up
to 35% of its assets in corporate fixed-income securities of domestic issuers
rated Ba or lower by Moody's or BB or lower by S&P or in nonrated securities
deemed by Greenwich Street Advisors to be of comparable quality. The Fund may
invest in fixed-income securities rated as low as Caa by Moody's or CCC by S&P.
In general, the Fund may invest in debt securities issued by foreign govern-
ments or any of their political subdivisions that are considered stable by
Smith Barney Global Capital Management, Inc., the Fund's subadviser.
Up to 5% of the Fund's assets may be invested in foreign securities issued by
countries with developing economies. The Fund may also invest in securities
issued by supranational organizations.
The Global Government Bond Portfolio, an investment portfolio of Smith Barney
World Funds, Inc., seeks as high a level of current income and capital appreci-
ation as is consistent with its policy of investing principally in high quality
bonds of the U.S. and foreign governments. Under normal market conditions, the
Fund invests at least 65% of its total assets in bonds issued or guaranteed by
the U.S. or foreign governments (including foreign states, provinces, cantons
and municipalities) or their agencies, authorities or instrumentalities denomi-
nated in various currencies, including U.S. dollars, or in multinational cur-
rency units, such as the European Currency Unit. Except with respect to govern-
ment securities of less developed
19
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
countries, the Fund invests in foreign government securities only if the issue
or the issuer thereof is rated in the two highest rating categories by Moody's
or S&P, or if unrated, are of comparable quality in the determination of the
investment adviser.
Under normal circumstances the Fund may invest up to 35% of its total assets
in debt obligations (including debt obligations convertible into common stock)
of U.S. or foreign corporations and financial institutions and supranational
entities. Any non-governmental investment would be limited to issues that are
rated A or better by Moody's or S&P, or if not rated, determined to be of com-
parable quality.
The Fund is a non-diversified portfolio and currently contemplates investing
primarily in obligations of the U.S. and of developed nations (i.e., industri-
alized countries) that the investment adviser believes to pose limited credit
risks. These countries currently are Australia, Austria, Belgium, Canada, Den-
mark, Finland, France, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zea-
land, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and Ger-
many. Investments may be made from time to time in government securities of
less developed countries (i.e., Argentina, Brazil, Chile, Mexico and Venezue-
la). Historical experience indicates that markets of less developed countries
have been more volatile than the markets of developed countries. The investment
adviser does not intend to invest more than 10% of the Fund's total assets in
government securities of less developed countries and will not invest more than
5% of its assets in the government securities of any one such country. Such
investments will be made only in investment grade securities (rated at least
Baa by Moody's or BBB by S&P), or if unrated, securities that are judged
to be of comparable quality by the investment adviser. Under normal market
conditions the Fund invests at least 65% of its assets in issues of
not less than three different countries; issues of any one country (other than
the United States) will represent no more than 45% of the Fund's
total assets.
The Cash Portfolio is an investment portfolio of Smith Barney Money Funds,
Inc., a money market fund that seeks maximum current income and preservation of
capital. The Fund may invest in domestic and foreign money market securi-
ties consisting of bank obligations and high quality commercial paper,
corporate obligations and municipal obligations, in addition to U.S. govern-
ment obligations and related repurchase agreements. The Fund intends to
maintain at least 25% of its total assets invested in obligations of domestic
and foreign banks. Shares of the Fund are not insured or guaranteed by the
U.S. government.
The Fund has adopted certain investment policies to assure that, to the
extent reasonably possible, the Fund's price per share will not change from
$1.00, although no assurance can be given that this goal will be achieved on a
continuous basis. In order to minimize fluctuations in market price, the Fund
will not purchase a security with a remaining maturity of greater than 13
months or maintain a dollar-weighted average portfolio maturity in excess of 90
days (securities used as collateral for repurchase agreements are not subject
to these restrictions).
The Fund's investments are limited to U.S. dollar-denominated
instruments that have received the highest rating from the "Requisite NRSROs",
securities of issuers that have received such rating with respect to other
short-term debt securities and comparable unrated securities. "Requisite
NRSROs" means (a) any two nationally recognized statistical ratings organiza-
tions ("NRSROs") that have issued a rating with respect to a security or class
of debt obligations of an issuer, or (b) one NRSRO, if only one NRSRO has
issued such a rating at the time that the Fund acquires the security. The
NRSROs currently designated as such by the SEC are S&P, Moody's, Fitch
Investors Services, Inc., Duff and Phelps Inc., IBCA Limited and its affi-
liate, IBCA, Inc. and Thomson BankWatch.
20
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
For purposes of the equity/fixed income fund allocation targets and ranges
applicable to each Portfolio (see page 11 above), each of the following
Underlying Smith Barney Funds , is considered to be an equity fund with
respect to 50% of a Portfolio's investment in such Fund and an income fund with
respect to the remaining 50% of such Portfolio's investment.
The Smith Barney Convertible Fund, an investment portfolio of Smith Barney
Income Funds, seeks current income and capital appreciation by investing in
convertible securities and in combinations of nonconvertible fixed-income
securities and warrants or call options that together resemble convertible
securities ("synthetic convertible securities"). Under normal circumstances,
the Fund will invest at least 65% of its assets in convertible securities, but
is not required to sell securities to conform to this limitation and may
retain on a temporary basis securities received upon the conversion or exer-
cise of such securities. The Fund will not invest in fixed-income securities
that are rated lower than B by Moody's or S&P or, if unrated, deemed by
SBMFM to be comparable to securities rated lower than B. The
Fund may invest up to 35% of its assets in synthetic convertible securities
and in equity and debt securities that are not convertible into common stock
and, for temporary defensive purposes, may invest in these securities without
limitation.
The Smith Barney Utilities Fund, an investment portfolio of Smith Barney
Income Funds, seeks current income by investing in equity and debt securities
of companies in the utility industry. Long-term capital appreciation is a sec-
ondary objective of the Fund. The utility industries are deemed to be com-
prised of companies principally engaged (that is, at least 50% of a company's
assets, gross income or net profits results from utility operations or the
company is regulated as a utility by a government agency or authority) in the
manufacture, production, generation, transmission and sale of electric and gas
energy and companies principally engaged in the communications field, includ-
ing entities such as telephone, telegraph, satellite, microwave and other com-
panies regulated by governmental agencies as utilities that provide communica-
tion facilities for the public benefit, but not including those in public
broadcasting. The Fund will invest primarily in utility equity and debt secu-
rities that have a high expected rate of return as determined by SBMFM. Under
normal market conditions, the Fund will invest at least 65% of its assets in
such securities. The Fund may invest up to 35% of its assets in equity and
debt securities of non-utility companies believed to afford a reasonable
opportunity for achieving the Fund's investment objectives. The Fund will
invest in investment grade debt securities, but may invest up to 10% of its
assets in securities rated BB or B by S&P or Ba or B by Moody's whenever SBMFM
believes that the incremental yield on such securities is advantageous to the
Fund in comparison to the additional risk involved.
The International Balanced Portfolio, an investment portfolio of Smith Bar-
ney World Funds, Inc., seeks a competitive total return on its assets from
growth of capital and income through a portfolio invested primarily in securi-
ties of established non-U.S. issuers. The Fund may borrow up to 15% of the
value of its assets for investment purposes, which involves certain risks.
Under normal market conditions, the Fund will invest its assets in an interna-
tional portfolio of equity securities (consisting of dividend and non-dividend
paying common stocks, preferred stocks, convertible securities, ADRs and
rights and warrants to such securities) and debt securities (consisting of
corporate debt securities, sovereign debt instruments issued by governments or
governmental entities, including supranational organizations and U.S. and for-
eign money market instruments). The Fund attempts to achieve a balance between
equity and debt securities. However, the proportion of equity and debt held by
the Fund at any one time will depend on
21
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
SBMFM's views on current market and economic conditions. Under normal condi-
tions, no more than 70%, nor less than 30%, of the Fund's assets will be
invested in either equity or debt securities; however, there is no limitation
on the percent or amount of the Fund's assets that may be
invested for growth or income.
The Fund is a non-diversified portfolio but will generally invest its assets
broadly among countries and will normally have at least 65% of its assets
invested in business activities in not less than three different countries out-
side of the U.S. The Fund will invest in a broad range of industries and sec-
tors and will mainly invest in securities issued by companies with market capi-
talization of at least $50,000,000. The Fund may invest in companies organized
or governments located in any area of the world. However, under unusual eco-
nomic or market conditions as determined by the investment adviser, for defen-
sive purposes the Fund may temporarily invest all or a major portion of its
assets in U.S. government securities, debt or equity securities of companies
incorporated in and having their principal business activities in the U.S. or
in U.S. as well as foreign money market instruments and equivalents.
The debt securities in which the Fund invests generally range in maturity
from two to ten years. Debt securities of developed foreign countries must
be rated as investment grade (or deemed by SBMFM to be of comparable quality)
at the time of purchase. Debt securities of emerging market countries may be
rated below investment grade and could include securities that are in default
as to payments of principal or interest. Up to 25% of the total assets of the
Fundmay be invested in securities of emerging market countries.
22
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
PERFORMANCE OF UNDERLYING SMITH BARNEY FUNDS
The following chart shows the average annual total returns for the longest
outstanding class of shares for each of the Underlying Smith Barney Funds in
which the Portfolios may invest (other than the Cash Portfolio of Smith Barney
Money Funds, Inc.) for the most recent one-, five- and ten-year periods (or
since inception if shorter and giving effect to the maximum applicable sales
charges) and the 30-day yields for income-oriented funds, in each case for the
period ended December 31, 1995.
<TABLE>
<CAPTION>
ASSETS OF ALL AVERAGE ANNUAL TOTAL RETURNS 30-DAY YIELD FOR
CLASSES AS OF THROUGH DECEMBER 31, 1995 PERIOD ENDED
DECEMBER 31, INCEPTION -------------------------- DECEMBER 31,
UNDERLYING SMITH BARNEY FUND 1995($000'S)DATECLASS ONE YEARFIVEYEARS
TEN YEARS 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Smith Barney
Aggressive Growth
Fund Inc. $ 525,528 10/24/83 A 28.94% 17.40% 15.70 % --
Smith Barney
Appreciation
Fund Inc. 3,024,628 03/10/70 A 22.74 12.18 12.81 --
Smith Barney Equity Funds:
Smith Barney Growth
and Income Fund218,807 11/06/92 A 24.36 -- 8.77 (+) --
Smith Barney Fundamental
Value Fund Inc. 987,935 11/12/81 A 21.48 17.38 12.12 --
Smith Barney Funds, Inc.:
Equity Income Portfolio
747,520 01/01/72 A 26.40 13.82 11.59 --
Short-Term U.S. Treasury Securities Portfo-
lio 106,902 11/11/91 A 13.16 -- 6.26 (+) 4.69%
Smith Barney Equity Funds:
Smith Barney High
Income Fund 888,802 09/02/86 B 13.03 16.35 8.76 (+) 7.83
Smith Barney
Utilities Fund 1,958,317 03/28/88 B 25.89 11.19 11.19 (+) --
Smith Barney
Premium Total
Return Fund 2,380,777 09/16/85 B 16.84 15.02 12.30 --
Smith Barney
Convertible Fund 82,137 09/02/86 B 15.82 12.30 8.20 (+) 2.83
Smith Barney
Diversified Strategic
Income Fund 2,627,676 12/28/89 B 10.57 9.45 9.20 (+) 8.48
Smith Barney Investment Funds Inc.:
Smith Barney
Managed Growth Fund
507,097 06/30/95 A -- -- (3.30)(+) --
Smith Barney Special
Equities Fund 342,704 12/13/82 B 57.30 25.87 11.76 --
Smith Barney Government
Securities Fund 606,406 03/20/84 B 8.71 8.06 7.65 5.99
Smith Barney Investment
Grade Bond Fund 519,566 01/04/82 B 30.56 13.78 10.93 5.71
Smith Barney Managed
Governments Fund Inc. 644,202 09/04/84 A 8.76 7.52 7.72 6.27
Smith Barney World Funds, Inc.:
International Equity
Portfolio 1,049,624 02/18/86 A (2.59) 13.44 11.10 (+) --
Emerging Markets
Portfolio 16,972 05/11/95 A -- -- (13.47)(+) --
International
Balanced Portfolio 25,245 08/25/94 A 8.90 -- 3.92 (+) --
Global Government
Bond Portfolio158,962 07/22/91 A 10.17 -- 8.36 (+) 5.82
- -------------
</TABLE>
+ inception (less than 10 years)
- ------------------------------------------------------------------------------
For the seven-day period ended December 31, 1995, the yield for the Cash
Portfolio of Smith Barney Money Funds, Inc. was 5.16% and the effective yield
was 5.30%.
The performance data relating to the Underlying Smith Barney Funds set forth
above is not, and should not be viewed as, indicative of the future performance
of either the Underlying Smith Barney Funds or the Concert Series. The per-
formance reflects the impact of sales charges and other distribution related
expenses that will not be incurred by the Class Y shares of the Underlying
Smith Barney Funds in which the Portfolios will invest.
INVESTMENT POLICIES AND STRATEGIES OF THE UNDERLYING SMITH BARNEY FUNDS
In pursuing their investment objectives and programs, each of the Underlying
Smith Barney Funds is permitted to engage in a wide range of investment poli-
cies. The Underlying Smith Barney Funds' risks are determined by the nature of
the securities held and the investment strategies used by the Funds' adviser.
Certain of these policies are described below and further information about the
investment policies and strategies of the Underlying Smith Barney Funds in
which the Portfolios may invest is contained in the
23
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
Appendix to this Prospectus and in the Statement of Additional Information as
well as the prospectuses of the Underlying Smith Barney Funds. Because each
Portfolio invests in the Underlying Smith Barney Funds, shareholders of each
Portfolio will be affected by these investment policies in direct proportion
to the amount of assets each Portfolio allocates to the Underlying Smith Bar-
ney Funds pursuing such policies.
Securities of Non-U.S. Issuers. The Portfolios will each invest in certain
Underlying Smith Barney Funds that invest all or a portion of their assets in
securities of non-U.S. issuers. These include non-dollar denominated securi-
ties traded outside the U.S. and dollar-denominated securities traded in the
U.S. (such as ADRs). Such investments involve some special risks such as fluc-
tuations in foreign exchange rates, future political and economic develop-
ments, and the possible imposition of exchange controls or other foreign gov-
ernmental laws or restrictions. In addition, with respect to certain coun-
tries, there is the possibility of expropriation of assets, repatriation, con-
fiscatory taxation, political or social instability or diplomatic developments
that could adversely affect investments in those countries. There
may be less publicly available information about a foreign company than
about a U.S. com- pany, and foreign companies may not be subject to
accounting, auditing, and financial reporting standards and requirements
comparable to or as uniform as those of U.S. companies. Non-U.S. securities
markets, while growing in volume, have, for the most part, substantially less
volume than U.S. markets, and securities of many foreign companies are less
liquid and their prices more volatile than securities of comparable U.S.
companies. Transaction costs on non-U.S. securities markets are generally
higher than in the U.S. There is generally less government supervision and reg-
ulation of exchanges, brokers and issuers than there is in the U.S. An Under-
lying Smith Barney Fund might have greater difficulty taking appropriate legal
action in non-U.S. courts. Dividend and interest income from non-U.S. securi-
ties will generally be subject to withholding taxes by the country in which
the issuer is located and may not be recoverable by the Underlying Smith
Barney Fund or a Portfolio investing in such Fund.
Options and Futures. Certain of the Underlying Smith Barney Funds may enter
into stock index, interest rate and currency futures contracts (or options
thereon) as a hedging device, or as an efficient means of regulating their
exposure to various markets. Certain of the Underlying Smith Barney Funds may
also purchase and sell call and put options. Futures (a type of potentially
high-risk derivative) are often used to manage risk because they enable the
investor to buy or sell an asset at a predetermined price in the future. The
Underlying Smith Barney Funds may buy and sell futures and options contracts
for a number of reasons including: to manage their exposure to changes in
interest rates, stock and bond prices, and foreign currencies; as an efficient
means of adjusting their overall exposure to certain markets; to adjust the
portfolio's duration; to enhance income; and to protect the value of the port-
folio securities. Certain of the Underlying Smith Barney Funds may purchase,
sell or write call and put options on securities, financial indices, and for-
eign currencies. Options and futures can be volatile investments, and involve
certain risks. If the adviser to the Underlying Smith Barney Fund applies a
hedge at an inappropriate time or judges market conditions incorrectly,
options and futures strategies may lower the Underlying Smith Barney Fund's
return. Further losses could also be experienced if the options and futures
positions held by an Underlying Smith Barney Fund were poorly correlated with
its other investments, or if it could not close out its positions because of
an illiquid secondary market.
Debt Securities. Certain of the Underlying Smith Barney Funds may be
affected by general changes in interest rates, which will result in increases
or decreases in the market value of the debt securities held by the Funds. The
market value of the fixed-income obligations in which the Underlying Smith
Barney Funds may invest can be expected to vary inversely in relation to the
changes in prevailing interest rates and also may be affected by other market
and credit factors.
24
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
Certain of the Underlying Smith Barney Funds may invest only in high-quali-
ty, high-grade or investment-grade securities. High quality securities are
those rated in the two highest categories by Moody's (Aaa or Aa) or S&P (AAA
or AA). High-grade securities are those rated in the three highest cat-
egories by Moody's (Aaa, Aa or A) or S&P (AAA, AA or A). Investment-grade sec-
urities are those rated in the four highest categories by Moody's (Aaa, Aa,
A or Baa) or S&P (AAA, AA, A or BBB). Securities rated Baa or BBB have specul-
ative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of their issuers to
make principal and interest payments than is the case with higher grade
securities.
Certain Underlying Smith Barney Funds may invest in securities thatare
rated below investment-grade; that is, rated below Baa by Moody's or BBB by
S&P. Securities rated below investment grade (and comparable unrated securi-
ties) are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds." Such securities are regarded as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in accor-
dance with the terms of the obligations and involve major risk exposure to
adverse business, financial, economic or political conditions. See the Appen-
dix to the Statement of Additional Information for additional information on
the bond ratings by Moody's and S&P.
VALUATION OF SHARES
Each Portfolio's net asset value per share is determined as of the close of
regular trading on the NYSE on each day that the NYSE is open, by dividing the
value of the Portfolio's net assets attributable to each Class by the total
number of shares of the Class outstanding. The value of each Underlying Smith
Barney Fund will be its net asset value at the time of computation. Short-term
investments that have a maturity of more than 60 days are valued at prices
based on market quotations for securities of similar type, yield and maturity.
Short-term investments that have a maturity of 60 days or less are valued at
amortized cost unless conditions dictate otherwise.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Concert Series intends to declare monthly income dividends on shares of
the Income Portfolio, quarterly income dividends on shares of the Conservative
Portfolio and the Balanced Portfolio and annually income dividends on
shares of the High Growth Portfolio and the Growth Portfolio. In addition,
the Concert Series intends to make annual distributions of capital gains, if
any, on the shares of each Portfolio.
If a shareholder does not otherwise instruct, dividends and capital gain
distributions will be reinvested automatically in additional shares of the
same Class at net asset value, subject to no sales charge or CDSC.
Income dividends and capital gain distributions that are invested are cred-
ited to shareholders' accounts in additional shares at the net value as of the
close of business on the payment date. A shareholder may change the option at
any time by notifying his or her Smith Barney Financial Consultant. Sharehold-
ers whose accounts are held directly by First Data should notify First Data in
writing at least five business days prior to the payment date to permit the
change to be entered in the shareholder's account.
25
<PAGE>
Smith Barney Concert Series Inc.
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
The per share dividends on Class B and Class C shares of each Portfolio may
be lower than the per share dividends on Class A and Class Y shares principally
as a result of the distribution fee applicable with respect to Class B and
Class C shares. The per share dividends on Class A shares of each Portfolio may
be lower than the per share dividends on Class Y shares principally as a result
of the service fee applicable to Class A shares. Distributions of capital
gains, if any, will be in the same amount for Class A, Class B, Class
C and Class Y shares.
TAXES
Each Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Code to be relieved of federal income tax on that part of
its net investment income and realized capital gains that it pays out to its
shareholders. To qualify, the Portfolio must meet certain tests, including dis-
tributing at least 90% of its investment company taxable income, and deriving
less than 30% of its gross income from the sale or other disposition of certain
investments held for less than three months.
Dividends from net investment income and distributions of realized short-term
capital gains on the sale of securities, whether paid in cash or automatically
invested in additional shares of the same Portfolio, are taxable to sharehold-
ers of each Portfolio as ordinary income. A portion of each Portfolio's divi-
dends may qualify for the dividends received deduction for corporations. Divi-
dends and distributions declared by each Portfolio may also be subject to state
and local taxes. Distributions out of net long-term capital gains (i.e., net
long-term capital gains in excess of net short-term capital losses) are taxable
to shareholders as long-term capital gains. Information as to the tax status of
dividends paid or deemed paid in each calendar year will be mailed to share-
holders as early in the succeeding year as practical but not later than January
31.
PURCHASE OF SHARES
GENERAL
Each Portfolio offers four Classes of Shares. Class A shares are sold to
investors with an initial sales charge and Class B and Class C shares are sold
without an initial sales charge but are subject to a CDSC payable upon certain
redemptions. Class Y shares are sold without an initial charge or CDSC and are
available only to investors investing a minimum of $5,000,000. See "Prospectus
Summary--Alternative Purchase Arrangements" for a discussion of
factors to consider in selecting which Class of shares to purchase.
Shares may be purchased through a brokerage account maintained with Smith
Barney. Shares may also be purchased through an Introducing Broker or an
investment dealer in the selling group. In addition, certain investors, includ-
ing qualified retirement plans and certain other institutional investors, may
purchase shares directly from the Concert Series through First Data. When pur-
chasing shares of a Portfolio, investors must specify whether the purchase is
for Class A, Class B, Class C or Class Y shares. No maintenance fee will be
charged by the Concert Series.
Investors in Class A, Class B and Class C shares may open an account by mak-
ing an initial investment of at least $1,000 for each account in each class
(except for Systematic Investment Plan accounts), or $250 for an IRA or a Self-
Employed Retirement Plan in a Portfolio. Investors in Class Y shares may open
an account by making an initial investment of $5,000,000. Subsequent invest-
ments of at least $50 may be made for all Classes. For participants in retire-
ment plans qualified under Section 403(b)(7) or Section
26
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
401(a) of the Code, the minimum initial investment requirement for Class A,
Class B and Class C shares and the subsequent investment requirement for all
Classes in a Portfolio is $25. For each Portfolio's Systematic Investment Plan,
the minimum initial investment requirement for Class A, Class B and Class C
shares and the subsequent investment requirement for all Classes is $50. There
are no minimum investment requirements in Class A shares for employees of Trav-
elers and its subsidiaries, including Smith Barney, Directors of the Concert
Series, and their spouses and children. The Concert Series reserves the right
to waive or change minimums, to decline any order to purchase its shares and to
suspend the offering of shares from time to time. Shares purchased will be held
in the shareholder's account by the Concert Series' transfer agent, First Data.
Share certificates are issued only upon a shareholder's written request to
First Data.
Purchase orders received by the Concert Series or Smith Barney prior to the
close of regular trading on the NYSE, on any day a Portfolio calculates its net
asset value, are priced according to the net asset value determined on that day
(the "trade date"). Orders received by dealers or Introducing Brokers prior to
the close of regular trading on the NYSE on any day a Portfolio calculates its
net asset value, are priced according to the net asset value determined on that
day, provided the order is received by the Concert Series or Smith Barney prior
to Smith Barney's close of business.For shares purchased through Smith Barney
or an Introducing Broker that transmits its orders to Smith Barney, payment for
Portfolio shares is due on the third business day after the trade date. In all
other cases, payment must be made with the purchase order.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any time by purchasing
shares through a service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, Smith Barney or First Data is authorized through
preauthorized transfers of $50 or more to charge the regular bank account or
other financial institution indicated by the shareholder on a monthly or quar-
terly basis to provide systematic additions to the shareholder's Portfolio
account. A shareholder who has insufficient funds to complete the transfer will
be charged a fee of up to $25 by Smith Barney or First Data. The Systematic
Investment Plan also authorizes Smith Barney to apply cash held in the share-
holder's Smith Barney brokerage account or redeem the shareholder's shares of a
Smith Barney money market fund to make additions to the account. Additional
information is available from the Concert Series or a Smith Barney Financial
Consultant.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the High
Growth Portfolio, the Growth Portfolio and the Balanced Portfolio are as fol-
lows:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------ DEALERS'
AMOUNT OF % OF % OF REALLOWANCE AS % OF
INVESTMENT OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $ 25,000 5.00% 5.26% 4.50%
$ 25,000 - 49,999 4.00 4.17 3.60
50,000 - 99,999 3.50 3.63 3.15
100,000 - 249,999 3.00 3.09 2.70
250,000 - 499,999 2.00 2.04 1.80
500,000 and over * * *
- ------------------------------------------------------------------------
</TABLE>
27
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
The sales charges applicable to purchases of Class A shares of the Conserva-
tive Portfolio and the Income Portfolio are as follows:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------ DEALERS'
AMOUNT OF % OF % OF REALLOWANCE AS % OF
INVESTMENT OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 4.50% 4.71% 4.00%
$ 25,000 - 49,999 4.00 4.17 3.60
50,000 - 99,999 3.50 3.63 3.15
100,000 - 249,999 2.50 2.56 2.25
250,000 - 499,999 1.50 1.52 1.35
500,000 and over * * *
</TABLE>
- ------------------------------------------------------------------------------
* Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge equal or exceed $500,000 in the
aggregate, will be made at net asset value without any initial sales charge,
but will be subject to a CDSC of 1.00% on redemptions made within 12 months
of purchase. The CDSC on Class A shares is payable to Smith Barney, which
compensates Smith Barney Financial Consultants and other dealers whose cli-
ents make purchases of $500,000 or more. The CDSC is waived in the same cir-
cumstances in which the CDSC applicable to Class B and Class C shares is
waived. See "Deferred Sales Charge Alternatives" and "Waivers of CDSC."
Members of the selling group may receive up to 90% of the sales charge and
may be deemed to be underwriters of the Concert Series as defined in the Secu-
rities Act of 1933, as amended.
The reduced sales charges shown above apply to the aggregate of purchases of
Class A shares of a Portfolio made at one time by "any person," which includes
an individual, his or her spouse and children, or a trustee or other fiduciary
of a single trust estate or single fiduciary account. The reduced sales charge
minimums may also be met by aggregating the purchase with the net asset value
of all Class A shares offered with a sales charge held in funds sponsored by
Smith Barney listed under "Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales of Class A shares to Trustees
or Directors of any investment company sponsored by Smith Barney, employees of
Travelers and its subsidiaries and employees of members of the National Associ-
ation of Securities Dealers, Inc., or to the spouse and children of such per-
sons (including the surviving spouse of a deceased director or employee, and
retired directors or employees), or sales to any trust, pension, profit-sharing
or other benefit plan for such persons provided such sales are made upon the
assurance of the purchaser that the purchase is made for investment purposes
and that the securities will not be resold except through redemption or repur-
chase; (b) offers of Class A shares to any other investment company in connec-
tion with the combination of such company with the Portfolio by merger, acqui-
sition of assets or otherwise; (c) purchases of Class A shares by any client of
a newly employed Smith Barney Financial Consultant (for a period up to 90 days
from the commencement of the Financial Consultant's employment with Smith Bar-
ney), on the condition the purchase of Class A shares is made with the proceeds
of the redemption of shares of a mutual fund which (i) was sponsored by the
Financial Consultant's prior employer, (ii) was sold to the client by the
Financial Consultant and (iii) was subject to a sales charge; (d) shareholders
who have redeemed Class A shares in a Portfolio (or Class A shares of another
fund of the Smith Barney Mutual Funds that are sold with a maximum sales charge
equal to or greater than the maximum sales charge of the Portfolio) and who
wish to reinvest their redemption proceeds in the Portfolio, provided the rein-
vestment is made within 60 calendar days of the redemption; and (e) accounts
managed by registered investment advisory subsidiaries of Travelers. In order
to obtain such discounts, the purchaser
28
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
must provide sufficient information at the time of purchase to permit verifica-
tion that the purchase would qualify for the elimination of the sales charge.
RIGHT OF ACCUMULATION
Class A shares of a Portfolio may be purchased by "any person" (as defined
above) at a reduced sales charge or at net asset value determined by aggregat-
ing the dollar amount of the new purchase and the total net asset value of all
Class A shares of the Portfolio and of funds sponsored by Smith Barney that>
are offered with a sales charge listed under "Exchange Privilege" then held
by such person and applying the sales charge applicable to such aggregate. In
order to obtain such discount, the purchaser must provide sufficient
information at the time of purchase to permit verification that the purchase
qualifies for the reduced sales charge. The right of accumulation is subject
to modification or discontinuance at any time with respect to all shares
purchased thereafter.
GROUP PURCHASES
Upon completion of certain automated systems, a reduced sales charge or pur-
chase at net asset value will also be available to employees (and partners) of
the same employer purchasing as a group, provided each participant makes the
minimum initial investment required. The sales charge applicable to purchases
by each member of such a group will be determined by the table set forth above
under "Initial Sales Charge Alternative--Class A Shares," and will be based
upon the aggregate sales of Class A shares of Smith Barney Mutual Funds offered
with a sales charge to, and share holdings of, all members of the group. To be
eligible for such reduced sales charges or to purchase at net asset value, all
purchases must be pursuant to an employer- or partnership-sanctioned plan meet-
ing certain requirements. One such requirement is that the plan must be open to
specified partners or employees of the employer and its subsidiaries, if any.
Such plan may, but is not required to, provide for payroll deductions, IRAs or
investments pursuant to retirement plans under Sections 401 or 408 of the Code.
Smith Barney may also offer a reduced sales charge or net asset value purchase
for aggregating related fiduciary accounts under such conditions that Smith
Barney will realize economies of sales efforts and sales related expenses. An
individual who is a member of a qualified group may also purchase Class A
shares at the reduced sales charge applicable to the group as a whole. The
sales charge is based upon the aggregate dollar value of Class A shares offered
with a sales charge that have been previously purchased and are still owned by
the group, plus the amount of the current purchase. A "qualified group" is one
that (a) has been in existence for more than six months, (b) has a purpose
other than acquiring Portfolio shares at a discount and (c) satisfies uniform
criteria that enable Smith Barney to realize economies of scale in its costs of
distributing shares. A qualified group must have more than 10 members, must be
available to arrange for group meetings between representatives of the Portfo-
lio and the members, and must agree to include sales and other materials
related to the Portfolio in its publications and mailings to members at no cost
to Smith Barney. In order to obtain such reduced sales charge or to purchase at
net asset value, the purchaser must provide sufficient information at the time
of purchase to permit verification that the purchase qualifies for the reduced
sales charge. Approval of group purchase reduced sales charge plans is subject
to the discretion of Smith Barney.
LETTER OF INTENT
Class A Shares. A Letter of Intent for amounts of $50,000 or more provides an
opportunity for an investor to obtain a reduced sales charge by aggregating
investments over a 13-month period, provided
29
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
that the investor refers to such Letter when placing orders. For purposes of a
Letter of Intent, the "Amount of Investment" as referred to in the preceding
sales charge table includes purchases of all Class A shares of each Portfolio
and other funds of the Smith Barney Mutual Funds offered with a sales charge
over a 13-month period based on the total amount of intended purchases plus the
value of all Class A shares previously purchased and still owned. An alterna-
tive is to compute the 13-month period starting up to 90 days before the date
of execution of a Letter of Intent. Each investment made during the period
receives the reduced sales charge applicable to the total amount of the invest-
ment goal. If the goal is not achieved within the period, the investor must pay
the difference between the sales charges applicable to the purchases made and
the charges previously paid, or an appropriate number of escrowed shares will
be redeemed. Please contact a Smith Barney Financial Consultant or First Data
to obtain a Letter of Intent application.
Class Y Shares. A Letter of Intent may also be used as a way for investors to
meet the minimum investment requirement for Class Y shares. Such investors must
make an initial minimum purchase of $1,000,000 in Class Y shares of a Portfolio
and agree to purchase a total of $5,000,000 of Class Y shares of the same Port-
folio within six months from the date of the Letter. If a total investment of
$5,000,000 is not made within the six-month period, all Class Y shares pur-
chased to date will be transferred to Class A shares, where they will be sub-
ject to all fees (including a service fee of 0.25%) and expenses applicable to
such Portfolio's Class A shares, which may include a CDSC of 1.00%. Please con-
tact a Smith Barney Financial Consultant or First Data for further information.
DEFERRED SALES CHARGE ALTERNATIVES
CDSC Shares are sold at net asset value next determined without an initial
sales charge so that the full amount of an investor's purchase payment may be
immediately invested in a Portfolio. A CDSC, however, may be imposed on certain
redemptions of these shares. "CDSC Shares" are: (a) Class B shares; (b) Class C
shares; and (c) Class A shares which when combined with Class A shares offered
with a sales charge currently held by an investor equal or exceed $500,000
in the aggregate.
Any applicable CDSC will be assessed on an amount equal to the lesser of the
original cost of the shares being redeemed or their net asset valueat the time
of redemption. CDSC Shares that are redeemed will not be subject to a CDSC to
the extent that the value of such shares represents: (a) capital appreciation
of Portfolio assets; (b) reinvestment of dividends or capital gain distribu-
tions; (c) with respect to Class B shares, shares redeemed more than five years
after their purchase; or (d) with respect to Class C shares and Class A shares
that are CDSC Shares, shares redeemed more than 12 months after their purchase.
Class C shares and Class A shares that are CDSC Shares are subject to a 1.00%
CDSC if redeemed within 12 months of purchase. In circumstances in which the
CDSC is imposed on Class B shares, the amount of the charge will depend on the
number of years since the shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of determining the number of
years since a purchase payment, all purchase payments made during a month will
be aggregated and deemed to have been made on the last day of the preceding
Smith Barney statement month. The following table sets forth the rates of the
charge for redemptions of Class B shares by shareholders, except in the case of
purchases by Participating Plans, as described below. See "Purchase of Shares--
Smith Barney 401(k) Program."
30
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED) DATE
<TABLE>
<CAPTION>
CDSC APPLICABLE TO CDSC
HIGH GROWTH PORTFOLIO, APPLICABLE TO
YEARS SINCE PURCHASE GROWTH PORTFOLIO AND CONSERVATIVE PORTFOLIO
PAYMENT WAS MADE BALANCED PORTFOLIO AND INCOME PORTFOLIO
- -----------------------------------------------------------------------
<S> <C> <C>
First 5.00% 4.50%
Second 4.00 4.00
Third 3.00 3.00
Fourth 2.00 2.00
Fifth 1.00 1.00
Sixth 0.00 0.00
Seventh 0.00 0.00
Eighth 0.00 0.00
- -----------------------------------------------------------------------
</TABLE>
Class B shares will convert automatically to Class A shares eight years after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fees. There will also be converted at that time such pro-
portion of Class B Dividend Shares owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number
of outstanding Class B shares (other than Class B Dividend Shares) owned by the
shareholder. Shareholders who held Class B shares of Smith Barney Shearson
Short-Term World Income Fund (the "Short-Term World Income Fund") on July 15,
1994 and who subsequently exchange those shares for Class B shares of a Portfo-
lio will be offered the opportunity to exchange all such Class B shares for
Class A shares of such Portfolio four years after the date on which those
shares were deemed to have been purchased. Holders of such Class B shares will
be notified of the pending exchange in writing approximately 30 days before the
fourth anniversary of the purchase date and, unless the exchange has been
rejected in writing, the exchange will occur on or about the fourth anniversary
date. See "Prospectus Summary--Alternative Purchase Arrangements--Class B
Shares Conversion Feature."
In determining the applicability of any CDSC or the conversion feature
described above, it will be assumed that a redemption is made first of shares
representing capital appreciation, next of shares representing the reinvestment
of dividends and capital gain distributions and finally of other shares held by
the shareholder for the longest period of time. The length of time that CDSC
Shares acquired through an exchange have been held will be calculated from the
date that the shares exchanged were initially acquired in one of the other
Smith Barney Mutual Funds, and Portfolio shares being redeemed will be consid-
ered to represent, as applicable, capital appreciation or dividend and capital
gain distribution reinvestments in such other funds. For Federal income tax
purposes, the amount of the CDSC will reduce the gain or increase the loss, as
the case may be, on the amount realized on redemption. The amount of any CDSC
will be paid to Smith Barney.
To provide an example, assume an investor purchased 100 Class B shares at $10
per share for a cost of $1,000. Subsequently, the investor acquired 5 addi-
tional shares through dividend reinvestment. During the fifteenth month after
the purchase, the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105 shares
at $12 per share). The CDSC would not be applied to the amount that
represents appreciation ($200) and the value of the reinvested dividend shares
($60). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would be charged at a rate of 4.00% (the applicable rate for Class B shares)
for a total deferred sales charge of $9.60.
31
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less than 1.00% per month of
the value of the shareholder's shares at the time the withdrawal plan commences
(see "Automatic Cash Withdrawal Plan"); (c) redemptions of shares within twelve
months following the death or disability of the shareholder; (d) redemption of
shares made in connection with qualified distributions from retirement plans or
IRAs upon the attainment of age 59 1/2; (e) involuntary redemptions; and (f)
redemptions of shares in connection with a combination of the Portfolio with
any investment company by merger, acquisition of assets or otherwise. In addi-
tion, a shareholder who has redeemed shares from other funds of the Smith Bar-
ney Mutual Funds may, under certain circumstances, reinvest all or part of the
redemption proceeds within 60 days and receive pro rata credit for any CDSC
imposed on the prior redemption.
CDSC waivers will be granted subject to confirmation (by Smith Barney in the
case of shareholders who are also Smith Barney clients or by First Data in the
case of all other shareholders) of the shareholder's status or holdings, as the
case may be.
SMITH BARNEY 401 (K) PROGRAM
Investors may be eligible to participate in the Smith Barney 401(k) Program,
which is generally designed to assist plan sponsors in the creation and opera-
tion of retirement plans under Section 401(a) of the Code. To the extent appli-
cable, the same terms and conditions are offered to all Participating Plans in
the Smith Barney 401(k) Program.
Each Portfolio offers to Participating Plans Class A, Class B, Class C and
Class Y shares as investment alternatives under the Smith Barney 401(k) Pro-
gram. Class A, Class B and Class C shares acquired through the Smith Barney
401(k) Program are subject to the same service and/or distribution fees as, but
different sales charge and CDSC schedules than, the Class A, Class B and Class
C shares acquired by other investors. Similar to those shares available to
other investors, Class Y shares acquired through the Smith Barney 401(k) Pro-
gram are not subject to any service or distribution fees or any initial sales
charge or CDSC. Once a Participating Plan has made an initial investment in
a Portfolio, all of its subsequent investments in the Portfolio must be
in the same Class of shares, except as otherwise described below.
Class A Shares. Class A shares of each Portfolio are offered without any ini-
tial sales charge to any Participating Plan that purchases from $500,000 to
$4,999,999 of Class A shares of one or more funds of the Smith Barney Mutual
Funds. Class A shares acquired through the Smith Barney 401(k) Program are sub-
ject to a CDSC of 1.00% of redemption proceeds, if the Participating Plan ter-
minates within four years of the date the Participating Plan first enrolled in
the Smith Barney 401(k) Program.
Class B Shares. Class B shares of each Portfolio are offered to any Partici-
pating Plan that purchases less than $250,000 of one or more funds of the Smith
Barney Mutual Funds. Class B shares acquired through the Smith Barney 401(k)
Program are subject to a CDSC of 3.00% of redemption proceeds, if the Partici-
pating Plan terminates within eight years of the date the Participating Plan
first enrolled in the Smith Barney 401(k) Program.
Eight years after the date the Participating Plan enrolled in the Smith Bar-
ney 401(k) Program, it will be offered the opportunity to exchange all of its
Class B shares for Class A shares of a Portfolio. Such Plans
32
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
will be notified of the pending exchange in writing approximately 60 days
before the eighth anniversary of the enrollment date and, unless the exchange
has been rejected in writing, the exchange will occur on or about the eighth
anniversary date. Once the exchange has occurred, a Participating Plan will not
be eligible to acquire additional Class B shares of the Portfolio but instead
may acquire Class A shares of the Portfolio. If the Participating Plan
elects not to exchange all of its Class B shares at that time, each Class B
share held by the Participating Plan will have the same conversion feature as
Class B shares held by other investors. See "Purchase of Shares--Deferred
Sales Charge Alternatives."
Class C Shares. Class C shares of each Portfolio are offered to any Partici-
pating Plan that purchases from $250,000 to $499,999 of one or more funds of
the Smith Barney Mutual Funds. Class C shares acquired through the Smith Barney
401(k) Program are subject to a CDSC of 1.00% of redemption proceeds, if the
Participating Plan terminates within four years of the date the Participating
Plan first enrolled in the Smith Barney 401(k) Program. Each year after the
date a Participating Plan enrolled in the Smith Barney 401(k) Program, if its
total Class C holdings equal at least $500,000 as of the calendar year-end, the
Participating Plan will be offered the opportunity to exchange all of its Class
C shares for Class A shares of a Portfolio. Such Plans will be notified in
writing within 30 days after the last business day of the calendar year, and
unless the exchange offer has been rejected in writing, the exchange will occur
on or about the last business day of the following March. Once the exchange has
occurred, a Participating Plan will not be eligible to acquire Class C shares
of a Portfolio but instead may acquire Class A shares of such Portfolio. Any
Class C shares not converted will continue to be subject to the distribution
fee.
Class Y Shares. Class Y shares of each Portfolio are offered without any
service or distribution fees, sales charge or CDSC to any Participating Plan
that purchases $5,000,000 or more of Class Y shares of one or more funds of the
Smith Barney Mutual Funds.
The applicable CDSC will be assessed on shares held through the Smith Barney
401(k) Program on an amount equal to the lesser of the original cost of the
shares being redeemed or their net asset value at the time of redemption; pro-
vided however, that shares will not be subject to a CDSC to the extent that the
value of such shares represents: (a) capital appreciation of Portfolio assets;
(b) reinvestments of dividends or capital gain distributions; and (c) with
respect to Class B shares, shares redeemed more than eight years after their
purchase (which will have converted to Class A shares), or (d) with respect to
Class C shares or Class A shares (not obtained through the conversion from
Class B shares), shares redeemed more than four years after their purchase.
Whether or not the CDSC applies to a Participating Plan depends on the number
of years since the Participating Plan first became enrolled in the Smith Barney
401(k) Program, unlike the applicability of the CDSC to other shareholders,
which depends on the number of years since those shareholders made the purchase
payment for the shares which are being redeemed.
The CDSC will be waived on redemptions of Class A, Class B and Class C shares
in connection with lump-sum or other distributions made by a Participating Plan
as a result of: (a) the retirement of an employee in the Participating Plan;
(b) the termination of employment of an employee in the Participating Plan; (c)
the death or disability of an employee in the Participating Plan; (d) the
attainment of age 59 1/2 by an employee in the Participating Plan; (e) hardship
of an employee in the Participating Plan to the extent permitted under Section
401(k) of the Code; or (f) redemptions of shares in connection with a loan made
by the Participating Plan to an employee.
33
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
Participating Plans wishing to acquire shares of a Portfolio through the
Smith Barney 401(k) Program must purchase such shares directly from First Data.
For further information regarding the Smith Barney 401(k) Program, investors
should contact a Smith Barney Financial Consultant.
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of each Class may be exchanged for
shares of the same Class in any other Portfolio of the Concert Series, as well
as in the following funds of the Smith Barney Mutual Funds, to the extent
shares are offered for sale in the shareholder's state of residence. Exchanges
of Class A, Class B and Class C shares are subject to minimum investment
requirements and all shares are subject to the other requirements of the fund
into which exchanges are made and a sales charge differential may apply.
FUND NAME
Growth Funds
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Natural Resources Fund Inc.
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc.-- Equity Income Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
Taxable Fixed-Income Funds
** Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
* Smith Barney Funds, Inc.--Income Return Account Portfolio
Smith Barney Funds, Inc.--Short-Term U.S. Treasury Securities Portfolio
Smith Barney Funds, Inc.--U.S. Government Securities Portfolio
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
34
<PAGE>
Smith Barney Concert Series Inc.
EXCHANGE PRIVILEGE (CONTINUED)
Tax-Exempt Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
* Smith Barney Intermediate Maturity California Municipals Fund
* Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
* Smith Barney Muni Funds--Florida Limited Term Portfolio
Smith Barney Muni Funds--Florida Portfolio
Smith Barney Muni Funds--Georgia Portfolio
* Smith Barney Muni Funds--Limited Term Portfolio
Smith Barney Muni Funds--National Portfolio
Smith Barney Muni Funds--New York Portfolio
Smith Barney Muni Funds--Ohio Portfolio
Smith Barney Muni Funds--Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
International Funds
Smith Barney World Funds, Inc.--Emerging Markets Portfolio
Smith Barney World Funds, Inc.--European Portfolio
Smith Barney World Funds, Inc.--Global Government Bond Portfolio
Smith Barney World Funds, Inc.--International Balanced Portfolio
Smith Barney World Funds, Inc.--International Equity Portfolio
Smith Barney World Funds, Inc.--Pacific Portfolio
Money Market Funds
+ Smith Barney Exchange Reserve Fund
++ Smith Barney Money Funds, Inc.--Cash Portfolio
++ Smith Barney Money Funds, Inc.--Government Portfolio
*** Smith Barney Money Funds, Inc.--Retirement Portfolio
+++ Smith Barney Municipal Money Market Fund, Inc.
+++ Smith Barney Muni Funds--California Money Market Portfolio
+++ Smith Barney Muni Funds--New York Money Market Portfolio
- ------------------------------------------------------------------------------
* Available for exchange with Class A, Class C and Class Y shares o each>
Portfolio.
** Available for exchange with Class A, Class B and Class Y shares of each
Portfolio. In addition, shareholders who own Class C shares of a Portfolio
through the Smith Barney 401(k) Program may exchange those shares for Class
C shares of this fund.
*** Available for exchange with Class A shares of each Portfolio.
+ Available for exchange with Class B and Class C shares of each Portfolio.
++ Available for exchange with Class A and Class Y shares of each Portfolio.
In addition, shareholders who own Class C shares o a Portfolio through the
Smith Barney 401(k) Program may exchange those shares for Class C shares of
this fund.
+++ Available for exchange with Class A and Class Y shares of each Portfolio.
35
<PAGE>
Smith Barney Concert Series Inc.
EXCHANGE PRIVILEGE (CONTINUED)
Class A Exchanges. Class A shares of Smith Barney Mutual Funds sold without a
sales charge or with a maximum sales charge of less than the maximum charged by
other Smith Barney Mutual Funds will be subject to the appropriate "sales
charge differential" upon the exchange of such shares for Class A shares of a
fund sold with a higher sales charge. The "sales charge differential" is lim-
ited to a percentage rate no greater than the excess of the sales charge rate
applicable to purchases of shares of the mutual fund being acquired in the
exchange over the sales charge rate(s) actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For pur-
poses of the exchange privilege, shares obtained through automatic reinvestment
of dividends and capital gain distributions are treated as having paid the same
sales charges applicable to the shares on which the dividends or distributions
were paid; however, except in the case of the Smith Barney 401(k) Program, if
no sales charge was imposed upon the initial purchase of the shares, any shares
obtained through automatic reinvestment will be subject to a sales charge dif-
ferential upon exchange.
Class B Exchanges. In the event a Class B shareholder (unless such share-
holder was a Class B shareholder of the Short-Term World Income Fund on July
15, 1994) wishes to exchange all or a portion of his or her shares into any of
the funds imposing a higher CDSC than that imposed by a Portfolio, the
exchanged Class B shares will be subject to the higher applicable CDSC. Upon an
exchange, the new Class B shares will be deemed to have been purchased on the
same date as the Class B shares of the Portfolio that have been exchanged.
Class C Exchanges. Upon an exchange, the new Class C shares will be deemed to
have been purchased on the same date as the Class C shares of the Portfolio
that have been exchanged.
Class Y Exchanges. Class Y shareholders of each Portfolio who wish to
exchange all or a portion of their Class Y shares for Class Y shares in any of
the funds identified above may do so without imposition of any charge.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions can
be detrimental to a Portfolio's performance and its shareholders. The Concert
Series may determine that a pattern of frequent exchanges is excessive and con-
trary to the best interests of each Portfolio's other shareholders. In this
event, the Concert Series may, atits discretion, decide to limit additional
purchases and/or exchanges by the shareholder. Upon such a determination, the
Concert Series will provide notice in writing or by telephone to the share-
holder at least 15 days prior to suspending the exchange privilege and during
the 15 day period the shareholder will be required to (a) redeem his or her
shares in the Portfolio or (b) remain invested in the Portfolio or exchange
into any of the funds of the Smith Barney Mutual Funds ordinarily available,
which position the shareholder would be expected to maintain for a significant
period of time. All relevant factors will be considered in determining what
constitutes an abusive pattern of exchanges.
Exchanges will be processed at the net asset value next determined, plus any
applicable sales charge differential. Redemption procedures discussed below are
also applicable for exchanging shares, and exchanges will be made upon receipt
of all supporting documents in proper form. If the account registration of the
shares of the fund being acquired is identical to the registration of the
shares of the fund exchanged, no signature guarantee is required. A capital
gain or loss for tax purposes will be realized upon the exchange, depending
upon the cost or other basis of shares redeemed. Before exchanging shares,
36
<PAGE>
Smith Barney Concert Series Inc.
EXCHANGE PRIVILEGE (CONTINUED)
investors should read the current prospectus describing the shares to be
acquired. Each Portfolio reserves the right to modify or discontinue exchange
privileges upon 60 days' prior notice to shareholders.
REDEMPTION OF SHARES
The Concert Series is required to redeem the shares of each Portfolio ten-
dered to it, as described below, at a redemption price equal to their net asset
value per share next determined after receipt of a written request in proper
form at no charge other than any applicable CDSC. Redemption requests received
after the close of regular trading on the NYSE are priced at the net
asset value next determined.
If a shareholder holds shares in more than one Class, any requests for
redemption must specify the Class being redeemed. In the event of a failure to
specify which Class, or if the investor owns fewer shares of the Class than
specified, the redemption request will be delayed until the Concert Series'
transfer agent receives further instructions from Smith Barney or if the share-
holder's account is not with Smith Barney, from the shareholder
directly. The redemption proceeds will be remitted on or before the third bus-
iness day following receipt of proper tender, except on any days on which the
NYSE is closed or as permitted under the 1940 Act in extraordinary circum-
stances. Generally, if the redemption proceeds are remitted to a Smith Barney
brokerage account, these funds will not be invested for the shareholder's
benefit without specific instruction and Smith Barney will benefit from the
use of temporarily uninvested funds. Redemption proceeds for shares purchased
by check, other than a certified or official bank check, will be remitted upon
clearance of the check, which may take up to ten days or more.
Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than those
held by Smith Barney as custodian may be redeemed through an investor's Finan-
cial Consultant, Introducing Broker or dealer in the selling group or by sub-
mitting a written request for redemption to:
Smith Barney Concert Series Inc.
Class A, B, C or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are regis-
tered. If the shares to be redeemed were issued in certificate form, the cer-
tificates must be endorsed for transfer (or be accompanied by an endorsed stock
power) and must be submitted to First Data together with the redemption
request.Any signature required in connection with a redemption request in
excess of $2,000 must be guaranteed by an eligible guarantor institution, such
as a domestic bank, savings and loan institution, domestic credit union, member
bank of the Federal Reserve System or member firm of a national securities
exchange. Written redemption requests of $2,000 or less do not require a signa-
ture guarantee unless more than one such redemption is made in any 10-day peri-
od.First Data may require additional supporting documents for redemptions made
by corporations, executors, administrators, trustees or guardians. A redemption
request will not be deemed properly received until First Data receives all
required documents in proper form. Redemption proceeds will be mailed to the
shareholder's address of record.
37
<PAGE>
Smith Barney Concert Series Inc.
REDEMPTION OF SHARES (CONTINUED)
TELEPHONE REDEMPTION AND EXCHANGE PROGRAM FOR SHAREHOLDERS WHO DO NOT HAVE A
SMITH BARNEY BROKERAGE ACCOUNT
Certain shareholders may be eligible to redeem and exchange Portfolio shares
by telephone. To determine if a shareholder is entitled to participate in this
program, he or she should contact First Data at (800) 451-2010. Once eligibil-
ity is confirmed, the shareholder must complete and return a Telephone/Wire
Authorization Form, including a signature guarantee, that will be provided by
First Data upon request. (Alternatively, an investor may authorize telephone
redemptions on the new account application with a signature guarantee when mak-
ing his/her initial investment in the Concert Series.)
Redemptions. Redemption requests of up to $10,000 of any Class or Classes of
a Portfolio's shares may be made by eligible shareholders by calling First Data
at (800) 451-2010. Such requests may be made between 9:00 a.m. and 4:00 p.m.
(New York City time) on any day the NYSE is open. Redemptions of shares (i) by
retirement plans or (ii) for which certificates have been issued are not per-
mitted under this program.
A shareholder will have the option of having the redemption proceeds mailed
to his/her address of record or wired to a bank account predesignated by the
shareholder. Generally, redemption proceeds will be mailed or wired, as the
case may be, on the next business day following the redemption request. In
order to use the wire procedures, the bank receiving the proceeds must be a
member of the Federal Reserve System or be a correspondent with a member bank.
The Concert Series reserves the right to charge shareholders a nominal fee for
each wire redemption. Such charges, if any, will be assessed against the share-
holder's Portfolio account from which shares were redeemed. In order to change
the bank account designated to receive redemption proceeds, a shareholder must
complete a new Telephone/Wire Authorization Form and, for the protection of the
shareholder's assets, will be required to provide a signature guarantee and
certain other documentation.
Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of the shares of the fund being acquired is identical to
the registration of the shares of the fund exchanged. Such exchange requests
may be made by calling First Data at (800) 451-2010 between 9:00 a.m. and 4:00
p.m. (New York City time) on any day on which the NYSE is open.
Additional Information regarding Telephone Redemption and Exchange
Program. Neither the Concert Series not its agents will be liable for following
instructions communicated by telephone that are reasonably believed to be genu-
ine. The Concert Series and its agents will employ procedures designed to ver-
ify the identity of the caller and legitimacy of instructions (for example, a
shareholder's name and account number will be required and phone calls may be
recorded). The Concert Series reserves the right to suspend, modify or discon-
tinue the telephone redemption and exchange program or to impose a charge for
this service at any time following at least seven (7) days prior notice to
shareholders.
AUTOMATIC CASH WITHDRAWAL PLAN
Each Portfolio offers shareholders an automatic cash withdrawal plan, under
which shareholders who own shares with a value of at least $10,000 may elect to
receive cash payments of at least $50 monthly or quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal plans only where the share-
holder is eligible to receive qualified distributions and has an account value
of at least $5,000. The withdrawal plan will be carried over on exchanges
between funds or Classes of a Portfolio. Any applicable
38
<PAGE>
Smith Barney Concert Series Inc.
REDEMPTION OF SHARES (CONTINUED)
CDSC will not be waived on amounts withdrawn by a shareholder that exceed
1.00% per month of the value of the shareholder's shares subject to the CDSC
at the time the withdrawal plan commences. For further information regarding
the automatic cash withdrawal plan, shareholders should contact a Smith Barney
Financial Consultant.
MINIMUM ACCOUNT SIZE
The Concert Series reserves the right to involuntarily liquidate any share-
holder's account in a Portfolio if the aggregate net asset value of the shares
held in that Portfolio account is less than $500. (If a shareholder has more
than one account in a Portfolio, each account must satisfy the minimum account
size.) The Concert Series, however, will not redeem shares based solely on
market reductions in net asset value. Before the Concert Series exercises such
right, shareholders will receive written notice and will be permitted 60 days
to bring accounts up to the minimum to avoid involuntary liquidation.
PERFORMANCE
From time to time a Portfolio may include its total return, average annual
total return, yield and current dividend return in advertisements and/or other
types of sales literature. These figures are computed separately for Class A,
Class B, Class C and Class Y shares of each Portfolio. These figures are based
on historical earnings and are not intended to indicate future performance.
Total return is computed for a specified period of time assuming deduction of
the maximum sales charge, if any, from the initial amount invested and rein-
vestment of all income dividends and capital gain distributions on the rein-
vestment dates at prices calculated as stated in this Prospectus, then divid-
ing the value of the investment at the end of the period so calculated by the
initial amount invested and subtracting 100%. The standard average annual
total return, as prescribed by the SEC is derived from this total return,
which provides the ending redeemable value. Such standard total return infor-
mation may also be accompanied with nonstandard total return information for
differing periods computed in the same manner but without annualizing the
total return or taking sales charges into account. The yield of a Portfolio's
Class refers to the net investment income earned by investments in the Class
over a 30-day period. This net investment income is then annualized, i.e., the
amount of income earned by the investments during that 30-day period is
assumed to be earned each 30-day period for twelve periods and is expressed as
a percentage of the investments. The yield is calculated according to a for-
mula prescribed by the SEC to facilitate comparison with yields quoted by
other investment companies. The Balanced Portfolio and the Conservative Port-
folio calculate current dividend return for each of their Classes by
annualizing the most recent quarterly dividend and dividing by the net
asset value or the maximum public offering price (including sales charge) on
the last day of the period for which current dividend return is presented. The
Income Portfolio calculates current dividend return for each of its Classes by
annualizing the most recent monthly distribution and dividing by the net
asset value or the maximum public offering price (including sales charge) on
the last day of the period for which current dividend return is presented. Each
Class' current dividend return may vary from time to time depending on market
conditions, the composition of the investment portfolio and its
operating expenses. These factors and possible differences in the methods used
in calculating current dividend return should be considered when comparing
current return of a Class to yields published for other investment com-
panies and other investment vehicles. Each Portfolio may also include compa-
rative performance information in advertising or marketing its shares. Such
performance information may include data from Lipper Analytical Services, Inc.
and other financial publications.
39
<PAGE>
Smith Barney Concert Series Inc.
MANAGEMENT OF THE CONCERT SERIES
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Concert Series
rests with the Concert Series' Board of Directors. A majority of the Series'
directors are non-interested persons as defined in Section 2(a)(19) of the
1940 Act. However, the directors and officers of the Series also serve in sim-
ilar positions with many of the Underlying Smith Barney Funds. Thus, if the
interests of a Portfolio and the Underlying Smith Barney Funds were ever to
become divergent, it is possible that a conflict of interest could arise and
affect how the directors and officers of the Series fulfill their fiduciary
duties to that Portfolio and the Underlying Smith Barney Funds. The directors
of the Series believe they have structured each Portfolio to avoid these con-
cerns. However, conceivably a situation could occur where proper action for
the Series or a Portfolio separately could be adverse to the interests of an
Underlying Smith Barney Fund, or the reverse could occur. If such a possibil-
ity arises, the directors and officers of the Series, the affected Underlying
Smith Barney Funds and SBMFM will carefully analyze the situation and take all
steps they believe reasonable to minimize and, where possible, eliminate the
potential conflict. Moreover, limitations on aggregate investments in the
Underlying Smith Barney Funds have been adopted by the Series to minimize this
possibility, and close and continuous monitoring will be exercised to avoid,
insofar as is possible, these concerns. The Statement of Additional Informa-
tion contains background information regarding each director and executive
officer of the Concert Series.
INVESTMENT MANAGER--SBMFM
SBMFM, the investment manager to each Portfolio, is a registered investment
adviser whose principal offices are located at 388 Greenwich Street, New York,
New York 10013. SBMFM (through its predecessor entities) has been in the
investment counseling business since 1940. SBMFM renders investment advice to
a wide variety of investment company clients that had aggregate assets under
management as of December 31, 1995 in excess of $71 billion. Subject to the
supervision and direction of the Concert Series' Board of Directors, SBMFM
will determine how each Portfolio's assets will be invested in the Underlying
Smith Barney Funds and in repurchase agreements pursuant to the investment
objective and policies of each Portfolio set forth in this Prospectus and make
recommendations to the Board of Directors concerning changes to (a) the Under-
lying Smith Barney Funds in which the Portfolios may invest, (b) the percent-
age range of assets that may be invested by each Portfolio in any one Under-
lying Smith Barney Fund and (c) the percentage range of assets of any Portfo-
lio that may be invested in equity funds and fixed income funds (including
money market funds). The directors of the Concert Series will period-
ically monitor the allocations made and the basis upon which such allocations
were made or maintained. SBMFM also furnishes each Portfolio with bookkeeping,
accounting and administrative services, office space and equipment, and the
services of the officers and employees of the Concert Series. Under the Asset
Allocation and Administration Agreement with each Portfolio, SBMFM has agreed
to bear all expenses of the Concert Series other than the management fee, the
fees payable pursuant to the plan adopted pursuant to Rule 12b-1 under the
1940 Act and extraordinary expenses. For the services rendered and
expenses borne, each Portfolio pays SBMFM a monthly fee at the annual rate of
0.35% ofthe value of its average daily net assets.
SBMFM also serves as investment adviser to each of the Underlying Smith
Barney Funds in which the Portfolios may invest (other than the Smith Barney
Premium Total Return Fund) and is responsible for the selection and management
of each of the Underlying Smith Barney Fund's investments. SBSA, located at
388 Greenwich Street, New York, New York 10013, serves as investment adviser
to Smith Barney Premium Total Return Fund. SBSA has been in the
investment counseling business since 1968 and is a wholly owned subsidiary of
SBMFM. SBSA renders investment advice to investment companies that had
aggregate assets under management as of December 31, 1995 in excess of $2.9
billion.
40
<PAGE>
Smith Barney Concert Series Inc.
MANAGEMENT OF THE CONCERT SERIES (CONTINUED)
Each Portfolio, as a shareholder in the Underlying Smith Barney Funds, will
indirectly bear its proportionate share of any investment management fees and
other expenses paid by the Underlying Smith Barney Funds. The effective manage-
ment fee of each of the Underlying Smith Barney Funds in which the Portfolios
may invest is set forth below as a percentage rate of the Fund's
annual net assets:
<TABLE>
<CAPTION>
MANAGEMENT
UNDERLYING SMITH BARNEY FUND FEES
- ----------------------------------------------------------
<S> <C>
Smith Barney Aggressive Growth Fund Inc. 0.80%
Smith Barney Appreciation Fund Inc. 0.61%
Smith Barney Equity Funds
Smith Barney Growth and Income Fund 0.65%
Smith Barney Fundamental Value Fund Inc. 0.75%
Smith Barney Funds, Inc.
Equity Income Portfolio 0.58%
Short-Term U.S. Treasury Securities Portfolio 0.45%
Smith Barney Income Funds
Smith Barney High Income Fund 0.70%
Smith Barney Utilities Fund 0.65%
Smith Barney Premium Total Return Fund 0.75%
Smith Barney Convertible Fund 0.70%
Smith Barney Diversified Strategic Income Fund 0.65%
Smith Barney Investment Funds Inc.
Smith Barney Managed Growth Fund 0.85%
Smith Barney Special Equities Fund 0.75%
Smith Barney Government Securities Fund 0.55%
Smith Barney Investment Grade Bond Fund 0.65%
Smith Barney Managed Governments Fund Inc. 0.65%
Smith Barney Money Funds, Inc.
Cash Portfolio 0.41%
Smith Barney World Funds, Inc.
International Equity Portfolio 0.85%
Emerging Markets Portfolio 1.00%
International Balanced Portfolio 0.85%
Global Government Bond Portfolio 0.75%
</TABLE>
PORTFOLIO MANAGEMENT
Thomas B. Stiles II, Chief Investment Officer of SBMFM, has primary responsi-
bility for the day-to-day management of each Portfolio. Mr. Stiles, born in
1940, is Chairman and Chief Executive Officer of Greenwich Street Advisors, a
division of SBMFM, and a Managing Director of Smith Barney .
Certain managing directors of SBMFM will assist Mr. Stiles in managing the
Portfolios.
DISTRIBUTOR
Smith Barney, located at 388 Greenwich Street, New York, New York 10013, dis-
tributes shares of each Portfolio as principal underwriter and as such conducts
a continuous offering pursuant to a best efforts arrangement requiring Smith
Barney to take and pay for only such securities as may be sold to the public.
Pursuant to the services and distribution plan adopted by each Portfolio under
Rule 12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid a service fee
with respect to Class A, Class B and Class C shares of each Portfolio at the
annual rate of 0.25% of the average daily net assets attributable to these
Classes. Smith Barney is also paid a distribution fee with respect to Class B
shares and Class C shares of the High
41
<PAGE>
Smith Barney Concert Series Inc.
DISTRIBUTOR (CONTINUED)
Growth Portfolio, the Growth Portfolio and the Balanced Portfolio at the annual
rate of 0.75% of the average daily net assets attributable to those Classes.
Smith Barney is paid a distribution fee with respect to Class B and Class C
shares of the Conservative Portfolio and the Income Portfolio at the annual
rate of 0.50% and 0.45%, respectively, of the average daily net assets attrib-
utable to those Classes. Class B shares that automatically convert to Class A
shares eight years after the date of original purchase will no longer be sub-
ject to a distribution fee. The fees are used by Smith Barney to pay its Finan-
cial Consultants for servicing shareholder accounts and, in the case of Class B
and Class C shares, to cover expenses primarily intended to result in the sale
of those shares. These expenses include: advertising expenses; the cost of
printing and mailing prospectuses to potential investors; payments to and
expenses of Smith Barney Financial Consultants and other persons who provide
support services in connection with the distribution of shares; interest and/or
carrying charges; and indirect and overhead costs of Smith Barney associated
with the sale of Portfolio shares, including lease, utility, communications and
sales promotion expenses.
The payments to Smith Barney Financial Consultants for selling shares of a
Class include a commission or fee paid by the investor or Smith Barney at the
time of sale and, with respect to Class A, Class B and Class C shares, a con-
tinuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
Actual distribution expenses for Class B and Class C shares of each Portfolio
for any given year may exceed the fees received pursuant to the Plan and will
be carried forward and paid by each Portfolio in future years so long as the
Plan is in effect. Interest is accrued monthly on such carryforward amounts at
a rate comparable to that paid by Smith Barney for bank borrowings.
ADDITIONAL INFORMATION
The Concert Series, an open-end, non-diversified investment company, was
incorporated in Maryland on August 11, 1995. The Concert Series has
authorized capital of 3,000,000,000 shares with a par value of $.001 per share.
The Board of Directors has authorized the issuance of five series of shares,
each representing shares in one of five separate Portfolios and may authorize
the issuance of additional series of shares in the future. The assets of each
Portfolio are segregated and separately managed and a shareholder's interest
is in the assets of the Portfolio in which he or she holds shares. Class A,
Class B, Class C and Class Y shares of a Portfolio represent interests in the
assets of that Portfolio and have identical voting, dividend, liquidation and
other rights (other than conversion) on the same terms and conditions except
that expenses related to the distribution of each Class of shares are borne
solely by each Class and each Class of shares has exclusive voting rights with
respect to provisions of the Concert Series' Rule 12b-1 distribution plan that
pertain to a particular Class. As described under "Voting" in the Statement of
Additional Information, the Concert Series ordinarily will not hold
shareholder meetings; however, shareholders have the right to call a meeting
upon a vote of 10% of the Concert Series' outstanding shares and the Concert
Series will assist shareholders in calling such a meeting as required by the
1940 Act. Shares do not have cumulative voting rights or preemptive rights
and are fully paid, transferable and non-assessable when issued for payment as
described in this Prospectus.
On matters submitted for consideration by shareholders of any Underlying
Smith Barney Fund, a Portfolio will vote its shares in proportion to the vote
of all other holders of shares of that Fund or, in certain limited instances,
the Portfolio will vote its shares in the manner indicated by a vote of holders
of shares of the Portfolio.
42
<PAGE>
Smith Barney Concert Series Inc.
ADDITIONAL INFORMATION (CONTINUED)
PNC Bank, National Association, located at 17th and Chestnut Streets, Phil-
adelphia, Pennsylvania 19103 serves as custodian of the Portfolio's invest-
ments.
First Data, located at Exchange Place, Boston, Massachusetts 02109, serves
as the Concert Series' transfer agent.
The Concert Series intends to send its shareholders a semi-annual report
and an audited annual report, which will include listings of the investment
securities held by the Concert Series at the end of the period covered. In an
effort to reduce the Concert Series' printing and mailing costs, the Concert
Series plans to consolidate the mailing of its semi-annual and annual reports
by household. This consolidation means that a household having multiple
accounts with the identical address of record will receive a single copy of
each report. In addition, the Concer Series also plans to consolidate the
mailing of its Prospectus so that a shareholder having multiple accounts (that
is, individual, IRA and/or Self-Employed Retirement Plan accounts) will receive
a single Prospectus annually. Shareholders who do not want this consolidation
to apply to their account should contact their Smith Barney Financial Consul-
tant or the Concert Series' transfer agent.
43
<PAGE>
Smith Barney Concert Series Inc.
APPENDIX
DESCRIPTIONS OF CERTAIN RISKS RELATED TO VARIOUS SECURITIES INVESTED IN, AND
INVESTMENT STRATEGIES EMPLOYED BY, THE UNDERLYING SMITH BARNEY FUNDS IN
WHICH THE PORTFOLIOS MAY INVEST
Repurchase Agreements. Repurchase agreements, as utilized by an Underlying
Smith Barney Fund or a Portfolio of the Concert Series, could involve certain
risks in the event of default or insolvency of the other party, including pos-
sible delays or restrictions upon the ability of an Underlying Smith Barney
Fund or a Portfolio to dispose of the underlying securities, the risk of a pos-
sible decline in the value of the underlying securities during the period in
which an Underlying Smith Barney Fund or a 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 part of the income from the agreement.
Reverse Repurchase Agreements. Certain of the Underlying Smith Barney Funds
may engage in reverse repurchase agreement transactions with banks, brokers and
other financial institutions. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Underlying Smith Barney
Fund may decline below the repurchase price of the securities.
Lending of Portfolio Securities. The risks in lending portfolio securities,
like those associated with other extensions of secured credit, consist of pos-
sible delays in receiving additional collateral or in the recovery of the secu-
rities or possible loss of rights in the collateral should the borrower fail
financially. Loans will be made to firms deemed by the adviser to the Under-
lying Smith Barney Fund to be of good standing and will not be made unless, in
the judgment of the adviser, the consideration to be earned from such loans
would justify the risk.
When-Issued Securities and Delayed-Delivery Transactions. The purchase of
securities on a when-issued or delayed-delivery basis involves the risk that,
as a result of an increase in yields available in the marketplace, 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.
Non-Diversified Funds. Certain of the Underlying Smith Barney Funds are
classified as non-diversified investment companies under the 1940 Act. Since,
as a non-diversified fund, such an Underlying Smith Barney Fund is
permitted to invest a greater proportion of its assets in the securities of
a smaller number of issuers, each such Fund may be subject to greater
risk with respect to its individual portfolio than a Fund that is more broadly
diversified.
Securities of Unseasoned Issuers. Securities in which certain of the Under-
lying Smith Barney Funds may invest may have limited marketability and, there-
fore, may be subject to wide fluctuations in market value. In addition, certain
securities may lack a significant operating history and be dependent on prod-
ucts or services without an established market share.
Convertible Securities and Synthetic Convertible Securities. While convert-
ible securities generally offer lower yields than non-convertible debt securi-
ties of similar quality, their prices may reflect changes in the value of the
underlying common stock. Convertible securities entail less credit risk than
the issuer's common stock.
Synthetic convertible securities are created by combining non-convertible
bonds or preferred stocks with warrants or stock call options. Synthetic con-
vertible securities differ from convertible securities in certain respects,
including that each component of a synthetic convertible security has a sepa-
rate market
A-1
<PAGE>
Smith Barney Concert Series Inc.
APPENDIX (CONTINUED)
value and responds differently to market fluctuations. Investing in synthetic
convertible securities involves the risks normally involved in holding the
securities comprising the synthetic convertible security.
Securities of Developing Countries. A developing country generally is con-
sidered to be a country that is in the initial stages of its industrialization
cycle. Investing in the equity and fixed-income markets of developing coun-
tries involves exposure to economic structures that are generally less diverse
and mature, and to political systems that can be expected to have less stabil-
ity, than those of developed countries. Historical experience indicates that
the markets of developing countries have been more volatile than the markets
of the more mature economies of developed countries; however, such markets
often have provided higher rates of return to investors.
Sovereign Debt Obligations. Sovereign debt of developing countries may
involve a high degree of risk, and may be in default or present the risk of
default. Governmental entities responsible for repayment of the debt may be
unable or unwilling to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition, prospects for
repaying of principal and interest may depend on political as well as economic
factors. Although some sovereign debt, such as Brady Bonds, is collateralized
by U.S. government securities, repayment of principal and interest is not
guaranteed by the U.S. government .
Restrictions on Foreign Investment. Some countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities. As illustrations, certain countries
require governmental approval prior to investments by foreign persons, or
limit the amount of investment by foreign persons in a particular company, or
limit the investment by foreign persons to only a specific class of securities
of a company that may have less advantageous terms than securities
of the company available for purchase by nationals or limit the repatriation of
funds for a period of time.
Smaller capital markets, while often growing in trading volume, have sub-
stantially less volume than U.S. markets, and securities in many smaller capi-
tal markets are less liquid and their prices may be more volatile than securi-
ties of comparable U.S. companies. Brokerage commissions, custodial services,
and other costs relating to investment in smaller capital markets are gener-
ally more expensive than in the U.S. Such markets have different clearance and
settlement procedures, and in certain markets there have been times when set-
tlements have been unable to keep pace with the volume of securities transac-
tions, making it difficult to conduct such transactions. Further, satisfactory
custodial services for investment securities may not be available in some
countries having smaller capital markets, which may result in an Underlying
Smith Barney Fund incurring additional costs and delays in transporting and
custodying such securities outside such countries. Delays in settlement could
result in temporary periods when assets of a Fund are uninvested and no return
is earned thereon. The inability of an Underlying Smith Barney Fund to make
intended security purchases due to settlement problems could cause such Fund
to miss attractive investment opportunities. Inability to dispose of a portfo-
lio security due to settlement problems could result either in losses to the
Fund due to subsequent declines in value of the portfolio security or, if the
Fund has entered into a contract to sell the security, could result in possi-
ble liability to the purchaser. There is generally less government supervision
and regulation of exchanges, brokers and issuers in countries having smaller
capital markets than there is in the U.S.
Mortgage-Related Securities. To the extent that an Underlying Smith Barney
Fund purchases mortgage-related securities at a premium, mortgage foreclosures
and prepayments of principal by mortgagors (which may be made at any time
without penalty) may result in some loss of the Fund's principal investment to
the extent of the premium paid. The Underlying Smith Barney Fund's yield may
be affected by reinvest-
A-2
<PAGE>
Smith Barney Concert Series Inc.
APPENDIX (CONTINUED)
ment of prepayments at higher or lower rates than the original investment. In
addition, like other debt securities, the values of mortgage-related securi-
ties, including government and government-related mortgage pools, generally
will fluctuate in response to market interest rates.
Non-Publicly Traded and Illiquid Securities. The sale of securities that are
not publicly traded is typically restricted under the Federal securities laws.
As a result, an Underlying Smith Barney Fund may be forced to sell these secu-
rities at less than fair market value or may not be able to sell them when the
Fund's adviser believes it desirable to do so. Investments by an Underlying
Smith Barney Fund in illiquid securities are subject to the risk that should
the Fund desire to sell any of these securities when a ready buyer is not
available at a price that the Fund's adviser deems representative of its val-
ue, the value of the Underlying Smith Barney Fund's net assets could be
adversely affected.
Short Sales. Possible losses from short sales differ from losses that could
be incurred from a purchase of a security, because losses from short sales may
be unlimited, whereas losses from purchases can equal only the total amount
invested.
Forward Roll Transactions. Forward roll transactions involve the risk that
the market value of the securities sold by an Underlying Smith Barney Fund may
decline below the repurchase price of the securities. Forward roll
transactions are considered borrowings by a Fund. Although investing the
proceeds of these borrowings in repurchase agreements or money market
instruments may provide an Underlying Smith Barney Fund with the opportunity
for higher income, this leveraging practice will increase a Fund's exposure to
capital risk and higher current expenses. Any income earned from the
securities purchased with the proceeds of these borrowings that exceeds the
cost of the borrowings would cause a Fund's net asset value per share to
increase faster than would otherwise be the case; any decline in the value of
the securities purchased would cause a Fund's net asset value per share to
decrease faster than would otherwise be the case.
Leverage. Certain of the Underlying Smith Barney Funds may borrow from
banks, on a secured or unsecured basis, in order to leverage their portfolios.
Leverage creates an opportunity for increased returns to shareholders of an
Underlying Smith Barney Fund but, at the same time, creates special risk con-
siderations. For example, leverage may exaggerate changes in the net asset
value of a Fund's shares and in a Fund's yield. Although the principal or
stated value of such borrowings will be fixed, the Fund's assets may change in
value during the time the borrowing is outstanding. Leverage will create
interest or dividend expenses for the Fund that can exceed the income
from the assets retained. To the extent the income or other gain derived from
securities purchased with borrowed funds exceeds the interest or dividends
the Fund will have to pay in respect thereof, the Fund's net income or other
gain will be greater than if leverage had not been used. Conversely, if the
income or other gain from the incremental assets is not sufficient to cover
the cost of leverage, the net income or other gain of the Fund will be less
than if leverage had not been used. If the amount of income for the increm-
ental securities is insufficient to cover the cost of borrowing, securities
might have to be liquidated to obtain required funds. Depending on market or
other conditions, such liquidations could be disadvantageous to the Underlying
Smith Barney Fund.
Floating and Variable Rate Income Securities. Floating and variable rate
income securities include securities whose rates vary inversely with changes
in market rates of interest. Such securities may also pay a rate of interest
determined by applying a multiple to the variable rate. The extent of
increases and decreases in the value of securities whose rates vary inversely
with changes in market rates of interest generally will be larger than compa-
rable changes in the value of an equal principal amount of a fixed rate secu-
rity having similar credit quality, redemption provisions and maturity.
A-3
<PAGE>
Smith Barney Concert Series Inc.
APPENDIX (CONTINUED)
Zero Coupon, Discount and Payment-in-Kind Securities. Zero coupon securities
generally pay no cash interest (or dividends in the case of preferred stock)
to their holders prior to maturity. Payment-in-kind securities allow the lend-
er, at its option, to make current interest payments on such securities either
in cash or in additional securities. Accordingly, such securities usually are
issued and traded at a deep discount from their face or par value and gener-
ally are subject to greater fluctuations of market value in response to chang-
ing interest rates than securities of comparable maturities and credit quality
that pay cash interest (or dividends in the case of preferred stock) on a cur-
rent basis.
Premium Securities. Premium securities are income securities bearing coupon
rates higher than prevailing market rates. Premium securities are typically
purchased at prices greater than the principal amounts payable on maturity. If
securities purchased by an Underlying Smith Barney Fund at a premium are
called or sold prior to maturity, the Fund will recognize a capital loss to
the extent the call or sale price is less than the purchase price. Addition-
ally, the Fund will recognize a capital loss if it holds such securities to
maturity.
Yankee Bonds. Yankee bonds are U.S. dollar-denominated bonds sold in the
U.S. by non-U.S. issuers. As compared with bonds issued in the U.S., such bond
issues normally carry a higher interest rate but are less actively traded.
Swap Agreements. As one way of managing its exposure to different types of
investments, certain of the Underlying Smith Barney Funds may enter into
interest rate swaps, currency swaps, and other types of swap agreements such
as caps, collars, and floors. Swap agreements can be highly volatile and may
have a considerable impact on a Fund's performance. Swap agreements are sub-
ject to risks related to the counterparty's ability to perform, and may
decline in value if the counterparty's creditworthiness deteriorates. A Fund
may also suffer losses if it is unable to terminate outstanding swap agree-
ments or reduce its exposure through offsetting transactions.
Indexed Securities. Certain of the Underlying Smith Barney Funds may invest
in indexed securities, including inverse floaters, whose value is linked to
currencies, interest rates, commodities, indices, or other financial indica-
tors. Indexed securities may be positively or negatively indexed (i.e., their
value may increase or decrease if the underlying instrument appreciates), and
may have return characteristics similar to direct investments in the under-
lying instrument or to one or more options on the underlying instrument.
Indexed securities may be more volatile than the underlying instrument itself.
Investment in Utility Securities. The Smith Barney Utilities Fund is partic-
ularly subject to risks that are inherent to the utility industries, including
difficulty in obtaining an adequate return on invested capital, difficulty in
financing large construction programs during an inflationary period, restric-
tions on operations and increased cost and delays attributable to environmen-
tal considerations and regulation, difficulty in raising capital in adequate
amounts on reasonable terms in periods of high inflation and unsettled capital
markets, increased costs and reduced availability of certain types of fuel,
occasional reduced availability and high costs of natural gas for resales, the
effects of energy conservation, the effects of a national energy policy and
lengthy delays and greatly increased costs and other problems associated with
the design, construction, licensing, regulation and operation of nuclear
facilities for electric generation, including, among other considerations, the
problems associated with the use of radioactive materials and the disposal of
radioactive wastes. There are substantial differences between the regulatory
practices and policies of various jurisdictions, and any given regulatory
agency may make major shifts in policy from time to time. There is no assur-
ance that regulatory authorities will grant rate increases in the future or
that such increases will be adequate to permit the payment of dividends on
common stocks. Additionally, existing
A-4
<PAGE>
Smith Barney Concert Series Inc.
APPENDIX (CONTINUED)
and possible future regulatory legislation may make it even more difficult for
these utilities to obtain adequate relief. Certain of the issuers of securi-
ties held by the Smith Barney Utilities Fund may own or operate nuclear gener-
ating facilities. Governmental authorities may from time to time review exist-
ing policies, and impose additional requirements governing the licensing, con-
struction and operation of nuclear power plants.
Each of the risks referred to above could adversely affect the ability and
inclination of public utilities to declare or pay dividends and the ability of
holders of common stock to realize any value from the assets of the issuer
upon liquidation or bankruptcy. All of the utilities that are issuers of the
securities held by the Smith Barney Utilities Fund have been experiencing one
or more of these problems in varying degrees. Moreover, price disparities
within selected utility groups and discrepancies in relation to averages and
indices have occurred frequently for reasons not directly related to the gen-
eral movements or price trends of utility common stocks. Causes of these dis-
crepancies include changes in the overall demand for and supply of various
securities (including the potentially depressing effect of new stock offer-
ings), and changes in investment objectives, market expectations or cash
requirements of other purchasers and sellers of securities.
A-5
<PAGE>
SMITH BARNEY
------------
A Member of Travelers Group[ART]
SMITH BARNEY
CONCERT SERIES INC.
388 GREENWICH STREET
NEW YORK, NY 10013
FD01083 1/96 16794
Statement of Additional Information
February 5, 1996
Smith Barney Concert Series Inc.
388 Greenwich Street, New York, New York 10013 (212) 723-9218
This Statement of Additional Information expands upon and
supplements the information contained in the current Prospectuses
of Smith Barney Concert Series Inc.
(the "Concert Series")
dated February 5, 1996, as amended or supplemented from time to time
(collectively the "Prospectus"), and should be read in
conjunction therewith . The Concert Series currently offers five
investment portfolios (individually, a "Portfolio" and
collectively, the "Portfolios"). Each Portfolio seeks to achieve
its objective by investing in a number of mutual funds that
consist of open-end management investment companies or series
thereof ("Underlying Smith Barney Funds") for which Smith
Barney Inc. ("Smith Barney") now or in the future acts as
principal underwriter or for which Smith Barney, Smith Barney
Mutual Funds Management Inc. ("SBMFM") or Smith Barney Strategy
Advisers Inc. ("SBSA") now or in the future acts as investment
adviser. The Concert Series' Prospectus may be obtained from a
Smith Barney Financial Consultant or an Investment Representative
of PFS Distributors, Inc. ("PFS"), or by writing or calling the
Concert Series at the address or telephone number listed above.
This Statement of Additional Information, although not in itself
a prospectus, is incorporated by reference into the Prospectus in
its entirety.
TABLE OF CONTENTS
For ease of reference, the same section headings are used in the
Prospectus and this Statement of Additional Information, except
as shown below:
Caption Page
Management Of The Concert Series 2
Investment Objectives And Management Policies 4
Purchase Of Shares 20
Redemption Of Shares 21
Distributors 21
Valuation Of Shares 23
Exchange Privilege 23
IRA And Other Prototype Plans 24
Performance 25
Taxes (See In The Prospectus "Dividends, Distributions And
Taxes") 26
Voting (See In The Prospectus "Additional Information") 29
Additional Information 29
Financial Statement 37
Appendix - Ratings Of Debt Obligations A-1
MANAGEMENT OF THE CONCERT SERIES
The executive officers of the Concert Series are employees of
certain of the organizations that provide services to the Concert
Series. These organizations are the following:
Smith Barney and PFS Distributors
SBMFM Investment Manager
PNC Bank, National Association ("PNC Bank") Custodian
First Data Investor Services Group, Inc. ("First Data"),
a subsidiary of First Data Corporation Transfer Agent
PFS Shareholder Services (the "Sub-Transfer Agent") Sub-
Transfer Agent
These organizations and the functions they perform for the
Concert Series are discussed in the Prospectus and in this
Statement of Additional Information.
Directors and Executive Officers of the Concert Series
The names of the directors and executive officers of the Concert
Series, together with information as to their principal business
occupations during the past five years, are shown below. Each
director who is an "interested person" of the Concert Series, as
defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), is indicated by an asterisk.
Walter E. Auch, Director (Age 73). Consultant to companies
in the financial services industry; Director of Pimco Advisers
L.P. His address is 6001 N. 62nd Place, Paradise Valley, Arizona
85253.
Martin Brody, Director (Age 73). Vice Chairman of the Board
of Restaurant Associates Industries, Inc. His address is c/o HNK
Associates, Three ADP Boulevard, Roseland, New Jersey 07068.
H. John Ellis, Jr., Director (Age 67). Prior to 1992,
Executive Vice President of the Consulting Services Division of
Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers").
His address is 222 Delaware Avenue, Wilmington, Delaware 19801.
Stephen E. Kaufman, Director (Age 63). Attorney. His
address is 277 Park Avenue, New York, New York 10017.
Armon E. Kamesar, Director (Age 67). Chairman of TEC, an
international organization of Chief Executive Officers; Trustee,
U.S. Bankruptcy Court. His address is 7328 Country Club Drive,
LaJolla, California 92037.
*Heath B. McLendon, Chairman of the Board (Age 63).
Managing Director of Smith Barney, Chairman of the Board of Smith
Barney Strategy Advisers Inc. and President of SBMFM; prior to
July 1993, Senior Executive Vice President of Shearson Lehman
Brothers, Vice Chairman of Asset Management Division of Shearson
Lehman Brothers. Mr. McLendon also serves as Chairman of the
Board of 41 investment companies sponsored by Smith Barney
("Smith Barney Mutual Funds"). His address is 388 Greenwich
Street, New York, New York 10013.
Madelon DeVoe Talley, Director (Age 62). Author. Governor-
at-large of the National Association of Securities Dealers, Inc.
Her address is 876 Park Avenue, New York, New York 10021.
Jessica M. Bibliowicz, President (Age 35). Executive Vice
President of Smith Barney; prior to 1994, Director of Sales and
Marketing for Prudential Mutual Funds. Ms. Bibliowicz also
serves as President of 39 Smith Barney Mutual Funds. Her address
is 388 Greenwich Street, New York, New York 10013.
Lewis E. Daidone, Senior Vice President and Treasurer (Age
37). Managing Director of Smith Barney; Director and Senior Vice
President of SBMFM. Mr. Daidone also serves as Senior Vice
President and Treasurer of 41 Smith Barney Mutual Funds. His
address is 388 Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary (Age 44). Managing Director
of Smith Barney; General Counsel and Secretary of SBMFM. Ms.
Sydor also serves as Secretary of 41 Smith Barney Mutual Funds.
Her address is 388 Greenwich Street, New York, New York 10013.
No officer, director or employee of Smith Barney, PFS or any of
their affiliates will receive any compensation from the Concert
Series for serving as an officer or director of the Concert
Series. The Concert Series pays each director who is not an
officer, director or employee of Smith Barney, PFS or any of
their affiliates a fee of $5,000 per annum plus $100 per
Portfolio per meeting attended and reimburses travel and out-of-
pocket expenses.
The following table shows the estimated compensation to be
provided by Concert Series to the directors during its first
fiscal year and compensation paid to such directors during the
1995 calendar year by other Smith Barney Mutual Funds:
Compensation Table
Pension or Total
Retirement Num-
Benefits Esti- Total ber of
Accrued mated Compen- Funds
Aggre- as Ex- Bene- sation Served
gate penses of fits on From in
Compen- Concert Retire- Fund Com-
Name sation Series ment Complex plex
Heath B. McLendon None None None None 41
Walter Auch $ 7,000 None None $ 19,500 2
Martin Brody 7,000 None None 103,625 15
H. John Ellis 7,000 None None None 1
Armon E. Kamesar 7,000 None None 19,500 1
Stephen E. Kaufman 7,000 None None 83,600 10
Madelon DeVoe Talley 7,000 None None 63,500 3
Investment Manager - SBMFM
SBMFM acts as investment manager to each Portfolio pursuant to
separate asset allocation and administration agreements (the
"Asset Allocation and Administration Agreements"). SBMFM is a
wholly owned subsidiary of Smith Barney Holdings Inc.
("Holdings") and Holdings is a wholly owned subsidiary of
Travelers Group Inc. ("Travelers"). The Asset Allocation and
Administration Agreements with respect to each Portfolio were
approved by the Board of Directors, including a majority of the
directors who are not "interested persons" of the Concert Series
or SBMFM (the "Independent Directors"), on December 14, 1995 and
by the initial shareholder of the respective Portfolios on
January 31, 1996. Pursuant to the Asset Allocation and
Administration Agreements, SBMFM will determine how each
Portfolio's assets will be invested in the Underlying Smith
Barney Funds and in repurchase agreements pursuant to the
investment objectives and policies of each Portfolio set forth in
the Prospectus and make recommendations to the Board of Directors
concerning changes to (a) the Underlying Smith Barney Funds in
which the Portfolios may invest, (b) the percentage range of
assets that may be invested by each Portfolio in any one
Underlying Smith Barney Fund and (c) the percentage range of
assets of any Portfolio that may be invested in equity funds and
fixed income funds (including money market funds). In addition
to such services, SBMFM pays the salaries of all officers and
employees who are employed by both it and the Concert Series,
maintains office facilities for the Concert Series, furnishes the
Concert Series with statistical and research data, clerical help
and accounting, data processing, bookkeeping, internal auditing
and legal services and certain other services required by the
Concert Series and each Portfolio, prepares reports to each
Portfolio's shareholders and prepares tax returns, reports to and
filings with the Securities and Exchange Commission (the "SEC")
and state Blue Sky authorities. SBMFM provides investment
advisory and management services to investment companies
affiliated with Smith Barney.
The management fee for each Portfolio is calculated at the annual
rate of 0.35% of that Portfolio's average daily net assets.
Under the Asset Allocation and Administration Agreements, SBMFM
has agreed to bear all expenses incurred in the operation of each
Portfolio other than the management fee, the fees payable
pursuant to the plan adopted pursuant to Rule 12b-1 under the
1940 Act and extraordinary expenses. Such expenses include
taxes, interest, brokerage fees and commissions, if any; fees of
directors who are not officers, directors, shareholders or
employees of Smith Barney or SBMFM; SEC fees and state Blue Sky
qualification fees; charges of custodians; transfer and dividend
disbursing agent's fees; certain insurance premiums; outside
auditing and legal expenses; costs of maintenance of corporate
existence; investor services (including allocated telephone and
personnel expenses); and costs of preparation and printing of the
prospectus for regulatory purposes and for distribution to
existing shareholders; cost of shareholders' reports and
shareholder meetings and meetings of the officers or Board of
Directors of the Concert Series.
Counsel and Auditors
Willkie Farr & Gallagher serves as legal counsel to the Concert
Series. The directors who are not "interested persons" of the
Concert Series have selected Stroock & Stroock & Lavan as their
legal counsel.
KPMG Peat Marwick LLP, independent accountants, 345 Park Avenue,
New York, New York 10154, have been selected as auditors for the
Concert Series and will render an opinion on the Concert Series'
financial statements annually.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectus discusses the investment objectives of the
Portfolios and each of the Underlying Smith Barney Funds in which
the Portfolios may invest, as well as the policies employed to
achieve those objectives. This section contains supplemental
information concerning the types of securities and other
instruments in which the Underlying Smith Barney Funds may invest
(and repurchase agreements in which the Portfolios and/or the
Underlying Smith Barney Funds may invest), the investment
policies and portfolio strategies the Underlying Smith Barney
Funds may utilize and certain risks attendant to such
investments, policies and strategies. There can be no assurance
that the respective investment objectives of the Portfolios or
the Underlying Smith Barney Funds will be achieved.
The Articles of Incorporation of the Concert Series permit the
Board of Directors to establish additional Portfolios of the
Concert Series from time to time. The investment objectives,
policies and restrictions applicable to additional Portfolios
would be established by the Board of Directors at the time such
Portfolios were established and may differ from those set forth
in the Prospectus and this Statement of Additional Information.
MONEY MARKET INSTRUMENTS. Each of the Underlying Smith Barney
Funds may invest in certain types of money market instruments
which may include: U.S. government securities; certificates of
deposit ("CDs"), time deposits ("TDs") and bankers' acceptances
issued by domestic banks (including their branches located
outside the United States and subsidiaries located in Canada),
domestic branches of foreign banks, savings and loan associations
and similar institutions; high grade commercial paper; and
repurchase agreements with respect to the foregoing types of
instruments. The following is a more detailed description of
such money market instruments.
U.S. GOVERNMENT SECURITIES. U.S. government securities include
debt obligations of varying maturities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities. U.S.
government securities include not only direct obligations of the
U.S. Treasury, but also securities issued or guaranteed by the
Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association
("GNMA"), General Services Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Land
Banks, Federal National Mortgage Association ("FNMA"), Maritime
Administration, Tennessee Valley Authority, District of Columbia
Armory Board, Student Loan Marketing Association, International
Bank for Reconstruction and Development and Resolution Trust
Corporation. Certain U.S. government securities, such as those
issued or guaranteed by GNMA, FNMA and Federal Home Loan Mortgage
Corporation ("FHLMC"), are mortgage-related securities. Because
the U.S. Government is not obligated by law to provide support to
an instrumentality that it sponsors, a Portfolio or an Underlying
Smith Barney Fund will invest in obligations issued by such an
instrumentality only if its investment adviser determines that
the credit risk with respect to the instrumentality does not make
its securities unsuitable for investment by the Portfolio or the
Fund, as the case may be.
BANK OBLIGATIONS. Domestic commercial banks organized under
Federal law are supervised and examined by the Comptroller of the
Currency and are required to be members of the Federal Reserve
System and to be insured by the Federal Deposit Insurance
Corporation (the "FDIC"). Domestic banks organized under state
law are supervised and examined by state banking authorities but
are members of the Federal Reserve System only if they elect to
join. Most state banks are insured by the FDIC (although such
insurance may not be of material benefit to an Underlying Smith
Barney Fund, depending upon the principal amount of certificates
of deposit ("CDs") of each held by the Fund) and are subject to
Federal examination and to a substantial body of Federal law and
regulation. As a result of Federal and state laws and
regulations, domestic branches of domestic banks are, among other
things, generally required to maintain specified levels of
reserves, and are subject to other supervision and regulation
designed to promote financial soundness.
Obligations of foreign branches of U.S. banks, such as CDs and
TDs, may be general obligations of the parent bank in addition to
the issuing branch, or may be limited by the terms of a specific
obligation and governmental regulation. Obligations of foreign
branches of U.S. banks and foreign banks are subject to different
risks than are those of U.S. banks or U.S. branches of foreign
banks. These risks include foreign economic and political
developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding
and other taxes on interest income. Foreign branches of U.S.
banks are not necessarily subject to the same or similar
regulatory requirements that apply to U.S. banks, such as
mandatory reserve requirements, loan limitations and accounting,
auditing and financial recordkeeping requirements. In addition,
less information may be publicly available about a foreign branch
of a U.S. bank than about a U.S. bank. CDs issued by wholly
owned Canadian subsidiaries of U.S. banks are guaranteed as to
repayment of principal and interest, but not as to sovereign
risk, by the U.S. parent bank.
Obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation and by
Federal and state regulation as well as governmental action in
the country in which the foreign bank has its head office. A
U.S. branch of a foreign bank with assets in excess of $1 billion
may or may not be subject to reserve requirements imposed by the
Federal Reserve System or by the state in which the branch is
located if the branch is licensed in that state. In addition,
branches licensed by the Comptroller of the Currency and branches
licensed by certain states ("State Branches") may or may not be
required to: (a) pledge to the regulator by depositing assets
with a designated bank within the state, an amount of its assets
equal to 5% of its total liabilities; and (b) maintain assets
within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable
at or through all of its agencies or branches within the state.
The deposits of State Branches may not necessarily be insured by
the FDIC. In addition, there may be less publicly available
information about a U.S. branch of a foreign bank than about a
U.S. bank.
COMMERCIAL PAPER. Commercial paper consists of short-term
(usually from 1 to 270 days) unsecured promissory notes issued by
corporations in order to finance their current operations. A
variable amount master demand note (which is a type of commercial
paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter
agreement between a commercial paper issuer and an institutional
lender, such as one of the Underlying Smith Barney Funds,
pursuant to which the lender may determine to invest varying
amounts. Transfer of such notes is usually restricted by the
issuer, and there is no secondary trading market for such notes.
REPURCHASE AGREEMENTS. The Portfolios and the Underlying Smith
Barney Funds may purchase securities and concurrently enter into
repurchase agreements with certain member banks which are the
issuers of instruments acceptable for purchase by the Portfolio
or the Fund, as the case may be, and with certain dealers on the
Federal Reserve Bank of New York's list of reporting dealers.
Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the
seller at an agreed-upon price and date. Under each repurchase
agreement, the selling institution will be required to maintain
the value of the securities subject to the repurchase agreement
at not less than their repurchase price. Repurchase agreements
could involve certain risks in the event of default or insolvency
of the other party, including possible delays or restrictions
upon a Portfolio's or a Fund's ability to dispose of the
underlying securities, the risk of a possible decline in the
value of the underlying securities during the period in which the
Portfolio or Fund seeks to assert its rights to them, the risk of
incurring expenses associated with asserting those rights and the
risk of losing all or part of the income from the repurchase
agreement.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. To
secure an advantageous price or yield, certain of the Underlying
Smith Barney Funds may purchase certain securities on a when-
issued basis or purchase or sell securities for delayed delivery.
Delivery of the securities in such cases occurs beyond the normal
settlement periods, but no payment or delivery is made by a Fund
prior to the reciprocal delivery or payment by the other party to
the transaction. In entering into a when-issued or delayed-
delivery transaction, an Underlying Smith Barney Fund will rely
on the other party to consummate the transaction and may be
disadvantaged if the other party fails to do so.
U.S. government securities normally are subject to changes in
value based upon changes, real or anticipated, in the level of
interest rates and the public's perception of the
creditworthiness of the issuers. In general, U.S. government
securities tend to appreciate when interest rates decline and
depreciate when interest rates rise. Purchasing these securities
on a when-issued or delayed-delivery basis, therefore, can
involve the risk that the yields available in the market when the
delivery takes place may actually be higher than those obtained
in the transaction itself. Similarly, the sale of U.S.
government securities for delayed delivery can involve the risk
that the prices available in the market when the delivery is made
may actually be higher than those obtained in the transaction
itself.
In the case of the purchase by an Underlying Smith Barney Fund of
securities on a when-issued or delayed-delivery basis, a
segregated account in the name of the Fund consisting of cash or
liquid debt securities equal to the amount of the when-issued or
delayed-delivery commitments will be established at the Fund's
custodian. For the purpose of determining the adequacy of the
securities in the accounts, the deposited securities will be
valued at market or fair value. If the market or fair value of
the securities declines, additional cash or securities will be
placed in the account daily so that the value of the account will
equal the amount of such commitments by the Fund involved. On
the settlement date, a Fund will meet its obligations from then-
available cash flow, the sale of securities held in the
segregated account, the sale of other securities or, although it
would not normally expect to do so, from the sale of the
securities purchased on a when-issued or delayed-delivery basis
(which may have a value greater or less than the Fund's payment
obligations).
LENDING OF PORTFOLIO SECURITIES. Certain of the Underlying Smith
Barney Funds have the ability to lend portfolio securities to
brokers, dealers and other financial organizations. A Fund will
not lend portfolio securities to Smith Barney unless it has
applied for and received specific authority to do so from the
SEC. Loans of portfolio securities will be collateralized by
cash, letters of credit or U.S. government securities which are
maintained at all times in an amount at least equal to the
current market value of the loaned securities. From time to
time, an Underlying Smith Barney Fund 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 which is
unaffiliated with the Fund and is acting as a "finder."
By lending its securities, an Underlying Smith Barney Fund can
increase its income by continuing to receive interest on the
loaned securities as well as by either investing the cash
collateral in short-term instruments or obtaining yield in the
form of interest paid by the borrower when U.S. government
securities are used as collateral. A Fund will comply with the
following conditions whenever its portfolio securities are
loaned: (a) the Fund must receive at least 100% cash collateral
or equivalent securities from the borrower; (b) the borrower must
increase such collateral whenever the market value of the
securities loaned rises above the level of such collateral; (c)
the Fund must be able to terminate the loan at any time; (d) the
Fund must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned
securities, and any increase in market value; (e) the Fund may
pay only reasonable custodian fees in connection with the loan;
and (f) voting rights on the loaned securities may pass to the
borrower; provided, however, that if a material event adversely
affecting the investment in the loaned securities occurs, the
Fund's trustees or directors, as the case may be, must terminate
the loan and regain the right to vote the securities. The risks
in lending portfolio securities, as with other extensions of
secured credit, consist of a possible delay in receiving
additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower
fail financially. Loans will be made to firms deemed by each
Underlying Smith Barney Fund's investment adviser to be of good
standing and will not be made unless, in the judgment of the
adviser, the consideration to be earned from such loans would
justify the risk.
OPTIONS ON SECURITIES. Certain of the Underlying Smith Barney
Funds may engage in transactions in options on securities, which,
depending on the Fund, may include the writing of covered put
options and covered call options, the purchase of put and call
options and the entry into closing transactions.
The principal reason for writing covered call options on
securities is to attempt to realize, through the receipt of
premiums, a greater return than would be realized on the
securities alone. Certain Underlying Smith Barney Funds,
however, may engage in option transactions only to hedge against
adverse price movements in the securities that it holds or may
wish to purchase and the currencies in which certain portfolio
securities may be denominated. In return for a premium, the
writer of a covered call option forfeits the right to any
appreciation in the value of the underlying security above the
strike price for the life of the option (or until a closing
purchase transaction can be effected). Nevertheless, the call
writer retains the risk of a decline in the price of the
underlying security. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums.
The writer of a covered put option accepts the risk of a decline
in the price of the underlying security. The size of the
premiums that a Fund may receive may be adversely affected as new
or existing institutions, including other investment companies,
engage in or increase their option-writing activities.
Options written by an Underlying Smith Barney Fund normally will
have expiration dates between one and nine months from the date
written. The exercise price of the options may be below, equal
to or above the market values of the underlying securities at the
times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-
money" and "out-of-the-money," respectively. An Underlying Smith
Barney Fund with option-writing authority may write (a) in-the-
money call options when its investment adviser expects that the
price of the underlying security will remain flat or decline
moderately during the option period, (b) at-the-money call
options when its adviser expects that the price of the underlying
security will remain flat or advance moderately during the option
period and (c) out-of-the-money call options when its adviser
expects that the price of the underlying security may increase
but not above a price equal to the sum of the exercise price plus
the premiums received from writing the call option. In any of
the preceding situations, if the market price of the underlying
security declines and the security is sold at this lower price,
the amount of any realized loss will be offset wholly or in part
by the premium received. Out-of-the-money, at-the-money and in-
the-money put options (the reverse of call options as to the
relation of exercise price to market price) may be utilized in
the same market environments that such call options are used in
equivalent transactions.
So long as the obligation of an Underlying Smith Barney Fund as
the writer of an option continues, the Fund may be assigned an
exercise notice by the broker-dealer through which the option was
sold, requiring the Fund to deliver, in the case of a call, or
take delivery of, in the case of a put, the underlying security
against payment of the exercise price. This obligation
terminates when the option expires or the Fund effects a closing
purchase transaction. A Fund can no longer effect a closing
purchase transaction with respect to an option once it has been
assigned an exercise notice. To secure its obligation to deliver
the underlying security when it writes a call option, or to pay
for the underlying security when it writes a put option, an
Underlying Smith Barney Fund will be required to deposit in
escrow the underlying security or other assets in accordance with
the rules of the Options Clearing Corporation (the "Clearing
Corporation") or similar foreign clearing corporation and of the
securities exchange on which the option is written.
Certain Underlying Smith Barney Funds may purchase and sell put,
call and other types of option securities that are traded on
domestic or foreign exchanges or the over-the-counter market
including, but not limited to, "spread" options, "knock-out"
options, "knock-in" options and "average rate" or "look-back"
options. "Spread" options are dependent upon the difference
between the price of two securities or futures contracts, "knock-
out" options are canceled if the price of the underlying asset
reaches a trigger level prior to expiration, "knock-in" options
only have value if the price of the underlying asset reaches a
trigger level and, "average rate" or "look-back" options are
options where, at expiration, the option's strike price is set
based on either the average, maximum or minimum price of the
asset over the period of the option.
An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized
securities exchange or in the over-the-counter market. Certain
Underlying Smith Barney Funds with option-writing authority may
write options on U.S. or foreign exchanges and in the over-the-
counter market.
An Underlying Smith Barney Fund may realize a profit or loss upon
entering into a closing transaction. In cases in which a Fund
has written an option, it will realize a profit if the cost of
the closing purchase transaction is less than the premium
received upon writing the original option and will incur a loss
if the cost of the closing purchase transaction exceeds the
premium received upon writing the original option. Similarly,
when a Fund has purchased an option and engages in a closing sale
transaction, whether the Fund realizes a profit or loss will
depend upon whether the amount received in the closing sale
transaction is more or less than the premium that the Fund
initially paid for the original option plus the related
transaction costs.
Although an Underlying Smith Barney Fund generally will purchase
or write only those options for which its adviser believes there
is an active secondary market so as to facilitate closing
transactions, there is no assurance that sufficient trading
interest to create a liquid secondary market on a securities
exchange will exist for any particular option or at any
particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to
exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other
unforeseen events, have at times rendered inadequate certain of
the facilities of the Clearing Corporation and U.S. and foreign
securities exchanges and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain
types of orders or trading halts or suspensions in one or more
options. There can be no assurance that similar events, or
events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not
be possible to effect closing transactions in particular options.
If as a covered call option writer a Fund is unable to effect
closing purchase transaction in a secondary market, it will not
be able to sell the underlying security until the option expires
or it delivers the underlying security upon exercise.
Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class
which may be held or written, or exercised within certain time
periods, by an investor or group of investors acting in concert
(regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised
in one or more accounts or through one or more brokers). It is
possible that the Underlying Smith Barney Funds with authority to
engage in options transactions and other clients of their
respective advisers and certain of their affiliates may be
considered to be such a group. A securities exchange may order
the liquidation of positions found to be in violation of these
limits and it may impose certain other sanctions.
In the case of options written by an Underlying Smith Barney Fund
that are deemed covered by virtue of the Fund's holding
convertible or exchangeable preferred stock or debt securities,
the time required to convert or exchange and obtain physical
delivery of the underlying common stocks with respect to which
the Fund has written options may exceed the time within which the
Fund must make delivery in accordance with an exercise notice.
In these instances, an Underlying Smith Barney Fund may purchase
or borrow temporarily the underlying securities for purposes of
physical delivery. By so doing, the Fund will not bear any
market risk because the Fund will have the absolute right to
receive from the issuer of the underlying security an equal
number of shares to replace the borrowed stock, but the Fund may
incur additional transaction costs or interest expenses in
connection with any such purchase or borrowing.
Additional risks exist with respect to certain of the U.S.
government securities for which an Underlying Smith Barney Fund
may write covered call options. If a Fund writes covered call
options on mortgage-backed securities, the securities that it
holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. The Fund
will compensate for the decline in the value of the cover by
purchasing an appropriate additional amount of those securities.
STOCK INDEX OPTIONS. Certain of the Underlying Smith Barney
Funds may purchase and write put and call options on U.S. stock
indexes listed on U.S. exchanges for the purpose of hedging its
portfolio. A stock index fluctuates with changes in the market
values of the stocks included in the index. Some stock index
options are based on a broad market index such as the New York
Stock Exchange Composite Index or a narrower market index such as
the Standard & Poor's 100. Indexes also are based on an industry
or market segment such as the American Stock Exchange Oil and Gas
Index or the Computer and Business Equipment Index.
Options on stock indexes are similar to options on stock except
that (a) the expiration cycles of stock index options are
monthly, while those of stock options currently are quarterly,
and (b) the delivery requirements are different. Instead of
giving the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of
exercise, multiplied by (b) a fixed "index multiplier." Receipt
of this cash amount will depend upon the closing level of the
stock index upon which the option is based being greater than, in
the case of a call, or less than, in the case of a put, the
exercise price of the option. The amount of cash received will
be equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery
of this amount. The writer may offset its position in stock
index options prior to expiration by entering into a closing
transaction on an exchange or it may let the options expire
unexercised.
The effectiveness of purchasing or writing stock index options as
a hedging technique will depend upon the extent to which price
movements in the portion of a securities portfolio being hedged
correlate with price movements of the stock index selected.
Because the value of an index option depends upon movements in
the level of the index rather than the price of a particular
stock, whether a Fund will realize a gain or loss from the
purchase or writing of options on an index depends upon movements
in the level of stock prices in the stock market generally or, in
the case of certain indexes, in an industry or market segment,
rather than movements in the price of a particular stock.
Accordingly, successful use by a Fund of options on stock indexes
will be subject to its adviser's ability to predict correctly
movements in the direction of the stock market generally or of a
particular industry. This requires different skills and
techniques than predicting changes in the prices of individual
stocks.
An Underlying Smith Barney Fund will engage in stock index
options transactions only when determined by its adviser to be
consistent with the Fund's efforts to control risk. There can be
no assurance that such judgment will be accurate or that the use
of these portfolio strategies will be successful. When a Fund
writes an option on a stock index, the Fund will establish a
segregated account with its custodian in an amount equal to the
market value of the option and will maintain the account while
the option is open.
MORTGAGE-RELATED SECURITIES. The average maturity of pass-
through pools of mortgage related securities varies with the
maturities of the underlying mortgage instruments. In addition,
a pool's stated maturity may be shortened by unscheduled payments
on the underlying mortgages. Factors affecting mortgage
prepayments include the level of interest rates, general economic
and social conditions, the location of the mortgaged property and
age of the mortgage. Because prepayment rates of individual
pools vary widely, it is not possible to accurately predict the
average life of a particular pool. Common practice is to assume
that prepayments will result in an average life ranging from 2 to
10 years for pools of fixed-rate 30-year mortgages. Pools of
mortgages with other maturities or different characteristics will
have varying average life assumptions.
Mortgage-related securities may be classified as private,
governmental or government-related, depending on the issuer or
guarantor. Private mortgage-related securities represent pass-
through pools consisting principally of conventional residential
mortgage loans created by non-governmental issuers, such as
commercial banks, savings and loan associations and private
mortgage insurance companies. Governmental mortgage-related
securities are backed up by the full faith and credit of the U.S.
Government . GNMA, the principal guarantor of such securities, is
a wholly owned U.S. government corporation within the Department
of Housing and Urban Development. Government-related mortgage-
related securities are not backed by the full faith and credit of
the U.S. Government. Issuers of such securities include FNMA and
FHLMC. FNMA is a government-sponsored corporation owned entirely
by private stockholders, which is subject to general regulation
by the Secretary of Housing and Urban Development. Pass-through
securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA. FHLMC is a corporate
instrumentality of the U.S., the stock of which is owned by
Federal Home Loan Banks. Participation certificates representing
interests in mortgages from FHLMC's national portfolio are
guaranteed as to the timely payment of interest and ultimate
collection of principal by FHLMC.
Private U.S. governmental or government-related entities create
mortgage loan pools offering pass-through investments in addition
to those described above. The mortgages underlying these
securities may be alternative mortgage instruments, that is,
mortgage instruments whose principal or interest payments may
vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage-related securities are
developed and offered to investors, certain of the Underlying
Smith Barney Funds, consistent with their investment objective
and policies, may consider making investments in such new types
of securities.
CURRENCY TRANSACTIONS. Certain of the Underlying Smith Barney
Funds may enter into forward currency exchange transactions. A
forward currency contract is an obligation to purchase or sell a
currency against another currency at a future date and price as
agreed upon by the parties. An Underlying Smith Barney Fund that
enters into a forward currency contract may either accept or make
delivery of the currency at the maturity of the forward contract
or, prior to maturity, enter into a closing transaction involving
the purchase or sale of an offsetting contract. A Fund may
engage in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. A Fund
might sell a particular foreign currency forward, for example,
when it holds bonds denominated in that currency but anticipates,
and seeks to be protected against, decline in the currency
against the U.S. dollar. Similarly, a Fund may sell the U.S.
dollar forward when it holds bonds denominated in U.S. dollars
but anticipates, and seeks to be protected against, a decline in
the U.S. dollar relative to other currencies. Further, a Fund
may purchase a currency forward to "lock in" the price of
securities denominated in that currency which it anticipates
purchasing.
Transaction hedging is the purchase or sale of forward currency
contracts with respect to a specific receivable or payable of the
Fund generally arising in connection with the purchase or sale of
its securities. Position hedging, generally, is the sale of
forward currency contracts with respect to portfolio security
positions denominated or quoted in the currency. A Fund may not
position hedge with respect to a particular currency to an extent
greater than the aggregate market value at any time of the
security or securities held in its portfolio denominated or
quoted in or currently convertible (such as through exercise of
an option or consummation of a forward currency contract) into
that particular currency, except that certain Underlying Smith
Barney Funds may utilize forward currency contracts denominated
in the European Currency Unit to hedge portfolio security
positions when a security or securities are denominated in
currencies of member countries in the European Monetary System.
If a Fund enters into a transaction hedging or position hedging
transaction, it will cover the transaction through one or more of
the following methods: (a) ownership of the underlying currency
or an option to purchase such currency; (b) ownership of an
option to enter into an offsetting forward currency contract; (c)
entering into a forward contract to purchase currency being sold
or to sell currency being purchased, provided that such covering
contract is itself covered by any one of these methods unless the
covering contract closes out the first contract; or (d)
depositing into a segregated account with the custodian or a sub-
custodian of the Fund cash or readily marketable securities in an
amount equal to the value of the Fund's total assets committed to
the consummation of the forward currency contract and not
otherwise covered. In the case of transaction hedging, any
securities placed in an account must be liquid debt securities.
In any case, if the value of the securities placed in the
segregated account declines, additional cash or securities will
be placed in the account so that the value of the account will
equal the above amount. Hedging transactions may be made from
any foreign currency into dollars or into other appropriate
currencies.
At or before the maturity of a forward contract, a Fund either
may 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 relevant Fund will obtain, on the same maturity date,
the same amount of the currency which it is obligated to deliver.
If a Fund retains the portfolio security and engages in an
offsetting transaction, the Fund, at the time of execution of the
offsetting transaction, will incur a gain or loss to the extent
movement has occurred in forward contract prices. Should forward
prices decline during the period between a Fund's entering into a
forward contract for the sale of a currency and the date that it
enters into an offsetting contract for the purchase of the
currency, the Fund will realize a gain to the extent that 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 Fund 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.
The cost to a Fund of engaging in currency transactions varies
with factors such as the currency involved, the length of the
contract period and the market conditions then prevailing.
Because transactions in currency exchange are usually conducted
on a principal basis, no fees or commissions are involved. The
use of forward currency contracts does not eliminate fluctuations
in the underlying prices of the securities, but it does establish
a rate of exchange that can be achieved in the future. In
addition, although forward currency contracts limit the risk of
loss due to a decline in the value of the hedged currency, at the
same time, they limit any potential gain that might result should
the value of the currency increase. If a devaluation is
generally anticipated a Fund may not be able to contract to sell
the currency at a price above the devaluation level they
anticipate.
FOREIGN CURRENCY OPTIONS. Certain Underlying Smith Barney Funds
may purchase or write put and call options on foreign currencies
for the purpose of hedging against changes in future currency
exchange rates. Foreign currency options generally have three,
six and nine month expiration cycles. Put options convey the
right to sell the underlying currency at a price which is
anticipated to be higher than the spot price of the currency at
the time the option expires. Call options convey the right to
buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time that the
option expires.
An Underlying Smith Barney Fund may use foreign currency options
under the same circumstances that it could use forward currency
exchange transactions. A decline in the dollar value of a
foreign currency in which a Fund's securities are denominated,
for example, will reduce the dollar value of the securities, even
if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
securities that it holds, the Fund may purchase put options on
the foreign currency. If the value of the currency does decline,
the Fund will have the right to sell the currency for a fixed
amount in dollars and will thereby offset, in whole or in part,
the adverse effect on its securities that otherwise would have
resulted. Conversely, if a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby potentially increasing the cost of the
securities, the Fund may purchase call options on the particular
currency. The purchase of these options could offset, at least
partially, the effects of the adverse movements in exchange
rates. The benefit to the Fund derived from purchases of foreign
currency options, like the benefit derived from other types of
options, will be reduced by the amount of the premium and related
transaction costs. In addition, if currency exchange rates do
not move in the direction or to the extent anticipated, the Fund
could sustain losses on transactions in foreign currency options
that would require it to forego a portion or all of the benefits
of advantageous changes in the rates.
FOREIGN GOVERNMENT SECURITIES. Among the foreign government
securities in which certain Underlying Smith Barney Funds may
invest are those issued by countries with developing economies,
which are countries in the initial stages of their
industrialization cycles. Investing in securities of countries
with developing economies involves exposure to economic
structures that are generally less diverse and less mature, and
to political systems that can be expected to have less stability,
than those of developed countries. The markets of countries with
developing economies historically have been more volatile than
markets of the more mature economies of developed countries, but
often have provided higher rates of return to investors.
RATINGS AS INVESTMENT CRITERIA. In general, the ratings of
nationally recognized statistical rating organization ("NRSROs")
represent the opinions of these agencies as to the quality of
securities that they rate. Such ratings, however, are relative
and subjective, and are not absolute standards of quality and do
not evaluate the market value risk of the securities. These
ratings will be used the by Underlying Smith Barney Funds as
initial criteria for the selection of portfolio securities, but
the Funds also will rely upon the independent advice of their
respective advisers to evaluate potential investments. Among the
factors that will be considered are the long-term ability of the
issuer to pay principal and interest and general economic trends.
The Appendix to this Statement of Additional Information contains
further information concerning the rating categories of NRSROs
and their significance.
Subsequent to its purchase by a Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. In addition, it is possible
that an NRSRO might not change its rating of a particular issue
to reflect subsequent events. None of these events will require
sale of such securities by a Fund, but the Fund's adviser will
consider such events in its determination of whether the Fund
should continue to hold the securities. In addition, to the
extent that the ratings change as a result of changes in such
organizations or their rating systems, or due to a corporate
reorganization, a Fund will attempt to use comparable ratings as
standards for its investments in accordance with its investment
objective and policies.
FUTURES CONTRACTS. The purpose of the acquisition or sale of a
futures contract by a Fund is to mitigate the effects of
fluctuations in interest rates or currency or market values,
depending on the type of contract, on securities or their values
without actually buying or selling the securities. Of course,
because the value of portfolio securities will far exceed the
value of the futures contracts sold by a Fund, an increase in the
value of the futures contracts could only mitigate -- but not
totally offset -- the decline in the value of the Fund.
Certain of the Underlying Smith Barney Funds may enter into
futures contracts or related options on futures contracts that
are traded on a domestic or foreign exchange or in the over-the-
counter market. Generally, these investments may be made solely
for the purpose of hedging against changes in the value of its
portfolio securities due to anticipated changes in interest
rates, currency values and/or market conditions when the
transactions are economically appropriate to the reduction of
risks inherent in the management of the Fund and not for purposes
of speculation. However, the International Equity Portfolio and
the International Balanced Portfolio may also enter into futures
transactions for non-hedging purposes, subject to applicable law.
The ability of the Funds to trade in futures contracts may be
limited by the requirements of the Internal Revenue Code of 1986
as amended (the "Code"), applicable to a regulated investment
company.
No consideration is paid or received by a Fund upon entering into
a futures contract. Initially, a Fund will be required to
deposit with its custodian an amount of cash or cash equivalents
equal to approximately 1% to 10% of the contract amount (this
amount is subject to change by the board of trade on which the
contract is traded and members of such board of trade may charge
a higher amount). This amount, known as initial margin, is in
the nature of a performance bond or good faith deposit on the
contract and is returned to a Fund upon termination of the
futures contract, assuming that all contractual obligations have
been satisfied. Subsequent payments, known as variation margin,
to and from the broker, will be made daily as the price of the
securities, currency or index underlying the futures contract
fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking-to-
market." At any time prior to expiration of a futures contract, a
Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing
position in the contract.
Several risks are associated with the use of futures contracts as
a hedging device. Successful use of futures contracts by a Fund
is subject to the ability of its adviser to predict correctly
movements in interest rates, stock or bond indices or foreign
currency values. These predictions involve skills and techniques
that may be different from those involved in the management of
the portfolio being hedged. In addition, there can be no
assurance that there will be a correlation between movements in
the price of the underlying securities, currency or index and
movements in the price of the securities which are the subject of
the hedge. A decision of whether, when and how to hedge involves
the exercise of skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of market
behavior or unexpected trends in interest rates or currency
values.
There is no assurance that an active market will exist for future
contracts at any particular time. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades
may be made that day at a price beyond that limit. It is
possible that futures contract prices could move to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial
losses. In such event, and in the event of adverse price
movements, a Fund would be required to make daily cash payments
of variation margin, and an increase in the value of the portion
of the portfolio being hedged, if any, may partially or
completely offset losses on the futures contract. As described
above, however, there is no guarantee that the price of the
securities being hedged will, in fact, correlate with the price
movements in a futures contract and thus provide an offset to
losses on the futures contract.
If a Fund has hedged against the possibility of a change in
interest rates or currency or market values adversely affecting
the value of securities held in its portfolio and rates or
currency or market values move in a direction opposite to that
which the Fund has anticipated, the Fund will lose part or all of
the benefit of the increased value of securities which it has
hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund had
insufficient cash, it may have to sell securities to meet daily
variation margin requirements at a time when it may be
disadvantageous to do so. These sales of securities may, but
will not necessarily, be at increased prices which reflect the
change in interest rates or currency values, as the case may be.
OPTIONS ON FUTURES CONTRACTS. An option on an interest rate
futures contract, as contrasted with the direct investment in
such a contract, gives the purchaser the right, in return for the
premium paid, to assume a position in the underlying interest
rate futures contract at a specified exercise price at any time
prior to the expiration date of the option. An option on a
foreign currency futures contract, as contracted with the direct
investment in such a contract, gives the purchaser the right, but
not the obligation, to assume a long or short position in the
relevant underlying foreign currency futures contract at a
predetermined exercise price at a time in the future. Upon
exercise of an option, the delivery of the futures position by
the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the
writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the
case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The
potential for loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option
(plus transaction costs). Because the value of the option is
fixed at the point of sale, there are no daily cash payments to
reflect changes in the value of the underlying contract; however,
the value of the option does change daily and that change would
be reflected in the net asset value of a Fund investing in the
options.
Several risks are associated with options on futures contracts.
The ability to establish and close out positions on such options
will be subject to the existence of a liquid market. In
addition, the purchase of put or call options on interest rate
and foreign currency futures will be based upon predictions by a
Fund's adviser as to anticipate trends in interest rates and
currency values, as the case may be, which could price to be
incorrect. Even if the expectations of an adviser are correct,
there may be an imperfect correlation between the change in the
value of the options and of the portfolio securities in the
currencies being hedged.
FOREIGN INVESTMENTS. Investors should recognize that investing
in foreign companies involves certain considerations which are
not typically associated with investing in U.S. issuers. Since
certain Underlying Smith Barney Funds will be investing in
securities denominated in currencies other than the U.S. dollar,
and since certain Funds may temporarily hold funds in bank
deposits or other money market investments denominated in foreign
currencies, the Funds may be affected favorably or unfavorably by
exchange control regulations or changes in the exchange rate
between such currencies and the dollar. A change in the value of
a foreign currency relative to the U.S. dollar will result in a
corresponding change in the dollar value of a Fund's assets
denominated in that foreign currency. Changes in foreign
currency exchange rates may also affect the value of dividends
and interest earned, gains and losses realized on the sale of
securities and net investment income and gain, if any, to be
distributed to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies
is determined by the forces of supply and demand in the foreign
exchange markets. Changes in the exchange rate may result over
time from the interaction of many factors directly o r indirectly
affecting economic conditions and political developments in other
countries. Of particular importance are rates of inflation,
interest rate levels, the balance of payments and the extent of
government surpluses or deficits in the U.S. and the particular
foreign country, all of which are in turn sensitive to the
monetary, fiscal and trade policies pursued by the governments of
the U.S. and other foreign countries important to international
trade and finance. Governmental intervention may also play a
significant role. National governments rarely voluntarily allow
their currencies to float freely in response to economic forces.
Sovereign governments use a variety of techniques, such as
intervention by a country's central bank or imposition of
regulatory controls or taxes, to affect the exchange rates of
their currencies.
Securities held by an Underlying Smith Barney Fund may not be
registered with, nor the issuers thereof be subject to reporting
requirements of, the SEC. Accordingly, there may be less
publicly available information about the securities and about the
foreign company or government issuing them than is available
about a domestic company or government entity. Foreign issuers
are generally not subject to uniform financial reporting
standards, practices and requirements comparable to those
applicable to U.S. issuers. In addition, with respect to some
foreign countries, there is the possibility of expropriation or
confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or
domestic developments which could affect U.S. investments in
those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of
payments positions. Certain Underlying Smith Barney Funds may
invest in securities of foreign governments (or agencies or
instrumentalities thereof), and many, if not all, of the
foregoing considerations apply to such investments as well.
Securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable domestic
companies. Certain foreign countries are known to experience
long delays between the trade and settlement dates of securities
purchased or sold.
The interest payable on a Fund's foreign securities may be
subject to foreign withholding taxes, and while investors may be
able to claim some credit or deductions for such taxes with
respect to their allocated shares of such foreign tax payments,
the general effect of these taxes will be to reduce the Fund's
income. Additionally, the operating expenses of a Fund can be
expected to be higher than that of an investment company
investing exclusively in the U.S. securities, since the expenses
of the Fund, such as custodial costs, valuation costs and
communication costs, as well as the rate of the investment
advisory fees, though similar to such expenses of some other
international funds, are higher than those costs incurred by
other investment companies.
FOREIGN COMMODITY EXCHANGES. Unlike trading on domestic
commodity exchanges, trading on foreign commodity exchanges is
not regulated by the Commodity Futures Trading Commission and may
be subject to greater risks than trading on domestic exchanges.
For example, some foreign exchanges may be principal markets so
that no common clearing facility exists and a trader may look
only to the broker for performance of the contract. In addition,
unless an Underlying Smith Barney Fund trading on a foreign
commodity exchange hedges against fluctuations in the exchange
rate between the U.S. dollar and the currencies in which trading
is done on foreign exchanges, any profits that the Fund might
realize in trading could be eliminated by adverse changes in the
exchange rate, or the Fund could incur losses as a result of
those changes.
SHORT SALES. Certain of the Underlying Smith Barney Funds may
from time to time sell securities short. A short sale is a
transaction in which the Fund sells securities that it does not
own (but has borrowed) in anticipation of a decline in the market
price of the securities.
When a Fund makes a short sale, the proceeds it receives from the
sale are retained by a broker until the Fund replaces the
borrowed securities. To deliver the securities to the buyer, the
Fund must arrange through a broker to borrow the securities and,
in so doing, the Fund becomes obligated to replace the securities
borrowed at their market price at the time of replacement,
whatever that price may be. The Fund may have to pay a premium
to borrow the securities and must pay any dividends or interest
payable on the securities until they are replaced.
A Fund's obligation to replace the securities borrowed in
connection with a short sale will be secured by collateral
deposited with the broker that consists of cash or U.S.
government securities. In addition, the Fund will place in a
segregated account with its custodian an amount of cash or U.S.
government securities equal to the difference, if any, between
(a) the market value of the securities sold at the time they were
sold short and (b) any cash or U.S. government securities
deposited as collateral with the broker in connection with the
short sale (not including the proceeds of the short sale). Until
it replaces the borrowed securities, the Fund will maintain the
segregated account daily at a level so that the amount deposited
in the account plus the amount deposited with the broker (not
including the proceeds from the short sale) (a) will equal the
current market value of the securities sold short and (b) will
not be less than the market value of the securities at the time
they were sold short.
SHORT SALES AGAINST THE BOX. Certain of the Underlying Smith
Barney Funds may enter into a short sale of common stock such
that when the short position is open the Fund involved owns an
equal amount of preferred stocks or debt securities, convertible
or exchangeable, without payment of further consideration, into
an equal number of shares of the common stock sold short. This
kind of short sale, which is described as "against the box," will
be entered into by a Fund for the purpose of receiving a portion
of the interest earned by the executing broker from the proceeds
of the sale. The proceeds of the sale will be held by the broker
until the settlement date when the Fund delivers the convertible
securities to close out its short position. Although prior to
delivery a Fund will have to pay an amount equal to any dividends
paid on the common stock sold short, the Fund will receive the
dividends from the preferred stock or interest from the debt
securities convertible into the stock sold short, plus a portion
of the interest earned from the proceeds of the short sale. The
Funds will deposit, in a segregated account with their custodian,
convertible preferred stock or convertible debt securities in
connection with short sales against the box.
SWAP AGREEMENTS. Among the hedging transactions into which
certain Underlying Smith Barney Funds may enter are interest rate
swaps and the purchase or sale of interest rate caps and floors.
Interest rate swaps involve the exchange by a Fund with another
party of their respective commitments to pay or receive interest,
e.g., an exchange of floating rate payments for fixed rate
payments. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a
notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payment of interest on a
notional principal amount from the party selling such interest
rate floor.
Certain Underlying Smith Barney Funds may enter into interest
rate swaps, caps and floors on either an asset-based or
liability-based basis, depending on whether it is hedging its
assets or its liabilities, and will usually enter into interest
rate swaps on a net basis, i.e., the two payment streams are
netted, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments. Inasmuch as these
hedging transactions are entered into for good faith hedging
purposes, the investment adviser and the Fund believe such
obligations do not constitute senior securities and, accordingly
will not treat them as being subject to its borrowing
restrictions. The net amount of the excess, if any, of a Fund's
obligations over its entitlement with respect to each interest
rate swap will be accrued on a daily basis and an amount of cash
or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated
account with PNC Bank. If there is a default by the other party
to such a transaction, a Fund will have contractual remedies
pursuant to the agreement related to the transaction. The swap
market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as
principals and as agents. As a result, the swap market has
become relatively liquid. Caps and floors are more recent
innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps.
RESTRICTED SECURITIES. Certain of the Underlying Smith Barney
Funds may invest in securities the disposition of which is
subject to legal or contractual restrictions. The sale of
restricted securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling
expenses than does the sale of securities eligible for trading on
a national securities exchange that are not subject to
restrictions on resale. Restricted securities often sell at a
price lower than similar securities that are not subject to
restrictions on resale.
REVERSE REPURCHASE AGREEMENTS. Certain Underlying Smith Barney
Funds may enter into reverse repurchase agreements with banks or
broker-dealers . A reverse repurchase agreement involves the sale
of a money market instrument held by an Underlying Smith Barney
Fund coupled with an agreement by the Fund to repurchase the
instrument at a stated price, date and interest payment. The
Fund will use the proceeds of a reverse repurchase agreement to
purchase other money market instruments which either mature at a
date simultaneous with or prior to the expiration of the reverse
repurchase agreement or which are held under an agreement to
resell maturing as of that time.
An Underlying Smith Barney Fund will enter into a reverse
repurchase agreement only when the interest income to be earned
from the investment of the proceeds of the transaction is greater
than the interest expense of the transaction. Under the 1940
Act, reverse repurchase agreements may be considered to be
borrowings by the seller. Entry into such agreements requires the
creation and maintenance of a segregated account with the Fund's
custodian consisting of U.S. government securities, cash or cash
equivalents.
LEVERAGING. Certain of the Underlying Smith Barney Funds may
from time to time leverage their investments by purchasing
securities with borrowed money. A Fund is required under the
1940 Act to maintain at all times an asset coverage of 300% of
the amount of its borrowings. If, as a result of market
fluctuations or for any other reason, the Fund's asset coverage
drops below 300%, the Fund must reduce its outstanding borrowings
within three business days so as to restore its asset coverage to
the 300% level.
Any gain in the value of securities purchased with borrowed money
that exceeds the interest paid on the amount borrowed would cause
the net asset value of the Underlying Smith Barney Fund's shares
to increase more rapidly than otherwise would be the case.
Conversely, any decline in the value of securities purchased
would cause the net asset value of the Fund's shares to decrease
more rapidly than otherwise would be the case. Borrowed money
thus creates an opportunity for greater capital gain but at the
same time increases exposure to capital risk. The net cost of
any borrowed money would be an expense that otherwise would not
be incurred, and this expense could restrict or eliminate a
Fund's net investment income in any given period.
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITORY RECEIPTS. Certain
of the Underlying Smith Barney Funds may invest in the securities
of foreign and domestic issuers in the form of American
Depository Receipts ("ADRs") and European Depository Receipts
("EDRs"). These securities may not necessarily be denominated in
the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a U.S. bank or
trust company that evidence ownership of underlying securities
issued by a foreign corporation. EDRs, which sometimes are
referred to as Continental Depository Receipts ("CDRs"), are
receipts issued in Europe typically by foreign banks and trust
companies that evidence ownership of either foreign or domestic
securities. Generally, ADRs, in registered form, are designed
for use in U.S. securities markets and EDRs and CDRs are designed
for use in European securities markets.
CONVERTIBLE SECURITIES. Convertible securities are fixed-income
securities that may be converted at either a stated price or
stated rate into underlying shares of common stock. Convertible
securities have general characteristics similar to both fixed-
income and equity securities. Although to a lesser extent than
with fixed-income securities generally, the market value of
convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stocks
and, therefore, also will react to variations in the general
market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly
on a yield basis, and so may not experience market value declines
to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the prices
of the convertible securities tend to rise as a reflection of the
value of the underlying common stock. While no securities
investments are without risk, investments in convertible
securities generally entail less risk than investments in common
stock of the same issuer.
As fixed-income securities, convertible securities are
investments that provide for a stable stream of income with
generally higher yields than common stocks. Of course, like all
fixed-income securities, there can be no assurance of current
income because the issuers of the convertible securities may
default on their obligations. Convertible securities, however,
generally offer lower interest or dividend yields than non-
convertible securities of similar quality because of the
potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for
capital appreciation through the conversion feature, which
enables the holder to benefit from increases in the market price
of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds, such as corporate debt obligations,
enjoy seniority in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however,
convertible securities typically have lower ratings than similar
nonconvertible securities.
WARRANTS. Because a warrant does not carry with it the right to
dividends or voting rights with respect to the securities that
the warrant holder is entitled to purchase, and because it does
not represent any rights to the assets of the issuer, a warrant
may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities
and a warrant ceases to have value if it is not exercised prior
to its expiration date. Warrants acquired by an Underlying Smith
Barney Fund in units or attached to securities may be deemed to
be without value.
PREFERRED STOCK. Preferred stocks, like debt obligations, are
generally fixed-income securities. Shareholder of preferred
stocks normally have the right to receive dividends at a fixed
rate when and as declared by the issuer's board of directors, but
do not participate in other amounts available for distribution by
the issuing corporation. Dividends on the preferred stock may be
cumulative, and all cumulative dividends usually must be paid
prior to common shareholders receiving any dividends. Preferred
stock dividends must be paid before common stock dividends and,
for that reason, preferred stocks generally entail less risk than
common stocks. Upon liquidation, preferred stocks are entitled
to a specified liquidation preference, which is generally the
same as the par or stated value, and are senior in right of
payment to common stock. Preferred stocks are, however, equity
securities in the sense that they do not represent a liability of
the issuer and, therefore, do not offer as great a degree of
protection of capital or assurance of continued income as
investments in corporate debt securities. In addition, preferred
stocks are subordinated in right of payment to all debt
obligations and creditors of the issuer, and convertible
preferred stocks may be subordinated to other preferred stock of
the same issuer.
Investment Restrictions
The Concert Series has adopted the following investment
restrictions for the protection of shareholders. Restrictions 1
through 6 below have been adopted by the Concert Series with
respect to each Portfolio as fundamental policies. Under the
1940 Act, a fundamental policy of a Portfolio may not be changed
without the vote of a majority, as defined in the 1940 Act, of
the outstanding voting securities of the Portfolio. Such
majority is defined as the lesser of (a) 67% or more of the
shares present at the meeting, if the holders of more than 50% of
the outstanding shares of the Portfolio are present or
represented by proxy, or (b) more than 50% of the outstanding
shares. Investment restrictions 7 through 15 may be changed by a
vote of a majority of the Concert Series' Board of Directors at
any time.
The investment policies adopted by the Concert Series prohibit a
Portfolio from:
1. Borrowing money except from banks for temporary or emergency
purposes, including the meeting of redemption requests in an
amount not exceeding 33-1/3% of the value of a Portfolio's total
assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the
borrowing is made.
2. Making loans of money to others, except through the purchase
of portfolio securities consistent with its investment objective
and policies and repurchase agreements.
3. Underwriting the securities of other issuers, except insofar
as the Portfolio may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of
portfolio securities.
4. Purchasing or selling real estate except that each Portfolio
may purchase and sell money market securities that are secured by
real estate or issued by companies that invest or deal in real
estate.
5. Investing in commodities.
6. Issuing senior securities except as permitted by investment
restriction 1.
7. Purchasing securities on margin.
8. Making short sales of securities or maintaining a short
position.
9. Pledging, hypothecating, mortgaging or otherwise encumbering
more than 33-1/3% of the value of a Portfolio's total assets.
10. Investing in oil, gas or other mineral exploration or
development programs.
11. Writing or selling puts, calls, straddles, spreads or
combinations thereof.
12. Purchasing restricted securities, illiquid securities (such
as repurchase agreements with maturities in excess of seven days)
or other securities that are not readily marketable.
13. Purchasing any security if as a result the Portfolio would
then have more than 5% of its total assets invested in securities
of companies (including predecessors) that have been in
continuous operation for fewer than three years (except for
Underlying Smith Barney Funds).
14. Making investments for the purpose of exercising control or
management.
15. Purchasing or retaining securities of any company if, to the
knowledge of the Concert Series, any officer or director of the
Concert Series or SBMFM individually owns more than 1/2 of 1% of
the outstanding securities of such company and together they own
beneficially more than 5% of such securities.
The Concert Series may make commitments more restrictive than the
restrictions listed above with respect to a Portfolio so as to
permit the sale of shares of the Portfolio in certain states.
Should the Concert Series determine that any such commitment is
no longer in the best interests of the Portfolio and its
shareholders, the Concert Series will revoke the commitment by
terminating the sale of shares of the Portfolio in the relevant
state. The percentage limitations contained in the restrictions
listed above (other than with respect to (1) above) apply at the
time of purchases of securities.
Notwithstanding the foregoing investment restrictions, the
Underlying Smith Barney Funds in which the Portfolios invest have
adopted certain investment restrictions which may be more or less
restrictive than those listed above, thereby permitting a
Portfolio to engage in investment strategies indirectly that are
prohibited under the investment restrictions listed above. The
investment restrictions of an Underlying Smith Barney Fund are
located in its Statement of Additional Information.
Pursuant to an exemptive order issued by the SEC (Investment
Company Act Release No. IC-21613, December 19, 1995) each
Portfolio may (i) purchase more than 3% of the outstanding voting
securities of any Underlying Smith Barney Fund, (ii) invest more
than 5% of its assets in any one Underlying Smith Barney Fund and
(iii) invest substantially all of its assets in the Underlying
Smith Barney Funds.
Because of their investment objectives and policies, the
Portfolios will each concentrate more than 25% of their assets in
the mutual fund industry. In accordance with the Portfolios'
investment programs set forth in the Prospectus, each of the
Portfolios may invest more than 25% of its assets in certain
Underlying Smith Barney Funds. However, each of the Underlying
Smith Barney Funds in which each Fund will invest (other than the
Smith Barney Utilities Fund) will not concentrate more than 25%
of its total assets in any one industry. The Smith Barney
Utilities Fund will invest at least 65% of its assets in
securities of companies in the utility industries.
Portfolio Turnover
Each Portfolio's turnover rate is not expected to exceed 25%
annually. A Portfolio may purchase or sell securities to: (a)
accommodate purchases and sales of its shares, (b) change the
percentages of its assets invested in each of the Underlying
Smith Barney Funds in response to market conditions, and (c)
maintain or modify the allocation of its assets between equity
and fixed income funds and among the Underlying Smith Barney
Funds within the percentage limits described in the Prospectus.
The turnover rates of the Underlying Smith Barney Funds have
ranged from 16% to 292% during their most recent fiscal years.
There can be no assurance that the turnover rates of these funds
will remain within this range during subsequent fiscal years.
Higher turnover rates may result in higher expenses being
incurred by the Underlying Smith Barney Funds.
PURCHASE OF SHARES
Volume Discounts
The schedule of sales charges on Class A shares described in the
Prospectus applies to purchases made by any "purchaser," which is
defined to include the following: (a) an individual; (b) an
individual's spouse and his or her children purchasing shares for
his or her own account; (c) a pension, profit-sharing or other
employee benefit plan qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
qualified employee benefit plans of employers who are "affiliated
persons" of each other within the meaning of the 1940 Act; (d)
tax-exempt organizations enumerated in Section 501(c)(3) or (13)
of the Code; and (e) a trustee or other professional fiduciary
(including a bank, or an investment adviser registered with the
SEC under the Investment Advisers Act of 1940, as amended)
purchasing shares of a Portfolio for one or more trust estates of
fiduciary accounts. Purchasers who wish to combine purchase
orders to take advantage of volume discounts on Class A shares
should contact a Smith Barney Financial Consultant.
Combined Right of Accumulation
Reduced sales charges, in accordance with the schedule in the
Prospectus, apply to any purchase of Class A shares from Smith
Barney if the aggregate investment in Class A shares of a
Portfolio and in Class A shares of other funds of the Smith
Barney Mutual Funds that are offered with an initial sales
charge, including the purchase being made, of any purchaser is
$25,000 or more. The reduced sales charge is subject to
confirmation of the shareholder's holdings through a check of
appropriate records. The Concert Series reserves the right to
terminate or amend the combined right of accumulation at any time
after written notice to shareholders. For further information
regarding the combined right of accumulation, shareholders should
contact a Smith Barney Financial Consultant.
Determination of Public Offering Price
The Concert Series offers its shares to the public on a
continuous basis. The public offering price for Class A shares
of the Concert Series is equal to the net asset value per share
at the time of purchase plus an initial sales charge based on the
aggregate amount of the investment. The public offering price
for Class B, Class C and Class Y shares (and Class A share
purchases, including applicable rights of accumulation, equaling
or exceeding $500,000) is equal to the net asset value per share
at the time of purchase and no sales charge is imposed at the
time of purchase. A contingent deferred sales charge ("CDSC"),
however, is imposed on certain redemptions of Class B and Class C
shares, and of Class A shares when purchased in amounts equaling
or exceeding $500,000. The method of determining a Portfolio's
net asset value is discussed below under "Valuation of Shares."
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment
postponed (a) for any period during which the NYSE is closed
(other than for customary weekend or holiday closings), (b) when
trading in markets a Portfolio normally utilizes is restricted,
or an emergency, as determined by the SEC, exists so that
disposal of a Portfolio's investments or determination of net
asset value is not reasonably practicable or (c) for such other
periods as the SEC by order may permit for protection of a
Portfolio's shareholders.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan") is
available to shareholders who own shares with a value of at least
$10,000 ($5,000 for retirement plan accounts) and who wish to
receive specific amounts of cash monthly or quarterly.
Withdrawals of at least $100 may be made under the Withdrawal
Plan by redeeming as many shares of a Portfolio as may be
necessary to cover the stipulated withdrawal payment. Any
applicable CDSC will not be waived on amounts withdrawn by
shareholders that exceed 1.00% per month of the value of a
shareholder's shares at the time the Withdrawal Plan commences.
(With respect to Withdrawal Plans in effect prior to November 7,
1994, any applicable CDSC will be waived on amounts that do not
exceed 2.00% per month of the value of a shareholder's shares at
the time the Withdrawal Plan commences.) To the extent
withdrawals exceed dividends, distributions and appreciation of a
shareholder's investment in a Portfolio, there will be a
reduction in the value of the shareholder's account and continued
withdrawal payments will reduce the shareholder's investment and
ultimately may exhaust it. Withdrawal payments should not be
considered as income from investment in a Portfolio.
Furthermore, as it generally would not be advantageous to a
shareholder to make additional investments in a Portfolio at the
same time he or she is participating in the Withdrawal Plan,
purchases by such shareholders in amounts of less than $5,000
ordinarily will not be permitted.
Shareholders who wish to participate in the Withdrawal Plan and
who hold their shares in certificate form must deposit their
share certificates with First Data as agent for Withdrawal Plan
members. All dividends and distributions on shares in the
Withdrawal Plan are reinvested automatically at net asset value
in additional shares of the Portfolio. Effective November 7,
1994, Withdrawal Plans should be set up with any Smith Barney
Financial Consultant. A shareholders who purchase shares
directly through First Data may continue to do so and
applications for participation in the Withdrawals Plan must be
received by First Data no later than the eighth day of the month
to be eligible for participation beginning with that month's
withdrawal. For additional information, shareholders should
contact a Smith Barney Financial Consultant.
DISTRIBUTORS
SMITH BARNEY. Smith Barney serves as a principal underwriter of
the Concert Series on a best efforts basis pursuant to a
distribution agreement (the "Distribution Agreement"). The
Distribution Agreement also gives authority to the Concert Series
to use the "Smith Barney" name so long as the Distribution
Agreement is in effect. To compensate its distributors for the
services provided and for the expenses borne, the Concert Series
has adopted a services and distribution plan (the "Plan'")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, each
Portfolio pays Smith Barney a service fee, accrued daily and paid
monthly, calculated at the annual rate of 0.25% of the value of
the Portfolio's average daily net assets attributable to the
Class A, Class B and Class C shares sold through Smith Barney.
In addition, each Portfolio pays Smith Barney a distribution fee
with respect to the Class B and Class C shares sold through Smith
Barney primarily intended to compensate Smith Barney for its
initial expense of paying Financial Consultants a commission upon
sales of those shares. The distribution fees applicable to Class
B and Class C shares of the High Growth Portfolio, the Growth
Portfolio and the Balanced Portfolio, accrued daily and paid
monthly, are calculated at the annual rate of 0.75% of the value
of a Portfolio's average daily net assets attributable to the
shares of the respective Class. The distribution fees applicable
to Class B and Class C shares of the Conservative Portfolio and
the Income Portfolio, accrued daily and paid monthly, are
calculated at the annual rate of 0.50% and 0.45%, respectively,
of the value of the Portfolio's average daily net assets
attributable to the shares of the respective Class.
PFS. PFS, located at 3100 Breckinridge Boulevard, Building 200,
Duluth, Georgia 30199-0062, also distributes shares of each
Portfolio as a principal underwriter and as such conducts a
continuous offering pursuant to a best efforts arrangement
requiring PFS to take and pay for only such securities as may be
sold to the public. The only Classes of shares being offered for
sale through PFS are Class A shares and Class B shares. Pursuant
to the Plan (described above), PFS is paid a service fee with
respect to Class A and Class B shares of each Portfolio sold
through PFS at the annual rate of 0.25% of the average daily net
assets attributable to each Class. PFS is also paid a
distribution fee with respect to Class B shares of the High
Growth Portfolio, the Growth Portfolio and the Balanced Portfolio
sold through PFS at the annual rate of 0.75% of the average daily
net assets attributable to that Class. PFS is paid a
distribution fee with respect to Class B shares of the
Conservative Portfolio and the Income Portfolio sold through PFS
at the annual rate of 0.50% of the average daily net assets
attributable to that Class. Class B shares that automatically
convert to Class A shares eight years after the date of original
purchase will no longer be subject to a distribution fee. The
fees are paid to PFS, which in turn, pays PFS Investments Inc.
("PFS Investments") to pay its Investments Representatives for
servicing shareholder accounts and, in the case of Class B
shares, to cover expenses primarily intended to result in the
sale of those shares. These expenses include: advertising
expenses; the cost of printing and mailing prospectuses to
potential investors; payments to and expenses of Investments
Representatives and other persons who provide support services in
connection with the distribution of shares; interest and/or
carrying charges; and indirect and overhead costs of PFS
Investments associated with the sale of Portfolio shares,
including lease, utility, communications and sales promotion
expenses.
The payments to PFS Investments Representatives for selling
shares of a Class include a commission or fee paid by the
investor or PFS at the time of sale and, with respect to Class A
and Class B shares, a continuing fee for servicing shareholder
accounts for as long as a shareholder remains a holder of that
Class. Investments Representatives may receive different levels
of compensation for selling different Classes of shares.
PFS Investments may be deemed to be an underwriter for purposes
of the Securities Act of 1933. From time to time, PFS or its
affiliates may also pay for certain non-cash sales incentives
provided to PFS Investments Representatives. Such incentives do
not have any effect on the net amount invested. In addition to
the reallowances from the applicable public offering price
described above, PFS may from time to time, pay or allow
additional reallowances or promotional incentives, in the form of
cash or other compensation to PFS Investments Representatives
that sell shares of each Portfolio.
Under its terms, the Plan continues from year to year, provided
such continuance is approved annually by vote of the Concert
Series' Board of Directors, including a majority of the
Independent Directors. The Plan may not be amended to increase
the amount of the service and distribution fees without
shareholder approval, and all material amendments of the Plan
also must be approved by the directors and Independent directors
in the manner described above. The Plan may be terminated with
respect to a Class of a Portfolio at any time, without penalty,
by the vote of a majority of the Independent Directors or by a
vote of a majority of the outstanding voting securities of the
Class (as defined in the 1940 Act). Pursuant to the Plan, Smith
Barney and PFS will provide the Concert Series' Board of
Directors with periodic reports of amounts expended under the
Plan and the purpose for which such expenditures were made.
GENERAL. Actual distribution expenses for Class B shares of each
Portfolio for any given year may exceed the fees received
pursuant to the Plan and will be carried forward and paid by each
Portfolio in future years so long as the Plan is in effect.
Interest is accrued monthly on such carryforward amounts at a
rate comparable to that paid by Smith Barney for bank borrowings.
The Concert Series' Board of Directors will evaluate the
appropriateness of the Plan and its payment terms on a continuing
basis and in so doing will consider all relevant factors,
including amounts received under the Plan and proceeds of the
CDSC.
VALUATION OF SHARES
The net asset value of each Portfolio's Classes of Shares will be
determined on any day that the New York Stock Exchange (the
"NYSE") is open. The NYSE is closed on the following holidays:
New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day,
and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively.
Because of the differences in distribution fees and Class-
specific expenses, the per share net asset value of each Class
may differ. The following is a description of the procedures
used by each Portfolio in valuing its assets.
The value of each Underlying Smith Barney Fund will be its net
asset value at the time of computation. Short-term investments
that have a maturity of more than 60 days are valued at prices
based on market quotations for securities of similar type, yield
and maturity. Short-term investments that have a maturity of 60
days or less are valued at amortized cost, which constitutes fair
value as determined by the Concert Series' Board of Directors.
Amortized cost involves valuing an instrument at its original
cost to the Portfolio and thereafter assuming a constant
amortization to maturity of any discount or premium regardless of
the effect of fluctuating interest rates on the market value of
the instrument.
EXCHANGE PRIVILEGE
Except as noted below and in the Prospectus, shareholders of any
Portfolio and of any other Smith Barney Mutual Fund may exchange
all or part of their shares for shares of the same class of any
other Portfolio or of other Smith Barney Mutual Funds, to the
extent such shares are offered for sale in the shareholder's
state of residence, on the basis of relative net asset value per
share at the time of exchange as follows:
A. Class A shares of any fund purchased with a sales charge may
be exchanged for Class A shares of any of the other funds, and a
sales charge differential, if any, will be applied. Class A
shares of any fund may be exchanged without a sales charge for
shares of the funds that are offered without a sales charge.
Class A shares of any fund purchased without a sales charge may
be exchanged for shares sold with a sales charge, and the
appropriate sales charge differential will be applied.
B. Class A shares of any fund acquired by a previous exchange of
shares may be exchanged for Class A shares of any of the other
funds, and the sales charge differential, if any, will be
applied.
C. Class B shares of any fund may be exchanged without a sales
charge. Class B shares of any fund exchanged for Class B shares
of another fund will be subject to the higher applicable CDSC of
the two funds and, for purposes of calculating CDSC rates, and
conversion periods, will be deemed to have been held since the
date the shares being exchanged were deemed to be purchased.
AS STATED IN THE PROSPECTUS FOR SHARES DISTRIBUTED THROUGH PFS,
THE EXCHANGE PRIVILEGE IS LIMITED. Dealers other than Smith
Barney must notify First Data of the investor's prior ownership
of Class A shares of Smith Barney High Income Fund and the
account number in order to accomplish an exchange of shares of
Smith Barney High Income Fund under paragraph B above.
The exchange privilege enables shareholders to acquire shares of
the same Class in a fund with different investment objectives
when they believe that a shift between funds is an appropriate
investment decision. This privilege is available to shareholders
residing in any state in which the fund shares being acquired may
legally be sold. Prior to any exchange, the shareholder should
obtain and review a copy of the current prospectus of each fund
into which an exchange is being considered. Prospectuses may be
obtained from a Smith Barney Financial Consultant or a PFS
Investments Representative.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the
then-current net asset value and, subject to any applicable sale
charge differential, the proceeds are immediately invested, at a
price as described above, in shares of the fund being acquired.
Smith Barney and PFS reserve the right to reject any exchange
request. The exchange privilege may be modified or terminated at
any time after written notice to shareholders.
IRA AND OTHER PROTOTYPE PLANS
Copies of the following plans with custody or trust agreements
have been approved by the Internal Revenue Service and are
available from the Concert Series, Smith Barney or PFS; investors
should consult with their own tax or retirement planning advisors
prior to the establishment of a plan.
IRA, Rollover IRA and Simplified Employee Pension - IRA
The Tax Reform Act of 1986 (the "Tax Reform Act") changed the
eligibility requirements for participants in Individual
Retirement Accounts ("IRAs"). Under the Tax Reform Act's new
provisions, if you or your spouse has earned income and neither
you nor your spouse is an active participant in any employer-
sponsored retirement plan, each of you may establish an IRA and
make maximum annual contributions equal to the lesser of earned
income or $2,000. If your spouse is not employed, you may
contribute and deduct on your joint venture a total of $2,250
between two IRA's.
If you or your spouse is an active participant in an employer-
sponsored retirement plan, a deduction for contributions to an
IRA might still be allowed in full or in part, depending on your
combined adjusted gross income. For married couples filing
jointly, a full deduction of contributions to an IRA will be
allowed where the couples' adjusted gross income is below $40,001
($25,001 for an unmarried individual); a partial deduction will
be allowed when adjusted gross income is between $40,001-$50,000
($25,001-$35,000 for an unmarried individual); and no deduction
when adjusted income is $50,000 ($35,000 for an unmarried
individual). Shareholders should consult their tax advisors
concerning the effects of the Tax Reform Act on the deductibility
of their IRA contributions.
A Rollover IRA is available to defer taxes on lump sum payments
and other qualifying rollover amounts (no maximum) received from
another retirement plan.
An employer who has established a Simplified Employee Pension -
IRA ("SEP-IRA") on behalf of eligible employees may make a
maximum annual contribution to each participant's account of 15%
(up to $22,500) of each participant's compensation.
In addition, certain small employers (those who have 25 or fewer
employees) can establish a Simplified Employees Pension Plan -
Salary Reduction Plan ("SEP-Salary Reduction Plan") under which
employees can make elective pre-tax contributions up to $9,240 of
gross income. Consult your tax advisor for special rules
regarding establishing either type of SEP.
An ERISA disclosure statement providing additional details is
included with each IRA application sent to participants.
Paired Defined Contribution Prototype
Corporations (including Subchapter S corporations) and non-
corporate entities may purchase shares of the Fund through the
Smith Barney Prototype Paired Defined Contribution Plan. The
prototype permits adoption of profit-sharing provisions, money
purchase pension provisions, or both, to provide benefits for
eligible employees and their beneficiaries. The prototype
provides for a maximum annual tax deductible contribution on
behalf of each Participant of up to 25% of compensation, but not
to exceed $30,000 (provided that a money purchase pension plan or
both a profit-sharing plan and a money purchase pension plan are
adopted thereunder).
PERFORMANCE
From time to time, the Concert Series may quote a Portfolio's
yield or total return in advertisements or in reports and other
communications to shareholders. The Concert Series may include
comparative performance information in advertising or marketing
the Portfolio's shares. Such performance information may include
the following industry and financial publications: BARRON'S,
BUSINESS WEEK, CDA INVESTMENT TECHNOLOGIES, INC., CHANGING TIMES,
FORBES, FORTUNE, INSTITUTIONAL INVESTOR, INVESTORS DAILY, MONEY,
MORNINGSTAR MUTUAL FUND VALUES, THE NEW YORK TIMES, USA TODAY AND
THE WALL STREET JOURNAL.
Yield
A Portfolio's 30-day yield figure described below is calculated
according to a formula prescribed by the SEC. The formula can be
expressed as follows: YIELD = 2[( [(a-b/(c*d))/1] + 1)6 - 1],
where
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
For the purpose of determining the interest earned (variable "a"
in the formula) on debt obligations purchased by the Portfolio at
a discount or premium, the formula generally calls for
amortization of the discount or premium; the amortization
schedule will be adjusted monthly to reflect changes in the
market values of the debt obligations.
Investors should recognize that in periods of declining interest
rates a Portfolio's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates,
the Portfolio's yield will tend to be somewhat lower. In
addition, when interest rates are falling, the inflow of net new
money to the Portfolio from the continuous sale of its shares
will likely be invested in portfolio instruments producing lower
yields than the balance of the Portfolio's investments, thereby
reducing the current yield of the Portfolio. In periods of
rising interest rates, the opposite can be expected to occur.
Average Annual Total Return
"Average annual total return" figures, as described below, are
computed according to a formula prescribed by the SEC. The
formula can be expressed as follows: P(1+T)/n = ERV, where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a Hypothetical $1,000
investment made at the beginning of a 1-, 5- or 10-year
period at the end of the 1-, 5- or 10-year period (or
fractional portion thereof), assuming reinvestment of
all dividends and distributions. A Class' total return
figures calculated in accordance with the above formula
assume that the maximum applicable sales charge or
maximum applicable CDSC, as the case may be, has been
deducted from the hypothetical $1,000 initial
investment at the time of purchase or redemption, as
applicable.
Aggregate Total Return
Aggregate total return figures, as described below, represent the
cumulative change in the value of an investment in the Class for
the specified period and are computed by the following formula:
(ERV-P)/P
Where: P = a hypothetical initial payment of $10,000, and ERV =
Ending Redeemable Value of a Hypothetical $10,000 investment made
at the beginning of a 1-, 5- or 10-year period (or fractional
portion thereof), at the end of the 1-, 5- or 10-year period (or
fractional portion thereof), assuming reinvestment of all
dividends and distributions.
A Class' performance will vary from time to time depending upon
market conditions, the composition of the Portfolio's investment
portfolio and operating expenses and the expenses exclusively
attributable to the Class. Consequently, any given performance
quotation should not be considered representative of the Class'
performance for any specified period in the future. Because
performance will vary, it may not provide a basis for comparing
an investment in the Class with certain bank deposits or other
investments that pay a fixed yield for a stated period of time.
Investors comparing the Class' performance with that of other
mutual funds should give consideration to the quality and
maturity of the respective investment companies' portfolio
securities.
TAXES
The following is a summary of certain Federal income tax
considerations that may affect the Concert Series and its
shareholders. The summary is not intended as a substitute for
individual tax advice, and investors are urged to consult their
tax advisors as to the tax consequences of an investment in any
Portfolio of the Concert Series .
Tax Status of the Portfolios
Each Portfolio will be treated as a separate taxable entity for
Federal income tax purposes.
Each Portfolio intends to qualify separately each year as a
"regulated investment company" under the Code. A qualified
Portfolio will not be liable for Federal income taxes to the
extent that its taxable net investment income and net realized
capital gains are distributed to its shareholders, provided that
each Portfolio distributes at least 90% of its net investment
income.
Each Portfolio intends to accrue dividend income for Federal
income tax purposes in accordance with the rules applicable to
regulated investment companies. In some cases, these rules may
have the effect of accelerating (in comparison to other
recipients of the dividend) the time at which the dividend is
taken into account by a Portfolio as taxable income.
Distributions of an Underlying Smith Barney Fund's investment
company taxable income are taxable as ordinary income to a
Portfolio which invests in the Fund. Distributions of the excess
of an Underlying Smith Barney Fund's net long-term capital gain
over its net short-term capital loss, which are properly
designated as "capital gain dividends," are taxable as long-term
capital gain to a Portfolio which invests in the Fund, regardless
of how long the Portfolio held the Fund's shares, and are not
eligible for the corporate dividends-received deduction. Upon
the sale or other disposition by a Portfolio of shares of any
Underlying Smith Barney Fund, the Portfolio generally will
realize a capital gain or loss which will be long-term or short-
term, generally depending upon the Portfolio's holding period for
the shares.
Tax Treatment of Shareholders
Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. If an Underlying
Smith Barney Fund derives dividends from domestic corporations, a
portion of the income distributions of a Portfolio which invests
in that Fund may be eligible for the 70% deduction for dividends
received by corporations. Shareholders will be informed of the
portion of dividends that qualify. The dividends received
deduction is reduced to the extent the shares of the Underlying
Smith Barney Fund with respect to which the dividends are
received are treated as debt-financed under federal income tax
law and is eliminated if either the shares of the corporation
paying the dividend, the shares of the Underlying Smith Barney
Fund or the shares of the Portfolio are deemed to have been held
by the Underlying Smith Barney Fund, the Portfolio or the
shareholders, as the case may be, for less than 46 days.
Distributions of net realized capital gain designated by a
Portfolio as capital gain dividends are taxable to shareholders
as long-term capital gain, regardless of the length of time the
shares of a Portfolio have been held by a shareholder.
Distributions of capital gain, whether long- or short-term, are
not eligible for the dividends received deduction.
Dividends (including capital gain dividends) declared by a
Portfolio in October, November or December of any calendar year
to shareholders of record on a date in such a month will be
deemed to have been received by shareholders on December 31 of
that calendar year, provided that the dividend is actually paid
by the Portfolio during January of the following calendar year.
All dividends are taxable to the shareholder whether reinvested
in additional shares or received in cash. Shareholders receiving
distributions in the form of additional shares will have a cost
basis for Federal income tax purposes in each share received
equal to the net asset value of a share of Portfolio on the
reinvestment date. Shareholders will be notified annually as to
the Federal tax status of distributions.
Distributions by a Portfolio reduce the net asset value of the
Portfolio's shares. Should a distribution reduce the net asset
value below a shareholder's cost basis, such distribution
nevertheless generally would be taxable to the shareholder as
ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return
of capital. In particular, investors should be careful to
consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution but the
distribution generally would be taxable to him or her.
Upon redemption, sale or exchange of his shares, a shareholder
will realize a taxable gain or loss depending upon his basis for
his shares. Such gain or loss will be treated as capital gain or
loss if the shares are capital assets in the shareholder's hands.
Such gain or loss generally will be long-term or short-term
depending upon the shareholder's holding period for the shares.
However, a loss realized by a shareholder on the sale of shares
of a Portfolio with respect to which capital gain dividends have
been paid will, to the extent of such capital gain dividends, be
treated as long-term capital loss if such shares have been held
by the shareholder for six months or less. A gain realized on a
redemption, sale or exchange will not be affected by a
reacquisition of shares. A loss realized on a redemption, sale
or exchange, however, will be disallowed to the extent the shares
disposed of are replaced (whether through reinvestment of
distributions or otherwise) within a period of 61 days beginning
30 days before and ending 30 days after the disposition of the
shares. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss.
If a shareholder (a) incurs a sales charge in acquiring shares of
the Concert Series, (b) disposes of those shares within 90 days
and (c) acquires shares in a mutual fund for which the otherwise
applicable sales charge is reduced by reason of a reinvestment
right (i.e., exchange privilege), the original sales charge
increases the shareholder's tax basis in the original shares only
to the extent the otherwise applicable sales charge for the
second acquisition is not reduced. The portion of the original
sales charge that does not increase the shareholder's tax basis
in the original shares would be treated as incurred with respect
to the second acquisition and, as a general rule, would increase
the shareholder's tax basis in the newly acquired shares.
Furthermore, the same rule also applies to a disposition of the
newly acquired shares made within 90 days of the subsequent
acquisition. This provision prevents a shareholder from
immediately deducting the sales charge by shifting his or her
investment in a family of mutual funds.
BACKUP WITHHOLDING. If a shareholder fails to furnish a correct
taxpayer identification number, fails to fully report 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 such withholding, then the shareholder may be
subject to a 31% "backup withholding tax" with respect to (a) any
taxable dividends and distributions and (b) any proceeds of any
redemption of the Concert Series shares. An individual's
taxpayer identification number is his or her social security
number. The backup withholding tax is not an additional tax and
may be credited against a shareholder's regular federal income
tax liability.
Taxation of the Underlying Smith Barney Funds
Each Underlying Smith Barney Fund intends to qualify annually and
elect to be treated as a regulated investment company under
Subchapter M of the Code. In any year in which an Underlying
Smith Barney Fund qualifies as a regulated investment company and
timely distributes all of its taxable income, the Underlying
Smith Barney Fund generally will not pay any federal income or
excise tax.
If more than 50% in value of an Underlying Smith Barney Fund's
assets at the close of any taxable year consists of stocks or
securities of foreign corporations, that Underlying Smith Barney
Fund may elect to treat certain foreign taxes paid by it as paid
by its shareholders. The shareholders would then be required to
include their proportionate share of the electing Fund's foreign
income and related foreign taxes in income even if the
shareholder does not receive the amount representing foreign
taxes. Shareholders itemizing deductions could then deduct the
foreign taxes, or, whether or not deductions are itemized but
subject to certain limitations, claim a direct dollar for dollar
tax credit against their U.S. federal income tax liability
attributable to foreign income. In many cases, a foreign tax
credit will be more advantageous than a deduction for foreign
taxes. Each of the Portfolios may invest in some Underlying
Smith Barney Funds that expect to be eligible to make the above-
described election. While a Portfolio will be able to deduct the
foreign taxes that it will be treated as receiving if the
election is made, the Portfolio will not itself be able to elect
to treat its foreign taxes as paid by its shareholders.
Accordingly, the shareholders of the Portfolio will not have an
option of claiming a foreign tax credit for foreign taxes paid by
the Underlying Smith Barney Funds, while persons who invest
directly in such Underlying Smith Barney Funds may have that
option.
General
The foregoing discussion related only to Federal income tax law
as applicable to U.S. citizens. Distributions by the Portfolio
also may be subject to state, local and foreign taxes, and their
treatment under state, local and foreign income tax laws may
differ from the Federal income tax treatment. Shareholders
should consult their tax advisors with respect to particular
questions of Federal, state, local and foreign taxation.
VOTING
As permitted by Maryland law, there will normally be no meetings
of shareholders for the purpose of electing directors unless and
until such time as less than a majority of the directors holding
office have been elected by shareholders. At that time, the
directors then in office will call a shareholders' meeting for
the election of directors. The directors must call a meeting of
shareholders when requested in writing to do so by the record
holders of not less than 10% of the outstanding shares of the
Concert Series. At such a shareholder meeting called for the
purpose, a director may be removed after the holders of record of
not less than a majority of the outstanding shares of the Concert
Series have declared that the director be removed by votes cast
in person or by proxy. Except as set forth above, the directors
shall continue to hold office and may appoint successor
directors.
On matters submitted for consideration by shareholders of any
Underlying Smith Barney Fund, a Portfolio will vote its shares in
proportion to the vote of all other holders of shares of that
Fund or, in certain limited instances, the Portfolio will vote
its shares in the manner indicated by a vote of holders of shares
of the Portfolio.
As used in the Prospectus and this Statement of Additional
Information, a "vote of a majority of the outstanding voting
securities" means the affirmative vote of the lesser of (a) more
than 50% of the outstanding shares of the Concert Series (or the
affected Portfolio or Class) or (b) 67% or more of such shares
present at a meeting if more than 50% of the outstanding shares
of the Concert Series (or the affected Portfolio or Class) are
represented at the meeting in person or by proxy. A Portfolio or
Class shall be deemed to be affected by a matter unless it is
clear that the interests of each Portfolio or Class in the matter
are identical or that the matter does not affect any interest of
the Portfolio or Class. The approval of a management agreement,
a distribution agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to
a Portfolio only if approved by a "vote of a majority of the
outstanding voting securities" of the Portfolio affected by the
matter; however, the ratification of independent accountants and
the election of directors are not subject to separate voting
requirements and may be effectively acted upon by a vote of the
holders of a majority of all Concert Series shares voting without
regard to Portfolio.
ADDITIONAL INFORMATION
The Concert Series was incorporated in Maryland on August 11,
1995.
Portfolio securities and cash owned by the Concert Series are
held in the custody of PNC Bank, National Association, 17th and
Chestnut Streets, Philadelphia, Pennsylvania 19103.
In the event of the liquidation or dissolution of the Concert
Series, shareholders of a Portfolio are entitled to receive the
assets belonging to that Portfolio that are available for
distribution and a proportionate distribution, based upon the
relative net assets of the respective Portfolios, of any general
assets not belonging to any particular Portfolio that are
available for distribution.
FINANCIAL STATEMENT
The Concert Series' Statement of Assets and Liabilities as of
January 22, 1996 accompanies this Statement of Additional
Information and is incorporated herein by reference.
APPENDIX - RATINGS OF DEBT OBLIGATIONS
BOND (AND NOTE ) RATINGS
Moody's Investors Services, Inc.
Aaa - Bonds that are rated "Aaa" are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated "Aa" are judged to be of high quality
by all standards. Together with the "Aaa" group they comprise
what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not
be as large as in "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present that make the long term risks appear somewhat
larger than in "Aaa" securities.
A - Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present that suggest
a susceptibility to impairment sometime in the future.
Baa - Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C - Bonds which are rated C are the lowest class of bonds and
issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Con (..) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are
rated conditionally. These are bonds secured by (a) earnings of
projects under construction, (b) earnings of projects unseasoned
in operating experience, (c) rentals which begin when facilities
are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis
of condition.
Note: The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Standard & Poor's Corporation
AAA - Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues
only in small degree.
A - Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB - Debt rated "BBB" is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in
this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is
regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance
with the terms of the obligation. 'BB' indicates the lowest
degree of speculation and 'C' the highest degree of speculation.
While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Plus (+) or Minus (-): The ratings from 'AA' to 'B' may be
modified by the addition of a plus or minus to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should
exercise judgment with respect to such likelihood and risk.
L - The letter "L" indicates that the rating pertains to the
principal amount of those bonds where the underlying deposit
collateral is fully insured by the Federal Savings & Loan
Insurance Corp. or the Federal Deposit Insurance Corp.
+ Continuance of the rating is contingent upon S&P's receipt of
closing documentation confirming investments and cash flow.
* Continuance of the rating is contingent upon S&P's receipt of
an executed copy of the escrow agreement.
NR Indicates no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P
does not rate a particular type of obligation as a matter of
policy.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.
Issuers rated "Prime-1" (or related supporting institutions) have
a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment will normally be evidenced by the
following characteristics: leading market positions in well-
established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash
generation; well-established access to a range of financial
markets and assured sources of alternate liquidity.
Issuers rated "Prime-2" (or related supporting institutions) have
strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Standard & Poor's Corporation
A-1 - This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issuers determined to possess overwhelming safety
characteristics will be noted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as high
as for issues designated A-1.
STATEMENT OF ASSETS AND LIABILITIES
Independent Auditors Report
The Shareholder and Board of Trustees
of Smith Barney Concert Series Fund Inc.:
We have audited the accompanying statement of assets and
liabilities of the High Growth Portfolio of Smith Barney Concert
Series Fund Inc. as of January 22, 1996. This statement of
assets and liabilities is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this
statement of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of assets and liabilities is free of material
misstatement. An audit of a statement of assets and liabilities
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the statement of assets and
liabilities. Our procedures included confirmation of cash in
bank by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred
to above presents fairly, in all material respects, the financial
position of the High Growth Portfolio of Smith Barney Concert
Series Fund Inc. as of January 22, 1996 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
January 22, 1996
SMITH BARNEY CONCERT SERIES FUND INC.
High Growth Portfolio
Statement of Assets and Liabilities
January 22, 1996
ASSETS:
Cash
Total Assets $100,000.00
NET ASSETS
Paid-in Capital $100,000.00
Net Assets $100,000.00
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $11.40
MAXIMUM PUBLIC OFFERING PRICE PER SHARE $12.00
SHARES OUTSTANDING 8,772
The accompanying notes are an integral part of this financial
statement.
SMITH BARNEY CONCERT SERIES FUND INC.
High Growth Portfolio
Notes to Statement of Assets and Liabilities
January 22, 1996
Note 1. Organization
The Concert Series Funds (the "Trust") was incorporated in
Maryland on August 11, 1995 and is registered under the
Investment Company Act of 1940, as amended, as an open-end non-
diversified management investment company. The Trust consists of
five portfolios (the "Funds"): The High Growth Portfolio, The
Growth Portfolio, The Balanced Portfolio, The Conservative
Portfolio, and The Income Portfolio.
The only transactions of the Funds have been the initial sale on
January 18, 1996 of 8,772 shares of the High Growth Portfolio to
Smith Barney Inc.
Note 2. Federal Taxes
The Trust intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investments companies and to
distribute each year substantially all of the investment company
taxable income to the shareholders of each of the Funds.
Accordingly, no federal tax provisions are required.
Note 3. Asset Allocation and Administration Agreement
The Funds have entered into an Advisory Agreement with Smith
Barney Mutual Funds Management Inc. (the "Advisor"), a
subsidiary of Smith Barney Holdings Inc. Pursuant to the terms
of the Advisory Agreement, the Advisor will manage the
investments and make investment decisions for each of the Funds.
A portfolio management committee consisting of senior investment
professionals of Smith Barney Mutual Funds Management will
allocate investments for each Portfolio among Underlying Smith
Barney Funds based on the outlook of Smith Barney Mutual Funds
Management, each Portfolio's investment manager, for the economy,
financial markets and the relative performance of the Underlying
Smith Barney Funds. The allocation among the Underlying Smith
Barney Funds will be made within investment ranges established by
the Board of Directors of the Concert Series which designate
minimum and maximum percentages for each of the Underlying Smith
Barney Funds. For these services, the Advisor is entitled to a
monthly fee at the annual rate of 0.35% of each Fund's average
daily net assets.
