<PAGE>
Smith Barney Concert Series Inc.
PROSPECTUS FEBRUARY 5, 1996
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3100 Breckinridge Blvd., Bldg 200
Duluth, Georgia 30199-0062
(800) 544-5445
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 supple-
mented 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 an Investments Representative of PFS Investments
Inc. ("PFS Investments"). The Statement of Additional Information has been
filed with the Securities and Exchange Commission (the "SEC") and is incorpo-
rated by reference into this Prospectus in its entirety.
PFS DISTRIBUTORS, 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.
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Smith Barney Concert Series Inc.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
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WHY INVEST IN THE CONCERT SERIES? 9
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INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES 10
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RISK FACTORS AND SPECIAL CONSIDERATIONS 13
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PORTFOLIO TURNOVER 14
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INVESTMENT RESTRICTIONS 14
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DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS 15
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VALUATION OF SHARES 25
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DIVIDENDS, DISTRIBUTIONS AND TAXES 25
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PURCHASE OF SHARES 26
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EXCHANGE PRIVILEGE 31
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REDEMPTION OF SHARES 32
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MINIMUM ACCOUNT SIZE 34
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PERFORMANCE 34
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MANAGEMENT OF THE CONCERT SERIES 35
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DISTRIBUTOR 37
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ADDITIONAL INFORMATION 37
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APPENDIX A-1
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</TABLE>
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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.
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2
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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
management 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
capital. 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
financial 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. The only
Classes of Shares being offered for sale pursuant to this prospectus are Class
A shares and Class B shares. 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
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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."
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 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 this Class. Because a Portfolio's future return cannot be predict-
ed, however, there can be no assurance that this would be the case.
The maximum purchase amount for Class A shares is $499,999,999 and for Class
B shares is $249,999.
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 addition, 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 purchase. 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
shares, purchasers eligible to purchase Class A shares at net asset value or at
a reduced sales charge should consider doing so.
PFS Investments Representatives may receive different compensation for sell-
ing each Class of shares. Investors should understand that the purpose of the
CDSC on the Class B 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.
PURCHASE OF SHARES Shares may be purchased through PFS Distributors, Inc.
("PFS"), a distributor of the Series' shares. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors in Class A and Class B shares may open an account
by making an initial investment of at least $1,000 for each account (except for
Systematic Investment Plan accounts), or
4
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Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
$250 for an individual retirement account ("IRA") or a Self-Employed Retirement
Plan. Subsequent investments of at least $50 may be made for each Class. 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 and
Class B shares and the subsequent investment requirement for each Class is $25.
The minimum initial investment requirement for Class A and Class B shares and
the subsequent investment requirement for all Classes through the Systematic
Investment Plan described below is $25. 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 for Portfolio shares in an amount of at least $25.
See "Purchase of Shares."
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
"Redemption of Shares."
MANAGEMENT OF EACH PORTFOLIO SBMFM serves as each Portfolio's investment
manager. SBMFM is a wholly owned subsidiary of Smith Barney Holdings Inc.
("Holdings"). 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 each 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
generally will be quoted daily in the financial section of most newspapers and
is also available from PFS Shareholder Services (the "Sub-Transfer Agent"). 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 each
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 reinvestments will become eligible for conversion to Class A
shares on a pro rata basis. See "Dividends, Distributions and Taxes."
5
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Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
RISK FACTORS AND SPECIAL CONSIDERATIONS The assets of each Portfolio are
invested in certain Underlying Smith Barney Funds, so each Portfolio's
investment 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 Portfo-
lios' shares, will fluctuate in response to changes in market and economic
conditions, as well as the financial condition and prospects of issuers in
which the Underling 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
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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
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CLASS A CLASS B
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<S> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales charge
imposed on purchases
(as a percentage of
offering price)...... 5.00% None
Maximum CDSC (as a
percentage of
original cost or
redemption proceeds,
whichever is lower).. None* 5.00%
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ANNUAL PORTFOLIO
OPERATING EXPENSES
(as a percentage of
average net assets)
Management fee........ 0.35% 0.35%
12b-1 fee**........... 0.25 1.00
Other expenses***..... None None
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Total Portfolio Oper-
ating Expenses...... 0.60% 1.35%
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</TABLE>
<TABLE>
<CAPTION>
APPLICABLE TO THE CONSERVATIVE PORTFOLIO
AND THE INCOME PORTFOLIO
-------------------------------------------
CLASS A CLASS B
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<S> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales charge imposed
on purchases
(as a percentage of offering
price) 4.50% None
Maximum CDSC (as a percentage
of original cost or
redemption proceeds,
whichever is lower)......... None* 4.50%
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ANNUAL PORTFOLIO OPERATING
EXPENSES
(as a percentage of average
net assets)
Management fee............... 0.35% 0.35%
12b-1 fee**.................. 0.25 0.75
Other expenses*** None None
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Total Portfolio Operating
Expenses................... 0.60% 1.10%
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</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.
*** Under the Asset Allocation and Administration Agreement with each
Portfolio, 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 and certain Class A shares, the length
of time the shares are held. See "Purchase of Shares" and "Redemption of
Shares." PFS receives an
7
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Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
annual 12b-1 service fee of 0.25% of the value of average daily net assets of
Class A shares of each Portfolio. PFS also receives with respect to Class B
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 net assets
of that Class, 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, PFS
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% 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 Underlying 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,
based on estimated operating expenses for its current fiscal year:
<TABLE>
<CAPTION>
UNDERLYING SMITH BARNEY FUND EXPENSE RATIO
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<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%
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</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 com-
mencement 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%
8
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Smith Barney Concert Series Inc.
PROSPECTUS SUMMARY (CONTINUED)
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.
EXAMPLE
The following example is intended to assist an investor in understanding the
various costs that an investor in each of the Portfolios will bear directly or
indirectly. The example assumes payment by each Portfolio of operating 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 past or
future expenses. Actual expenses may be greater or lesser than those shown
above.
<TABLE>
<CAPTION>
AN INVESTOR WOULD PAY THE AN INVESTOR WOULD PAY THE
FOLLOWING EXPENSES ON A $1,000 FOLLOWING EXPENSES ON THE SAME
INVESTMENT, ASSUMING (1) 5.00% ANNUAL INVESTMENT, ASSUMING THE SAME ANNUAL
RETURN AND (2) REDEMPTION AT THE BUT WITHOUT A REDEMPTION AT THE
END OF EACH TIME PERIOD: END OF EACH TIME PERIOD:
------------------------------------- ------------------------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
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<S> <C> <C> <C> <C>
High Growth Portfolio
Class A $ 65 $ 95 $ 65 $ 95
Class B 73 101 23 71
Growth Portfolio
Class A $ 64 $ 94 $ 64 $ 94
Class B 72 99 22 69
Balanced Portfolio
Class A $ 63 $ 92 $ 63 $ 92
Class B 72 97 22 67
Conservative Portfolio
Class A $ 58 $ 86 $ 58 $ 86
Class B 64 88 19 58
Income Portfolio
Class A $ 58 $ 84 $ 58 $ 84
Class B 63 87 18 57
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</TABLE>
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.
9
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Smith Barney Concert Series Inc.
WHY INVEST IN THE CONCERT SERIES? (CONTINUED)
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 vehicle, 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.
10
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Smith Barney Concert Series Inc.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES (CONTINUED)
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
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>
11
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Smith Barney Concert Series Inc.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES (CONTINUED)
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 PORTFOLIO PORTFOLIO 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>
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 flexi-
bility in meeting redemptions, expenses and the timing of new investments, and
serves as a short-term defense during periods of unusual volatility.
12
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Smith Barney Concert Series Inc.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES (CONTINUED)
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 Addi-
tional 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 Govern-
ment 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; purchase zero coupon bonds and pay-
ment-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 secu-
rities, 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 con-
sider whether to increase or decrease their investment in the affected Under-
lying Smith Barney Fund. Lower quality debt instruments generally offer a
higher current yield than that available from higher grade issues, but typi-
cally 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 finan-
cial stress that could adversely affect their ability to make payments of
principal and inter
13
<PAGE>
Smith Barney Concert Series Inc.
RISK FACTORS AND SPECIAL CONSIDERATIONS (CONTINUED)
est 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 Under-
lying Smith Barney 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.
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 Informa-
tion. Investment restrictions of the Underlying Smith Barney Funds in which
the Portfolios invest may be more or less restrictive than those adopted by
the Concert Series.
14
<PAGE>
Smith Barney Concert Series Inc.
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 diversi-
fied 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 common stocks, pre-
ferred stocks, warrants, rights and securities convertible into common stocks)
that are believed to afford attractive opportunities for investment apprecia-
tion. 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 oppor-
tunities. 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 differ-
ent 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
15
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
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 which are convertible into or
exchangeable for such stocks, including warrants) that SBMFM believes to have
superior appreciation potential. The Fund invests primarily in equity securi-
ties of secondary growth companies, generally not within the S&P 500, as iden-
tified 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 development of new tech-
nology, 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 mar-
ket 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
capital. 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 portfo-
lio 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 agree-
ments collateralized by U.S. government securities with broker/dealers or
other financial institutions, including the Fund's custodian) and may also
purchase 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, emphasis is generally placed on issues with established dividend
records as well as potential for price appreciation. From time to time, howev-
er, a portion of the assets may be invested in non-dividend paying stocks. The
Fund may make investments in foreign securities, though management currently
intends to limit such investments to 5% of the Fund's assets, and an addi-
tional 10% of its assets may be invested in American Depositary 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 capi-
talizations exceeding $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.
16
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
Under normal market conditions, the Fund will invest substantially all, but
not less than 65%, of its assets in equity securities. The Fund 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 mortgage 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
Barney Income Funds, seeks to provide shareholders with total return, consist-
ing of long-term capital appreciation and income, by investing primarily in a
diversified portfolio of dividend-paying common stocks. The Fund also pur-
chases put and call options and writes covered put and call options on securi-
ties it holds and on stock indexes primarily as a hedge to reduce investment
risk. Because the Fund seeks total return by emphasizing investments in divi-
dend-paying common stocks, it will not have as much investment flexibility as
total return funds that may pursue their objective by investing in both income
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
Investor 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 con-
vertible 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 portfolio invested primarily in securities of emerging country issuers (con-
sisting of dividend and non-dividend paying common stocks, preferred stocks,
convertible securities and rights and warrants to such securities). The Fund
will also invest in debt securities having a high potential for capital appre-
ciation, especially in countries where direct equity investment is not permit-
ted. 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, Cana-
da, 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.
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
17
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
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 con-
siderations.
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
primarily 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, immediately after such
purchase, no more than 10% of its total assets are invested in such securi-
ties. The Fund may hold securities with higher ratings when the yield differ-
ential between low-rated and higher-rated securities narrows 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
18
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
assets in excess of $1 billion; and high-yielding common stocks and warrants.
A reduction in the rating of a security does not require the sale of the secu-
rity 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. Gov-
ernment. Shares of the Fund are not issued, insured or guaranteed, as to value
or yield, by the U.S. Government or its agencies or instrumentalities. 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 approx-
imately three years. Pending direct investment in U.S. Treasury debt securi-
ties, 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 advantage 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 Fund's portfolio of U.S. government securities consists primarily of mort-
gage-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, intermedi-
ate-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 repur-
chase agreements 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 princi-
pal repayment at maturity, while paid in U.S. dollars, is determined by refer-
ence 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
19
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
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 secu-
rities. The types of fixed-income securities among which the Fund's assets will
be primarily allocated are: obligations issued or guaranteed as to principal
and interest by the United States government; mortgage-related securities
issued by various governmental and non-governmental entities; domestic and for-
eign corporate securities; and foreign government securities. Under normal con-
ditions, 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 countries, the Fund invests in foreign gov-
ernment 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).
20
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
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 securities
consisting of bank obligations and high quality commercial paper, corporate
obligations and municipal obligations, in addition to U.S. government obliga-
tions 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 organizations ("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 affiliate, IBCA, Inc. and Thomson BankWatch.
For purposes of the equity/fixed income fund allocation targets and ranges
applicable to each Portfolio (see page 11 above), each of the following Under-
lying 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 secu-
rities and warrants or call options that together resemble convertible securi-
ties ("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 exercise 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
21
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
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 SBMFM's views on current market and
economic conditions. Under normal conditions, no more than 70%, nor less than
30%, of the Fund's assets will be invested in either equity or debt securi-
ties; 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
outside of the U.S. The Fund will invest in a broad range of industries and
sectors and will mainly invest in securities issued by companies with market
capitalization of at least $50,000,000. The Fund may invest in companies orga-
nized or governments located in any area of the world. 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, debt or equity securities of compa-
nies 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.
22
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
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 Fund
may be invested in securities of emerging market countries.
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>
AVERAGE ANNUAL TOTAL RETURNS
ASSETS OF ALL THROUGH DECEMBER 31, 1995 30-DAY YIELD FOR
CLASSES AS OF ----------------------------- PERIOD ENDED
DECEMBER 31, INCEPTION DECEMBER 31,
UNDERLYING SMITH BARNEY FUND 1995 ($000'S) DATE CLASS ONE YEAR FIVE YEARS 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 Fund 218,807 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 Portfolio 158,962 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 perfor-
mance 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.
23
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
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 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 Under-
lying 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 Barney Funds pursuing such poli-
cies.
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 securities
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 fluctua-
tions in foreign exchange rates, future political and economic developments,
and the possible imposition of exchange controls or other foreign governmental
laws or restrictions. In addition, with respect to certain countries, there is
the possibility of expropriation of assets, repatriation, confiscatory taxa-
tion, 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. company, 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. securi-
ties markets are generally higher than in the U.S. There is generally less gov-
ernment supervision and regulation of exchanges, brokers and issuers than there
is in the U.S. An Underlying Smith Barney Fund might have greater difficulty
taking appropriate legal action in non-U.S. courts. Dividend and interest
income from non-U.S. securities 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.
24
<PAGE>
Smith Barney Concert Series Inc.
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
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.
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 rates in the three highest categories
by Moody's (Aaa, Aa or A) or S&P (AAA, AA or A). Investment-grade securities
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 speculative char-
acteristics 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 that are
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 Con-
cert 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.
25
<PAGE>
Smith Barney Concert Series Inc.
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
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 the Sub-Transfer Agent.
The per share dividends on Class B shares of each Portfolio may be lower than
the per share dividends on Class A shares principally as a result of the dis-
tribution fee applicable with respect to Class B shares. Distributions of capi-
tal gains, if any, will be in the same amount for Class A and Class B 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. However, only the Class A
shares and Class B shares are being offered pursuant to this Prospectus. Class
A shares are sold to investors with an initial sales charge and Class B shares
are sold without an initial sales charge but are subject to a CDSC payable upon
certain redemptions. See "Prospectus Summary--Alternative Purchase Arrange-
ments" for a discussion of factors to consider in selecting which Class of
shares to purchase.
Initial purchases of shares of each Portfolio of the Concert Series must be
made through a PFS Investments Representative by completing the appropriate
application found in the prospectus. The completed application should be for-
warded to the Sub-Transfer Agent, 3100 Breckinridge Blvd., Bldg. 200, Duluth,
Georgia 30199-0062. Checks drawn on foreign banks must be payable in U.S. dol-
lars and have the routing number of the U.S. bank encoded on the check. Subse-
quent investments may be sent directly to the Sub-Transfer Agent.
Investors in Class A and Class B shares may open an account by making an ini-
tial 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. Subsequent investments of at least $50 may be
made for each Class. For participants in retirement plans qualified under Sec-
tion 403(b)(7) or Section 401(a) of the Code, the minimum initial investment
requirement for Class A and Class B shares and the
26
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
subsequent investment requirement for each Class in a Portfolio is $25. For
each Portfolio's Systematic Investment Plan, the minimum initial investment
requirement for Class A and Class B shares and the subsequent investment
requirement for each Class is $25. There are no minimum investment require-
ments in Class A shares for employees of Travelers 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 Sub-Transfer Agent. Share certificates are issued only upon a
shareholder's written request to the Sub-Transfer Agent.
Purchase orders received by the Sub-Transfer Agent 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.
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, the Sub-Transfer Agent is authorized through pre-
authorized transfers of $25 or more to charge the regular bank account or
other financial institution indicated by the shareholder on a monthly basis to
provide systematic additions to the shareholder's Portfolio account. A share-
holder who has insufficient funds to complete the transfer will be charged a
fee of up to $25 by PFS or the Sub-Transfer Agent.
27
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
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'
% OF % OF REALLOWANCE AS % OF
AMOUNT 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>
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'
% OF % OF REALLOWANCE AS % OF
AMOUNT OF INVESTMENT OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $ 25,000 4.50% 4.71% 4.05%
$ 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 PFS, which in turn,
pays PFS Investments to compensate its Investments Representatives 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 shares is waived. See "De-
ferred 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.
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, and employees
of Travelers and its subsidiaries and employees of members of the National
Association of Securities Dealers, Inc., or to the spouse and children of such
persons (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) 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
28
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
greater than the maximum sales charge of the Portfolio) and who wish to rein-
vest their redemption proceeds in the Portfolio, provided the reinvestment is
made within 60 calendar days of the redemption; (d) accounts managed by regis-
tered investment advisory subsidiaries of Travelers; and (e) sales through PFS
Investments Representatives where the amounts invested represent the redemption
proceeds from investment companies distributed by an entity other than PFS, on
the condition that (i) the redemption has occurred no more than 60 days prior
to the purchase of the shares, (ii) the shareholder paid an initial sales
charge on such redeemed shares and (iii) the shares redeemed were not subject
to a deferred sales charge. PFS Investments may pay its Investments Representa-
tives an amount equal to 0.40% of the amount invested if the purchase repre-
sents redemption proceeds from an investment company distributed by an entity
other than PFS. In order to obtain such discounts, the purchaser must provide
sufficient information at the time of purchase to permit verification that the
purchase would qualify for the elimination of the sales charge.
VOLUME DISCOUNTS
The "Amount of Investment" referred to in the sales charge table set forth
above under "Initial Sales Charge Alternative--Class A Shares" includes the
purchase of Class A shares in a Portfolio and of other funds sponsored by Smith
Barney that are offered with a sales charge listed under "Exchange Privilege."
A person eligible for a volume discount includes an individual; members of a
family unit comprising a husband, wife and minor children; a trustee or other
fiduciary purchasing for a single fiduciary account including pension, profit-
sharing and other employee benefit trusts qualified under Section 401(a) of the
Code; or multiple custodial accounts where more than one beneficiary is
involved if purchases are made by salary reduction and/or payroll deduction for
qualified and nonqualified accounts and transmitted by a common employer enti-
ty. Employer entity for payroll deduction accounts may include trade and craft
associations and any other similar organizations.
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 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 pur-
chases 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 alternative 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 investment 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 con-
tact a PFS Investments Representative to obtain a Letter of Intent application.
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: (i) Class B shares and
(ii) 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.
29
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Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
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 value at 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 A shares that are CDSC
Shares, shares redeemed more than 12 months after their purchase.
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 pur-
chase 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 state-
ment month. The following table sets forth the rates of the charge for redemp-
tions of Class B shares by shareholders.
<TABLE>
<CAPTION>
CDSC
APPLICABLE TO HIGH GROWTH CDSC
YEARS SINCE PURCHASE PORTFOLIO, GROWTH PORTFOLIO AND APPLICABLE TO CONSERVATIVE
PAYMENT WAS MADE BALANCED PORTFOLIO 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. 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 PFS.
30
<PAGE>
Smith Barney Concert Series Inc.
PURCHASE OF SHARES (CONTINUED)
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.
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 PFS of the sharehold-
er's status or holdings, as the case may be.
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 and Class B 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
. Smith Barney Appreciation Fund Inc.
. Smith Barney Growth Opportunity Fund
. Smith Barney Investment Grade Bond Fund
. *Smith Barney Money Funds, Inc.--Cash Portfolio
. **Smith Barney Exchange Reserve Fund
- --------------------------------------------------------------------------------
* Available for exchange with Class A shares of a Portfolio.
** Available for exchange with Class B shares of a Portfolio.
31
<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, 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 differential upon exchange.
Class B Exchanges. In the event a Class B shareholder 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.
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, at its discretion, decide to limit additional
purchases and/or exchanges by the shareholder. Upon such a determination by the
Fund, the Concert Series will provide notice in writing or by telephone to the
shareholder 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,
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
Shareholders may redeem for cash some or all of their shares of a Portfolio
at any time by sending a written request in proper form directly to the Sub-
Transfer Agent, PFS Shareholder Services, at 3100 Breckinridge Blvd, Bldg. 200,
Duluth, Georgia 30199-0062. If you should have any questions concerning how to
redeem your account after reviewing the information below, please contact the
Sub-Transfer Agent
32
<PAGE>
Smith Barney Concert Series Inc.
REDEMPTION OF SHARES (CONTINUED)
at (800) 544-5445, Spanish-speaking representatives (800) 544-7278 or TDD Line
for the Hearing Impaired (800) 824-1721.
As described under "Purchase of Shares," redemptions of Class B shares are
subject to a CDSC.
The request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account registra-
tion. If the proceeds of the redemption exceed $50,000, or if the proceeds are
not paid to the record owner(s) at the record address, if the shareholder(s)
has had an address change in the past 45 days, or if the shareholder(s) is a
corporation, sole proprietor, partnership, trust or fiduciary, signature(s)
must be guaranteed by one of the following: a bank or trust company; a broker-
dealer; a credit union; a national securities exchange, registered securities
association or clearing agency; a saving and loan association; or a federal
savings bank.
Generally, a properly completed Redemption Form with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, in the case of shareholders
holding certificates, the certificates for the shares being redeemed must
accompany the redemption request. Additional documentary evidence of authority
is also required by the Sub-Transfer Agent in the event redemption is requested
by a corporation, partnership, trust, fiduciary, executor or administrator.
Additionally, if a shareholder requests a redemption from a Retirement Plan
account (IRA, SEP or 403(b)(7)), such request must state whether or not federal
income tax is to be withheld from the proceeds of the redemption check.
A shareholder may utilize the Sub-Transfer Agent's FAX to redeem their
account as long as a signature guarantee or other documentary evidence is not
required. Redemption requests should be properly signed by all owners of the
account and faxed to the Sub-Transfer Agent at (800) 554-2374. Facsimile
redemptions may not be available if the shareholder cannot reach the Sub-Trans-
fer Agent by FAX, whether because all telephone lines are busy or for any other
reason; in such case, a shareholder would have to use the Portfolio's regular
redemption procedure described above. Facsimile redemptions received by the
Sub-Transfer Agent prior to 4:00 p.m. Eastern time on a regular business day
will be processed at the net asset value per share determined that day.
In all cases, the redemption price is the net asset value per share of the
Portfolio next determined after the request for redemption is received in
proper form by the Sub-Transfer Agent. Payment for shares redeemed will be made
by check mailed within three days after acceptance by the Sub-Transfer Agent of
the request and any other necessary documents in proper order. Such payment may
be postponed or the right of redemption suspended as provided by the rules of
the SEC. If the shares to be redeemed have been recently purchased by check or
draft, the Sub-Transfer Agent may hold the payment of the proceeds until the
purchase check or draft has cleared, usually a period of up to 15 days. Any
taxable gain or loss will be recognized by the shareholder upon redemption of
shares.
After following the above-stated redemption guidelines, a shareholder(s) may
elect to have the redemption proceeds wire-transferred directly to the share-
holder's bank account of record (defined as a currently established pre-autho-
rized draft on the shareholder's account with no changes within the previous 45
days), as long as the bank account is registered in the same name(s) as the
account with the Concert Series. If the proceeds are not to be wired to the
bank account of record, or mailed to the registered owner(s), a signature guar-
antee will be required from all shareholder(s). A $25 service fee will be
charged by the Sub-Transfer Agent to help defray the administrative expense of
executing a wire redemption. Redemption proceeds will normally be wired to the
designated bank account on the next business day following the redemption, and
should ordinarily be credited to your bank account by your bank within 48 to 72
hours.
33
<PAGE>
Smith Barney Concert Series Inc.
REDEMPTION OF SHARES (CONTINUED)
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 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 the Sub-Transfer Agent.
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 Series, however, will not redeem shares based solely on market
reductions in net asset value. Before the Series exercises such right, share-
holders 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
and Class B 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 reinvestment of all income
dividends and capital gain distributions on the reinvestment dates at prices
calculated as stated in this Prospectus, then dividing the value of the invest-
ment 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 information may also be accompanied with non-
standard 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 cal-
culated according to a formula prescribed by the SEC to facilitate comparison
with yields quoted by other investment companies. The Balanced Portfolio and
the Conservative Portfolio calculate current dividend return for each of their
Classes 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
34
<PAGE>
Smith Barney Concert Series Inc.
PERFORMANCE (CONTINUED)
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 companies and other investment vehicles. Each Portfolio may
also include comparative performance information in advertising or marketing
its shares. Such performance information may include data from Lipper Analyti-
cal Services, Inc. and other financial publications.
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 Series will periodically monitor the
allocations made and the basis upon which such allocations were made or main-
tained. 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 Series. Under the Asset Allocation and Adminis-
tration Agreement with each Portfolio, SBMFM has agreed to bear all expenses
of the Concert Series other than the management
35
<PAGE>
Smith Barney Concert Series Inc.
MANAGEMENT OF THE CONCERT SERIES (CONTINUED)
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% of
the value of its average daily net assets.
SBMFM also serves as investment adviser to each of the Underlying Smith Bar-
ney Funds in which the Portfolios may invest (other than the Smith Barney Pre-
mium 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 coun-
seling business since 1968 and is a wholly owned subsidiary of SBMFM. SBSA ren-
ders investment advice to investment companies that had aggregate assets under
management as of December 31, 1995 in excess of $2.9 billion.
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 is set forth below as a
percentage rate of its annual net assets:
<TABLE>
<CAPTION>
UNDERLYING SMITH BARNEY FUND MANAGEMENT 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.
36
<PAGE>
Smith Barney Concert Series Inc.
DISTRIBUTOR
PFS, located at 3100 Breckinridge Blvd., Bldg 200, Duluth, Georgia 30199-
0062, 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. Pursuant to the services and distribution plan adopted by each Portfo-
lio under Rule 12b-1 under the 1940 Act (the "Plan"), PFS is paid a service fee
with respect to Class A and Class B shares of each Portfolio 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 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 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 to pay its Investments Representatives for servicing
shareholder accounts and, in the case of Class B shares, to cover expenses pri-
marily intended to result in the sale of those shares. These expenses include:
advertising expenses; the cost of printing and mailing prospectuses to poten-
tial 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 Secu-
rities 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 Repre-
sentatives that sell shares of each Portfolio.
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 car-
ried 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 rele-
vant factors, including expenses borne by PFS, amounts received under the Plan
and proceeds of the CDSC.
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 repre-
senting shares in one of five separate Portfolios and may authorize the issu-
ance of additional series of
37
<PAGE>
Smith Barney Concert Series Inc.
ADDITIONAL INFORMATION (CONTINUED)
shares in the future. The assets of each Portfolio are segregated and sepa-
rately managed and a shareholder's interest is in the assets of the Portfolio
in which he or she holds shares. Class A and Class B shares of a Portfolio rep-
resent 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 ordi-
narily 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 pre-
emptive 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.
PNC Bank, National Association, located at 17th and Chestnut Streets, Phila-
delphia, Pennsylvania 19103 serves as custodian of the Portfolio's investments.
First Data, located at Exchange Place, Boston, Massachusetts 02109, serves as
the Concert Series' transfer agent.
PFS Shareholder Services is located at 3100 Breckinridge Blvd., Bldg 200,
Duluth, Georgia 30199-0062 and serves as the Concert Series' Sub-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 securi-
ties 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 Concert 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 Pro-
spectus annually. Shareholders who do not want this consolidation to apply to
their account should contact the Sub-Transfer Agent.
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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 clas-
sified 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 value and
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Smith Barney Concert Series Inc.
APPENDIX (CONTINUED)
responds differently to market fluctuations. Investing in synthetic convertible
securities involves the risks normally involved in holding the securities com-
prising the synthetic convertible security.
Securities of Developing Countries. A developing country generally is consid-
ered to be a country that is in the initial stages of its industrialization
cycle. Investing in the equity and fixed-income markets of developing countries
involves exposure to economic structures that are generally less diverse and
mature, and to political systems that can be expected to have less stability,
than those of developed countries. Historical experience indicates that the
markets of developing countries have been more volatile than the markets of the
more mature economies of developed countries; however, such markets often have
provided higher rates of return to investors.
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 guar-
anteed by the U.S. Government.
Restrictions on Foreign Investment. Some countries prohibit or impose sub-
stantial 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 substan-
tially less volume than U.S. markets, and securities in many smaller capital
markets are less liquid and their prices may be more volatile than securities
of comparable U.S. companies. Brokerage commissions, custodial services, and
other costs relating to investment in smaller capital markets are generally
more expensive than in the U.S. Such markets have different clearance and set-
tlement procedures, and in certain markets there have been times when settle-
ments have been unable to keep pace with the volume of securities transactions,
making it difficult to conduct such transactions. Further, satisfactory custo-
dial 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 tempo-
rary 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 portfolio secu-
rity 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 possible liabil-
ity to the purchaser. There is generally less government supervision and regu-
lation 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 with-
out penalty) may result in some loss of the Fund's principal invest-
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Smith Barney Concert Series Inc.
APPENDIX (CONTINUED)
ment to the extent of the premium paid. The Underlying Smith Barney Fund's
yield may be affected by reinvestment of prepayments at higher or lower rates
than the original investment. In addition, like other debt securities, the
values of mortgage-related securities, including government and government-
related mortgage pools, generally will fluctuate in response to market inter-
est 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 transac-
tions are considered borrowings by a Fund. Although investing the proceeds of
these borrowings in repurchase agreements or money market instruments may pro-
vide 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 other-
wise 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 other-
wise 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 securi-
ties 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 lever-
age had not been used. If the amount of income for the incremental 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.
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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 lender,
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 generally
are subject to greater fluctuations of market value in response to changing
interest rates than securities of comparable maturities and credit quality that
pay cash interest (or dividends in the case of preferred stock) on a current
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. Additionally, 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 inter-
est 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 subject 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 suf-
fer losses if it is unable to terminate outstanding swap agreements 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 underlying
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 particu-
larly 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 environmental
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 facil-
ities for electric generation, including, among other considerations, the prob-
lems 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 assurance
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
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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 securities
held by the Smith Barney Utilities Fund may own or operate nuclear generating
facilities. Governmental authorities may from time to time review existing pol-
icies, and impose additional requirements governing the licensing, construction
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 securi-
ties 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 general move-
ments or price trends of utility common stocks. Causes of these discrepancies
include changes in the overall demand for and supply of various securities (in-
cluding the potentially depressing effect of new stock offerings), and changes
in investment objectives, market expectations or cash requirements of other
purchasers and sellers of securities.
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Smith Barney
Concert
Series
Inc.
3100 Breckenridge Blvd, Bldg 200 Duluth, Georgia 30199-0062
FDXXXX XX
