<PAGE>
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
[PHOTOGRAPH]
ANNUAL REPORT
January 31, 1997
[PHOTOGRAPH]
Investment Strategies for Your Life
[PHOTOGRAPH]
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day. (TM)
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Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders .................................................... 1
The Concert Allocation Series Article--Dissecting the Bull Market ......... 6
The Concert Allocation Series Portfolios
The High Growth Portfolio ........................................... 10
The Growth Portfolio ................................................ 14
The Balanced Portfolio .............................................. 18
The Conservative Portfolio .......................................... 22
The Income Portfolio ................................................ 26
Schedules of Investments .................................................. 30
Statements of Assets and Liabilities ...................................... 35
Statements of Operations .................................................. 36
Statements of Changes in Net Assets ....................................... 37
Notes to Financial Statements ............................................. 38
Financial Highlights ...................................................... 43
Independent Auditors' Report .............................................. 46
Tax Information ........................................................... 47
Directors and Officers .................................................... 48
</TABLE>
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Dear Shareholder:
[PHOTOGRAPH]
Jessica M. Bibliowicz
President
The Concert Allocation Series
We are pleased to provide you with the annual report for Smith Barney Concert
Allocation Series Inc., formerly know as Smith Barney Concert Series Inc., for
the period ended January 31, 1997. In this report we summarize the prevailing
market and economic conditions and outline the investment strategy followed by
each of the five Concert Allocation Series Portfolios. A detailed summary of
each Portfolio's performance and current holdings can be found in the
appropriate sections that follow.
The First Year of the Concert Allocation Series...Off to a Strong Start
This past year has been an exciting one for the Concert Allocation Series and
marked by significant milestones. We are proud to report that as of January 31,
1997, total assets in the Concert Allocation Series are approximately $1.1
billion and that we are helping roughly 170,000 shareholders reach their
financial goals.
Moreover, since our last report, we added the word "Allocation" to the Concert
Series name, because each Portfolio allocates assets to help meet a particular
investment objective while providing diversification. According to many
investment professionals, how your assets are allocated is the single most
important investment decision you can make. We believe this concept embodies the
spirit of the Concert Allocation Series -- to allocate the investments of the
individual Portfolios among a number of Smith Barney Mutual Funds designed to
achieve optimal long-term performance based on your investment objectives.
[PHOTOGRAPH]
Heath B. McLendon
Chairman and Chief Executive Officer
The Concert Allocation Series
The Performance of the Concert Allocation Series Portfolios*
<TABLE>
<CAPTION>
Total Return Since Inception
(2/5/96 - 1/31/97) Class A** Class A***
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<S> <C> <C>
High Growth Portfolio 8.78% 14.50%
Growth Portfolio 5.52 11.08
Balanced Portfolio 5.11 10.64
Conservative Portfolio 3.68 8.57
Income Portfolio 1.60 6.39
</TABLE>
[PHOTOGRAPH]
Thomas B. Stiles II
Chief Investment Officer
The Concert Allocation Series
* Performance numbers for the other classes of shares can be found beginning on
page 12. ** These total return figures assume reinvestment of all dividends and
reflect the deduction of the maximum front-end sales charge for each Portfolio's
Class A shares: 5.00% for the High Growth, Growth and Balanced Portfolios and
4.50% for the Conservative and Income Portfolios. *** These total return figures
do not reflect the deduction of a sales charge for each Portfolio's Class A
shares. In addition, both columns of data represent past performance which is
not indicative of future results. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The Concert Allocation Series Portfolios invest in a wide range of asset
classes. And in most market environments, some asset classes outperform others,
often by a considerable
(1)
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The Benefits of Long-Term Investing
Growth of $10,000 Invested in the Standard & Poor's 500 Composite Stock Index,
Salomon Brothers World Government Bond Index,
Morgan Stanley Capital International EAFE Index and
Lehman Government/Corporate Bond Index
(January 31, 1987 - January 31, 1997)
(unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Standard & Poor's Salomon World MSCI EAFE Lehman Gov't./
500 Index Gov't Bond Index Index Corp. Bond Index
----------------- ---------------- --------- ----------------
12/87 10,000 10,000 10,000 10,000
12/88 9,666 10,680 11,496 10,437
12/89 11,603 11,371 14,778 11,001
12/90 13,277 12,057 15,492 12,232
12/91 14,389 13,183 12,759 13,579
12/92 17,648 14,654 12,842 15,362
12/93 19,511 16,109 11,566 17,141
12/94 22,019 17,839 16,676 18,907
12/95 22,133 17,399 15,978 18,319
12/96 30,681 20,454 18,611 21,565
12/97 38,759 22,213 19,024 22,081
- --------------------------------------------------------------------------------
The Standard & Poor's 500 Composite Stock Index ("S&P 500") is a
capitalization-weighted index of 500 widely held common stocks. The Salomon
Brothers World Government Bond Index is a market-capitalization-weighted
benchmark that tracks the performance of the government bond markets of 14
countries. The Morgan Stanley Capital International EAFE Index ("MSCI EAFE")
consists of the equity total returns for Europe, Australia and the Far East. The
Lehman Government/Corporate Bond Index is a combination of publicly issued
intermediate- and long-term U.S. government bonds and corporate bonds. These
indices are unmanaged and are not subject to the same management and trading
expenses as a mutual fund.
margin. The Portfolios' performance should generally be somewhere between the
best and the worst asset classes due to their diversification across a number of
asset classes.
For example, during the reporting period, the performance of the Concert
Allocation Series Portfolios has generally outperformed many bond and
international stock indices, while lagging U.S. stock indices. But whatever the
short-term performance, we believe investment success should be measured by how
much you can earn over the long-term.
While most investors today understand the potential advantages of investing in
stocks over the long term, the risks of market fluctuations may not be fully
appreciated. And while no one can predict the next market downturn or how long
it will last, remember that the original goal of the Concert Allocation Series
was to create a series of diversified portfolios to meet your long-term
investment needs. Our focus in creating the Concert Allocation Series was to
maximize reward potential and to minimize risk. We are pleased with how each of
the Concert Allocation Series Portfolios has performed in terms of volatility
since its inception.
The One-Year Period Ended January 31, 1997, in Review
Last year was not a typical year for U.S. markets. Stock investors enjoyed much
better than average returns as the broad markets surged over 20% from January
1996 through January 1997. Bond investors, on the other hand, realized low,
(2)
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single-digit returns. For the one year ended January 31, 1997, the bond market,
as measured by the Lehman Government/Corporate Bond Index, had a total return of
roughly 2.4%. This is not how the markets are supposed to perform based on their
behavior during the past decade. Stock prices generally do not go up when bond
prices remain flat. Stock and bond markets are "supposed" to move in tandem.
Many investors may be wondering what has been happening.
In our view, the economy may truly be different this time. A sage once said that
the four words "it's different this time" have cost more people more money than
any other four words in the English language. But at the risk of proving that
wise man right, let us examine why this time may truly be different.
We are now in the sixth year of an economic recovery. This time span alone is
somewhat different, as the typical postwar recovery is only four years or so.
Even more unusual, however, has been the behavior of inflation. In a typical
pattern, inflation heads lower for the first year or two of economic recovery
and then starts rising. That has not happened this time. In fact, inflation
today shows almost no sign of resurgence, and the latest Consumer Price Index
(CPI) report shows a roughly 3% increase in inflation over the past year.
Another development that usually takes place as economic recoveries age is that
productivity traditionally decreases as a result of slowing economic growth and
rising wages. But this trend has also not materialized this time, and labor
productivity has been on the upswing. Why? Economic growth has been slower and
steadier than usual. So there has really not been a "slowing" of economic
growth, because there was never any acceleration or "peaking" of growth.
This combination of slower-than-average growth, lower-than-average inflation and
higher-than-average productivity was clearly a winner in the stock market. The
stock market decided that these factors would lead to better-than-average
earnings growth -- a judgment that was more than borne out in continuing strong
earnings reports. In fact, as of mid February, more than 55% of companies have
reported year-end earnings ahead of analysts' expectations; less than 30% have
disappointed by not meeting analysts' projections.
On the other hand, the bond markets have taken these same fundamentals to a
quite different conclusion. Low inflation is great for bonds, but not if it's
about to end. In one sense, the bond market has been an agnostic on the question
of whether "it's different this time." As nonbelievers, many fixed-income
investors have focused on the eventual, and some would claim inevitable, rise in
inflation as the business cycle matures.
At this time, you may be asking where we stand in this debate. Is the stock
market's or bond market's interpretation of events "right"? We'll give you our
answer after we take a closer look at U.S. markets.
U.S. Markets
At the outset, it is worth noting that one aspect of last year's stock market
rise was absolutely typical. At the beginning of 1996, stocks had to overcome a
lot of skepticism. Many investors fretted over earnings, inflation, valuation
levels and just about everything else. Their concerns were the building blocks
of the "wall of worry" -- a wall that, according to market lore, must be
climbed. As it turned out, the stock market easily surmounted any and all
obstacles erected by the pessimists.
We have been referring to the stock market as if it were a monolith -- clearly
an exaggeration. For "the market" ultimately consists of individual stocks. For
analytical purposes, however, it is useful to look at the performance of various
sectors to get a clearer perspective on broad market trends. For example,
looking at sector performance over the past year, the technology and finance
areas were among the leaders, while utilities and basic materials lagged.
Technology company stocks surged due to incredible underlying demand for
advanced products -- whether they be computers, microprocessors or
communications equipment. Corporations large and small have come to realize the
pressing need
(3)
<PAGE>
to upgrade their technology in order to compete more effectively. And consumers
have snapped up faster personal computers and smaller, more capable cellular
telephones. In our opinion, this strong fundamental demand is what led to the
outstanding stock performance in the technology sector.
Finance stocks were also strong performers, as earnings continued to surprise
analysts positively and consolidation among banks and insurance companies
continued. In the slow-growth economy of the last several years, the modest
earnings growth of finance companies has proven to be relatively attractive to
many investors.
As we have noted, two of the lagging market sectors were basic materials and
utilities. The basic material sector underperformed, perhaps as a response to
low inflation not only in the U.S. but worldwide. Utilities often trail a
strongly up-trending market. But last year utilities also suffered as investors
sorted out the impact of deregulation and greater competition on both electric
and telephone companies.
The bond market significantly trailed the stock market over the last year. Bond
returns were only modestly positive, with interest income compensating for an
erosion in principal. Although there were no signs of inflation last year, bond
investors for the most part have remained skeptical. Nonetheless, after six
years of economic recovery, bondholders grew increasingly nervous that the
phantom of inflation would reappear. In response to those fears, interest rates
rose in 1996.
We said earlier that many stock investors believed "it's different this time,"
while many bond investors were skeptical. We come down squarely on the side of
those who think it's different this time. We believe the economic cycle will
stay quite positive for investors, due to a continuation of moderate economic
growth, strong labor productivity, low inflation and decent corporate profits.
But that does not mean that investors should expect a repeat of the
extraordinary stock performance of the last few years. Instead, they should
anticipate more normal returns in line with corporate earnings, which have been
growing at a 10% clip. Why do these more moderate returns make sense to us?
Given corporate earning expectations (and current levels of inflation and
interest rates), we believe the stock market is trading roughly at fair value.
Although our expectations for future returns are less than what we have seen
most recently in the market, they are in line with long-term stock market
history.
International Markets
During the reporting period the global equity markets, led by an ebullient U.S.
stock market, have been very positive. Intermittent concerns regarding the
"overheating" of the U.S. economy (which could lead to upward pressure on prices
and interest rates) have, for the most part, abated.
Global inflation, the nemesis of financial assets, is at a quarter-century low.
Many of the world's economies are growing at a modest pace, enabling consumers
to enjoy greater purchasing power while not causing concerns about accelerating
inflation. Moreover, since many global economies have weak labor markets
(especially in Europe, where unemployment rates average 12%), we expect a
continuation of subdued inflation.
We continue to see good growth opportunities in Europe, which is undergoing
profound structural changes, driven by recognition that "business as usual" is
no longer affordable or desirable. Many European corporations have embarked on
U.S.-style restructuring programs to improve corporate profitability, sharpen
their company focus and, ultimately, enhance shareholder value.
Interest rates have declined rapidly and are likely to stay low as many European
governments struggle to reduce their budget deficits in advance of monetary
union in 1999. Budget deficits must be reduced and inflation contained,
(4)
<PAGE>
which suggests continued fiscal restraint. As a result, many governments
introduced austere budget plans this past fall. Monetary conditions are positive
for European stocks, with interest rates at relatively modest levels, where they
are likely to remain for the foreseeable future.
Moreover, there has been a growing awareness by many Europeans of the need to
save for their retirement as more and more European governments gradually
privatize their pension systems and shift more responsibility to individual
investors. We believe increasing numbers of European investors seeking higher
returns will gravitate to Europe's equity markets.
With the exception of Hong Kong and Malaysia, the Pacific Rim equity markets
have not fully participated in the strong 1996 surge in global equity markets.
Japan, the largest Pacific market, is still in the throes of sluggish economic
recovery after five years of recession. However, despite Japan's ongoing
problems, we continue to invest in select Japanese companies that represent
outstanding investment opportunities.
The benefits to dollar-based investors of diversifying across a broad range of
global bond markets were brought home strongly during 1996. At certain times
there can be a wide divergence in the performance of the world's major
government bond markets, as was demonstrated during the past year. For example,
the U.S. government bond market produced low single-digit returns during the
year, while the bond markets of Italy and Spain both returned more than 20% in
local currency terms.
Many other European bond markets have also performed well this past year. Low
economic growth rates on the continent led Germany to cut official interest
rates. This German move was mirrored elsewhere in Europe, further underpinning
the relative outperformance of these bond markets.
Conclusion
Most investment professionals believe that well-diversified portfolios should
include mutual funds that employ different investment styles and have exposures
to different market sectors. Over time, this broader level of portfolio
diversification can help to significantly reduce volatility. As this letter has
shown, not only do different markets perform differently at various times, but
different investors can analyze the same fundamental conditions and draw
different conclusions.
We believe the Concert Allocation Series Portfolios are an effective way to
build a well diversified portfolio and provide you with all the benefits of
broad diversification. Spreading your money across a variety of asset classes
can lower your risk, help to manage volatility and raise your chances for
long-term success. The Concert Allocation Series Portfolios were created based
on this important concept and we would like to thank you for investing with us.
We look forward to helping you reach your financial goals in the years ahead.
Sincerely,
/s/ Jessica M. Bibliowicz /s/ Heath B. McLendon /s/ Thomas B. Stiles II
Jessica M. Bibliowicz Heath B. McLendon Thomas B. Stiles II
President Chairman and Chief Investment Officer
Chief Executive Officer
March 10, 1997
(5)
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DISSECTING THE BULL MARKET
[PHOTOGRAPH]
R. Jay Gerken, CFA
A Stock Market Analysis and Outlook
By R. Jay Gerken, CFA
R. Jay Gerken, CFA has over seventeen years of Wall Street experience and is a
Managing Director of Smith Barney. Mr. Gerken holds a B.A. in history from Brown
University and an M.B.A. from Harvard University. He is currently responsible
for managing more than $400 million in mutual fund assets for Smith Barney and
is the portfolio manager of the Smith Barney Growth and Income Fund, which is
represented in the High Growth, Growth and Balanced Portfolios of the Concert
Allocation Series.
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Large-Cap Stocks Have Led the Way
The U.S. equity market has experienced one of the greatest bull markets in
history. The three major domestic indices--the Dow Jones Industrial Average, S&P
500 and the Nasdaq Composite--have exhibited impressive returns over the past
one- and three-year periods. Curiously, however, many investors do not feel as
if they have fully shared in this bounty.
One of the reasons investors may feel underwhelmed becomes clearer on closer
examination of the returns. Propelling the index numbers is the spectacular
outperformance of larger-capitalized stocks. Due to their outsized weighting in
the indices and their strong momentum, the large-cap stocks have
disproportionately influenced indices such as the S&P 500 and Nasdaq Composite.
But trees do not grow to the sky, and large-cap stocks will not continue their
upward momentum forever. Going forward, we expect that the performance of
smaller- and mid-cap companies will catch up to that of their larger peers. In
addition, the international arena may show better performance relative to the
U.S. equity markets. In anticipation of these broad market shifts, we believe
that investors should be diversified and that such diversification include the
smaller-capitalization and international markets.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
S&P 500 Top 25 S&P 500
-------------- -------
1994-1996 24% 17%
1996 29% 20%
S&P 500 Annualized Percentage
Price Change
................................................................................
Figure 1
Following is a look at the performance of the top 25 companies in the S&P 500
and the Nasdaq Composite. We did not analyze the Dow Jones Industrials as this
index, by definition, consists of 30 large-capitalization companies. All figures
are annualized price changes as of December 31, 1996.
(6)
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Top Stocks vs. S&P 500
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[THE FOLLOWING TABLES WERE REPRESENTED BY BAR CHARTS IN THE PRINTED MATERIAL.]
INSERT PLOT POINTS
(Annualized percentage price
changes as of 12/31/96)
S&P 500 20%
MO 25%
KO 42%
PG 30%
DIS 19%
...............................................................................
Figure 2*
S&P 500 20%
MSFT 88%
INTC 131%
IBM 66%
HWP 20%
................................................................................
Figure 3**
S&P 500 20%
MRK 21%
INJ 16%
PFE 32%
BMY 27%
................................................................................
Figure 4+
S&P 500 20%
GE 29%
DD 16%
................................................................................
Figure 5++
* Coca-Cola and other big consumer stocks proved to be the "real thing" for
investors in 1996.
** Technology stocks were outstanding across the board, with Intel leading
this outperforming sector. Two of these stocks (MSFT and INTC) are also
among the Nasdaq Composite's top 25.
+ Health care was another strong sector. The lifting of investor worries over
a whole range of "managed care" issues also boosted stock prices.
++ Proving America's industrial resurgence, two industrial giants, DuPont and
General Electric, lifted stock market averages.
A Closer Look at the S&P 500
The S&P 500 has enjoyed very handsome returns over the last few years, and the
performance of its largest-capitalization companies has been spectacular. To
illustrate the performance of the large-cap stocks, we broke out the 25 largest
companies from the index and calculated the price changes for this group. As
shown in Figure 1 on page 6, the top 25 companies in the S&P 500 performed 9%
better than the overall index during the past year. Over three years, the top 25
companies returned 7% per year above the index.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
S&P 500 20%
S&P 500 Top 25 29%
"S&P 475" 16%
The largest stocks had the largest impact on performance. Removing the largest
25 stocks lowered the S&P 500's 12-month return by 4%.
................................................................................
Figure 6
To demonstrate just how great an impact the larger stocks had on the performance
of the overall index, we recalculated index performance without the largest 25
stocks. Shown in Figure 6, above, is the S&P 500, the 25 largest-cap stocks, and
the "S&P 475"--the S&P without the largest 25 stocks. Removing just the top 25
stocks lowered the S&P 500 return by 4% over the past year!
This outperformance by the largest stocks in the S&P 500 spanned major sectors
of the market. The charts on the left, entitled "Top Stocks vs. S&P 500"
(Figures 2-5), are a few examples, by industry sector, of companies in the top
25 whose strong performance and large market capitalization contributed
significantly to the overall increase of the S&P 500.
Leading the surge in consumer stocks (Figure 2) were those all-American icons,
Coca-Cola and Procter & Gamble. Both benefited from a refocus on their core
operations, aggressive cost containment and vigorous overseas growth.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
S&P 500 Top 25 NASDAQ
-------------- ------
1994-1996 50% 17%
1996 55% 23%
Nasdaq Annualized Percentage
Price Change
................................................................................
Figure 7
Technology stocks (Figure 3) were outstanding across the board, with Intel
leading this outperforming sector. Intel's price increase reflected its
dominance in processors, a lead that appeared even more formidable in 1996. It's
also noteworthy that two new technology names (Microsoft and Intel) are also
among the top 25 stocks in the Nasdaq Composite, a topic we'll cover in the next
section.
(7)
<PAGE>
[THE FOLLOWING TABLES WERE REPRESENTED BY BAR CHARTS IN THE PRINTED MATERIAL.]
NASDAQ 23%
NASDAQ Top 25 55%
NASDAQ less Top 25 8%
Most of the Nasdaq Composite's returns have been driven by a very narrow slice
of large-cap stocks.
................................................................................
Figure 8
NASDAQ 23%
TLAB 103%
CSCO 71%
MSFT 88%
DELL 207%
INTC 131%
The Nasdaq Composite's top 25 was dominated by the technology sector, and the
performance of this sector was dominated by five companies.
................................................................................
Figure 9
NASDAQ
Composite S&P 500 EAFE w/Japan EAFE
--------- ------- ------------ ----
1994-1996 19% 17% 10% 7%
1996 23% 20% 18% 4%
The S&P 500 and Nasdaq Composite have both substantially outperformed EAFE in
recent years.
................................................................................
Figure 10
Health care (Figure 4 on the previous page) was another strong sector in 1996.
In particular, Pfizer and Bristol Myers benefited from strong pharmaceutical
profits. The lifting of investor worries over a whole range of "managed care"
issues also boosted stock prices.
Finally, the two industrial names (Figure 5 on the previous page), General
Electric and DuPont, led the market by a handsome margin. In addition, both led
U.S. industry in restructuring to meet, and then beat, international
competition.
The Effect is Magnified on Nasdaq
The Nasdaq Composite Index is a capitalization-weighted index of all stocks
which trade on Nasdaq. Today this index includes over 5,500 companies with an
aggregate market capitalization of over $1.5 trillion. Most Nasdaq companies,
though clearly not all of them, are small- to medium-capitalization issues. We
analyzed the Nasdaq to see if this index had the same large-cap performance bias
as the S&P 500. In fact, the large-cap bias in Nasdaq was far greater than that
seen in the S&P.
Again, we compared the aggregate annualized price percentage change in the
largest companies in the Nasdaq to that of the overall Nasdaq Composite Index.
The results are shown in Figure 7 on the previous page. There is a huge spread
of 32% between the top 25 companies and the Composite over the last year! Over a
three-year period, the top 25 bested the Composite by a similar margin.
As in our previous analysis, we removed twenty-five large-cap stocks from the
overall index to judge their impact of 1996 performance. As shown in Figure 8,
when we removed the top 25 stocks from the Nasdaq Composite, index returns were
lowered to 8%. So most of the returns of the Nasdaq Composite have been driven
by a very narrow slice of large-cap stocks.
Unlike the top names in the S&P 500 Index, the Nasdaq Composite's top 25 are
dominated by one sector: technology. The strongest large-cap performers in the
technology sector are shown in Figure 9.
The International Scene
Performance in the international arena has lagged the U.S. markets. The most
common international index is Morgan Stanley's EAFE (Europe, Australia and Far
East), a measure of stock performance in the developed non-U.S. markets. The S&P
500 and Nasdaq Composite have both substantially outperformed EAFE in recent
years as shown in Figure 10.
It's interesting that EAFE without Japan has performed in line with domestic
markets over the past year. Major world markets, other than Japan, had strong
returns. This is but one more indication that international markets are
beginning to accelerate and to attract investors' attention.
(8)
<PAGE>
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
S&P 500 Avg. 16.6x
Top 25 Avg. 18.9x
Bottom 25 Avg. 13.9x
Price-to-earnings ratios of the S&P 500 vs. the 25 largest and smallest
capitalization stocks.
................................................................................
Figure 11
Conclusion
As stated at the outset, we expect stiffer competition for the very
large-capitalization U.S. stocks going forward. This performance competition
will probably come from two sources: the international arena, and smaller- to
medium-capitalization domestic companies.
There are any number of reasons why the momentum of large-cap companies may
slow. But clearly one of them is valuation. Many international markets now look
like reasonable values relative to U.S. markets. And the valuation of
smaller-cap U.S. stocks has improved.
Figure 11 examines one measure of valuation, price-to-earnings (P/E) ratios. The
P/Es of the 25 largest stocks in the S&P 500 were compared to the P/Es of the 25
smallest-capitalization stocks. At 13.9 times 1997 earnings, the P/Es of the
smaller stocks are now below those of larger stocks and the S&P as a whole. This
is the inverse of how investors usually price smaller-cap stock multiples.
Thus, we anticipate that the relative performance of large- capitalization U.S.
stocks will decelerate. Investors will need to diversify their holdings beyond
the highly visible, large-cap U.S. equity market. International and small- to
mid-capitalization companies will offer greater performance potential.
Investors should review their portfolios, and insure that they are diversified
to capture these trends. A diversified portfolio should include large-and
small-cap, domestic and international stocks. Such a portfolio should not only
help maximize returns, but may also prove less risky than one less broadly
based.
................................................................................
Sources for all charts: Smith Barney Mutual Funds Management Inc.
The Standard & Poor's 500 Composite Index is an unmanaged but commonly used
measure of common stock total return performance. It is not possible to invest
in an index. Past performance is no guarantee of future results.
There may be additional risks associated with international investing, such as
currency fluctuations, differing standards of accounting and financial
disclosure, relatively low liquidity in some foreign markets and the potential
for adverse political and economic events.
This information represents the current opinions of Smith Barney Mutual Funds
Management and is based on conditions present on January 31, 1997. Opinions
about worldwide political, economic or financial market conditions are subject
to change. This does not constitute an offer to buy or solicitation to sell any
of the securities mentioned herein. This material is not intended to predict the
future performance of any securities market. Any statistics contained herein
have been obtained from sources believed reliable, but the accuracy of this
information cannot be guaranteed.
(9)
<PAGE>
THE HIGH GROWTH PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Bond Funds .............................................................. 10%
Stock Funds ............................................................. 90%
</TABLE>
The High Growth Portfolio seeks capital appreciation by investing a high
percentage of its assets in aggressive equity funds.
................................................................................
The High Growth Portfolio
The High Growth Portfolio seeks capital appreciation. Among the Portfolios of
the Concert Allocation Series, the High Growth Portfolio invests the highest
percentage of its assets in aggressive equity mutual funds. This includes mutual
funds that focus on smaller, more speculative companies as well as mid-sized (or
larger) companies with the potential for rapid growth. In addition, a
significant portion of the Portfolio is invested in international or emerging
markets funds in order to achieve greater diversification.
================================================================================
Portfolio Update
================================================================================
The last twelve months has seen most major stock markets hit new highs. However,
as we discuss in the "Dissecting the Bull Market" article on page 6, the
performance of individual sectors, and individual stocks, varied dramatically
during the year. For example, the U.S. stock market, as measured by the Standard
& Poor's 500 Index, soared to new levels fueled primarily by large
capitalization, blue chip stocks and was propelled furthered by approximately
$200 billion that flowed into equity mutual funds -- which was subsequently
invested in the same stocks. Not surprisingly, mutual funds that invest in these
stocks generally reported strong total returns.
Many non-U.S. stock markets also reached new highs, although the levels were not
as dramatic as the U.S. market. Internationally-focused mutual funds generally
participated in these returns. Less consistent were the total returns generated
by small and mid-cap stocks. While the indices that track these stocks also hit
new highs, advances in these areas were limited to a relatively small number of
stocks. As a result, mutual funds that focus on these stocks turned in mixed
results.
The funds in the High Growth Portfolio that invest in large- and mid-cap and
international stocks participated in the returns generated by last year's
markets. However, the portion of the Portfolio allocated to a small
capitalization stock fund underperformed the broader small cap market.
Nevertheless, we believe that maintaining a stable allocation among the
underlying funds is necessary to achieve the High Growth Portfolio's objective
of providing a competitive total return over a full market cycle. Therefore, the
allocation among individual funds within the High Growth Portfolio has remained
relatively unchanged during the reporting period.
The Concert Allocation Series High Growth Portfolio's Class A shares had a total
return of roughly 14.5% for the period ended January 31, 1997, before the effect
of any sales charges is deducted. The chart on page 13 compares the Portfolio's
performance to broad-based indices that track four of the asset classes
represented in the Portfolio. This chart shows the performance of Class A, Class
B and Class C shares, including the effects of the appropriate sales charges. As
you can see, the High Growth Portfolio's performance is below that of the
strongest index, the Standard & Poor's 500, but above that of the weakest index,
the MSCI Europe, Australia and Far East (EAFE). Historically, the leading asset
class and the lagging asset class have varied from one year to the next. We
believe the Concert Allocation Series' focused allocation strategy will help
generate less volatile, relatively stable investment returns.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix of
investments for the High Growth Portfolio. The allocation and investment mix of
the Portfolio may vary depending upon market conditions, cash flows in and out
of the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
The Concert Allocation Series' Board of Directors.
(10)
<PAGE>
The Concert Allocation Series High Growth Portfolio Breakdown (as of 1/31/97)
[THE FOLLOWING INFORMATION WAS REPRESENTED BY
A PIE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
20% Smith Barney
Aggressive Growth Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Intel Corp.
Tyco International Ltd.
Quantum Corp.
U.S. Healthcare Inc.
Genzyme Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20% Smith Barney
Special Equities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Starbucks Corp.
Boston Chicken Inc.
Peoplesoft Inc.
Callaway Golf Co.
Cymer Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20% Smith Barney World Funds --
International Equity Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Ericsson (Sweden)
Novartis (Switzerland)
Nokia (Finland)
Teva Pharmaceutical (Israel)
SGL Carbon (Germany)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Allstate Corp.
Eastman Kodak Co.
Merck &Co.
Chase Manhattan Corp.
Amoco Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Growth & Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Hewlett-Packard Co.
General Electric Co.
Coca-Cola Co.
NationsBank Corp.
Monsanto Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Fundamental Value Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
American International Group, Inc.
Amoco Corp.
American Express Co.
Citicorp
BankAmerica Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
High Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
NWCG Holdings Corp.
Marcus Cable Co.
Nextel Communications, Inc.
Time Warner Inc.
Revlon Worldwide Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Managed Growth Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Forest Laboratories, Inc.
Readers Digest Association, Inc.
United Healthcare Corp.
Dean Foods Co.
UST Inc.
- --------------------------------------------------------------------------------
(11)
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.41 $0.20 $0.42 14.50%+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.41 $0.16 $0.42 14.06%+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.42 $0.16 $0.42 14.15%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $12.24 $12.41 $0.00 $0.00 1.39%+
===========================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
<TABLE>
<CAPTION>
Average Annual Total Return+
...........................................................................................................................
Without Sales Charge(1)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 14.50% 14.06% 14.15% 1.39%
===========================================================================================================================
<CAPTION>
With Sales Charge(2)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 8.78% 9.06% 13.15% 1.39%
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00%; and Class B shares reflect
the deduction of a 5.00% CDSC, which applies if shares are redeemed within
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
(12)
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return+
................................................................................
Without Sales Charge(1)
- --------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 1/31/97) 14.50%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/97) 14.06
- --------------------------------------------------------------------------------
Class C (Inception* through 1/31/97) 14.15
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/97) 1.39
- --------------------------------------------------------------------------------
</TABLE>
(1) Assumes reinvestment of all dividends and capital gains distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
Growth of $10,000 Invested in Class A, B and C Shares of the High Growth
Portfolio vs. the Standard & Poor's 500 Composite Stock Index, Russell 2000
Index, Morgan Stanley Capital International EAFE Index and Salomon Brothers High
Yield Market Index
................................................................................
February 5, 1996 -- January 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Salomon
Standard Brothers
& Poor's High
High Growth High Growth High Growth 500 Russell MSCI Yield
Portfolio- Portfolio- Portfolio- Composite 2000 EAFE Market
Class A Class B Class C Stock Index Index Index Index
----------- ----------- ----------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9500 9950 9990 10000 10000 10000 10000
2/96 9600 10020 10069 10093 10312 10036 10062
3/96 9683 10099 10139 10190 10522 10252 10012
4/96 10042 10476 10516 10340 11085 10552 10009
5/96 10225 10661 10701 10605 11522 10360 10065
6/96 9883 10301 10341 10646 11049 10421 10142
7/96 9142 9511 9551 10175 10084 10119 10208
8/96 9567 9950 9999 10390 10670 10143 10313
9/96 9942 10336 10376 10974 11087 10415 10556
10/96 9791 10169 10218 11277 10916 10311 10676
11/96 10486 10900 10940 12128 11366 10723 10881
12/96 10422 10887 10927 11888 11664 10588 10967
1/31/97 10878 11356 11405 12630 11897 10220 11049
</TABLE>
The above chart represents a hypothetical illustration of $10,000 invested in
Class A, B and C shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% sales charge at the time of investment for Class A shares,
the deduction of the maximum 5.00% CDSC for Class B shares and the deduction of
the 1.00% CDSC for Class C shares. It also assumes reinvestment of dividends and
capital gains, if any at net asset value through January 31, 1997. The Standard
& Poor's 500 Composite Stock Index is an unmanaged index composed of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the over-the-counter market. The Russell 2000 Index is a
capitalization weighted total return index which is comprised of 2,000 of some
of the smaller capitalized U.S. domiciled companies whose common stock is traded
in the United States on the New York Stock Exchange, American Stock Exchange and
Nasdaq. The Morgan Stanley Capital International EAFE Index ("MSCI EAFE")
consists of the equity total returns for Europe, Australia and the Far East. The
Salomon Brothers High Yield Market Index covers a significant portion of the
below-investment grade U.S. corporate bond market. These indices are unmanaged
and are not subject to the same management and trading expenses as a mutual
fund. The performance of the Portfolio's other classes may be greater or less
than the shares' performance indicated on this chart, depending on whether
greater or lesser sales charges and fees were incurred by shareholders investing
in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
(13)
<PAGE>
THE GROWTH PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Bond Funds ............................................................... 30%
Stock Funds .............................................................. 70%
</TABLE>
The Growth Portfolio seeks long-term growth of capital by investing primarily in
funds containing the issues of more established companies.
................................................................................
The Growth Portfolio
The Growth Portfolio seeks long-term growth of capital. Among the Portfolios of
the Concert Allocation Series, the Growth Portfolio invests the highest
percentage of its assets in large capitalization stock mutual funds to provide
growth. The Portfolio's equity allocation also includes funds that invest in
small and mid-cap stocks and international securities. In addition, a
significant portion of the Growth Portfolio is also allocated to bonds to help
reduce volatility.
================================================================================
Portfolio Update
================================================================================
The last twelve months has seen most major stock markets hit new highs. However,
as we discuss in the "Dissecting the Bull Market" article on page 6, the
performance of individual sectors, and individual stocks, varied dramatically
during the year. For example, the U.S. stock market, as measured by the Standard
& Poor's 500 Index, soared to new levels fueled primarily by large
capitalization, blue chip stocks and was propelled furthered by approximately
$200 billion that flowed into equity mutual funds -- which was subsequently
invested in the same stocks. Not surprisingly, mutual funds that invest in these
stocks generally reported strong total returns.
Many non-U.S. stock markets also reached new highs, although the levels were not
as dramatic as the U.S. markets. Internationally-focused mutual funds generally
participated in these returns. Less consistent were the total returns generated
by small- and mid-cap stocks. While the indices that track these stocks also hit
new highs, advances in these areas were limited to a relatively small number of
sectors. As a result, mutual funds that focus on these stocks turned in mixed
results. Bond investors had a totally different experience. Interest rates rose
slightly during the year and the bond markets generally produced low total
returns for the period. As a result, most bond funds reported modest total
returns.
The funds in the Growth Portfolio that invest in large- and mid-cap and
international stocks participated in the returns generated by last year's
markets. However, these returns were somewhat offset by the Portfolio's
allocation in a small cap fund, which underperformed the broader small cap
market, and bond funds, which provided relatively flat returns. Nevertheless, we
believe that maintaining a stable allocation among the underlying funds is
necessary to achieve the Growth Portfolio's objective of providing a competitive
total return over a full market cycle. Therefore, the allocation among
individual funds within the Growth Portfolio has remained relatively unchanged
during the reporting period.
The Concert Allocation Series Growth Portfolio's Class A shares had a total
return of roughly 11.1% for the period ended January 31, 1997, before the effect
of any sales charges is deducted. The chart on page 17 compares the Portfolio's
performance to broad-based indices that track four of the asset classes
represented in the Portfolio. This chart shows the performance of Class A, Class
B and Class C shares, including the effects of appropriate sales charges. As you
can see, the Growth Portfolio's performance is below that of the strongest
index, the Standard & Poor's 500, but above that of the weakest index, the MSCI
Europe, Australia and Far East (EAFE). Historically, the leading asset class and
the lagging asset class have varied from one year to the next. We believe the
Concert Allocation Series' focused allocation strategy will help generate less
volatile, relatively stable investment returns.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Growth Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
The Concert Allocation Series' Board of Directors.
(14)
<PAGE>
The Concert Allocation Series Growth Portfolio Breakdown (as of 1/31/97)
[THE FOLLOWING INFORMATION WAS REPRESENTED BY
A PIE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
10% Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Allstate Corp.
Eastman Kodak Co.
Merck & Co.
Chase Manhattan Corp.
Amoco Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Fundamental Value Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
American International Group, Inc.
Amoco Corp.
American Express Co.
Citicorp
BankAmerica Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Managed Growth Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Forest Laboratories, Inc.
Readers Digest Association, Inc.
United Healthcare Corp.
Dean Foods Co.
UST Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney World Funds --
International Equity Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Ericsson (Sweden)
Novartis (Switzerland)
Nokia (Finland)
Teva Pharmaceutical (Israel)
SGL Carbon (Germany)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Aggressive Growth Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Intel Corp.
Tyco International Ltd.
Quantum Corp.
U.S. Healthcare Inc.
Genzyme Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Special Equities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Starbucks Corp.
Boston Chicken Inc.
Peoplesoft Inc.
Callaway Golf Co.
Cymer Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Growth & Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Hewlett-Packard Co.
General Electric Co.
Coca-Cola Co.
NationsBank Corp.
Monsanto Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
High Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
NWCG Holdings Corp.
Marcus Cable Co.
Nextel Communications, Inc.
Time Warner Inc.
Revlon Worldwide Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Government Securities Fund
- --------------------------------------------------------------------------------
Sector Breakdown:
66.0% U.S. Treasury Securities
32.4% Mortgage-Backed Securities
1.6% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
9 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Managed Governments Fund Inc.
- --------------------------------------------------------------------------------
Sector Breakdown:
24.8% U.S. Treasury Securities
75.2% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
7 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Investment Grade Bond Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
U.S. Treasury Strips
Time Warner Inc.
NationsBank Corp.
General Motors Corp.
American General Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney World Funds-
Global Government Bond Portfolio
- --------------------------------------------------------------------------------
Top 5 Country Holdings:
Japan Spain
Germany Ireland
Italy
- --------------------------------------------------------------------------------
(15)
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.32 $0.31 $0.02 11.08%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.33 $0.22 $0.02 10.32%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.33 $0.22 $0.02 10.32%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $12.18 $12.32 $0.00 $0.00 1.15%+
===========================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
<TABLE>
<CAPTION>
Average Annual Total Return+
...........................................................................................................................
Without Sales Charge(1)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 11.08% 10.32% 10.32% 1.15%
===========================================================================================================================
<CAPTION>
With Sales Charge(2)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 5.52% 5.32% 9.32% 1.15%
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00%; and Class B shares reflect
the deduction of a 5.00% CDSC, which applies if shares are redeemed within
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
(16)
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return+
...........................................................................................................................
Without Sales Charge(1)
===========================================================================================================================
<S> <C>
Class A (Inception* through 1/31/97) 11.08%
- ---------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 1/31/97) 10.32
- ---------------------------------------------------------------------------------------------------------------------------
Class C (Inception* through 1/31/97) 10.32
- ---------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 1/31/97) 1.15
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
Growth of $10,000 Invested in Class A, B and C Shares of the Growth Portfolio
vs. the Standard & Poor's 500 Composite Stock Index, Russell 2000 Index,
Morgan Stanley Capital International EAFE Index and
Lehman Government/Corporate Bond Index
................................................................................
February 5, 1996 -- January 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Growth
<TABLE>
<CAPTION>
Standard & Intermediate
Growth Growth Growth Poor's 500 Russell MSCI Investment
Portfolio- Portfolio- Portfolio- Composite 2000 EAFE Grade Bond
Class A Class B Class C Stock Index Index Index Index
---------- ---------- ---------- ----------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9500 9950 9990 10000 10000 10000 10000
2/96 9492 9941 9981 10093 10312 10036 9788
3/96 9550 9994 10034 10190 10522 10252 9706
4/96 9775 10222 10262 10340 11085 10552 9639
5/96 9900 10345 10394 10605 11522 10360 9622
6/96 9750 10178 10227 10646 11049 10421 9494
7/96 9258 9661 9701 10175 10084 10119 9473
8/96 9542 9950 9990 10390 10670 10143 9449
9/96 9867 10292 10332 10974 11087 10415 9281
10/96 9875 10283 10332 11277 10916 10311 9064
11/96 10285 10706 10746 12128 11366 10723 9231
12/96 10218 10642 10682 11888 11664 10588 9129
1/31/97 10552 10894 11022 12630 11897 10220 9118
</TABLE>
The above chart represents a hypothetical illustration of $10,000 invested in
Class A, B and C shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% sales charge at the time of investment for Class A shares,
the deduction of the maximum 5.00% CDSC for Class B shares and the deduction of
the 1.00% CDSC for Class C shares. It also assumes reinvestment of dividends and
capital gains, if any at net asset value through January 31, 1997. The Standard
& Poor's 500 Composite Stock Index is an unmanaged index composed of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the over-the-counter market. The Russell 2000 Index is a
capitalization weighted total return index which is comprised of 2,000 of some
of the smaller capitalized U.S. domiciled companies whose common stock is traded
in the United States on the New York Stock Exchange, American Stock Exchange and
Nasdaq. The Morgan Stanley Capital International EAFE Index ("MSCI EAFE") is
composite index consists of equity total returns for Europe, Australia and the
Far East. The Lehman Government/Corporate Bond Index is a combination of
publicly issued intermediate- and long-term U.S. government bonds and corporate
bonds. These indices are unmanaged and are not subject to the same management
and trading expenses as a mutual fund. The performance of the Portfolio's other
classes may be greater or less than the performance indicated on this chart,
depending on whether greater or lesser sales charges and fees were incurred by
shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
(17)
<PAGE>
THE BALANCED PORTFOLIO
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
================================================================================
Target Asset Allocation
================================================================================
<TABLE>
<S> <C>
Bond Funds ............................................................... 50%
Stock Funds .............................................................. 50%
</TABLE>
The Balanced Portfolio seeks a balance of capital growth and income by placing
equal emphasis on funds investing in stocks and bonds.
................................................................................
The Balanced Portfolio
The Balanced Portfolio seeks long-term growth of capital and income, placing
equal emphasis on current income and capital appreciation. The Balanced
Portfolio, as its name states, divides its assets roughly between equity and
fixed income mutual funds. The equity funds are primarily large-capitalization,
dividend-paying stock funds. The fixed income portion of the Portfolio is
largely invested in funds that invest in U.S. Government and Agency securities,
and mortgage-backed securities.
================================================================================
Portfolio Update
================================================================================
The last twelve months has seen most major stock markets hit new highs. However,
as we discuss in the "Dissecting the Bull Market" article on page 6, the
performance of individual sectors, and individual stocks, varied dramatically
during the year. For example, the U. S. stock market, as measured by the
Standard & Poor's 500 Index, soared to new levels fueled primarily by large
capitalization, blue chip stocks and was propelled furthered by approximately
$200 billion that flowed into equity mutual funds -- which was subsequently
invested in the same stocks. Not surprisingly, mutual funds that invest in these
stocks generally reported strong total returns.
Although 1996 was a strong year for the stock markets, bond investors had a
totally different experience. Even though there were no signs of inflation last
year, bond investors remained fearful. After six years of economic recovery,
bondholders grew increasingly nervous that the phantom of inflation would
reappear. In response to those fears, interest rates rose slightly for the year
and most bond funds produced modest gains.
The assets in the Balanced Portfolio are split between equity and bond funds,
with most of the Portfolio's assets invested in domestic securities. The
attractive, double-digit returns generated by the equity funds in the Balanced
Portfolio were somewhat offset by the modest, mostly single-digit returns
produced from its underlying bond funds. Overall, the Balanced Portfolio turned
in a competitive performance during the period. We continue to believe that
maintaining a stable allocation among the underlying funds is necessary to
achieve the Balanced Portfolio's objective of providing a competitive total
return over a full market cycle. Therefore, the allocation among individual
funds within the Balanced Portfolio has remained relatively unchanged during the
reporting period.
The Concert Allocation Series Balanced Portfolio's Class A shares had a total
return of roughly 10.6% for the period ended January 31, 1997, before the effect
of any sales charges is deducted. The chart on page 21 compares the Portfolio's
performance to broad-based indices that track four of the asset classes
represented in the Portfolio. This chart shows the performance of Class A, Class
B and Class C shares, including the effects of appropriate sales charges. As you
can see, the Balanced Portfolio's performance is below that of the strongest
index, the Standard & Poor's 500, but above that of the weakest index, Lehman
Government/Corporate Bond Index. Historically, the leading asset class and the
lagging asset class have varied from one year to the next. We believe the
Concert Allocation Series' focused allocation strategy will help generate less
volatile, relatively stable investment returns.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Balanced Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
The Concert Allocation Series' Board of Directors.
(18)
<PAGE>
The Concert Allocation Series Balanced Portfolio Breakdown (as of 1/31/97)
[THE FOLLOWING INFORMATION WAS REPRESENTED
BY A PIE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
10% Smith Barney
Growth & Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Hewlett-Packard Co.
General Electric
Coca-Cola Co.
NationsBank Corp.
Monsanto Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds --
Equity Income Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Xerox Corp.
Eastman Kodak Co.
Bristol-Myers Squibb Co.
Mobile Corp.
Baxter International
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Premium Total Return Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Loews Corp.
Student Loan Marketing Association
Philip Morris Co.
Bristol-Myers Squibb Co.
Lehman Brothers Holdings, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15% Smith Barney
Diversified Strategic Income Fund
- --------------------------------------------------------------------------------
Portfolio Composition:
37% U.S. Government & Mortgage-Backed Securities
89.47% Mortgage-Backed Securities
10.53% U.S. Treasury Securities
25% High Yield Corporate Bonds
Top 5 Holdings:
Marcus Cable Co.
Revlon Worldwide Corp.
Ornda Healthcorp
Panamsat Corp.
NWCG Holdings Corp.
38% Foreign Government Bonds
Top 5 Countries:
Spain Italy
United Kingdom Germany
Canada
Average Weighted Maturity:
5 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney World Funds --
International Balanced Portfolio
- --------------------------------------------------------------------------------
Top 5 Country Holdings:
Japan Netherlands
France Sweden
United States
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Managed Governments Fund Inc.
- --------------------------------------------------------------------------------
Sector Breakdown:
24.8% U.S. Treasury Securities
75.2% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
7 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds-Short-Term
U.S. Treasury Securities Portfolio
- --------------------------------------------------------------------------------
Sector Breakdown:
100% U.S. Treasury Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
4 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Allstate Corp.
Eastman Kodak Co.
Merck & Co.
Chase Manhattan Corp.
Amoco Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Government Securities Fund
- --------------------------------------------------------------------------------
Sector Breakdown:
66.0% U.S. Treasury Securities
32.4% Mortgage-Backed Securities
1.6% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
7 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Fundamental Value Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
American International Group, Inc.
Amoco Corp.
American Express Co.
Citicorp
BankAmerica Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Convertible Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
USX Marathon Corp.
Equitable Cos.
Grand Metropolitan
Inco Ltd.
Airborne Freight
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Utilities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
FPL Group
Texas Utilities Co.
Edison International
PanEnergy Corp.
Cinergy Corp.
- --------------------------------------------------------------------------------
(19)
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.14 $0.45 $0.00 10.64%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.14 $0.37 $0.00 9.90%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.40 $12.14 $0.37 $0.00 9.90%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $12.10 $12.13 $0.00 $0.00 0.25%+
===========================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
<TABLE>
<CAPTION>
Average Annual Total Return+
...........................................................................................................................
Without Sales Charge(1)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 10.64% 9.90% 9.90% 0.25%
===========================================================================================================================
<CAPTION>
With Sales Charge(2)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 5.11% 4.90% 8.90% 0.25%
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00%; and Class B shares reflect
the deduction of a 5.00% CDSC, which applies if shares are redeemed within
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
(20)
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return+
...........................................................................................................................
Without Sales Charge(1)
===========================================================================================================================
<S> <C>
Class A (Inception* through 1/31/97) 10.64%
- ---------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 1/31/97) 9.90
- ---------------------------------------------------------------------------------------------------------------------------
Class C (Inception* through 1/31/97) 9.90
- ---------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 1/31/97) 0.25
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gains distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
Growth of $10,000 Invested in Class A, B and C Shares of the Balanced Portfolio
vs. the Standard &Poor's 500 Composite Stock Index, Lehman Government/Corporate
Bond Index, Salomon Brothers One-Year Treasury Bill Index and Salomon Brothers
World Government Bond Index
................................................................................
February 5, 1996 -- January 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Standard & Salomon Salomon
Poor's 500 Lehman Global Brothers Brothers
Balanced Balanced Balance Composite Government/ One-Year World
Portfolio Portfolio Portfolio Stock Corporate Treasury Government
Class-A Class-B Class-C Index Bond Index Bill Index Bond Index
--------- --------- --------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9500 9950 9990 10000 10000 10000 10000
2/96 9442 9889 9929 10093 9788 10012 9949
3/96 9483 9926 9966 10190 9706 10044 9935
4/96 9533 9970 10010 10340 9639 10078 9895
5/96 9617 10049 10089 10605 9622 10120 9897
6/96 9698 10134 10165 10646 9494 10175 9975
7/96 9513 9930 9970 10175 9473 10214 10167
8/96 9631 10045 10085 10390 9449 10263 10207
9/96 9874 10299 10331 10974 9281 10332 10249
10/96 10062 10487 10527 11277 9064 10410 10440
11/96 10420 10854 10894 12128 9231 10463 10578
12/96 10350 10770 10810 11888 9129 10499 10492
1/31/97 $10511 11013 10980 12630 9118 10551 10568
</TABLE>
The above chart represents a hypothetical illustration of $10,000 invested in
Class A, B and C shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% sales charge at the time of investment for Class A shares,
the deduction of the maximum 5.00% CDSC for Class B shares and the deduction of
the 1.00% CDSC for Class C shares. It also assumes reinvestment of dividends and
capital gains, if any at net asset value through January 31, 1997. The Standard
& Poor's 500 Composite Stock Index is an unmanaged index composed of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the over-the-counter market. The Lehman Government/Corporate Bond
Index is a combination of publicly issued intermediate- and long-term U.S.
government bonds and corporate bonds. The Salomon Brothers One-Year Treasury
Bill Index is composed of one 1-Year United States Treasury Bill whose return is
tracked until its maturity. The Salomon Brothers World Government Bond Index is
a market-capitalization-weighted benchmark that tracks the performance of the
government bond markets of 14 countries. These indices are unmanaged and are not
subject to the same management and trading expenses as a mutual fund. The
performance of the Portfolio's other classes may be greater or less than the
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
(21)
<PAGE>
THE CONSERVATIVE PORTFOLIO
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
================================================================================
Target Asset Allocation
================================================================================
<TABLE>
<S> <C>
Bond Funds ............................................................... 70%
Stock Funds .............................................................. 30%
</TABLE>
The Conservative Portfolio seeks income and, secondarily, long-term growth of
capital by investing the majority of its assets in funds that invest in bonds.
................................................................................
The Conservative Portfolio
The Conservative Portfolio seeks income and secondarily, long-term capital
growth. Among the Portfolios of the Concert Allocation Series, the Conservative
Portfolio consists primarily of taxable fixed income funds, with a significant
portion invested in stock funds that invest primarily in large capitalization
U.S. stocks.
================================================================================
Portfolio Update
================================================================================
The last twelve months has seen most major stock markets hit new highs. However,
as we discuss in the "Dissecting the Bull Market" article on page 6, the
performance of individual sectors, and individual stocks, varied dramatically
during the year. For example, the U.S. stock market, as measured by the Standard
& Poor's 500 Index, soared to new levels fueled primarily by large
capitalization, blue chip stocks and was propelled furthered by approximately
$200 billion that flowed into equity mutual funds -- which was subsequently
invested in the same stocks. Not surprisingly, mutual funds that invest in these
stocks generally reported strong total returns.
Although 1996 was a strong year for the stock markets, bond investors had a
totally different experience. Even though there were no signs of inflation last
year, bond investors remained fearful. After six years of economic recovery,
bondholders grew increasingly nervous that the phantom of inflation would
reappear. In response to those fears, interest rates rose slightly for the year
and most bond funds produced modest gains.
The funds in the Conservative Portfolio that invest in bonds for the most part
generated modest, single-digit returns. The equity portion of the Portfolio is
mostly invested in funds with large-cap, dividend-paying stocks and thus
participated in the returns from last year's stock market. Overall, the
Conservative Portfolio turned in a competitive performance during the period. We
continue to believe that maintaining a stable allocation among the underlying
funds is necessary to achieve the Conservative Portfolio's objective of
providing a competitive total return over a full market cycle. Therefore, the
allocation among individual funds within the Conservative Portfolio has remained
relatively unchanged during the reporting period.
The Concert Allocation Series Conservative Portfolio's Class A shares had a
total return of roughly 8.6% for the period ended January 31, 1997, before the
effect of any sales charges is deducted. The chart on page 25 compares the
Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio. This chart shows the performance of Class
A, Class B and Class C shares, including the effects of appropriate sales
charges. As you can see, the Conservative Portfolio's performance is below that
of the strongest index, the S&P 500 but above that of Lehman
Government/Corporate Bond Index. Historically, the leading asset class and
lagging asset class have varied from one year to the next. We believe the
Concert Allocation Series' focused allocation strategy will help generate less
volatile, relatively stable investment returns.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Conservative Portfolio. The allocation and investment mix of
the Portfolio may vary depending upon market conditions, cash flows in and out
of the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
The Concert Allocation Series' Board of Directors.
(22)
<PAGE>
The Concert Allocation Series Conservative Portfolio Breakdown (as of 1/31/97)
[THE FOLLOWING INFORMATION WAS REPRESENTED BY A
PIE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
15% Smith Barney
Managed Governments Fund Inc.
- --------------------------------------------------------------------------------
Sector Breakdown:
24.8% U.S. Treasury Securities
75.2% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Maturity:
7 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Convertible Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
USX Marathon Corp.
Equitable Cos.
Grand Metropolitan
Inco Ltd.
Airborne Freight
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Premium Total Return Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Loews Corp.
Student Loan Marketing Association
Philip Morris Co.
Bristol-Myers Squibb Co.
Lehman Brothers Holdings
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20% Smith Barney Diversified
Strategic Income Fund
- --------------------------------------------------------------------------------
Portfolio Composition:
37% U.S. Government & Mortgage-Backed Securities
89.47% Mortgage-Backed Securities
10.53% U.S. Treasury Securities
25% High Yield Corporate Bonds
Top 5 Holdings:
Marcus Cable Co.
Revlon Worldwide Corp.
Ornda Healthcorp
Panamsat Corp.
NWCG Holdings Corp.
38% Foreign Government Bonds
Top 5 Countries:
Spain Italy
United Kingdom Germany
Canada
Average Weighted Maturity:
5 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds --
Equity Income Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Xerox Corp.
Eastman Kodak Co.
Bristol-Myers Squibb Co.
Mobile Corp.
Baxter International
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Government Securities Fund
- --------------------------------------------------------------------------------
Sector Breakdown:
66.0% U.S. Treasury Securities
32.4% Mortgage-Backed Securities
1.6% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
9 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds-Short-Term
U.S. Treasury Securities Portfolio
- --------------------------------------------------------------------------------
Sector Breakdown:
100% U.S. Treasury Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
4 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
High Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
NWCG Holdings Corp.
Marcus Cable Co.
Nextel Communications, Inc.
Time Warner Inc.
Revlon Worldwide Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney World Funds-
International Balanced Portfolio
- --------------------------------------------------------------------------------
Top 5 Country Holdings:
Japan
France
United States
Netherlands
Sweden
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Utilities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
FPL Group
Texas Utilities Co.
Edison International
PanEnergy Corp.
Cinergy Corp.
- --------------------------------------------------------------------------------
(23)
<PAGE>
THE CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.46 $11.90 $0.52 $0.00 8.57%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.46 $11.89 $0.47 $0.00 8.03%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.46 $11.89 $0.47 $0.00 8.08%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.89 $11.90 $0.00 $0.00 0.08%+
===========================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
<TABLE>
<CAPTION>
Average Annual Total Return+
...........................................................................................................................
Without Sales Charge(1)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 8.57% 8.03% 8.08% 0.08%
===========================================================================================================================
<CAPTION>
With Sales Charge(2)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 3.68% 3.53% 7.08% 0.08%
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.50%; Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from initial purchase. The CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class
C shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
(24)
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return+
...........................................................................................................................
Without Sales Charge(1)
===========================================================================================================================
<S> <C>
Class A (Inception* through 1/31/97) 8.57%
- ---------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 1/31/97) 8.03
- ---------------------------------------------------------------------------------------------------------------------------
Class C (Inception* through 1/31/97) 8.08
- ---------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 1/31/97) 0.08
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gains distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
Growth of $10,000 Invested in Class A, B and C Shares of the Conservative
Portfolio vs. the Standard & Poor's 500 Composite Stock Index, Lehman
Government/Corporate Bond Index, Salomon Brothers High Yield Market Index and
Salomon Brothers One-Year Treasury Bill Index
................................................................................
February 5, 1996 -- January 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Salomon
Standard & Lehman Salomon Brothers
Conservative Conservative Conservative Poor's 500 Government/ Brothers One-Year
Portfolio Portfolio Portfolio Composite Corporate High Yield Treasury
Class-A Class-B Class-C Stock index Bond Index Market Index Bill Index
----------- ------------ ------------ ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9550 9955 9990 10000 10000 10000 10000
2/96 9492 9885 9920 10093 9788 10062 10012
3/96 9501 9899 9935 10190 9706 10012 10044
4/96 9526 9917 9961 10340 9639 10009 10078
5/96 9568 9952 9996 10605 9622 10065 10120
6/96 9653 10046 10083 10646 9494 10142 10175
7/96 9560 9940 9976 10175 9473 10208 10214
8/96 9636 10019 10056 10390 9449 10313 10263
9/96 9850 10239 10277 10974 9281 10556 10332
10/96 10039 10428 10475 11277 9064 10676 10410
11/96 10323 10724 10762 12128 9231 10881 10463
12/96 10273 10658 10698 11888 9129 10967 10499
1/31/97 10369 10758 10798 12630 9118 11049 10551
</TABLE>
The above chart represents a hypothetical illustration of $10,000 invested in
Class A, B and C shares on February 5, 1996 (inception date), assuming deduction
of the maximum 4.50% sales charge at the time of investment for Class A shares,
the deduction of the maximum 4.50% CDSC for Class B shares and the deduction of
the 1.00% CDSC for Class C shares. It also assumes reinvestment of dividends and
capital gains, if any at net asset value through January 31, 1997. The Standard
& Poor's 500 Composite Stock Index is an unmanaged index composed of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the over-the-counter market. The Lehman Government/Corporate Bond
Index is a combination of publicly issued intermediate- and long-term U.S.
government bonds and corporate bonds. The Salomon Brothers High Yield Market
Index covers a significant portion of the below-investment grade U.S. corporate
bond market. The Salomon Brothers One-Year Treasury Bill Index is composed of
one 1-Year United States Treasury Bill whose return is tracked until its
maturity. These indices are unmanaged and are not subject to the same management
and trading expenses as a mutual fund. The performance of the Portfolio's other
classes may be greater or less than the performance indicated on this chart,
depending on whether greater or lesser sales charges and fees were incurred by
shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
(25)
<PAGE>
THE INCOME PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Bond Funds ............................................................... 90%
Stock Funds .............................................................. 10%
</TABLE>
The Income Portfolio seeks high current income by investing primarily in bond
funds.
................................................................................
The Income Portfolio
The Income Portfolio seeks high current income. Among the Portfolios of the
Concert Allocation Series, the Income Portfolio allocates most of its assets in
taxable-fixed-income funds designed to generate a high level of income
consistent with safety and relative stability of principal. A small portion of
the Portfolio is invested in equity funds that invest in large-capitalization
U.S. stocks.
================================================================================
Portfolio Update
================================================================================
Although 1996 was a strong year for the stock markets, bond investors had a
totally different experience. Even though there were no signs of inflation last
year, bond investors remained fearful. After six years of economic recovery,
bondholders grew increasingly nervous that the phantom of inflation would
reappear. In response to those fears, interest rates rose slightly for the year
and most bond funds produced modest gains.
The funds in the Income Portfolio that invest in bonds for the most part
generated modest, single-digit returns. However, the underlying funds in the
Portfolio that invest in dividend-paying stocks and high yield bonds helped to
boost its overall performance. We continue to believe that maintaining a stable
allocation among the underlying funds is necessary to achieve the Income
Portfolio's objective of providing a competitive total return over a full market
cycle. Therefore, the allocation among individual funds within the Income
Portfolio has remained relatively unchanged during the reporting period.
The Concert Allocation Series Portfolio's Class A shares had a total return of
roughly 6.4% for the period ended January 31, 1997, before the effect of any
sales charges is deducted. The chart on page 29 compares the Portfolio's
performance to broad-based indices that track four of the asset classes
represented in the Portfolio. This chart shows the performance of Class A, Class
B and Class C shares, including the effects of appropriate sales charges. We
believe the Concert Allocation Series' focused allocation strategy will help
generate less volatile, relatively stable investment returns.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Income Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
The Concert Allocation Series' Board of Directors.
(26)
<PAGE>
The Concert Allocation Series Income Portfolio Breakdown (as of 1/31/97)
[THE FOLLOWING INFORMATION WAS REPRESENTED BY A
PIE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
20% Smith Barney Funds-Short-Term
U.S. Treasury Securities Portfolio
- --------------------------------------------------------------------------------
Sector Breakdown:
100% U.S. Treasury Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
4 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15% Smith Barney
Government Securities Fund
- --------------------------------------------------------------------------------
Sector Breakdown:
66.0% U.S. Treasury Securities
32.4% Mortgage-Backed Securities
1.6% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
9 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15% Smith Barney
Managed Governments Fund Inc.
- --------------------------------------------------------------------------------
Sector Breakdown:
24.8% U.S. Treasury Securities
75.2% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
7 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20% Smith Barney
Diversified Strategic Income Fund
- --------------------------------------------------------------------------------
Portfolio Composition:
37% U.S. Government & Mortgage-Backed Securities
89.47% Mortgage-Backed Securities
10.53% U.S. Treasury Securities
25% High Yield Corporate Bonds
Top 5 Holdings:
Marcus Cable Co.
Revlon Worldwide Corp.
Ornda Healthcorp
Panamsat Corp.
NWCG Holdings Corp.
38% Foreign Government Bonds
Top 5 Countries:
Spain Italy
United Kingdom Germany
Canada
Average Weighted Maturity:
5 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Utilities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
FPL Group
Texas Utilities Co.
Edison International
PanEnergy Corp.
Cinergy Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Convertible Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
USX Marathon Corp.
Equitable Cos.
Grand Metropolitan
Inco Ltd.
Airborne Freight
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
High Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
NWCG Holdings Corp.
Marcus Cable Co.
Nextel Communications, Inc.
Time Warner Inc.
Revlon Worldwide Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds --
Equity Income Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Xerox Corp.
Eastman Kodak Co.
Bristol-Myers Squibb Co.
Mobile Corp.
Baxter International
- --------------------------------------------------------------------------------
(27)
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.46 $11.53 $0.63 $0.00 6.39%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.46 $11.53 $0.58 $0.00 5.89%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.46 $11.53 $0.59 $0.00 5.94%+
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-1/31/97 $11.55 $11.53 $0.06 $0.00 0.35%+
===========================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
<TABLE>
<CAPTION>
Average Annual Total Return+
...........................................................................................................................
Without Sales Charge(1)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 6.39% 5.89% 5.94% 0.35%
===========================================================================================================================
<CAPTION>
With Sales Charge(2)
-------------------------------------------------------------------
Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
Inception* through 1/31/97 1.60% 1.39% 4.94% 0.35%
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.50%; and Class B shares reflect
the deduction of a 4.50% CDSC, which applies if shares are redeemed less
than one year from initial purchase. This CDSC declines by 0.50% the first
year after purchase and thereafter by 1.00% per year until no CDSC is
incurred. Class C shares reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
(28)
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return+
...........................................................................................................................
Without Sales Charge(1)
===========================================================================================================================
<S> <C>
Class A (Inception* through 1/31/97) 6.39%
- ---------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 1/31/97) 5.89
- ---------------------------------------------------------------------------------------------------------------------------
Class C (Inception* through 1/31/97) 5.94
- ---------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 1/31/97) 0.35
===========================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
* Inception date for Class A, B and C shares is February 5, 1996 and Class Z
shares is January 17, 1997.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
Growth of $10,000 Invested in Class A, B and C Shares of the Income Portfolio
vs. Standard & Poor's 500 Composite Stock Index, Lehman Government/Corporate
Bond Index, Salomon Brothers High Yield Market Index and Salomon Brothers
One-Year Treasury Bill Index
................................................................................
February 5, 1996 -- January 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Standard & Lehman Salomon Salomon
Poor's 500 Government/ Brothers Brothers
Composite Corporate High One-Year
Income Portfolio- Income Portfolio- Income Portfolio- Stock Bond Yield Treasury
Class A Class B Class C Index Index Index Bill Index
----------------- ----------------- ----------------- ---------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9550 9955 9990 10000 10000 10000 10000
2/96 9450 9850 9885 10093 9788 10062 10012
3/96 9448 9844 9879 10190 9706 10012 10044
4/96 9429 9820 9856 10340 9639 10009 10078
5/96 9444 9831 9867 10605 9622 10065 10120
6/96 9535 9921 9958 10646 9494 10142 10175
7/96 9482 9862 9899 10175 9473 10208 10214
8/96 9531 9909 9947 10390 9449 10313 10263
9/96 9735 10118 10156 10974 9281 10556 10332
10/96 9923 10310 10349 11277 9064 10676 10410
11/96 10155 10548 10587 12128 9231 10881 10463
12/96 10092 10478 10490 11888 9129 10967 10499
1/31/97 10160 10544 10584 12630 9118 11049 10551
</TABLE>
The above chart represents a hypothetical illustration of $10,000 invested in
Class A, B and C shares on February 5, 1996 (inception date), assuming deduction
of the maximum 4.50% sales charge at the time of investment for Class A shares,
the deduction of the maximum 4.50% CDSC for Class B shares and the deduction of
the 1.00% CDSC for Class C shares. It also assumes reinvestment of dividends and
capital gains, if any at net asset value through January 31, 1997. The Standard
& Poor's 500 Composite Stock Index is an unmanaged index composed of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the over-the-counter market. The Lehman Government/Corporate Bond
Index is a combination of publicly issued intermediate- and long-term U.S.
government bonds and corporate bonds. The Salomon Brothers High Yield Market
Index covers a significant portion of the below-investment grade U.S. corporate
bond market. The Salomon Brothers One-Year Treasury Bill Index is composed of
one 1-Year United States Treasury Bill whose return is tracked until its
maturity. These indices are unmanaged and are not subject to the same management
and trading expenses as a mutual fund. The performance of the Portfolio's other
classes may be greater or less than the performance indicated on this chart,
depending on whether greater or lesser sales charges and fees were incurred by
shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
(29)
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
Shares Value
===========================================================================================================================
<S> <C> <C>
Underlying Funds--99.0%
1,846,108 Smith Barney Aggressive Growth Fund Inc. $ 64,133,801
2,314,269 Smith Barney Appreciation Fund Inc. 31,450,911
1,589,832 Smith Barney Fundamental Value Fund Inc. 15,659,845
1,092,055 Smith Barney Growth and Income Fund 15,660,067
2,546,227 Smith Barney High Income Fund 29,332,536
2,266,899 Smith Barney Managed Growth Fund 31,011,180
2,114,013 Smith Barney Special Equities Fund 62,701,628
3,190,681 Smith Barney World Funds, Inc.--International Equity Portfolio 62,441,619
- ---------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$298,335,038) 312,391,587
===========================================================================================================================
<CAPTION>
Face
Amount Value
===========================================================================================================================
<S> <C> <C>
Repurchase Agreement--1.0%
$ 3,164,000 Chase Securities Inc., 5.498% due 2/3/97; Proceeds at maturity--$3,165,450;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 3/31/01; Market value--$3,227,298)
(Cost--$3,164,000) 3,164,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$301,499,038*) $315,555,587
===========================================================================================================================
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(30)
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
Shares Value
===========================================================================================================================
<S> <C> <C>
Underlying Funds--99.1%
1,185,020 Smith Barney Aggressive Growth Fund Inc. $ 41,167,610
2,974,949 Smith Barney Appreciation Fund Inc. 40,429,569
4,085,038 Smith Barney Fundamental Value Fund Inc. 40,237,631
2,154,119 Smith Barney Government Securities Fund 19,990,226
2,808,204 Smith Barney Growth and Income Fund 40,269,657
3,278,121 Smith Barney High Income Fund 37,763,964
1,659,290 Smith Barney Investment Grade Bond Fund 20,110,600
1,597,980 Smith Barney Managed Governments Fund Inc. 19,942,793
2,914,267 Smith Barney Managed Growth Fund 39,867,183
1,359,401 Smith Barney Special Equities Fund 40,319,853
1,660,614 Smith Barney World Funds, Inc.--Global Government Bond Portfolio 19,877,560
2,052,243 Smith Barney World Funds, Inc.--International Equity Portfolio 40,162,404
- ---------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$383,413,004) 400,139,050
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Value
===========================================================================================================================
<S> <C> <C>
Repurchase Agreement--0.9%
$ 3,810,000 Chase Securities Inc., 5.498% due 2/3/97; Proceeds at maturity--$3,811,746;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 3/31/01; Market value--$3,886,222)
(Cost--$3,810,000) 3,810,000
===========================================================================================================================
Total Investments--100% (Cost--$387,223,004*) $403,949,050
===========================================================================================================================
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(31)
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.1%
822,071 Smith Barney Appreciation Fund Inc. $ 11,171,953
660,572 Smith Barney Convertible Fund 11,077,800
4,137,957 Smith Barney Diversified Strategic Income Fund 32,979,523
1,441,135 Smith Barney Funds, Inc.--Equity Income Portfolio 22,294,370
5,199,034 Smith Barney Funds, Inc.--Short-Term U.S. Treasury Securities Portfolio 21,004,098
1,129,263 Smith Barney Fundamental Value Fund Inc. 11,123,242
1,192,389 Smith Barney Government Securities Fund 11,065,374
1,551,443 Smith Barney Growth and Income Fund 22,247,693
1,770,383 Smith Barney Managed Governments Fund Inc. 22,094,385
1,125,202 Smith Barney Premium Total Return Fund 22,166,496
738,584 Smith Barney Utilities Fund 11,041,840
1,618,813 Smith Barney World Funds, Inc.--International Balanced Portfolio 22,112,987
- ---------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$214,035,495) 220,379,761
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.9%
$ 2,063,000 Chase Securities Inc., 5.498% due 2/3/97; Proceeds at maturity--$2,063,945;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 3/31/01; Market value--$2,104,272)
(Cost--$2,063,000) 2,063,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$216,098,495*) $222,442,761
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(32)
<PAGE>
THE CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--98.5%
373,748 Smith Barney Convertible Fund $ 6,267,747
1,566,296 Smith Barney Diversified Strategic Income Fund 12,483,379
407,435 Smith Barney Funds, Inc.--Equity Income Portfolio 6,303,021
1,472,522 Smith Barney Funds, Inc.--Short-Term U.S. Treasury Securities Portfolio 5,948,988
676,408 Smith Barney Government Securities Fund 6,277,069
271,042 Smith Barney High Income Fund 3,122,407
752,761 Smith Barney Managed Governments Fund Inc. 9,394,453
318,582 Smith Barney Premium Total Return Fund 6,276,070
209,577 Smith Barney Utilities Fund 3,133,177
229,628 Smith Barney World Funds--International Balanced Portfolio 3,136,717
- ---------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$61,212,344) 62,343,028
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement--1.5%
<S> <C> <C>
$967,000 Chase Securities Inc., 5.498% due 2/3/97; Proceeds at maturity--$967,443;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 3/31/01; Market value--$986,346)
(Cost--$967,000) 967,000
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$62,179,344*) $63,310,028
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(33)
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
Shares Value
===========================================================================================================================
<S> <C> <C>
Underlying Funds--98.4%
112,434 Smith Barney Convertible Fund $ 1,885,514
943,702 Smith Barney Diversified Strategic Income Fund 7,521,305
245,202 Smith Barney Funds, Inc.--Equity Income Portfolio 3,793,275
1,817,868 Smith Barney Funds, Inc.--Short-Term U.S. Treasury Securities Portfolio 7,344,187
610,857 Smith Barney Government Securities Fund 5,668,755
326,847 Smith Barney High Income Fund 3,765,278
453,300 Smith Barney Managed Governments Fund Inc. 5,657,180
126,091 Smith Barney Utilities Fund 1,885,060
===========================================================================================================================
Total Underlying Funds (Cost--$37,142,136) 37,520,554
===========================================================================================================================
<CAPTION>
Face
Amount Value
===========================================================================================================================
Repurchase Agreement--1.6%
<S> <C> <C>
$609,000 Chase Securities Inc., 5.498% due 2/3/97; Proceeds at maturity--$609,279;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 3/31/01; Market value--$621,184)
(Cost--$609,000) 609,000
===========================================================================================================================
Total Investments--100% (Cost--$37,751,136*) $38,129,554
===========================================================================================================================
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(34)
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities January 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Assets:
Investments--Cost $301,499,038 $387,223,004 $216,098,495 $62,179,344 $37,751,136
- ---------------------------------------------------------------------------------------------------------------------------
Investments, at value $315,555,587 $403,949,050 $222,442,761 $63,310,028 $38,129,554
Cash 233,825 123 971 126 903
Receivable for Fund shares sold 1,643,598 3,189,038 -- 895,235 38,354
Receivable for securities sold -- -- 1,600,636 -- --
Receivable from manager -- -- -- 35,110 62,277
Dividends and interest receivable 484 760,300 714,766 20,216 25,023
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets 317,433,494 407,898,511 224,759,134 64,260,715 38,256,111
===========================================================================================================================
Liabilities:
Payable for securities purchased 2,292,392 3,647,741 1,490,751 1,021,888 459,884
Payable for Fund shares purchased 323,855 196,771 313,381 325,743 36,999
Accrued expenses 124,218 254,221 99,467 -- --
Dividends payable -- -- -- -- 24,679
Distribution fees payable 38,606 54,683 29,466 7,707 4,086
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities 2,779,071 4,153,416 1,933,065 1,355,338 525,648
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Assets $314,654,423 $403,745,095 $222,826,069 $62,905,377 $37,730,463
===========================================================================================================================
Net Assets:
Par value of capital shares $ 25,348 $ 32,762 $ 18,356 $ 5,290 $ 3,273
Capital paid in excess of par value 297,934,568 382,963,302 212,494,826 60,769,691 36,912,533
Undistributed (overdistributed) net
investment income 91,946 541,947 (35,195) 50,761 (5,395)
Accumulated net realized gain
on investments 2,546,012 3,481,038 4,003,816 948,951 441,634
Net unrealized appreciation
of investments 14,056,549 16,726,046 6,344,266 1,130,684 378,418
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Assets $314,654,423 $403,745,095 $222,826,069 $62,905,377 $37,730,463
===========================================================================================================================
Shares Outstanding:
Class A 12,412,308 13,069,698 7,490,061 2,561,867 1,545,691
Class B 11,377,869 17,154,346 9,220,667 2,380,393 1,544,079
Class C 1,557,244 2,537,474 1,645,411 347,342 183,305
Class Z 340 488 211 89 38
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $12.41 $12.32 $12.14 $11.90 $11.53
Class B* $12.41 $12.33 $12.14 $11.89 $11.53
Class C** $12.42 $12.33 $12.14 $11.89 $11.53
Class Z (and redemption price) $12.41 $12.32 $12.13 $11.90 $11.53
- ---------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.71% of
net asset value per share) -- -- -- $12.46 $12.07
(net asset value plus 5.26% of
net asset value per share) $13.06 $12.97 $12.78 -- --
===========================================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC (4.50%
for the Conservative Portfolio and the Income Portfolio) if shares are
redeemed within one year from initial purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
(35)
<PAGE>
Statements of Operations For the Period Ended January 31, 1997(a)
<TABLE>
<CAPTION>
High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment Income:
Income distributions from
Underlying Funds $ 4,934,888 $10,326,609 $5,726,449 $1,920,695 $1,356,405
Interest 153,227 171,500 96,676 32,220 16,322
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Income 5,088,115 10,498,109 5,823,125 1,952,915 1,372,727
===========================================================================================================================
Expenses:
Distribution fees (Note 2) 967,468 1,371,889 748,415 158,444 103,597
Other expenses (Note 2) 528,764 678,365 369,783 109,360 69,248
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,496,232 2,050,254 1,118,198 267,804 172,845
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income 3,591,883 8,447,855 4,704,927 1,685,111 1,199,882
- ---------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Net Gain
(Note 3):
Capital Gain Distributions from
Underlying Funds 3,081,396 3,809,172 4,003,816 948,951 441,634
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized
Appreciation of Investments:
Beginning of period -- -- -- -- --
End of period 14,056,549 16,726,046 6,344,266 1,130,684 378,418
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 14,056,549 16,726,046 6,344,266 1,130,684 378,418
- ---------------------------------------------------------------------------------------------------------------------------
Net Gain on Investments 17,137,945 20,535,218 10,348,082 2,079,635 820,052
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $20,729,828 $28,983,073 $15,053,009 $3,764,746 $2,019,934
===========================================================================================================================
</TABLE>
(a) For the period from February 5, 1996 (inception date) to January 31, 1997.
See Notes to Financial Statements.
(36)
<PAGE>
Statements of Changes in Net Assets For the Period Ended January 31, 1997(a)
<TABLE>
<CAPTION>
High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 3,591,883 $ 8,447,855 $ 4,704,927 $ 1,685,111 $ 1,199,882
Net realized capital gain distribution 3,081,396 3,809,172 4,003,816 948,951 441,634
Increase in net unrealized appreciation 14,056,549 16,726,046 6,344,266 1,130,684 378,418
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets
From Operations 20,729,828 28,983,073 15,053,009 3,764,746 2,019,934
===========================================================================================================================
Distributions to
Shareholders From:
Net investment income (3,499,937) (7,905,908) (4,740,122) (1,634,350) (1,205,277)
Net realized gains (535,384) (328,134) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (4,035,321) (8,234,042) (4,740,122) (1,634,350) (1,205,277)
===========================================================================================================================
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 312,840,370 393,822,423 218,875,840 65,095,637 41,434,601
Net asset value of shares issued
for reinvestment of dividends 4,014,986 8,128,066 4,542,233 1,547,780 1,026,312
Cost of shares reacquired (18,995,440) (18,954,425) (10,904,891) (5,868,436) (5,545,107)
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 297,859,916 382,996,064 212,513,182 60,774,981 36,915,806
===========================================================================================================================
Increase in Net Assets 314,554,423 403,745,095 222,826,069 62,905,377 37,730,463
Net Assets:
Beginning of period 100,000 -- -- -- --
End of period* $314,654,423 $403,745,095 $222,826,069 $62,905,377 $37,730,463
===========================================================================================================================
* Includes undistributed (overdistributed)
net investment income of: $91,946 $541,947 $(35,195) $50,761 $(5,395)
===========================================================================================================================
</TABLE>
(a) For the period from February 5, 1996 (inception date) to January 31, 1997.
See Notes to Financial Statements.
(37)
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Concert Allocation Series Inc. ("Fund"), formerly known as the
Smith Barney Concert Series Inc., is registered under the Investment Company Act
of 1940, as amended. The Fund, a Maryland corporation, is a non-diversified,
open-end management investment company and consists of the following portfolios
("Portfolios"): High Growth Portfolio, Growth Portfolio, Balanced Portfolio,
Conservative Portfolio and Income Portfolio. The Portfolios invest in other
mutual funds ("Underlying Funds") managed by Smith Barney Mutual Funds
Management Inc. ("SBMFM") or an affliliate of Smith Barney Inc.
The significant accounting policies consistently followed by the Fund are: (a)
investments in the Underlying Funds are valued at the closing net asset value
per share of each Underlying Fund on the day of valuation; (b) dividend income
is recorded on the ex-dividend date and interest income is recorded on the
accrual basis; (c) gains or losses on the sale of Underlying Funds are
calculated by using the specific identification method; (d) dividends and
distributions to shareholders are recorded on the ex-dividend date; (e) the Fund
intends to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies to make
distributions of taxable income sufficient to relieve it from substantially all
Federal income and excise taxes; (f) direct expenses are charged to each class
of each portfolio; management fees are allocated on the basis of the relative
net assets of each class; and (g) estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. Management Agreement and Other Transactions
SBMFM, a subsidiary of Smith Barney Holdings Inc. ("SBH"), is the investment
manager for the Fund. Each Portfolio pays SBMFM a monthly fee calculated at an
annual rate of 0.35% on the average daily net assets. Out of its fees, SBMFM
pays all of the expenses of the Fund, except for Rule 12b-1 Plan Distribution
fees and extraordinary expenses.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of Fund
shares. For the period ended January 31, 1997, SB received sales charges of
approximately $2.7 million on sales of the Portfolios' Class A shares.
The High Growth Portfolio, Growth Portfolio and Balanced Portfolio have a
contingent deferred sales charge ("CDSC") of 5.00% on Class B shares, which
applies if redemption occurs less than one year from initial purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. The
Conservative Portfolio and Income Portfolio have a CDSC of 4.50% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase and declines by 0.50% the first year after purchase and thereafter by
1.00% per year until no CDSC is incurred. The Portfolios' Class C shares have a
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In certain cases, Class A shares also have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase. This CDSC only applies
to those purchases of Class A shares, which when combined with current holdings
of Class A shares, equal or exceed $500,000 in the aggregate. These purchases do
not incur an initial sales charge. For the period ended January 31, 1997, CDSCs
paid to SB were approximately:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
High Growth $7,000 $ 77,000 $6,000
Growth -- 104,000 8,000
Balanced -- 32,000 6,000
Conservative 1,000 21,000 2,000
Income -- 15,000 --
- ------------------------------------------------------------------------------
</TABLE>
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to their Class A, B and C shares calculated at the annual rate of 0.25% of the
average daily net assets of each respective class. In addition, the High Growth
Portfolio, Growth Portfolio and Balanced Portfolio pay a distribution fee with
respect to their Class B and C shares calculated at the annual rate of 0.75% of
the average daily net assets of each class. The Conservative Portfolio and
Income Portfolio pay a distribution fee with respect to their Class B and C
shares calculated at the annual rates of 0.50% and 0.45%, respectively, of the
average daily net assets of each class. For the period ended January 31, 1997,
total Distribution Plan fees were as follows:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
High Growth $181,145 $ 689,309 $ 97,014
Growth 188,769 1,020,855 162,265
Balanced 102,703 541,210 104,502
Conservative 37,430 106,340 14,674
Income 22,108 73,157 8,332
- -------------------------------------------------------------------------------
</TABLE>
All officers and one Director of the Fund are employees of SB.
(38)
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. Investments
During the period ended January 31, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
===========================================================================================================================
<S> <C> <C>
High Growth $298,335,038 --
Growth 383,427,909 --
Balanced 214,142,032 --
Conservative 61,255,925 --
Income 37,170,845 --
===========================================================================================================================
</TABLE>
At January 31, 1997, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
<TABLE>
<CAPTION>
Net Unrealized
Portfolio Appreciation* Depreciation* Appreciation*
===========================================================================================================================
<S> <C> <C> <C>
High Growth $16,494,376 $(2,437,827) $14,056,549
Growth 18,887,865 (2,161,819) 16,726,046
Balanced 6,430,261 (85,995) 6,344,266
Conservative 1,130,684 -- 1,130,684
Income 378,418 -- 378,418
===========================================================================================================================
</TABLE>
*Substantially the same for Federal income tax purposes.
4. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
Government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
5. Capital Shares
At January 31, 1997, the Fund had 3,000,000,000 shares of capital stock
authorized with a par value of $0.001 per share. The Portfolios have the ability
to issue multiple classes of shares. Each share of a class represents an
identical interest in the Portfolios and has the same rights, except that each
class bears certain expenses specifically related to the distribution of its
shares.
At January 31, 1997, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C Class Z
===========================================================================================================================
<S> <C> <C> <C> <C>
High Growth $146,257,906 $133,438,054 $18,259,763 $4,193
Growth 153,051,401 200,359,714 29,578,970 5,979
Balanced 86,847,713 106,679,562 18,983,351 2,556
Conservative 29,403,921 27,373,307 3,996,700 1,053
Income 17,439,317 17,412,933 2,063,122 434
===========================================================================================================================
</TABLE>
(39)
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Period Ended January 31, 1997+
-----------------------------------------
Shares Amount
====================================================================================================================================
<S> <C> <C>
HIGH GROWTH PORTFOLIO:
Class A
Shares sold 13,124,757 $ 154,592,156
Shares issued on reinvestment 224,774 2,687,404
Shares redeemed (937,223) (11,121,654)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 12,412,308 $ 146,157,906
====================================================================================================================================
Class B
Shares sold 11,836,415 $ 138,836,232
Shares issued on reinvestment 97,776 1,166,635
Shares redeemed (556,322) (6,564,813)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 11,377,869 $ 133,438,054
====================================================================================================================================
Class C
Shares sold 1,654,072 $ 19,404,342
Shares issued on reinvestment 13,489 160,947
Shares redeemed (110,317) (1,305,526)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,557,244 $ 18,259,763
====================================================================================================================================
Class Y*
Shares sold 284 $ 3,447
Shares issued on reinvestment -- --
Shares redeemed (284) (3,447)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase -- $ --
====================================================================================================================================
Class Z**
Shares sold 340 $ 4,193
Shares issued on reinvestment -- --
Shares redeemed -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 340 $ 4,193
====================================================================================================================================
GROWTH PORTFOLIO:
Class A
Shares sold 13,495,334 $ 158,086,985
Shares issued on reinvestment 325,034 3,912,736
Shares redeemed (750,670) (8,948,320)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 13,069,698 $ 153,051,401
====================================================================================================================================
Class B
Shares sold 17,577,354 $ 205,297,381
Shares issued on reinvestment 304,841 3,665,936
Shares redeemed (727,849) (8,603,603)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 17,154,346 $ 200,359,714
====================================================================================================================================
Class C
Shares sold 2,610,438 $ 30,432,078
Shares issued on reinvestment 45,684 549,394
Shares redeemed (118,648) (1,402,502)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,537,474 $ 29,578,970
====================================================================================================================================
Class Z**
Shares sold 488 $ 5,979
Shares issued on reinvestment -- --
Shares redeemed -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 488 $ 5,979
====================================================================================================================================
</TABLE>
+ For the period from February 5, 1996 (inception date) to January 31, 1997.
* For Class Y shares, transactions are for the period from January 13, 1997
(inception date) to January 15, 1997.
** For Class Z shares, transactions are for the period from January 17, 1997
(inception date) to January 31, 1997.
(40)
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Period Ended January 31, 1997+
----------------------------------------
Shares Amount
====================================================================================================================================
<S> <C> <C>
BALANCED PORTFOLIO:
Class A
Shares sold 7,749,149 $ 89,908,388
Shares issued on reinvestment 175,557 2,069,938
Shares redeemed (434,645) (5,130,613)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 7,490,061 $ 86,847,713
====================================================================================================================================
Class B
Shares sold 9,437,519 $ 109,225,248
Shares issued on reinvestment 180,806 2,129,887
Shares redeemed (397,658) (4,675,573)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 9,220,667 $ 106,679,562
====================================================================================================================================
Class C
Shares sold 1,709,183 $ 19,739,648
Shares issued on reinvestment 29,105 342,408
Shares redeemed (92,877) (1,098,705)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,645,411 $ 18,983,351
====================================================================================================================================
Class Z*
Shares sold 211 $ 2,556
Shares issued on reinvestment -- --
Shares redeemed -- --
Net Increase 211 $ 2,556
====================================================================================================================================
CONSERVATIVE PORTFOLIO:
Class A
Shares sold 2,705,133 $ 31,087,958
Shares issued on reinvestment 70,128 813,639
Shares redeemed (213,394) (2,497,676)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,561,867 $ 29,403,921
====================================================================================================================================
Class B
Shares sold 2,565,271 $ 29,522,662
Shares issued on reinvestment 55,499 643,899
Shares redeemed (240,377) (2,793,254)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,380,393 $ 27,373,307
====================================================================================================================================
Class C
Shares sold 389,145 $ 4,483,964
Shares issued on reinvestment 7,781 90,242
Shares redeemed (49,584) (577,506)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 347,342 $ 3,996,700
====================================================================================================================================
Class Z*
Shares sold 89 $ 1,053
Shares issued on reinvestment -- --
Shares redeemed -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 89 $ 1,053
====================================================================================================================================
</TABLE>
+ For the period from February 5, 1996 (inception date) to January 31, 1997.
* For Class Z shares, transactions are for the period from January 13, 1997
(inception date) to January 15, 1997.
(41)
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Period Ended January 31, 1997+
----------------------------------------
Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME PORTFOLIO:
Class A
Shares sold 1,686,791 $ 19,048,638
Shares issued on reinvestment 46,330 526,416
Shares redeemed (187,430) (2,135,737)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,545,691 $ 17,439,317
====================================================================================================================================
Class B
Shares sold 1,777,131 $ 20,069,722
Shares issued on reinvestment 39,677 450,386
Shares redeemed (272,729) (3,107,175)
Net Increase 1,544,079 $ 17,412,933
====================================================================================================================================
Class C
Shares sold 205,441 $ 2,315,807
Shares issued on reinvestment 4,366 49,510
Shares redeemed (26,502) (302,195)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 183,305 $ 2,063,122
====================================================================================================================================
Class Z*
Shares sold 38 $ 434
Shares issued on reinvestment -- --
Shares redeemed -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 38 $ 434
====================================================================================================================================
</TABLE>
+ For the period from February 5, 1996 (inception date) to January 31, 1997.
* For Class Z shares, transactions are for the period from January 17, 1997
(inception date) to January 31, 1997.
(42)
<PAGE>
Financial Highlights
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
HIGH GROWTH PORTFOLIO Class A(1) Class B(1) Class C(1) Class Z(2)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.40 $11.40 $11.40 $12.24
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.20 0.16 0.16 0.01
Net realized and unrealized gain 1.43 1.43 1.44 0.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.63 1.59 1.60 0.17
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distribution From:
Net investment income (0.20) (0.16) (0.16) --
Net realized gains (0.42) (0.42) (0.42) --
Total Distributions (0.62) (0.58) (0.58) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.41 $12.41 $12.42 $12.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 14.50% 14.06% 14.15% 1.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $154,069 $141,241 $19,340 $4
Ratios to Average Net Assets+:
Expenses 0.60% 1.35% 1.35% 0.35%
Net investment income 2.79 2.04 2.04 3.33*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH PORTFOLIO Class A(1) Class B(1) Class C(1) Class Z(2)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.40 $11.40 $11.40 $12.18
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.33 0.23 0.24 0.02
Net realized and unrealized gain 0.92 0.94 0.93 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.25 1.17 1.17 0.14
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distribution From:
Net investment income (0.31) (0.22) (0.22) --
Net realized gains (0.02) (0.02) (0.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.24) (0.24) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.32 $12.33 $12.33 $12.32
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 11.08% 10.32% 10.32% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $161,026 $211,434 $31,279 $6
Ratios to Average Net Assets+:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.60% 1.35% 1.35% 0.35%
Net investment income 4.79 4.04 4.04 5.30*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
(2) For the period from January 17, 1997 (inception date) to January 31, 1997.
* Not annualized.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
(43)
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
BALANCED PORTFOLIO Class A(1) Class B(1) Class C(1) Class Z(2)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.40 $11.40 $11.40 $12.10
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.45 0.37 0.37 0.03
Net realized and unrealized gain 0.74 0.74 0.74 0.00**
Total Income From Operations 1.19 1.11 1.11 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distribution From:
Net investment income (0.45) (0.37) (0.37) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.37) (0.37) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.14 $12.14 $12.14 $12.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 10.64% 9.90% 9.90% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $90,938 $111,918 $19,968 $2
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.60% 1.35% 1.35% 0.35%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.88 4.14 4.14 5.39*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CONSERVATIVE PORTFOLIO Class A(1) Class B(1) Class C(1) Class Z(2)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.46 $11.46 $11.46 $11.89
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.53 0.48 0.48 0.01
Net realized and unrealized gain 0.43 0.42 0.42 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.96 0.90 0.90 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distribution From:
Net investment income (0.52) (0.47) (0.47) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.47) (0.47) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.90 $11.89 $11.89 $11.90
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 8.57% 8.03% 8.08% 0.08%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $30,478 $28,297 $4,129 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.60% 1.10% 1.05% 0.35%
Net investment income 5.66 5.16 5.21 6.15*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
(2) For the period from January 17, 1997 (inception date) to January 31, 1997.
* Not annualized.
** Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
(44)
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
INCOME PORTFOLIO Class A(1) Class B(1) Class C(1) Class Z(2)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.46 $11.46 $11.46 $11.55
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.63 0.58 0.59 0.07
Net realized and unrealized gain (loss) 0.07 0.07 0.07 (0.03)
Total Income From Operations 0.70 0.65 0.66 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distribution From:
Net investment income (0.63) (0.58) (0.59) (0.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.58) (0.59) (0.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.53 $11.53 $11.53 $11.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 6.39% 5.89% 5.94% 0.35%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $17,817 $17,800 $2,113 $0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.60% 1.10% 1.05% 0.35%
Net investment income 6.32 5.82 5.87 6.86*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
(2) For the period from January 17, 1997 (inception date) to January 31, 1997.
* Not annualized.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
(45)
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Smith Barney Concert Allocation Series Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the High Growth, Growth, Balanced,
Conservative, and Income Portfolios ("Portfolios") of the Smith Barney Concert
Allocation Series Inc. ("Fund") as of January 31, 1997, and the related
statements of operations, changes in net assets and financial highlights for the
period from February 5, 1996 (commencement of operations) to January 31, 1997.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of January 31, 1997, by
correspondence with the custodian. As to securities purchased and sold but not
received or delivered, we performed other appropriate auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
aforementioned portfolios of the Smith Barney Concert Allocation Series Inc. as
of January 31, 1997, and the results of their operations, changes in their net
assets and financial highlights for the period from February 5, 1996 to January
31, 1997, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
March 17, 1997
(46)
<PAGE>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
January 31, 1997:
* long-term capital gain distributions paid:
<TABLE>
<CAPTION>
<S> <C>
High Growth Portfolio $535,384
Growth Portfolio 328,134
</TABLE>
* the following percentages of ordinary dividends paid qualified for the
corporate dividends received deduction:
<TABLE>
<CAPTION>
<S> <C>
High Growth Portfolio 35.18%
Growth Portfolio 18.31
Balanced Portfolio 23.41
Conservative Portfolio 12.30
Income Portfolio 9.29
</TABLE>
In addition, for those states that provide an exemption to taxable income, the
Fund designates the following percentages of ordinary dividends paid as derived
from Federal Government obligations:
<TABLE>
<CAPTION>
<S> <C>
High Growth Portfolio 2.82%
Growth Portfolio 9.88
Balanced Portfolio 18.49
Conservative Portfolio 21.42
Income Portfolio 29.59
</TABLE>
(47)
<PAGE>
Directors
Walter E. Auch
Martin Brody
Stephen E. Kaufman
Armon E. Kamesar
Heath B. McLendon, Chairman
Madelon DeVoe Talley
H. John Ellis, Jr.
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Thomas B. Stiles II
Chief Investment Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
R. Jay Gerken
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
and Administrator
Smith Barney Mutual Funds
Management Inc.
Distributors
Smith Barney Inc.
PFS Distributors, Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
Smith Barney Concert Allocation
Series Inc.
388 Greenwich Street
New York, New York 10013
(48)
<PAGE>
This report is not authorized for distribution to prospective investors unless
accompanied or preceded by a current prospectus for the Fund, which contains
more complete information, including fees and expenses. Please read the
prospectus carefully before investing or sending money.
SMITH BARNEY
------------
A Member of Travelers Group [LOGO]
Member NASD, SIPC
(C) 1996 Smith Barney Inc.
FD01278 3/97
