<PAGE>
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
+ SELECT HIGH GROWTH PORTFOLIO
+ SELECT GROWTH PORTFOLIO
+ SELECT BALANCED PORTFOLIO
+ SELECT CONSERVATIVE PORTFOLIO
+ SELECT INCOME PORTFOLIO
SEMI-ANNUAL REPORT
JULY 31, 1997
INVESTMENT STRATEGIES FOR YOUR LIFE
[LOGO]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders.................................................... 1
The Concert Allocation Series Portfolios
The Select High Growth Portfolio...................................... 5
The Select Growth Portfolio........................................... 6
The Select Balanced Portfolio......................................... 7
The Select Conservative Portfolio..................................... 8
The Select Income Portfolio........................................... 9
Historical Performance.................................................... 10
Schedules of Investments.................................................. 11
Statements of Assets and Liabilities...................................... 16
Statements of Operations.................................................. 17
Statements of Changes in Net Assets....................................... 18
Notes to Financial Statements............................................. 19
Financial Highlights...................................................... 21
Directors and Officers.................................................... 22
</TABLE>
<PAGE>
Dear Shareholder:
[PHOTO]
Heath B. McLendon
CHAIRMAN
THE CONCERT ALLOCATION SERIES
[PHOTO]
Thomas B. Stiles II
INVESTMENT OFFICER
THE CONCERT ALLOCATION SERIES
We are pleased to provide the semi-annual report for the Smith Barney Concert
Allocation Series Inc. ("Concert Allocation Series") for the period ended July
31, 1997. In this report we summarize prevailing market and economic conditions
and outline the investment strategy followed by five of the ten Concert
Allocation Series Portfolios covered in this report. A detailed summary of each
Portfolio's performance and current holdings can be found in the appropriate
sections that follow.
THE PERFORMANCE OF THE CONCERT ALLOCATION SERIES
SELECT PORTFOLIOS*
TOTAL RETURNS FOR THE PERIOD ENDED 7/31/97
<TABLE>
<CAPTION>
PORTFOLIO TOTAL RETURN
- ------------------------- ---------------
<S> <C>
Select High Growth 12.50%
Select Growth 11.70
Select Balanced 10.50
Select Conservative 9.30
Select Income 8.50
</TABLE>
* THE PERFORMANCE FIGURES SHOWN ABOVE 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.
As the extended bull market in U.S. stocks continues, we remain positive on the
long-term prospects for financial assets. And while we certainly do not believe
anyone has outlawed the business cycle, we expect the positive influences that
have dominated the investment landscape to continue.
On the other hand, we have come a long, long way and many of the tenets of the
positive framework have become conventional wisdom. Valuations, especially those
of the major multinationals that dominate the popular averages, would appear to
generally reflect their franchise value and long-term growth potential. To us,
this has two implications. The first is that the rate of ascent of stock prices
is likely to slow dramatically. Second, market volatility could continue to
increase, and the rise in stock prices could be punctuated by occasional
setbacks brought about by periodic questioning of the current framework.
Fifteen years into one of the greatest bull markets in history, we think most
investors understand the potential rewards of stock investing. However, the
normal risks of investing, such as occasional market fluctuations (a condition
we expect could increase in the coming months), may still not be fully
appreciated.
1
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE BENEFITS OF
LONG-TERM INVESTING
GROWTH OF $10,000
INVESTED IN THE
STANDARD & POOR'S
500 COMPOSITE STOCK
INDEX, LEHMAN
GOVERNMENT/CORPORATE
BOND INDEX,
SALOMON BROTHERS
WORLD GOVERNMENT
BOND INDEX AND
MORGAN STANLEY
CAPITAL
INTERNATIONAL EAFE
INDEX
(JULY 31, 1987 --
JULY 31, 1997)
(UNAUDITED)
LEHMAN SALOMON BROTHERS
GOVERNMENT/CORPORATE WORLD GOVERNMENT
S&P 500 INDEX BOND INDEX BOND INDEX MSCI EAFE INDEX
<S> <C> <C> <C> <C>
Jul-87 $10,000 $10,000 $10,000 $10,000
Jan-88 8,191 10,650 10,627 9,642
Jan-89 9,832 11,225 11,315 12,395
Jan-90 11,251 12,481 11,997 12,993
Jan-91 12,193 13,857 13,117 10,701
Jan-92 14,955 15,676 14,581 10,771
Jan-93 16,534 17,491 16,029 9,700
Jan-94 18,659 19,293 17,751 13,987
Jan-95 18,756 18,693 17,312 13,401
Jan-96 25,999 22,005 20,352 15,609
Jan-97 32,845 22,531 22,103 15,956
Jul-97 40,248 23,829 23,232 18,711
</TABLE>
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX ("S&P 500") IS A
CAPITALIZATION-WEIGHTED INDEX OF 500 WIDELY HELD COMMON STOCKS. 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 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.
THESE INDICES ARE UNMANAGED AND ARE NOT SUBJECT TO THE SAME MANAGEMENT AND
TRADING EXPENSES AS A MUTUAL FUND.
THE NIRVANA ECONOMY
The domestic markets have rewarded investors with a good year's performance over
the period under review. The U.S. stock market returns were outstanding, with
returns almost equal to those for the previous twelve months. And bond market
returns, while more modest, actually exceeded last year's returns.
What drove these better than average numbers? An economy that has been described
as somewhere between perfection and nirvana. Economic growth slowed to a 3.6%
rate in the second quarter after stronger Gross Domestic Product ("GDP") growth
in the previous two quarters. Inflation was contained, with the Consumer Price
Index ("CPI") growing a mere 0.8% between January and July. And corporate
earnings continued to surprise many analysts.
U.S. MARKETS
It wasn't clear at the beginning of the reporting period that things were going
to turn out so swimmingly. The Federal Reserve Board ("Fed") raised interest
rates at its March meeting, triggering a swoon in stock and bond prices. But
shortly thereafter it became clear that the economy was slowing, so that the Fed
seemed unlikely to raise rates again in the near future.
2
<PAGE>
The Fed's move last March to increase interest rates was due to two strong
quarters of over 4% growth, in the fourth quarter of 1996 and the first quarter
of 1997. The Fed reacted at least in part to a "growth scare," a fear that the
economy was growing too quickly and that inflation might be reignited. The Fed's
previous move, however, had been to lower interest rates. In January 1996 the
Fed was reacting to a different set of economic statistics, ones which indicated
that the economy was growing too slowly. One could call this a "slowdown fear."
By skillfully navigating between growth scares and slowdown fears, the Fed has
helped engineer one of the longest postwar economic expansions. It is now more
than six years since the last economic recession.
So the U.S. economy has been nothing short of amazing. We believe that this long
economic expansion would not have been possible without the Fed's skillful
navigation; we also believe that it would not have been possible without changes
in technology and world trade.
Companies have made accelerated investments in technology over the last decade.
It now appears that these investments are finally paying off in increased
productivity. This higher productivity has not yet been fully captured in
government statistics, however, as the official numbers have a difficult time
recording the improvements in the service side of the economy. Instead, this
increased efficiency has shown up most completely in earnings reports. Companies
are surprising investors with their rates of profit growth and margin increases,
attesting to corporations' success in realizing the benefits of their technology
investments.
But the changes in world trade may be even more profound than the progress in
technology. The end of the cold war has opened up vast areas of the world. New
markets are available for the sale of goods and services. New sources of labor
are available: plentiful, educated and inexpensive. Almost every country in the
world is welcoming capital investment, including some that are still nominally
Communist governments.
These technological and trade forces have had two beneficial results: low
inflation and strong corporate profits. Inflation is low as measured by the CPI.
As noted, it ran just 0.8% over the last six months -- a 1.6% annual rate. In
fact, we believe that the CPI actually overstates inflation, perhaps by as much
as 2%. If we are right, "true" inflation was actually below zero -- so we
actually had a mild instance of deflation over the last six months.
Some have voiced fears that low inflation, let alone deflation, might prove
negative for corporate profits. This has not been the case. In the latest
quarter, over 60% of the companies in the S&P 500 reported earnings ahead of
analysts' expectations. Analysts have miscalculated the benefits of corporate
investments in technology. They have also missed the benefits of increased sales
and cheaper sources for goods and labor in the international marketplace.
Perhaps nirvana is an economic overstatement, for not everyone has shared in its
benefits. But the economy has been on a wonderful roll. And as long as the
fundamentals of reasonable growth, low inflation and strong corporate earnings
stay in place, we anticipate that the stock and bond markets will remain
attractive to long-term investors.
INTERNATIONAL MARKETS
During the reporting period the global equity markets have continued to
participate in the liquidity rally. In our view, the predominant themes at work
today in the stock markets are unprecedented corporate restructuring moves,
companies focusing on their core business strengths, and more individuals and
institutions gravitating toward stocks. These are positive long-term trends that
should support the equity markets for the foreseeable future.
One of the major issues that Europe faced during the period under review was
whether the European Monetary Union ("EMU") would continue. The debate over the
future of the EMU overlooks the austerity of governments and the forced
re-engineering of companies that together are having a beneficial effect on many
stock prices.
3
<PAGE>
Over the past six months, the Pacific Rim markets have generally been
disappointing. The slowdown of the "Tiger" economies, coupled with growing
macroeconomic imbalances and speculative attacks, has brought several market
economies to their knees. Since July 1, 1997, the Thai currency has devalued
roughly 20% which also led to lower Philippine, Indonesian and Malaysian
currencies as well. Hong Kong/China, leveraged mightily to U.S. interest rates,
has benefited from the recent bond market rally in the U.S.
Interestingly, during the first half of 1997 the Japanese market was one of the
world's strongest, rising over 20% in U.S. dollar terms, half from local market
appreciation and half from a firming of the yen against the dollar. Latin
American and other emerging markets were favorites during the reporting period
and this region is clearly recovering.
After the steady gains witnessed during 1996, the global bond market returns
were mixed during the early months of 1997. Several factors became increasingly
prominent in determining overall performance. First and most importantly, the
Fed's decision to raise official interest rates, although widely discounted,
signalled a halt to rising bond prices around the globe.
In Europe, investors generally perceived that interest rates had bottomed in the
core economies of Germany, France and the United Kingdom, although the prospect
of a shift to higher official interest rates remained remote. Moreover, in the
case of the southern European and Scandinavian economies' it seemed likely that
there was still scope for further monetary easing, given the improving inflation
outlook and the ongoing impetus towards the EMU. There was some profit-taking
across the board in many higher-yielding bond markets and currencies that was
triggered by concern that the EMU criteria for admission could not be
realistically met before the 1999 deadline.
CONCLUSION
Our goal in developing the Concert Allocation Series Select Portfolios was to
maximize reward potential and minimize risk. Our emphasis on minimizing risk
through diversification by investing in a wide range of asset classes remains
the core strategy of the Concert Allocation Series Select Portfolios.
Thank you for investing with us. We look forward to helping you reach your
financial goals through all types of market conditions.
Sincerely,
[/S/ HEATH B. MCLENDON] [/S/ THOMAS B. STILES II]
Heath B. McLendon Thomas B. Stiles II
CHAIRMAN INVESTMENT OFFICER
AUGUST 25, 1997
4
<PAGE>
THE SELECT HIGH GROWTH PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
10% 90%
</TABLE>
THE SELECT HIGH GROWTH PORTFOLIO SEEKS CAPITAL APPRECIATION BY INVESTING A HIGH
PERCENTAGE OF ITS ASSETS IN AGGRESSIVE EQUITY FUNDS.
.................................................................
THE SELECT HIGH GROWTH PORTFOLIO
The Select High Growth Portfolio seeks capital appreciation. Among the
Portfolios of the Concert Allocation Series, the Select 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.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 22.54%
Russell 2000 13.07%
MSCI EAFE 17.27%
Salomon Brothers High
Yield Market 7.58%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1997.
.................................................................
PORTFOLIO UPDATE
The last six months has seen most major stock markets turning in solid
performances with the U.S. stock market, as measured by the Standard & Poor's
500 Composite Stock Index, continuing its extended climb. While the second
quarter of 1997 was the best quarter for the U.S. stock market in more than ten
years, the performance of individual sectors, and individual stocks, varied
dramatically during the reporting period. Large capitalization, blue chip
domestic stocks that dominate the popular market averages outperformed most
other types of equities.
Stronger earnings and increased valuations have elevated many U.S. large-
capitalization stocks. Although based in the U.S., these companies have powerful
global franchises. This wider scope gives them increased opportunities both to
grow revenues -- by reaching international customers and to control expenses --
and by outsourcing production to the most efficient locales. Analysts have
consistently underestimated the ability of these large-cap companies to grow
earnings. Due to their higher earnings and increased ability to control their
destinies, investors have rewarded these companies with stepped-up valuations.
Many non-U.S. markets also performed well during the period under review and
internationally-focused funds for the most part participated in these healthy
gains. Most foreign stock markets enjoyed a strong second quarter of 1997 and
Latin America in particular advanced by roughly 22% during the second quarter.
However, most non-U.S. markets continued to lag the U.S. market.
The funds within the Select High Growth Portfolio that invest in large-cap,
mid-cap and international stocks participated in the strong returns generated by
the markets over the past six months. However, the portion of the Portfolio
investments allocated to a small-capitalization stock fund underperformed the
broader small-cap market. The allocation among the individual funds within the
Select High Growth Portfolio has remained relatively unchanged during the
reporting period.
The Concert Allocation Series Select High Growth Portfolio generated a total
return of 12.50% for the period ended July 31, 1997. The chart that appears at
the bottom of the first column shows the total return for the six months ended
July 31, 1997 for the four broad-based indices that track four of the asset
classes represented in the Portfolio. Historically, the leading asset class and
the lagging asset class have varied from year to year. We seek to generate less
volatile, relatively stable returns by keeping the asset allocation of each
Concert Allocation Series Portfolio focused on long-term investment goals.
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT 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.
5
<PAGE>
THE SELECT GROWTH PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
30% 70%
</TABLE>
THE SELECT GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING
PRIMARILY IN FUNDS CONTAINING THE ISSUES OF MORE ESTABLISHED COMPANIES.
.................................................................
THE SELECT GROWTH PORTFOLIO
The Select Growth Portfolio seeks long-term growth of capital. Among the
Portfolios of the Concert Allocation Series, the Select 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 Portfolio is also allocated to bonds to help reduce
volatility.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 22.54%
Russell 2000 13.07%
MSCI EAFE 17.27%
Lehman Government/Corporate Bond 5.76%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1997.
.................................................................
PORTFOLIO UPDATE
The last six months has seen most major stock markets turning in solid
performances with the U.S. stock market, as measured by the Standard & Poor's
500 Composite Stock Index, continuing its extended climb. While the second
quarter of 1997 was the best quarter for the U.S. stock market in more than ten
years, the performance of individual sectors, and individual stocks, varied
dramatically during the reporting period. Large-capitalization, blue-chip
domestic stocks that dominate the popular market averages outperformed most
other types of equities. While small- and mid-cap stocks generated competitive
returns during the reporting period, they still underperformed large-cap ones.
With respect to bonds, low inflation coupled with a declining federal budget
deficit provided support for the bond market. Bond investors enjoyed solid
single-digit gains that seem modest in comparison to the extended bull market in
U.S. stocks the first seven months of 1997.
Stronger earnings and increased valuations have elevated many large U.S.
capitalization stocks. Although based in the U.S., these companies have powerful
global franchises. This wider scope gives them increased opportunities to both
grow revenues -- by reaching international customers and to control expenses --
and by outsourcing production to the most efficient locales. Analysts have
consistently underestimated the ability of these large-cap companies to grow
earnings. Due to their higher earnings and increased ability to control their
destinies, investors have rewarded these companies with stepped-up valuations.
Many non-U.S. markets also performed well during the period under review and
internationally-focused funds for the most part participated in these healthy
gains. Most foreign stock markets enjoyed strong performances the first half and
Latin America in particular advanced by roughly 22% during this time. However,
most other markets continued to lag the U.S. market.
The funds within the Select Growth Portfolio that invest in large-cap, mid-cap
and international stocks participated in the solid gains from the markets over
the past six months. However, the portion of the Portfolio allocated to a small-
capitalization stock fund underperformed the broader small-cap market. The
allocation among the individual funds with the Select Growth Portfolio has
remained relatively the same during the reporting period. The Concert Allocation
Series Select Growth Portfolio posted a total return of 11.70% for the period
ended July 31, 1997. The chart that appears at the bottom of the first column
shows the total return for the six months ended July 31, 1997 for the four
broad-based indices that track four of the asset classes represented in the
Portfolio.
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT 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.
6
<PAGE>
THE SELECT BALANCED PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
50% 50%
</TABLE>
THE SELECT BALANCED PORTFOLIO SEEKS A BALANCE OF CAPITAL GROWTH AND INCOME BY
PLACING EQUAL EMPHASIS ON FUNDS INVESTING IN STOCKS AND BONDS.
.................................................................
THE SELECT BALANCED PORTFOLIO
The Select Balanced Portfolio seeks long-term growth of capital and income,
placing equal emphasis on current income and capital appreciation. The Select
Balanced Portfolio, as its name states, divides its assets roughly especially
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.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 22.54%
Lehman Government/Corporate Bond 5.76%
Salomon Brothers One-Year Treasury Bill 3.23%
Salomon Brothers World Government Bond 4.97%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1997.
.................................................................
PORTFOLIO UPDATE
The last six months has seen most major stock markets turning in solid
performances with the U.S. stock market, as measured by the Standard & Poor's
500 Composite Stock Index, continuing its extended climb. While the second
quarter of 1997 was the best quarter for the U.S. stock market in more than ten
years, the performance of individual sectors, and individual stocks, varied
dramatically during the reporting period. Large-capitalization, blue-chip
domestic stocks that dominate the popular market averages outperformed most
other types of equities.
While the first half of 1997 witnessed a continuation of the bull market in U.S.
stocks, bond investors enjoyed solid single-digit gains that seemed modest by
comparison. Low inflation coupled with a declining budget deficit provided
support for the bond market during the period under review.
The assets in the Select Balanced Portfolio are split between stock and bond
funds, with most of the Portfolio's assets invested in domestic securities. The
healthy double-digit returns from the stock funds within the Select Balanced
Portfolio were somewhat offset by the mostly single-digit returns from its
underlying bond funds. Overall, the Select Balanced Portfolio turned in a
competitive performance during the reporting period. The allocation among
individual funds within the Balanced Portfolio has remained relatively unchanged
during the past six months.
The Concert Allocation Series Select Balanced Portfolio had a total return of
10.50% for the period ended July 31, 1997. The chart that appears at the bottom
of the first column shows the total return for the six months ended July 31,
1997 for the four broad-based indices that track four of the asset classes
represented in the Portfolio. Historically, the leading asset class and the
lagging asset class have varied from year to year. We seek to generate less
volatile, relatively stable returns by keeping the asset allocation of each
Concert Allocation Series Portfolio focused on achieving long-term investment
goals.
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT 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.
7
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STOCK FUNDS BOND FUNDS
<S> <C>
30% 70%
</TABLE>
THE SELECT 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 SELECT CONSERVATIVE PORTFOLIO
The Select Conservative Portfolio primarily seeks income and secondarily,
long-term capital growth. Among the Portfolios of the Concert Allocation Series,
the Select 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.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 22.54%
Lehman Government/Corporate Bond 5.76%
Salomon Brothers High
Yield Market 7.58%
Salomon Brothers One-Year Treasury Bill 3.23%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1997.
.................................................................
PORTFOLIO UPDATE
The last six months has seen most major stock markets turning in solid
performances with the U.S. stock market, as measured by the Standard & Poor's
500 Composite Stock Index, continuing its extended climb. While the second
quarter of 1997 was the best quarter for the U.S. stock market in more than ten
years, the performance of individual sectors, and individual stocks, varied
dramatically during the reporting period. Large-capitalization, blue-chip
domestic stocks that dominate the popular market averages outperformed most
other types of equities.
With respect to bonds, low inflation coupled with a declining federal budget
deficit provided support for the bond market. Bond investors enjoyed solid
single-digit gains that seem modest in comparison to the extended bull market in
U.S. stocks the first seven months of 1997.
The funds within the Select Conservative Portfolio that invest in bonds had
modest, single-digit returns. The stock portion of the Portfolio is mostly
invested in large-cap, dividend-paying stocks and thus participated in the
healthy returns from the stock market during the reporting period. Overall, the
Select Conservative Portfolio turned in a competitive performance during the
reporting period. The allocation among individual funds within the Select
Conservative Portfolio has remained relatively unchanged during the past six
months.
The Concert Allocation Series Select Conservative Portfolio had a total return
of 9.30% for the period ended July 31, 1997. The chart that appears at the
bottom of the first column shows the total return for the six months ended July
31, 1997 for the four broad-based indices that track four of the asset classes
represented in the Portfolio. Historically, the leading asset class and the
lagging asset class have varied from year to year. We seek to generate less
volatile, relatively stable returns by keeping the asset allocation of each
Concert Allocation Series Portfolio focused on achieving long-term investment
goals.
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT 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.
8
<PAGE>
THE SELECT INCOME PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
90% 10%
</TABLE>
THE SELECT INCOME PORTFOLIO SEEKS HIGH CURRENT INCOME BY INVESTING PRIMARILY IN
BOND FUNDS.
.................................................................
THE SELECT INCOME PORTFOLIO
The Select Income Portfolio seeks high current income. Among the Portfolios of
the Concert Allocation Series, the Select 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.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 22.54%
Lehman Government/Corporate Bond 5.76%
Salomon Brothers High
Yield Market 7.58%
Salomon Brothers One-Year Treasury Bill 3.23%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1997.
.................................................................
PORTFOLIO UPDATE
While the first half of 1997 witnessed a continuation of the bull market in U.S.
stocks, bond investors enjoyed solid single-digit gains that seemed modest by
comparison. Low inflation coupled with a declining budget deficit provided
support for the bond market during the period under review.
The funds within the Select Income Portfolio that invest in bonds posted 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. The allocation among individual funds within the Select Income
Portfolio has remained relatively unchanged during the reporting period. The
Concert Allocation Series Select Income Portfolio posted a total return of
approximately 8.50% for the period ended July 31, 1997. The chart that appears
at the bottom of the first column shows the total return for the six months
ended July 31, 1997 for the four broad-based indices that track four of the
asset classes represented in the Portfolio.
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT 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.
9
<PAGE>
HISTORICAL PERFORMANCE--SELECT HIGH GROWTH PORTFOLIO
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN TOTAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION RETURN
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
2/5/97*-7/31/97 $10.00 $11.25 $0.00 $0.00 12.50%+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE--SELECT GROWTH PORTFOLIO
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN TOTAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION RETURN
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
2/5/97*-7/31/97 $10.00 $11.17 $0.00 $0.00 11.70%+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE--SELECT BALANCED PORTFOLIO
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN TOTAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION RETURN
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
2/5/97*-7/31/97 $10.00 $11.05 $0.00 $0.00 10.50%+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE--SELECT CONSERVATIVE PORTFOLIO
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN TOTAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION RETURN
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
2/5/97*-7/31/97 $10.00 $10.93 $0.00 $0.00 9.30%+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE--SELECT INCOME PORTFOLIO
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN TOTAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION RETURN
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
2/5/97*-7/31/97 $10.00 $10.85 $0.00 $0.00 8.50%+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
IT IS THE SELECT PORTFOLIOS' POLICY TO DISTRIBUTE DIVIDENDS AND CAPITAL GAINS,
IF ANY, ANNUALLY.
AVERAGE ANNUAL TOTAL RETURN+
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
2/5/97*-7/31/97 12.50% 11.70% 10.50% 9.30% 8.50%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS.
10
<PAGE>
THE SELECT HIGH GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1997
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
------------------------------------------------------------------------
UNDERLYING FUNDS--91.9%
43,082 Smith Barney Aggressive Growth Fund Inc. $1,810,740
56,650 Smith Barney Appreciation Fund Inc. 899,605
40,663 Smith Barney Fundamental Value Fund Inc. 450,148
26,893 Smith Barney Growth and Income Fund 449,383
71,575 Smith Barney High Income Fund 847,441
58,209 Smith Barney Managed Growth Fund 899,908
63,684 Smith Barney Special Equities Fund 1,804,164
81,305 Smith Barney World Funds, Inc. - International
Equity Portfolio 1,791,142
------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$8,182,311) 8,952,531
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
------------------------------------------------------------------------
REPURCHASE AGREEMENT--8.1%
$792,000 Chase Securities Inc., 5.713% due 8/1/97;
Proceeds at maturity--$792,126;
(Fully collateralized by U.S. Treasury Notes,
6.375% due 9/30/01; Market value--$807,853)
(Cost--$792,000) 792,000
------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$8,974,311*) $9,744,531
------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST IS SUBSTANTIALLY THE SAME FOR FEDERAL INCOME TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
THE SELECT GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1997
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
-------------------------------------------------------------------------
UNDERLYING FUNDS--95.9%
33,907 Smith Barney Aggressive Growth Fund Inc. $ 1,425,132
89,230 Smith Barney Appreciation Fund Inc. 1,416,980
128,092 Smith Barney Fundamental Value Fund Inc. 1,417,974
72,174 Smith Barney Government Securities Fund 705,859
84,701 Smith Barney Growth and Income Fund 1,415,356
112,729 Smith Barney High Income Fund 1,334,712
54,399 Smith Barney Investment Grade Bond Fund 708,816
54,821 Smith Barney Managed Governments Fund Inc. 703,906
91,683 Smith Barney Managed Growth Fund 1,417,427
50,181 Smith Barney Special Equities Fund 1,421,631
58,285 Smith Barney World Funds, Inc. - Global
Government Bond Portfolio 702,911
64,023 Smith Barney World Funds, Inc. - International
Equity Portfolio 1,410,432
-------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$13,106,303) 14,081,136
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
-------------------------------------------------------------------------
REPURCHASE AGREEMENT-- 4.1%
$595,000 Chase Securities Inc., 5.713% due 8/1/97;
Proceeds at maturity--$595,094;
(Fully collateralized by U.S. Treasury Notes,
6.375% due 9/30/01; Market value--$606,910)
(Cost--$595,000) 595,000
-------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$13,701,303*) $14,676,136
-------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST IS SUBSTANTIALLY THE SAME FOR FEDERAL INCOME TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
THE SELECT BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1997
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
---------------------------------------------------------------------------
UNDERLYING FUNDS--92.4%
51,510 Smith Barney Appreciation Fund Inc. $ 817,979
43,677 Smith Barney Convertible Fund 815,017
303,762 Smith Barney Diversified Strategic Income Fund 2,430,104
73,955 Smith Barney Fundamental Value Fund Inc. 818,683
89,141 Smith Barney Funds, Inc. - Equity Income
Portfolio 1,634,852
372,183 Smith Barney Funds, Inc. - Short Term U.S.
Treasury Securities Portfolio 1,522,232
83,350 Smith Barney Government Securities Fund 815,166
97,841 Smith Barney Growth and Income Fund 1,634,938
126,579 Smith Barney Managed Governments Fund Inc. 1,625,275
74,664 Smith Barney Premium Total Return Fund 1,630,666
55,318 Smith Barney Utilities Fund 860,758
113,846 Smith Barney World Funds, Inc. - International
Balanced Portfolio 1,624,583
---------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$15,406,979) 16,230,253
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
---------------------------------------------------------------------------
REPURCHASE AGREEMENT--7.6%
$1,337,000 Chase Securities Inc., 5.713% due 8/1/97;
Proceeds at maturity--$1,337,212;
(Fully collateralized by U.S. Treasury Notes,
6.375% due 9/30/01; Market value--$1,363,763)
(Cost--$1,337,000) 1,337,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$16,743,979*) $17,567,253
---------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST IS SUBSTANTIALLY THE SAME FOR FEDERAL INCOME TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1997
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
------------------------------------------------------------------------
UNDERLYING FUNDS--95.1%
16,741 Smith Barney Convertible Fund $ 312,384
77,585 Smith Barney Diversified Strategic Income Fund 620,679
17,073 Smith Barney Funds, Inc. - Equity Income
Portfolio 313,122
72,098 Smith Barney Funds, Inc. - Short-Term U.S.
Treasury Securities Portfolio 294,880
31,927 Smith Barney Government Securities Fund 312,244
13,120 Smith Barney High Income Fund 155,346
36,373 Smith Barney Managed Governments Fund Inc. 467,034
14,293 Smith Barney Premium Total Return Fund 312,162
10,024 Smith Barney Utilities Fund 155,977
10,902 Smith Barney World Funds, Inc. - International
Balanced Portfolio 155,569
------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$2,983,262) 3,099,397
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
------------------------------------------------------------------------
REPURCHASE AGREEMENT-- 4.9%
$159,000 Chase Securities Inc., 5.713% due 8/1/97;
Proceeds at maturity--$159,025;
(Fully collateralized by U.S. Treasury Notes,
6.375% due 9/30/01; Market value--$162,183)
(Cost--$159,000) 159,000
------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$3,142,262*) $3,258,397
------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST IS SUBSTANTIALLY THE SAME FOR FEDERAL INCOME TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
THE SELECT INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1997
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
-----------------------------------------------------------------------
UNDERLYING FUNDS--94.8%
4,357 Smith Barney Convertible Fund $ 81,305
40,389 Smith Barney Diversified Strategic Income Fund 323,111
8,887 Smith Barney Funds, Inc. - Equity Income
Portfolio 162,981
77,042 Smith Barney Funds, Inc. - Short-Term U.S.
Treasury Securities Portfolio 315,103
24,934 Smith Barney Government Securities Fund 243,855
13,662 Smith Barney High Income Fund 161,755
18,937 Smith Barney Managed Governments Fund Inc. 243,150
5,220 Smith Barney Utilities Fund 81,222
-----------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$1,562,759) 1,612,482
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
-----------------------------------------------------------------------
REPURCHASE AGREEMENT--5.2%
$88,000 Chase Securities Inc., 5.713% due 8/1/97;
Proceeds at maturity--$88,014;
(Fully collateralized by U.S. Treasury Notes,
6.375% due 9/30/01; Market value--$89,761)
(Cost--$88,000) 88,000
-----------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$1,650,759*) $1,700,482
-----------------------------------------------------------------------
</TABLE>
* AGGREGATE COST IS SUBSTANTIALLY THE SAME FOR FEDERAL INCOME TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JULY 31, 1997
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at cost $8,974,311 $ 13,701,303 $ 16,743,979 $3,142,262 $ 1,650,759
- -----------------------------------------------------------------------------------------------------------------
Investments, at value $9,744,531 $ 14,676,136 $ 17,567,253 $3,258,397 $ 1,700,482
Cash 691 399 75 -- --
Receivable from manager 8,362 7,048 7,192 10,457 10,698
Dividends and interest receivables 125 94 4,251 905 923
- -----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 9,753,709 14,683,677 17,578,771 3,269,759 1,712,103
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 249,446 460,285 533,056 143,599 80,051
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 249,446 460,285 533,056 143,599 80,051
- -----------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $9,504,263 $ 14,223,392 $ 17,045,715 $3,126,160 $ 1,632,052
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 845 $ 1,274 $ 1,542 $ 286 $ 150
Capital paid in excess of par value 8,715,979 13,183,774 16,080,138 2,974,995 1,564,925
Undistributed net investment income 17,219 63,511 140,761 34,744 17,254
Net unrealized appreciation of
investments 770,220 974,833 823,274 116,135 49,723
- -----------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $9,504,263 $ 14,223,392 $ 17,045,715 $3,126,160 $ 1,632,052
- -----------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING 844,933 1,273,839 1,542,328 286,063 150,429
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, PER SHARE $11.25 $11.17 $11.05 $10.93 $10.85
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE PERIOD ENDED JULY 31, 1997(A)
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income distributions from Underlying
Funds $ 16,840 $ 62,450 $ 140,498 $ 34,732 $ 17,202
Interest 5,537 8,795 9,627 1,728 892
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 22,377 71,245 150,125 36,460 18,094
- -------------------------------------------------------------------------------------------------------------------
EXPENSES:
Other expenses (Note 2) 5,158 7,734 9,364 1,716 840
- -------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 5,158 7,734 9,364 1,716 840
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 17,219 63,511 140,761 34,744 17,254
- -------------------------------------------------------------------------------------------------------------------
NET UNREALIZED GAIN (NOTE 3):
Change in Net Unrealized
Appreciation of Investments:
Beginning of period -- -- -- -- --
End of period 770,220 974,833 823,274 116,135 49,723
- -------------------------------------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED
APPRECIATION 770,220 974,833 823,274 116,135 49,723
- -------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 770,220 974,833 823,274 116,135 49,723
- -------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $787,439 $ 1,038,344 $ 964,035 $150,879 $ 66,977
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO JULY
31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE PERIOD ENDED JULY 31,
1997(A)
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 17,219 $ 63,511 $ 140,761 $ 34,744 $ 17,254
Increase in net unrealized
appreciation 770,220 974,833 823,274 116,135 49,723
- -----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 787,439 1,038,344 964,035 150,879 66,977
- -----------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 8,802,379 13,254,232 16,366,403 3,373,181 1,610,728
Cost of shares reacquired (85,555) (69,184) (284,723) (397,900) (45,653)
- -----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 8,716,824 13,185,048 16,081,680 2,975,281 1,565,075
- -----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 9,504,263 14,223,392 17,045,715 3,126,160 1,632,052
NET ASSETS:
Beginning of period -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
END OF PERIOD* $9,504,263 $ 14,223,392 $ 17,045,715 $3,126,160 $ 1,632,052
- -----------------------------------------------------------------------------------------------------------------
*INCLUDES UNDISTRIBUTED NET
INVESTMENT INCOME OF: $17,219 $63,511 $140,761 $34,744 $17,254
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO JULY
31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
...............................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Select High Growth, Select Growth, Select Balanced, Select Conservative and
Select Income Portfolios ("Portfolios") are separate investment portfolios of
the Smith Barney Concert Allocation Series Inc. ("Fund"). The Fund, a Maryland
corporation, is registered under the Investment Act of 1940, as amended, as an
open-end management investment company and consists of these portfolios and five
other separate investment portfolios: High Growth, Growth, Balanced,
Conservative and Income Portfolios. The Portfolios invest in other mutual funds
("Underlying Funds") managed by Smith Barney Mutual Funds Management Inc. or an
affiliate of Smith Barney Inc. Shares of the Portfolios are offered to separate
accounts sponsored by certain life insurance companies and qualified pension and
retirement plans. The financial statements and financial highlights for the
other portfolios are presented in a separate semi-annual report.
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-divided 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; and (f) estimates and assumptions are required
to be made regarding assets, liabilities and changes in the 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
Travelers Investment Advisor, Inc. ("TIA"), a subsidiary of Smith Barney
Holdings Inc., acts as the investment manager for the Fund. Each Portfolio pays
TIA a monthly fee calculated at an annual rate of 0.35% on the average daily net
assets. From this fee all expenses of the Fund are deducted except for
extraordinary expenses. If expenses exceed the 0.35% fee, this amount is paid on
behalf of the Fund by TIA.
All officers and one director of the Fund are employees of Smith Barney Inc.
3. INVESTMENTS
During the period ended July 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>
- -------------------------------------------------------------------
Select High Growth $ 8,182,311 --
Select Growth 13,106,303 --
Select Balanced 15,406,979 --
Select Conservative 2,983,262 --
Select Income 1,562,759 --
- -------------------------------------------------------------------
</TABLE>
At July 31, 1997, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
PORTFOLIO APPRECIATION DEPRECIATION APPRECIATION
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Select High Growth $770,220 -- $770,220
Select Growth 974,833 -- 974,833
Select Balanced 823,274 -- 823,274
Select Conservative 116,135 -- 116,135
Select Income 49,723 -- 49,723
- ----------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
...............................................................................
4. REPURCHASE AGREEMENTS
The Portfolios purchase (and their custodian takes possession of ) U.S.
government securities from banks and security dealers subject to agreements to
resell the securities to 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 lease equal to
the repurchase price.
5. CAPITAL SHARES
At July 31, 1997, the Fund had $5.5 billion shares of capital stock authorized
with a par value of $0.001 per share. Transactions in shares for each portfolio
were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, 1997(A)
<S> <C>
- -------------------------------------------------------------
SELECT HIGH GROWTH PORTFOLIO:
Shares sold 853,132
Shares redeemed (8,199)
- -------------------------------------------------------------
NET INCREASE 844,933
- -------------------------------------------------------------
SELECT GROWTH PORTFOLIO:
Shares sold 1,280,628
Shares redeemed (6,789)
- -------------------------------------------------------------
NET INCREASE 1,273,839
- -------------------------------------------------------------
SELECT BALANCED PORTFOLIO:
Shares sold 1,570,045
Shares redeemed (27,717)
- -------------------------------------------------------------
NET INCREASE 1,542,328
- -------------------------------------------------------------
SELECT CONSERVATIVE PORTFOLIO:
Shares sold 324,096
Shares redeemed (38,033)
- -------------------------------------------------------------
NET INCREASE 286,063
- -------------------------------------------------------------
SELECT INCOME PORTFOLIO:
Shares sold 154,846
Shares redeemed (4,417)
- -------------------------------------------------------------
NET INCREASE 150,429
- -------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO JULY
31, 1997.
20
<PAGE>
FINANCIAL HIGHLIGHTS
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(1) (1) (1) (1) (1)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.00 $10.00 $10.00 $10.00
- --------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income 0.02 0.05 0.09 0.12 0.11
Net realized and unrealized gain 1.23 1.12 0.96 0.81 0.74
- --------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.25 1.17 1.05 0.93 0.85
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.25 $11.17 $11.05 $10.93 $10.85
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 12.50% 11.70% 10.50% 9.30% 8.50%
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S) $9,504 $ 14,223 $17,046 $3,126 $1,632
- --------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 0.35% 0.35% 0.35% 0.35% 0.35%
Net investment income 1.15 2.82 5.17 6.96 7.06
- --------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 0% % 0 0% 0% 0%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO JULY
31, 1997 (UNAUDITED).
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED
21
<PAGE>
<TABLE>
<S> <C>
DIRECTORS INVESTMENT ADVISER
Walter E. Auch AND ADMINISTRATOR
Martin Brody Travelers Investment Adviser,
Stephen E. Kaufman Inc.
Armon E. Kamesar CUSTODIAN
Heath B. McLendon, CHAIRMAN PNC Bank, N.A.
H. John Ellis, Jr. SHAREHOLDER SERVICING AGENT
OFFICERS First Data Investor Services
Heath B. McLendon Group, Inc.
CHIEF EXECUTIVE OFFICER P.O. Box 9134
Lewis E. Daidone Boston, MA 02205-9134
SENIOR VICE PRESIDENT SMITH BARNEY CONCERT
AND TREASURER ALLOCATION SERIES INC.
Thomas B. Stiles II 388 Greenwich Street
INVESTMENT OFFICER New York, New York 10013
R. Jay Gerken
VICE PRESIDENT AND
INVESTMENT OFFICER
Thomas M. Reynolds
CONTROLLER
Christina T. Sydor
SECRETARY
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
This report is submitted for the general information of
the owner of the Smith Barney Concert Allocation Series Inc.: [LOGO]
Select High Growth, Select Growth, Select Balanced, Select
Conservative and Select Income Portfolios. It is not Member NASD, SIPC
authorized for distribution to prospective investors unless -C- 1996 Smith Barney Inc.
accompanied or preceded by an effective Prospectus for the FD01325 9/97
Fund, which contains information concerning the Fund's
investment policies, fees and expenses, as well as other
pertinent information.
</TABLE>
<PAGE>
[PHOTO]
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
o High Growth Portfolio
o Growth Portfolio
o Balanced Portfolio
o Conservative Portfolio
o Income Portfolio
SEMI-ANNUAL REPORT
July 31, 1997
Investment Strategies for Your Life
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
Table of Contents
Letter to Shareholders .................................................... 1
An Interview with Portfolio Manager R. Jay Gerken, CFA .................... 5
The Concert Allocation Series Portfolios
The High Growth Portfolio ........................................... 8
The Growth Portfolio ................................................ 13
The Balanced Portfolio .............................................. 18
The Conservative Portfolio .......................................... 23
The Income Portfolio ................................................ 28
Schedules of Investments .................................................. 33
Statements of Assets and Liabilities ...................................... 38
Statements of Operations .................................................. 39
Statements of Changes in Net Assets ....................................... 40
Notes to Financial Statements ............................................. 42
Financial Highlights ...................................................... 47
Directors and Officers .................................................... 52
<PAGE>
[PHOTO]
Heath B. McLendon
Chairman
The Concert Allocation Series
[PHOTO]
Thomas B. Stiles II
Investment Officer
The Concert Allocation Series
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Concert
Allocation Series Inc. ("Concert Allocation Series") for the period ended July
31, 1997. In this report we summarize prevailing market and economic conditions
and outline the investment strategy followed by the five of ten Concert
Allocation Series Portfolios covered in this report. A detailed summary of each
Portfolio's performance and current holdings can be found in the appropriate
sections that follow. In addition, an interview with R. Jay Gerken, CFA, a
Managing Director of Smith Barney, appears on page five.
The Performance of the Concert Allocation Series Portfolios*
Total Returns for the Six Months Ended 7/31/97
<TABLE>
<CAPTION>
Portfolio Class A** Class A***
- ---------- --------- ----------
<S> <C> <C>
High Growth 5.13% 10.64%
Growth 5.32 10.88
Balanced 4.71 10.23
Conservative 3.88 8.76
Income 2.85 7.67
</TABLE>
* Performance numbers for the other classes of shares can be found beginning on
page 10. ** These total return figures assume reinvestment of all dividends (if
any) 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.
As the extended bull market in U.S. stocks continues, we remain positive on the
long-term prospects for financial assets. And while we certainly do not believe
anyone has outlawed the business cycle, we expect the positive influences that
have dominated the investment landscape to continue.
On the other hand, we have come a long, long way, and many of the tenets of the
positive framework have become conventional wisdom. Valuations, especially those
of the major multinationals that dominate the popular averages, would appear to
generally reflect their franchise value and long-term growth potential. To us,
this has two implications. The first is that the rate of ascent of stock prices
is likely to slow dramatically. Second, market volatility could continue to
increase, and the rise in stock prices could be punctuated by occasional
setbacks brought about by periodic questioning of the current framework.
Fifteen years into one of the greatest bull markets in history, we think most
investors understand the potential rewards of stock investing. However, the
normal risks of investing, such as occasional market fluctuations (a condition
we expect could increase in the coming months), may still not be fully
appreciated.
(1)
<PAGE>
The Benefits of Long-Term Investing
Growth of $10,000 Invested in the Standard & Poor's 500 Composite Stock Index,
Lehman Government/Corporate Bond Index, Salomon Brothers World Government
Bond Index and Morgan Stanley Capital International EAFE Index
(July 31, 1987 - July 31, 1997)
(unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION> Lehman Government/ Salomon Brothers World
S&P 500 Index Corporate Bond Index Government Bond Index MSCI EAFE index
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7/87 $10,000 $10,000 $10,000 $10,000
1/88 8,191 10,650 10,627 9,642
1/89 9,832 11,225 11,315 12,395
1/90 11,251 12,481 11,997 12,993
1/91 12,193 13,857 13,117 10,701
1/92 14,955 15,676 14,581 10,771
1/93 16,534 17,491 16,029 9,700
1/94 18,659 19,293 17,751 13,987
1/95 18,756 18,693 17,312 13,401
1/96 25,999 22,005 20,352 15,609
1/97 32,845 25,531 22,103 15,956
7/97 40,248 23,829 23,232 18,711
</TABLE>
The Standard & Poor's 500 Composite Stock Index ("S&P 500") is a
capitalization-weighted index of 500 widely held common stocks. 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 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.
These indices are unmanaged and are not subject to the same management and
trading expenses as a mutual fund.
Our goal in developing the Concert Allocation Series Portfolios was to maximize
reward potential and minimize risk. Our emphasis on minimizing risk through
diversification by investing in a wide range of asset classes remains the core
strategy of the Concert Allocation Series.
The Nirvana Economy
The domestic markets have rewarded investors with a good year's performance over
the six months ended July 31, 1997. The U.S. stock market returns were
outstanding, with returns almost equal to those for the previous twelve months.
And bond market returns, while more modest, actually exceeded last year's
returns.
What drove these better than average numbers? An economy that has been described
as somewhere between perfection and nirvana. Economic growth slowed to a 3.6%
rate in the second quarter after stronger Gross Domestic Product ("GDP") growth
in the previous two quarters. Inflation was contained, with the Consumer Price
Index ("CPI") growing a mere 0.8% between January and July. And corporate
earnings continued to surprise many analysts.
U.S. Markets
It wasn't clear at the beginning of the reporting period that things were going
to turn out so swimmingly. The Federal Reserve Board ("Fed") raised interest
rates at its March meeting, triggering a swoon in stock and bond prices. But
(2)
<PAGE>
shortly thereafter it became clear that the economy was slowing, so that the Fed
seemed unlikely to raise rates again in the near future.
The Fed's move last March to increase interest rates was due to two strong
quarters of over 4% growth, in the fourth quarter of 1996 and the first quarter
of 1997. The Fed reacted at least in part to a "growth scare," a fear that the
economy was growing too quickly and that inflation might be reignited. The Fed's
previous move, however, had been to lower interest rates. In January 1996 the
Fed was reacting to a different set of economic statistics, which indicated that
the economy was growing too slowly. One could call this a "slowdown fear." By
skillfully navigating between growth scares and slowdown fears, the Fed has
helped engineer one of the longest postwar economic expansions. It is now more
than six years since the last economic recession.
So the U.S. economy has been nothing short of amazing. We believe that this long
economic expansion would not have been possible without the Fed's skillful
navigation; we also believe that it would not have been possible without changes
in technology and world trade.
Companies have made accelerated investments in technology over the last decade.
It now appears that these investments are finally paying off in increased
productivity. This higher productivity has not yet been fully captured in
government statistics, however, as the official numbers have a difficult time
recording the improvements in the service side of the economy. Instead, this
increased efficiency has shown up most completely in earnings reports. Companies
are surprising investors with their rates of profit growth and margin increases,
attesting to corporations' success in realizing the benefits of their technology
investments.
But the changes in world trade may be even more profound than the progress in
technology. The end of the cold war has opened up vast areas of the world. New
markets are available for the sale of goods and services. New sources of labor
are available: plentiful, educated and inexpensive. Almost every country in the
world is welcoming capital investment, including some that are still nominally
Communist governments.
These technological and trade forces have had two beneficial results: low
inflation and strong corporate profits. Inflation is low as measured by the CPI.
As noted, it ran just 0.8% over the last six months -- a 1.6% annual rate. In
fact, we believe that the CPI actually overstates inflation, perhaps by as much
as 2%. If we are right, "true" inflation was actually below zero -- so we
actually had a mild instance of deflation over the last six months.
Some have voiced fears that low inflation, let alone deflation, might prove
negative for corporate profits. This has not been the case. In the latest
quarter, over 60% of the companies in the S&P 500 reported earnings ahead of
analysts' expectations. Analysts have miscalculated the benefits of corporate
investments in technology. They have also missed the benefits of increased sales
and cheaper sources for goods and labor in the international marketplace.
Perhaps nirvana is an economic overstatement, for not everyone has shared in its
benefits. But the economy has been on a wonderful roll. And as long as the
fundamentals of reasonable growth, low inflation and strong corporate earnings
stay in place, we anticipate that the stock and bond markets will remain
attractive to long-term investors.
International Markets
During the reporting period, the global equity markets continued to participate
in the liquidity rally. In our view, the predominant themes at work today in the
stock markets are unprecedented corporate restructuring moves, companies
focusing on their core business strengths, and more individuals and institutions
gravitating toward stocks. These are positive long-term trends that should
support the equity markets for the foreseeable future.
(3)
<PAGE>
One of the major issues that Europe faced during the period under review was
whether the European Monetary Union ("EMU") would continue. The debate over the
future of the EMU overlooks the austerity of governments and the forced
re-engineering of companies that together are having a beneficial effect on many
stock prices.
Over the past six months, the Pacific Rim markets have generally been
disappointing. The slowdown of the "Tiger" economies, coupled with growing
macroeconomic imbalances and speculative attacks, has brought several market
economies to their knees. Since July 1, 1997, the Thai currency has devalued
roughly 20% which also led to lower Philippine, Indonesian and Malaysian
currencies as well. Hong Kong/China, leveraged mightily to U.S. interest rates,
has benefited from the recent bond market rally in the United States.
Interestingly, during the first half of 1997 the Japanese market was one of the
world's strongest, rising over 20% in U.S. dollar terms, half from local market
appreciation and half from a firming of the yen against the dollar. Latin
American and other emerging markets were favorites during the reporting period.
This region is clearly recovering.
After the steady gains witnessed during 1996, the global bond market returns
were mixed during the early months of 1997. Several factors became increasingly
prominent in determining overall performance. First and most importantly, the
Fed's decision to raise official interest rates, although widely discounted,
signalled a halt to rising bond prices around the globe.
In Europe, investors generally perceived that interest rates had bottomed in the
core economies of Germany, France and the United Kingdom, although the prospect
of a shift to higher official interest rates remained remote. Moreover, in the
case of the southern European and Scandinavian economies it seemed likely that
there was still scope for further monetary easing, given the improving inflation
outlook and the ongoing impetus towards the EMU. There was some profit-taking
across the board in many higher-yielding bond markets and currencies that was
triggered by concern that the EMU criteria for admission could not be
realistically met before the 1999 deadline.
Conclusion
Our aim with the Concert Allocation Series still is to offer investors a series
of diversified portfolios to help them fulfill their long-term investment needs
with less market turbulence. While we are positive about the long-term outlook
for financial assets in general and stocks in particular, we expect volatility
in the financial markets to increase and the benefits of diversifying across a
broad range of asset classes to become even more apparent.
Thank you for investing with us. We look forward to helping you reach your
financial goals through all types of market conditions.
Sincerely,
/s/Heath B. McLendon /s/Thomas B. Stiles II
- --------------------- -----------------------
Heath B. McLendon Thomas B. Stiles II
Chairman Investment Officer
August 25, 1997
(4)
<PAGE>
[PHOTO]
R. Jay Gerken, CFA
An Interview with Portfolio Manager 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.
- --------------------------------------------------------------------------------
Jay, could you provide some perspective on the recent performance of the
financial markets? How are events in the financial marketplace affecting the
average investor?
Jay: The big story, of course, is the historic climb of the U.S. stock market.
As most investors know, large-cap stocks have been roaring ahead. For the most
part that's very good news, because almost all of us benefit from a bull market.
But unfortunately, many investors may be getting a somewhat warped view of the
markets. The perception right now is that "as long as I own large-cap U.S.
stocks, I'm going to make a lot of money."
What would you say to investors who believe that the large-cap stock rally will
never end?
Jay: There are two misconceptions at work here. One is that large-cap U.S.
stocks will continue moving up in a straight line forever. Obviously, that isn't
going to happen. The second is that large-cap U.S. stocks will continue to
outperform all other investment options year after year. Even if the S&P 500
continues to do well--and we have a generally positive outlook at Smith
Barney--there are many other sectors that are poised to do even better. Those
sectors include small-cap stocks, international stocks and other asset classes.
In other words, most investors would be well advised to keep a portion of their
portfolio in blue-chip stocks, but not ignore the other asset classes?
Jay: That's right. Since the first quarter of 1995, investors have been rewarded
for failing to diversify, for staying with the best-performing asset
class--large-cap domestic stocks--and more or less ignoring all other options.
When investors have done this in the past, the consequences have been rather
unpleasant. We are a little concerned that the lessons of history are being lost
in stock market euphoria.
(5)
<PAGE>
How would you describe the Concert Allocation Series approach to
diversification? Could you tell us how and why Smith Barney Mutual Funds
developed the various Portfolios?
Jay: When we put the Concert Allocation Series Portfolios together, we looked at
historical returns and volatility in a number of different ways. We examined the
track records for individual mutual funds and closely analyzed broader trends in
stocks, bonds and cash. But we also looked carefully at subcategories within
those basic groups: large-cap stocks versus small-caps; domestic equities versus
international; government bonds versus corporate bonds. The Concert Allocation
Series Portfolios are designed to blend the advantages of these investments into
one convenient vehicle.
Jay, what does all this mean for investors in terms of performance and
volatility?
Jay: The Concert Allocation Series was created to help investors achieve certain
basic investment goals such as growth, income, relative safety of principal or
some combination of these three. By design, an investment in a particular
Concert Allocation Series Portfolio is likely to be less volatile than an
investment in a single asset type, a particular mutual fund or a specific
financial market. With respect to investment returns, the performance of each
Concert Allocation Series Portfolio is designed to rank somewhere in the middle
of the asset classes in which it invests, performing below the best markets but
better than the worst ones. We all dream of hitting home runs, but more often
than not, when it comes to long-term investing success, singles and doubles
usually win the game.
Do most investors understand this "slow and steady" approach?
Jay: Yes, for the most part they do. But there may be some misconceptions that
the various Concert Allocation Series Portfolios are supposed to outperform
various markets or indexes, whether that's blue-chip stocks, small-cap stocks or
global bonds. The truth is that we created the Concert Allocation Series to be
something of a risk-control vehicle. We wanted to give investors a way to
achieve steady growth with reduced volatility over the long haul. The Portfolios
should not be viewed as a means of cashing in on soaring markets or hot
securities.
(6)
<PAGE>
Jay, with U.S. stocks doing so well, aren't you tempted to rebalance the
Portfolios to take advantage of recent trends in the market?
Jay: No. That goes against our entire philosophy. We think chasing hot trends or
strong markets is a terrible way to achieve your financial goals. That's because
it's virtually impossible to predict what's going to be the best-performing
asset class with any degree of consistency. Conversely, it's equally difficult
to predict what will be the worst-performing asset class. So if you want to
avoid climbing on the rocket right before it fizzles, you've got to be
diversified. Over the long term, we believe the Concert Allocation Series
Portfolios give investors a very accessible, understandable and efficient
vehicle to do that.
Jay, some investors still believe they can predict the market. In fact,
well-known market gurus and observers continue to have large and dedicated
followings.
Jay: We don't know anyone who can consistently predict which asset class is
going to be hot and which is going to be cold. Mind you, there's no shortage of
self-proclaimed experts who claim they can do this, and they'll be happy to
share that information with you in a newsletter that costs $69.95 per year. But
if these folks are so smart, you have to wonder why they're chasing checks for
$69.95 instead of just tending to their own fortunes.
What final thoughts would you like to leave with shareholders?
Jay: We want shareholders to know that we are holding true to the principles
behind the development of the Concert Allocation Series Portfolios. These
principles are centered around three important concepts: time, reward and risk.
The Concert Allocation Series is a long-term investment that has been designed
to reduce overall market volatility. Moreover, the Concert Allocation Series
will generally achieve returns roughly in the middle of the asset classes in
which it invests. Fundamentally, each Concert Allocation Series Portfolio is a
convenient, one-step program that provides investors with the benefits of
judicious asset allocation. We think the various Portfolios are ideal vehicles
for helping investors reach their long-term investment goals.
(7)
<PAGE>
THE HIGH GROWTH PORTFOLIO
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
================================================================================
Target Asset Allocation
================================================================================
<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. Moreover, a significant
portion of the Portfolio is invested in international or emerging markets funds
in order to achieve a greater level of diversification.
================================================================================
Portfolio Update
================================================================================
The last six months has seen most major stock markets turning in solid
performances with the U.S. stock market, as measured by the Standard & Poor's
500 Composite Stock Index, continuing its extended climb. While the second
quarter of 1997 was the best quarter for the U.S. stock market in more than ten
years, the performance of individual sectors, and individual stocks, varied
dramatically during the reporting period. Large capitalization, blue chip
domestic stocks that dominate the popular market averages outperformed most
other types of equities.
Stronger earnings and increased valuations have elevated many U.S. large-
capitalization stocks. Although based in the U.S., these companies have powerful
global franchises. This wider scope gives them increased opportunities both to
grow revenues -- by reaching international customers and to control expenses --
and by outsourcing production to the most efficient locales. Analysts have
consistently underestimated the ability of these large-cap companies to grow
earnings. Due to these companies' higher earnings and increased ability to
control their destinies, investors have rewarded them with stepped-up
valuations.
Many non-U.S. markets also performed well during the period under review, and
internationally focused funds for the most part participated in these healthy
gains. Most foreign stock markets enjoyed a strong second quarter of 1997, and
Latin America in particular advanced by roughly 22% during the second quarter.
However, most non-U.S. markets continued to lag the U.S. market.
The funds within the High Growth Portfolio that invest in large-cap, mid-cap and
international stocks participated in the strong returns generated by the markets
over the past six months. However, the portion of the Portfolio investments
allocated to a small-capitalization stock fund underperformed the broader
small-cap market. The allocation among the 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 generated a
total return of approximately 10.64% for the six months ended July 31, 1997,
before the effect of any sales charges is deducted. The chart that appears on
page 12 compares the Portfolio's performance to broad-based indices that track
four of the asset classes represented in the Portfolio. Historically, the
leading asset class and the lagging asset class have varied from year to year.
We seek to generate less volatile, relatively stable returns by keeping the
asset allocation of each Concert Allocation Series Portfolio focused on
long-term investment goals.
- --------------------------------------------------------------------------------
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.
(8)
<PAGE>
The Concert Allocation Series High Growth Portfolio Breakdown (as of 7/31/97)
[THE FOLLOWING PAGE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
20% Smith Barney
Aggressive Growth Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Intel Corp.
Quantum Corp. Delaware
EVI Inc.
United Healthcare
Westinghouse Electric Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20% Smith Barney
Special Equities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Starbucks Corp.
Planet Hollywood International Inc.
Callaway Golf Co.
Gucci Group NV
Evergreen Media Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20% Smith Barney World Funds-
International Equity Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Telefonaktiebolaget LM Ericsson Class B
Novartis AG Registered Shares
Nokia OY AB Class A Shares
NTT Data Communications Systems Co.
Rohm Company Ltd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Allstate Corp.
Mobil Corp.
Xerox Corp.
General Electric Co.
Johnson & Johnson
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Growth & Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Hewlett Packard Co.
General Electric Co.
NationsBank Corp.
Monsanto Co.
Coca-Cola Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Fundamental Value Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Aluminum Co. of America
Adobe Systems
Newmont Mining Corp.
Wal-Mart Corp.
American Express Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
High Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Time Warner Inc.
Nextel Communications
First Nationwide
Indah Kiat International
Terex Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Managed Growth Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Forest Labs Inc. Class A Shares
United Healthcare
Stratus Computer
Wellpoint Health Network
Humana Inc.
- --------------------------------------------------------------------------------
(9)
<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>
7/31/97 $12.41 $13.73 $0.00 $0.00 10.64%+
- -------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.41 0.20 0.04 11.04+
- -------------------------------------------------------------------------------------------------------------------------
Total $0.20 $0.04
- -------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.41 $13.68 $0.00 $0.00 10.23%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.41 0.07 0.04 9.91+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.07 $0.04
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.42 $13.69 $0.00 $0.00 10.23%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.42 0.07 0.04 10.00+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.07 $0.04
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.41 $13.75 $0.00 $0.00 10.80%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 12.24 12.41 0.00 0.00 1.39+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.00 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
(10)
<PAGE>
Average Annual Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
----------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 10.64% 10.23% 10.23% 10.80%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 27.67 26.72 26.81 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 14.87 13.80 13.85 12.34+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Without Sales Charge(2)
----------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 5.13% 5.23% 9.23% 10.80%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 21.26 21.72 25.81 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 10.97 11.25 13.85 12.34+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
- --------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 7/31/97) 22.85%
- --------------------------------------------------------------------------------
Class B (Inception* through 7/31/97) 21.16
- --------------------------------------------------------------------------------
Class C (Inception* through 7/31/97) 21.25
- --------------------------------------------------------------------------------
Class Z (Inception* through 7/31/97) 12.34+
- --------------------------------------------------------------------------------
</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.
(11)
<PAGE>
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 -- July 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
High High High Standard & Russell MSCI Salomon Brothers
Growth Portfolio Growth Portfolio Growth Portfolio Poor's 500 2000 EAFE High Yield
Class A Shares Class B Shares Class C Shares Composite Stock Index Index Index Market Index
-------------- -------------- -------------- --------------------- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 $ 9,500 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
4/96 10,042 10,026 10,426 10,340 11,085 10,552 10,009
7/96 9,142 9,083 9,466 10,175 10,084 10,119 10,208
10/96 9,791 9,719 10,128 11,277 10,916 10,311 10,676
1/97 10,549 10,491 10,900 12,630 11,897 10,220 11,049
4/97 9,996 9,998 10,398 12,935 11,092 10,487 11,201
7/31/97 11,671 11,716 12,125 15,476 13,452 11,985 11,886
</TABLE>
The chart above 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 July 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.
(12)
<PAGE>
THE GROWTH PORTFOLIO
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
================================================================================
Target Asset Allocation
================================================================================
<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 six months has seen most major stock markets turning in solid
performances with the U.S. stock market, as measured by the Standard & Poor's
500 Composite Stock Index, continuing its extended climb. While the second
quarter of 1997 was the best quarter for the U.S. stock market in more than ten
years, the performance of individual sectors, and individual stocks, varied
dramatically during the reporting period. Large-capitalization, blue-chip
domestic stocks that dominate the popular market averages outperformed most
other types of equities. While small- and mid-cap stocks generated competitive
returns during the reporting period, they still underperformed large-cap ones.
With respect to bonds, low inflation coupled with a declining federal budget
deficit provided support for the bond market. Bond investors enjoyed solid
single-digit gains that seemed modest in comparison to the extended bull market
in U.S. stocks the first seven months of 1997.
Stronger earnings and increased valuations have elevated many large U.S.
capitalization stocks. Although based in the U.S., these companies have powerful
global franchises. This wider scope gives them increased opportunities to both
grow revenues -- by reaching international customers and to control expenses --
and by outsourcing production to the most efficient locales. Analysts have
consistently underestimated the ability of these large-cap companies to grow
earnings. Due to their higher earnings and increased ability to control their
destinies, investors have rewarded these companies with stepped-up valuations.
Many non-U.S. markets also performed well during the period under review and
internationally-focused funds for the most part participated in these healthy
gains. Most foreign stock markets enjoyed strong performances with Latin America
in particular advanced by roughly 22% during the first half of this time.
However, most other markets continued to lag the U.S. market.
The funds within the Growth Portfolio that invest in large- and mid-cap and
international stocks participated in the solid gains from the markets over the
past six months. However, the portion of the Portfolio allocated to a
small-capitalization stock fund underperformed the broader small-cap market. The
allocation among the individual funds with the Growth Portfolio has remained
relatively the same during the reporting period.
The Concert Allocation Series Growth Portfolio's Class A shares posted a total
return of approximately 10.88% for the six months ended July 31, 1997, before
the effect of any sales charges is deducted. The chart that appears on page 17
compares the Portfolio's performance to broad-based indices that track four of
the asset classes represented in the Portfolio.
- --------------------------------------------------------------------------------
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.
(13)
<PAGE>
The Concert Allocation Series Growth Portfolio Breakdown (as of 7/31/97)
[THE FOLLOWING PAGE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
10% Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Allstate Corp.
Mobil Corp.
Xerox Corp.
General Electric Co.
Johnson & Johnson
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Fundamental Value Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Aluminum Co. of America
Adobe Systems
Newmont Mining Corp.
Wal-Mart Corp.
American Express Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Managed Growth Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Forest Labs Inc. Class A
United Healthcare
Stratus Computer
Wellpoint Health Network
Humana Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney World Funds-
International Equity Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Telefonaktiebolaget LM Ericsson Class B
Novartis AG Registered Shares
Nokia OY AB Class A shares
NTT Data Communications Systems Co.
Rohm Company Ltd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Aggressive Growth Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Intel Corp.
Quantum Corp. Delaware
EVI Inc.
United Healthcare
Westinghouse Electric Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Special Equities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Starbucks Corp.
Planet Hollywood International Inc.
Callaway Golf Co.
Gucci Group NV
Evergreen Media Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Growth & Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Hewlett-Packard Co.
General Electric Co.
NationsBank Corp.
Monsanto Co.
Coca-Cola Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
High Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Time Warner Inc.
Nextel Communications
First Nationwide
Indah Kiat International
Terex Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney World Funds-
Global Government Bond Portfolio
- --------------------------------------------------------------------------------
Top 5 Country Holdings:
United States
Japan
Italy
Great Britain
Belgium
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Government Securities Fund
- --------------------------------------------------------------------------------
Sector Breakdown:
61.1% U.S. Treasuries
28.9% Mortgage-Backed Securities
10.0% Other
Credit Quality:
90% AAA-Rated-All Treasury-GNMAs
Average Maturity:
18.93 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Managed Governments Fund Inc.
- --------------------------------------------------------------------------------
Sector Breakdown:
41% U.S. Treasuries
59% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Investment Grade Bond Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
U.S. Treasury Strips
NationsBank Corp.
Time Warner Inc.
IBM Corp.
American General
- --------------------------------------------------------------------------------
(14)
<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>
7/31/97 $12.32 $13.66 $0.00 $0.00 10.88%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.32 0.31 0.02 11.08+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.31 $0.02
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.33 $13.62 $0.00 $0.00 10.46%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.33 0.22 0.02 10.32+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.22 $0.02
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.33 $13.62 $0.00 $0.00 10.46%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.33 0.22 0.02 10.32+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.22 $0.02
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.32 $13.67 $0.00 $0.00 10.96%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 12.18 12.32 0.00 0.00 1.15+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.00 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
(15)
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ---------------------------------------------------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 10.88% 10.46% 10.46% 10.96%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 26.37 25.50 25.50 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 15.06 14.24 14.24 12.23+
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Without Sales Charge(2)
----------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 5.32% 5.46% 9.46% 10.96%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 20.10 20.50 24.50 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 11.15 11.71 14.24 12.23+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
- --------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 7/31/97) 23.16%
- --------------------------------------------------------------------------------
Class B (Inception* through 7/31/97) 21.87
- --------------------------------------------------------------------------------
Class C (Inception* through 7/31/97) 21.87
- --------------------------------------------------------------------------------
Class Z (Inception* through 7/31/97) 12.23+
- --------------------------------------------------------------------------------
</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>
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 -- July 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Standard & Russell MSCI Lehman Government/
Growth Portfolio Growth Portfolio Growth Portfolio Poor's 500 2000 EAFE Corporate Bond
Class A Shares Class B Shares Class C Shares Composite Stock Index Index Index Index
-------------- -------------- -------------- --------------------- ----- ----- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 $ 9,500 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
4/96 9,775 9,772 10,172 10,340 11,085 10,552 9,639
7/96 9,258 9,225 9,613 10,175 10,084 10,119 9,473
10/96 9,875 9,833 10,242 11,277 10,916 10,311 9,064
1/97 10,552 10,532 10,932 12,630 11,897 10,220 9,118
4/97 10,270 10,310 10,710 12,935 11,092 10,487 9,160
7/31/97 11,700 11,787 12,187 15,476 13,452 11,985 9,643
</TABLE>
The chart above 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 July 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 a
composite index that 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 AS A PIE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
================================================================================
Target Asset Allocation
================================================================================
<S> <C>
Bond Fund 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 especially 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 mainly invested in funds that invest in U.S. government and
Agency securities, as well as mortgage-backed securities.
================================================================================
Portfolio Update
================================================================================
The last six months has seen most major stock markets turning in solid
performances with the U.S. stock market, as measured by the Standard & Poor's
500 Composite Stock Index, continuing its extended climb. While the second
quarter of 1997 was the best quarter for the U.S. stock market in more than ten
years, the performance of individual sectors, and individual stocks, varied
dramatically during the reporting period. Large-capitalization, blue-chip
domestic stocks that dominate the popular market averages outperformed most
other types of equities.
While the first half of 1997 witnessed a continuation of the bull market in U.S.
stocks, bond investors enjoyed solid single-digit gains that seemed modest by
comparison. Low inflation coupled with a declining budget deficit provided
support for the bond market during the period under review.
The assets in the Balanced Portfolio are split between stock and bond funds,
with most of the Portfolio's assets invested in domestic securities. The healthy
double-digit returns from the stock funds within the Balanced Portfolio were
somewhat offset by the mostly single-digit returns from its underlying bond
funds. Overall, the Balanced Portfolio turned in a competitive performance
during the reporting period. The allocation among individual funds within the
Balanced Portfolio has remained relatively unchanged during the past six months.
The Concert Allocation Series Balanced Portfolio's Class A shares had a total
return of approximately 10.23% for the six months ended July 31, 1997, before
the effect of any sales charges is deducted. The chart that appears on page 22
compares the Portfolio's performance to broad-based indices that track four of
the asset classes represented in the Portfolio.
Historically, the leading asset class and the lagging asset class have varied
from year to year. We seek to generate less volatile, relatively stable returns
by keeping the asset allocation of each Concert Allocation Series Portfolio
focused on achieving long-term investment goals.
- --------------------------------------------------------------------------------
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 7/31/97)
[THE FOLLOWING PAGE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
10% Smith Barney
Growth & Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Hewlett Packard Co.
General Electric Co.
NationsBank Corp.
Monsanto Co.
Coca-Cola Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds-
Equity Income Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Xerox Corp.
Bristol-Myers Squibb & Co.
American Home Products
Unilever NV
Bantor International
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Premium Total Return Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Student Loan Marketing Association
Loews Corp.
Lehman Brothers Holdings
Unilever NV
Bantor International
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15% Smith Barney
Diversified Strategic Income Fund
- --------------------------------------------------------------------------------
Portfolio Composition:
37.9% U.S. Government & Mortgage Securities
33.2% Mortgage-Backed Securities
4.7% U.S. Treasuries
20.0% High Yield Corporate Bonds
35.3% Foreign Government Bonds
6.8% Other
Top 5 Holdings:
Nextel Communications Inc.
Indah Kiat Internatioal Finance Co.
Clearnet Communications
Terex Corporation
Millicom International Cellular
Top 5 Countries:
United Kingdom
Germany
Canada
Spain
Australia
Average Weighted Maturity:
17.92 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Managed Governments Fund Inc.
- --------------------------------------------------------------------------------
Sector Breakdown:
41% U.S. Treasuries
59% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds-Short-Term
U.S. Treasury Securities Portfolio
- --------------------------------------------------------------------------------
Sector Breakdown:
98.25% U.S. Treasuries
1.75% Repurchases
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
4.88 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Government Securities Fund
- --------------------------------------------------------------------------------
Sector Breakdown:
61.1% U.S. Treasuries
28.9% Mortgage-Backed Securities
10.0% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Utilities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
FPL Group
American Electric Power
NIPSCO Industries
Cinergy Corp.
Texas Utilities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Convertible Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Grand Metropolitan PLC
Airborne Freight Corp.
INCO Ltd.
Tenet Healthcare Corp.
Corning Delaware LP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Fundamental Value Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Aluminum Co. of America
Adobe Systems
Newmont Mining Corp.
Wal-Mart Corp.
American Express Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Top 5 Holdings:
Allstate Corp.
Mobil Corp.
Xerox Corp.
General Electric Co.
Johnson & Johnson
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney World Funds-
International Balanced Portfolio
- --------------------------------------------------------------------------------
Top 5 Country Holdings:
Japan
United Kingdom
Italy
Netherlands
Germany
- --------------------------------------------------------------------------------
(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>
7/31/97 $12.14 $13.13 $0.24 $0.00 10.23%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.14 0.45 0.00 10.64+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.69 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.14 $13.12 $0.19 $0.00 9.77%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.14 0.37 0.00 9.90+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.56 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.14 $13.12 $0.19 $0.00 9.77%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.14 0.37 0.00 9.90+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.56 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $12.13 $13.12 $0.25 $0.00 10.38%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 12.10 12.13 0.00 0.00 0.25+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.25 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
(20)
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ---------------------------------------------------------------------------------------------------------------------------
Without Sales Charge(1)
------------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 10.23% 9.77% 9.77% 10.38%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 21.80 20.89 20.89 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 14.31 13.47 13.47 10.65+
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Without Sales Charge(2)
------------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 4.71% 4.77% 8.77% 10.38%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 15.74 15.89 19.89 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 10.43 10.92 13.47 10.65+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
- --------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 7/31/97) 21.96%
- --------------------------------------------------------------------------------
Class B (Inception* through 7/31/97) 20.64
- --------------------------------------------------------------------------------
Class C (Inception* through 7/31/97) 20.64
- --------------------------------------------------------------------------------
Class Z (Inception* through 7/31/97) 10.65+
- --------------------------------------------------------------------------------
</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.
(21)
<PAGE>
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 -- July 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Salomon Salomon
Brothers Brothers
Balanced Balanced Balanced Standard & Lehman Government/ One Year Global
Portfolio Portfolio Portfolio Poor's 500 Corporate Bond Treasury Bond
Class A Shares Class B Shares Class C Shares Composite Stock Index Index Bill Index Index
-------------- -------------- -------------- --------------------- ------------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 $ 9,500 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
4/96 9,533 9,520 9,920 10,340 9,639 10,078 9,895
7/96 9,513 9,486 9,881 10,175 9,473 10,214 10,167
10/96 10,062 10,037 10,437 11,277 9,064 10,410 10,440
1/97 10,511 10,490 10,890 12,630 9,118 10,551 10,568
4/97 10,562 10,615 11,015 12,935 9,160 10,683 10,668
7/31/97 11,587 11,664 12,064 15,476 9,643 10,892 11,108
</TABLE>
The chart above 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 July 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.
(22)
<PAGE>
THE CONSERVATIVE PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
<S> <C>
Stock Funds 30%
Bond Funds 70%
</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 six months has seen most major stock markets turning in solid
performances with the U.S. stock market, as measured by the Standard & Poor's
500 Composite Stock Index, continuing its extended climb. While the second
quarter of 1997 was the best quarter for the U.S. stock market in more than ten
years, the performance of individual sectors, and individual stocks, varied
dramatically during the reporting period. Large-capitalization, blue-chip
domestic stocks that dominate the popular market averages outperformed most
other types of equities.
With respect to bonds, low inflation coupled with a declining budget deficit
provided support for the bond market during the period under review. Bond
investors enjoyed solid single-digit gains that seemed modest by comparison to
the extended bull market in U.S. stocks in the first seven months of 1997.
The funds within the Conservative Portfolio that invest in bonds had modest,
single-digit returns. The stock portion of the Portfolio is mostly invested in
large-cap, dividend-paying stocks and thus participated in the healthy returns
from the stock market during the reporting period. Overall, the Conservative
Portfolio turned in a competitive performance during the reporting period. The
allocation among individual funds within the Conservative Portfolio has remained
relatively unchanged during the past six months.
The Concert Allocation Series Conservative Portfolio's Class A shares had a
total return of approximately 8.76% for the six months ended July 31, 1997,
before the effect of any sales charges is deducted. The chart that appears on
page 27 compares the Portfolio's performance to broad-based indices that track
four of the asset classes represented in the Portfolio.
Historically, the leading asset class and the lagging asset class have varied
from year to year. We seek to generate less volatile, relatively stable returns
by keeping the asset allocation of each Concert Allocation Series Portfolio
focused on achieving long-term investment goals.
- --------------------------------------------------------------------------------
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.
(23)
<PAGE>
The Concert Allocation Series Conservative Portfolio Breakdown (as of 7/31/97)
[THE FOLLOWING PAGE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
15% Smith Barney
Managed Governments Fund Inc.
- --------------------------------------------------------------------------------
Sector Breakdown:
41% U.S. Treasuries
59% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Maturity:
10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Convertible Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Grand Metropolitan PLC
Airborne Freight Corp.
Inco Ltd.
Tenet Healthcare Corp.
Corning Delaware LP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Premium Total Return Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Student Loan Marketing Association
Loews Corp.
Lehman Brothers Holdings
Unilever NV
Bantor International
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20% Smith Barney Diversified
Strategic Income Fund
- --------------------------------------------------------------------------------
Portfolio Composition:
37.9% U.S. Government & Mortgage
Securities
33.2% Mortgage-Backed Securities
4.7% U.S. Treasuries
20.0% High Yield Corporate Bonds
35.3% Foreign Government Bonds
6.8% Other
Top 5 Holdings:
Nextel Communications Inc.
Indah Kiat International Finance Co.
Clearnet Communications
Terex Corporation
Millicom International Cellular
Top 5 Countries:
United Kingdom
Germany
Canada
Spain
Australia
Average Weighted Maturity:
17.92 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds-
Equity Income Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Xerox Corp.
Bristol-Myers Squibb & Co.
American Home Products
Unilever NV
Bantor International
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney
Government Securities Fund
- --------------------------------------------------------------------------------
Sector Breakdown:
61.1% U.S. Treasuries
28.9% Mortgage-Backed Securities
10.0% Other
Credit Quality:
90% AAA-Rated-All Treasury-GNMAs
Average Weighted Maturity:
18.93 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds-Short-Term
U.S. Treasury Securities Portfolio
- --------------------------------------------------------------------------------
Sector Breakdown:
98.25% U.S. Treasuries
1.75% Repurchases
Credit Quality:
100% AAA-Rated
Average Maturity:
4.88 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
High Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Time Warner Inc.
Nextel Communications
First Nationwide
Indah Kiat International
Terex Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney World Funds-
International Balanced Portfolio
- --------------------------------------------------------------------------------
Top 5 Country Holdings:
Japan
United Kingdom
Italy
Netherlands
Germany
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Utilities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
FPL Group
American Electric Power
NIPSCO Industries
Cinergy Corp.
Texas Utilities
- --------------------------------------------------------------------------------
(24)
<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>
7/31/97 $11.90 $12.62 $0.30 $0.00 8.76%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.90 0.52 0.00 8.57+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.82 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $11.89 $12.61 $0.27 $0.00 8.51%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.89 0.47 0.00 8.03+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.74 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $11.89 $12.61 $0.28 $0.00 8.54%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.89 0.47 0.00 8.08+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.75 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $11.90 $12.63 $0.32 $0.00 8.98%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.89 11.90 0.00 0.00 0.08+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.32 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
(25)
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ---------------------------------------------------------------------------------------------------------------------------
Without Sales Charge(1)
-----------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 8.76% 8.51% 8.54% 8.98%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 17.96 17.41 17.47 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 11.84 11.30 11.35 9.07+
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
With Sales Charge(2)
-----------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
Six Months Ended 7/31/97+ 3.88% 4.01% 7.54% 8.98%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 12.66 12.91 16.47 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 8.43 8.73 11.35 9.07+
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative Total Return
- ---------------------------------------------------------------------------------------------------------------------------
Without Sales Charge(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 7/31/97) 18.08%
- ---------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 7/31/97) 17.23
- ---------------------------------------------------------------------------------------------------------------------------
Class C (Inception* through 7/31/97) 17.31
- ---------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 7/31/97) 9.07+
- ---------------------------------------------------------------------------------------------------------------------------
</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.
(26)
<PAGE>
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 -- July 31, 1997 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Standard & Lehman Salomon Salomon
Conservative Conservative Conservative Poor's 500 Government/ Brothers High Brothers One-
Portfolio Portfolio Portfolio Composite Corporate Yield Year Treasury
Class A Shares Class B Shares Class C Shares Stock Index Bond Index Market Index Bill Index
-------------- -------------- -------------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/15/96 $ 9,550 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
4/96 9,526 9,515 9,872 10,340 9,639 10,009 10,078
7/96 9,560 9,542 9,888 10,175 9,473 10,208 10,214
10/96 10,039 10,023 10,385 11,277 9,064 10,676 10,410
1/97 10,369 10,353 10,708 12,630 9,118 11,049 10,551
4/97 10,424 10,448 10,854 12,935 9,160 11,201 10,683
7/31/97 11,277 11,323 11,731 15,476 9,643 11,886 10,892
</TABLE>
The chart above 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 July 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.
(27)
<PAGE>
THE INCOME PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
<S> <C>
Stock Funds 10%
Bond Funds 90%
</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 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
================================================================================
While the first half of 1997 witnessed a continuation of the bull market in U.S.
stocks, bond investors enjoyed solid single-digit gains that seemed modest by
comparison. Low inflation coupled with a declining budget deficit provided
support for the bond market during the period under review.
The funds within the Income Portfolio that invest in bonds posted 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. The allocation among individual funds within the Income Portfolio
has remained relatively unchanged during the reporting period.
The Concert Allocation Series Income Portfolio's Class A shares posted a total
return of approximately 7.67% for the six months ended July 31, 1997, before the
effect of any sales charges is deducted. The chart that appears on page 32
compares the Portfolio's performance to broad-based indices that track four of
the asset classes represented in the Portfolio.
- --------------------------------------------------------------------------------
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.
(28)
<PAGE>
The Concert Allocation Series Income Portfolio Breakdown (as of 7/31/97)
[THE FOLLOWING PAGE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
20% Smith Barney Funds-Short-Term
U.S. Treasury Securities Portfolio
- --------------------------------------------------------------------------------
Sector Breakdown:
98.25% U.S. Treasuries
1.75% Repurchases
Credit Quality:
100% AAA-Rated
Average Maturity:
4.88 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15% Smith Barney
Government Securities Fund
- --------------------------------------------------------------------------------
Sector Breakdown:
61.1% U.S. Treasuries
28.9% Mortgage-Backed Securities
10.0% Other
Credit Quality:
90% AAA-Rated--All Treasury-GNMA
Average Maturity:
18.93 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15% Smith Barney
Managed Governments Fund Inc.
- --------------------------------------------------------------------------------
Sector Breakdown:
41% U.S. Treasuries
59% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Maturity:
10 Years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20% Smith Barney
Diversified Strategic Income Fund
- --------------------------------------------------------------------------------
Portfolio Composition:
37.9% U.S. Government & Mortgage
Securities
33.2% Mortgage-Backed Securities
4.7% U.S. Treasuries
20.0% High Yield Corporate Bonds
35.3% Foreign Government Bonds
6.8% Other
Top 5 Holdings:
Nextel Communications Inc.
Indah Kiat International Finance Co.
Clearnet Communications
Terex Corporation
Millicom International
Top 5 Countries:
United Kingdom
Germany
Canada
Spain
Australia
Average Weighted Maturity:
17.92 Years
- --------------------------------------------------------------------------------
5% Smith Barney
Utilities Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
FPL Group
American Electric Power
NIPSCO Industries
Cinergy Corp.
Texas Utilities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5% Smith Barney
Convertible Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Grand Metropolitan PLC
Airborne Freight Corp.
Inco Ltd.
Tenet Healthcare Corp.
Corning Delaware LP
- --------------------------------------------------------------------------------
10% Smith Barney
High Income Fund
- --------------------------------------------------------------------------------
Top 5 Holdings:
Time Warner Inc.
Nextel Communications
First Nationwide
Indah Kiat International
Terex Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10% Smith Barney Funds-
Equity Income Portfolio
- --------------------------------------------------------------------------------
Top 5 Holdings:
Xerox Corp.
Bristol-Myers Squibb & Co.
American Home Products
Unilever NV
Bantor International
- --------------------------------------------------------------------------------
(29)
<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>
7/31/97 $11.53 $12.05 $0.34 $0.00 7.67%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.53 0.63 0.00 6.39+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.97 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $11.53 $12.05 $0.31 $0.00 7.40%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.53 0.58 0.00 5.89+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.89 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $11.53 $12.05 $0.32 $0.00 7.43%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.53 0.59 0.00 5.94+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.91 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
<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>
7/31/97 $11.53 $12.06 $0.36 $0.00 7.88%+
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/97 11.55 11.53 0.06 0.00 0.35+
- ---------------------------------------------------------------------------------------------------------------------------
Total $0.42 $0.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
(30)
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
- ---------------------------------------------------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 7.67% 7.40% 7.43% 7.88%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 15.37 14.79 14.85 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 9.67 9.05 9.10 8.26+
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
With Sales Charge(2)
----------------------------------------------------------------
Class A Class B Class C Class Z
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 7/31/97+ 2.85% 2.90% 6.43% 7.88%
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/97 10.20 10.29 13.85 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Inception*-7/31/97 6.23 6.45 9.10 8.26+
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative Total Return
- ---------------------------------------------------------------------------------------------------------------------------
Without Sales Charge(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 7/31/97) 14.54%
- ---------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 7/31/97) 13.73
- ---------------------------------------------------------------------------------------------------------------------------
Class C (Inception* through 7/31/97) 13.81
- ---------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 7/31/97) 8.26+
- ---------------------------------------------------------------------------------------------------------------------------
</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 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.
(31)
<PAGE>
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 -- July 31, 1997 (unaudited)
<TABLE>
<CAPTION>
Standard & Lehman Salomon Salomon
Income Income Income Poor's 500 Government/ Brothers High Brothers One-
Portfolio Portfolio Portfolio Composite Corporate Yield Year Treasury
Class A Shares Class B Shares Class C Shares Stock Index Bond Index Market Index Bill Index
-------------- -------------- -------------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,550 10,000 10,000 10,000 10,000 10,000 10,000
4/96 9,429 9,425 9,768 10,340 9,639 10,009 10,078
7/96 9,482 9,472 9,812 10,175 9,473 10,208 10,214
10/96 9,923 9,907 10,259 11,277 9,064 10,676 10,410
1/97 10,160 10,139 10,494 12,630 9,118 11,049 10,551
4/97 10,216 10,236 10,641 12,935 9,160 11,201 10,683
7/31/97 10,939 10,973 11,381 15,476 9,643 11,886 10,892
</TABLE>
The chart above 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 July 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.
(32)
<PAGE>
THE HIGH GROWTH PORTFOLIO
Schedule of Investments (unaudited) July 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.1%
2,230,761 Smith Barney Aggressive Growth Fund Inc. $93,758,902
2,841,497 Smith Barney Appreciation Fund Inc. 45,122,973
2,048,172 Smith Barney Fundamental Value Fund Inc. 22,673,274
1,351,193 Smith Barney Growth and Income Fund 22,578,444
3,580,097 Smith Barney High Income Fund 42,388,354
2,914,693 Smith Barney Managed Growth Fund 45,061,161
3,187,747 Smith Barney Special Equities Fund 90,308,901
4,071,847 Smith Barney World Funds, Inc. - International Equity Portfolio 89,702,808
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$394,225,506) 451,594,817
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.9%
$ 4,044,000 Chase Securities Inc., 5.713% due 8/1/97; Proceeds at maturity--$4,044,642;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 9/30/01; Market value--$4,124,948)
(Cost--$4,044,000) 4,044,000
====================================================================================================================================
Total Investments--100% (Cost--$398,269,506*) $455,638,817
====================================================================================================================================
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(33)
<PAGE>
THE GROWTH PORTFOLIO
Schedule of Investments (unaudited) July 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.2%
1,424,630 Smith Barney Aggressive Growth Fund Inc. $ 59,877,238
3,601,726 Smith Barney Appreciation Fund Inc. 57,195,411
5,182,993 Smith Barney Fundamental Value Fund Inc. 57,375,736
2,912,352 Smith Barney Government Securities Fund 28,482,809
3,424,160 Smith Barney Growth and Income Fund 57,217,730
4,540,175 Smith Barney High Income Fund 53,755,679
2,201,010 Smith Barney Investment Grade Bond Fund 28,679,171
2,207,617 Smith Barney Managed Governments Fund Inc. 28,345,804
3,695,526 Smith Barney Managed Growth Fund 57,132,845
2,020,383 Smith Barney Special Equities Fund 57,237,469
2,338,484 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 28,202,120
2,580,823 Smith Barney World Funds, Inc. - International Equity Portfolio 56,855,547
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$502,739,703) 570,357,559
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.8%
$ 4,429,000 Chase Securities Inc., 5.713% due 8/1/97; Proceeds at maturity--$4,429,703;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 9/30/01; Market value--$4,517,655)
(Cost--$4,429,000) 4,429,000
====================================================================================================================================
Total Investments--100% (Cost--$507,168,703*) $574,786,559
====================================================================================================================================
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(34)
<PAGE>
THE BALANCED PORTFOLIO
Schedule of Investments (unaudited) July 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.2%
1,044,796 Smith Barney Appreciation Fund Inc. $ 16,591,361
885,650 Smith Barney Convertible Fund 16,526,238
6,156,225 Smith Barney Diversified Strategic Income Fund 49,249,800
1,808,448 Smith Barney Funds, Inc. - Equity Income Portfolio 33,166,944
7,624,000 Smith Barney Funds, Inc. - Short-Term U.S. Treasury Securities Portfolio 31,182,159
1,508,281 Smith Barney Fundamental Value Fund Inc. 16,696,670
1,689,850 Smith Barney Government Securities Fund 16,526,739
1,993,538 Smith Barney Growth and Income Fund 33,312,023
2,565,839 Smith Barney Managed Governments Fund Inc. 32,945,369
1,520,577 Smith Barney Premium Total Return Fund 33,209,407
1,067,503 Smith Barney Utilities Fund 16,610,345
2,308,546 Smith Barney World Funds, Inc. - International Balanced Portfolio 32,942,949
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$299,648,322) 328,960,004
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.8%
$ 2,556,000 Chase Securities Inc., 5.713% due 8/1/97; Proceeds at maturity--$2,556,406;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 9/30/01; Market value--$2,607,163)
(Cost--$2,556,000) 2,556,000
====================================================================================================================================
Total Investments--100% (Cost--$302,204,322*) $331,516,004
====================================================================================================================================
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(35)
<PAGE>
THE CONSERVATIVE PORTFOLIO
Schedule of Investments (unaudited) July 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.1%
472,557 Smith Barney Convertible Fund $ 8,817,920
2,190,018 Smith Barney Diversified Strategic Income Fund 17,520,145
482,097 Smith Barney Funds, Inc. - Equity Income Portfolio 8,841,655
2,034,241 Smith Barney Funds, Inc. - Short-Term U.S. Treasury Securities Portfolio 8,320,045
901,244 Smith Barney Government Securities Fund 8,814,171
370,458 Smith Barney High Income Fund 4,386,226
1,026,671 Smith Barney Managed Governments Fund Inc. 13,182,459
404,467 Smith Barney Premium Total Return Fund 8,833,554
284,592 Smith Barney Utilities Fund 4,428,256
307,787 Smith Barney World Funds, Inc. - International Balanced Portfolio 4,392,122
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$81,840,318) 87,536,553
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.9%
$824,000 Chase Securities Inc., 5.713% due 8/1/97; Proceeds at maturity--$824,131;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 9/30/01; Market value--$840,494)
(Cost--$824,000) 824,000
====================================================================================================================================
Total Investments--100% (Cost--$82,664,318*) $88,360,553
====================================================================================================================================
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(36)
<PAGE>
THE CONSERVATIVE PORTFOLIO
Schedule of Investments (unaudited) July 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.4%
133,275 Smith Barney Convertible Fund $ 2,486,918
1,235,043 Smith Barney Diversified Strategic Income Fund 9,880,340
274,463 Smith Barney Funds, Inc. - Equity Income Portfolio 5,033,644
2,350,926 Smith Barney Funds, Inc. - Short-Term U.S. Treasury Securities Portfolio 9,615,289
765,124 Smith Barney Government Securities Fund 7,482,911
418,805 Smith Barney High Income Fund 4,958,654
580,062 Smith Barney Managed Governments Fund Inc. 7,448,002
162,788 Smith Barney Utilities Fund 2,532,981
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$47,027,903) 49,438,739
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.6%
$293,000 Chase Securities Inc., 5.713% due 8/1/97; Proceeds at maturity--$293,046;
(Fully collateralized by U.S. Treasury Notes, 6.375% due 9/30/01; Market value--$298,865)
(Cost--$293,000) 293,000
====================================================================================================================================
Total Investments--100% (Cost--$47,320,903*) $49,731,739
====================================================================================================================================
</TABLE>
* Aggregate cost is substantially the same for Federal income tax purposes.
See Notes to Financial Statements.
(37)
<PAGE>
Statements of Assets and Liabilities (unaudited) July 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at cost $398,269,506 $507,168,703 $302,204,322 $82,664,318 $47,320,903
Investments, at value $455,638,817 $574,786,559 $331,516,004 $88,360,553 $49,731,739
Cash 606 492 -- 911 218
Receivable for Fund shares sold 260,566 555,644 169,839 58,532 68,337
Receivable from manager -- -- -- 17,534 65,169
Dividends and interest receivable 642 704 91,268 24,292 27,951
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 455,900,631 575,343,399 331,777,111 88,461,822 49,893,414
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased 1,602,515 1,206,589 1,003,291 391,594 136,732
Distribution fees payable 100,968 138,232 79,247 17,359 9,066
Payable for Fund shares purchased 17,085 2,100 -- -- --
Payable to bank -- -- 9,241 -- --
Accrued expenses 45,670 359,757 192,941 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,766,238 1,706,678 1,284,720 408,953 145,798
====================================================================================================================================
Total Net Assets $454,134,393 $573,636,721 $330,492,391 $88,052,869 $49,747,616
====================================================================================================================================
Net Assets:
Par value of capital shares $33,136 $42,074 $25,188 $6,980 $4,130
Capital paid in excess of par value 393,908,506 498,299,861 296,598,271 81,078,085 46,865,764
Undistributed net investment income 277,428 4,195,892 553,434 322,618 25,252
Accumulated net realized gain
on investments 2,546,012 3,481,038 4,003,816 948,951 441,634
Net unrealized appreciation
of investments 57,369,311 67,617,856 29,311,682 5,696,235 2,410,836
====================================================================================================================================
Total Net Assets $454,134,393 $573,636,721 $330,492,391 $88,052,869 $49,747,616
====================================================================================================================================
Shares Outstanding:
Class A 16,512,786 17,211,109 10,627,464 3,348,116 2,025,434
Class B 14,654,528 21,865,032 12,539,958 3,193,981 1,842,875
Class C 1,876,650 2,903,448 1,941,959 403,135 238,409
Class Z 91,823 94,546 78,391 34,944 22,854
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.73 $13.66 $13.13 $12.62 $12.05
Class B* $13.68 $13.62 $13.12 $12.61 $12.05
Class C** $13.69 $13.62 $13.12 $12.61 $12.05
Class Z (and redemption price) $13.75 $13.67 $13.12 $12.63 $12.06
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.71% of
net asset value per share) -- -- -- $13.21 $12.62
(net asset value plus 5.26% of
net asset value per share) $14.45 $14.38 $13.82 -- --
====================================================================================================================================
</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.
(38)
<PAGE>
Statements of Operations (unaudited) For the Six Months Ended July 31, 1997
- --------------------------------------------------------------------------------
<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 $1,872,573 $5,989,799 $6,630,679 $2,367,574 $1,436,259
Interest 94,479 109,463 68,392 19,479 8,749
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 1,967,052 6,099,262 6,699,071 2,387,053 1,445,008
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Distribution fees (Note 2) 1,143,631 1,624,775 931,044 186,248 106,939
Other expenses (Note 2) 637,939 820,542 473,292 129,191 74,233
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,781,570 2,445,317 1,404,336 315,439 181,172
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 185,482 3,653,945 5,294,735 2,071,614 1,263,836
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized Net Gain (Note 3):
Change in Net Unrealized
Appreciation of Investments:
Beginning of period 14,056,549 16,726,046 6,344,266 1,130,684 378,418
End of period 57,369,311 67,617,856 29,311,682 5,696,235 2,410,836
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 43,312,762 50,891,810 22,967,416 4,565,551 2,032,418
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain on Investments 43,312,762 50,891,810 22,967,416 4,565,551 2,032,418
====================================================================================================================================
Increase in Net Assets From Operations $43,498,244 $54,545,755 $28,262,151 $6,637,165 $3,296,254
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
(39)
<PAGE>
Statements of Changes in Net Assets (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended July 31, 1997
<TABLE>
<CAPTION>
High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $185,482 $3,653,945 $5,294,735 $2,071,614 $1,263,836
Increase in net unrealized appreciation 43,312,762 50,891,810 22,967,416 4,565,551 2,032,418
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets
From Operations 43,498,244 54,545,755 28,262,151 6,637,165 3,296,254
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to
Shareholders From:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income -- -- (4,706,106) (1,799,757) (1,233,189)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders -- -- (4,706,106) (1,799,757) (1,233,189)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 131,006,991 153,115,251 102,525,647 26,830,247 15,636,446
Net asset value of shares issued
for reinvestment of dividends -- -- 4,535,137 1,711,740 1,065,533
Cost of shares reacquired (35,025,265) (37,769,380) (22,950,507) (8,231,903) (6,747,891)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 95,981,726 115,345,871 84,110,277 20,310,084 9,954,088
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 139,479,970 169,891,626 107,666,322 25,147,492 12,017,153
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 314,654,423 403,745,095 222,826,069 62,905,377 37,730,463
====================================================================================================================================
End of period* $454,134,393 $573,636,721 $330,492,391 $88,052,869 $49,747,616
====================================================================================================================================
* Includes undistributed
net investment income of: $277,428 $4,195,892 $553,434 $322,618 $25,252
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
(40)
<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
- ------------------------------------------------------------------------------------------------------------------------------------
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.
(41)
<PAGE>
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The High Growth, Growth, Balanced, Conservative and Income Portfolios
("Portfolios") are separate investment portfolios of the Smith Barney Concert
Allocation Series Inc. ("Fund"), formerly known as the Smith Barney Concert
Series Inc. The Fund, a Maryland corporation, is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, open-end management
investment company and consists of these portfolios and five other separate
investment portfolios: Select High Growth, Select Growth, Select Balanced,
Select Conservative and Select Income Portfolios. The Portfolios invest in other
mutual funds ("Underlying Funds") managed by Smith Barney Mutual Funds
Management Inc. ("SBMFM") or an affiliate of Smith Barney Inc. The financial
statements and financial highlights for the other portfolios are presented in a
separate semi-annual report.
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. From this fee all expenses
of the Fund are deducted except for Rule 12b-1 Plan Distribution fees and
extraordinary expenses. If expenses exceed the 0.35% fee, this amount is paid on
behalf of the Fund by SBMFM.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of Fund
shares. For the six months ended July 31, 1997, SB received sales charges of
approximately $757,000 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. For the period ended July 31, 1997, CDSCs paid to SB were
approximately:
<TABLE>
<CAPTION>
Portfolio Class B Class C
- --------------------------------------------------------------------------------
<S> <C> <C>
High Growth $140,000 $7,000
Growth 222,000 6,000
Balanced 90,000 3,000
Conservative 14,000 --
Income 20,000 1,000
- --------------------------------------------------------------------------------
</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 six months ended July 31, 1997,
total Distribution Plan fees were as follows:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
High Growth $225,725 $812,488 $105,418
Growth 239,242 1,215,784 169,749
Balanced 139,950 679,139 111,955
Conservative 44,488 126,500 15,260
Income 25,472 73,145 8,322
- --------------------------------------------------------------------------------
</TABLE>
All officers and one Director of the Fund are employees of SB.
(42)
<PAGE>
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
3. Investments
During the six months ended July 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 $96,408,791 --
Growth 119,660,441 --
Balanced 85,719,364 --
Conservative 20,941,032 --
Income 10,150,833 --
- --------------------------------------------------------------------------------
</TABLE>
At July 31, 1997, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
Net Unrealized
Portfolio Appreciation Depreciation Appreciation
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
High Growth $60,407,133 $(3,037,822) $57,369,311
Growth 69,551,183 (1,933,327) 67,617,856
Balanced 29,311,682 -- 29,311,682
Conservative 5,696,235 -- 5,696,235
Income 2,410,836 -- 2,410,836
- --------------------------------------------------------------------------------
</TABLE>
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 July 31, 1997, the Fund had $5.5 billion 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 July 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 $196,713,384 $173,779,225 $22,275,966 $1,173,067
Growth 204,241,497 258,743,231 34,150,568 1,206,639
Balanced 125,523,106 147,483,463 22,629,394 987,496
Conservative 38,853,915 37,126,895 4,680,604 423,651
Income 23,010,013 20,882,907 2,711,051 265,923
- --------------------------------------------------------------------------------
</TABLE>
(43)
<PAGE>
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Six Months Ended July 31, 1997 Period Ended January 31, 1997+
------------------------------ ------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HIGH GROWTH PORTFOLIO:
Class A
Shares sold 5,592,969 $ 68,959,651 13,124,757 $ 154,592,156
Shares issued on reinvestment -- -- 224,774 2,687,404
Shares redeemed (1,492,491) (18,504,173) (937,223) (11,121,654)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 4,100,478 $ 50,455,478 12,412,308 $ 146,157,906
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 4,393,568 $ 54,177,283 11,836,415 $ 138,836,232
Shares issued on reinvestment -- -- 97,776 1,166,635
Shares redeemed (1,116,909) (13,836,112) (556,322) (6,564,813)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 3,276,659 $ 40,341,171 11,377,869 $ 133,438,054
- -----------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 537,707 $ 6,675,928 1,654,072 $ 19,404,342
Shares issued on reinvestment -- -- 13,489 160,947
Shares redeemed (218,301) (2,659,725) (110,317) (1,305,526)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 319,406 $ 4,016,203 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 93,449 $ 1,194,129 340 $ 4,193
Shares issued on reinvestment -- -- -- --
Shares redeemed (1,966) (25,255) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 91,483 $ 1,168,874 340 $ 4,193
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Class A
Shares sold 5,530,771 $ 68,665,095 13,495,334 $ 158,086,985
Shares issued on reinvestment -- -- 325,034 3,912,736
Shares redeemed (1,389,360) (17,474,999) (750,670) (8,948,320)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 4,141,411 $ 51,190,096 13,069,698 $ 153,051,401
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 6,088,501 $ 75,571,257 17,577,354 $ 205,297,381
Shares issued on reinvestment -- -- 304,841 3,665,936
Shares redeemed (1,377,815) (17,187,740) (727,849) (8,603,603)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 4,710,686 $ 58,383,517 17,154,346 $ 200,359,714
- -----------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 614,264 $ 7,655,172 2,610,438 $ 30,432,078
Shares issued on reinvestment -- -- 45,684 549,394
Shares redeemed (248,290) (3,083,574) (118,648) (1,402,502)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 365,974 $ 4,571,598 2,537,474 $ 29,578,970
- -----------------------------------------------------------------------------------------------------------------------------------
Class Z**
Shares sold 95,894 $ 1,223,727 488 $ 5,979
Shares issued on reinvestment -- -- -- --
Shares redeemed (1,836) (23,067) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 94,058 $ 1,200,660 488 $ 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.
(44)
<PAGE>
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Six Months Ended July 31, 1997 Period Ended January 31, 1997+
------------------------------ ------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED PORTFOLIO:
Class A
Shares sold 3,898,283 $ 48,123,808 7,749,149 $ 89,908,388
Shares issued on reinvestment 174,180 2,151,122 175,557 2,069,938
Shares redeemed (935,060) (11,599,537) (434,645) (5,130,613)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 3,137,403 $ 38,675,393 7,490,061 $ 86,847,713
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 3,939,840 $ 48,500,627 9,437,519 $ 109,225,248
Shares issued on reinvestment 168,357 2,078,431 180,806 2,129,887
Shares redeemed (788,906) (9,775,157) (397,658) (4,675,573)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 3,319,291 $ 40,803,901 9,220,667 $ 106,679,562
- -----------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 397,836 $ 4,902,860 1,709,183 $ 19,739,648
Shares issued on reinvestment 24,245 299,045 29,105 342,408
Shares redeemed (125,533) (1,555,862) (92,877) (1,098,705)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 296,548 $ 3,646,043 1,645,411 $ 18,983,351
- -----------------------------------------------------------------------------------------------------------------------------------
Class Z*
Shares sold 79,342 $ 998,352 211 $ 2,556
Shares issued on reinvestment 520 6,539 -- --
Shares redeemed (1,682) (19,951) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 78,180 $ 984,940 211 $ 2,556
- -----------------------------------------------------------------------------------------------------------------------------------
CONSERVATIVE PORTFOLIO:
Class A
Shares sold 1,125,373 $ 13,540,132 2,705,133 $ 31,087,958
Shares issued on reinvestment 73,783 884,697 70,128 813,639
Shares redeemed (412,907) (4,974,835) (213,394) (2,497,676)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 786,249 $ 9,449,994 2,561,867 $ 29,403,921
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 967,063 $ 11,610,951 2,565,271 $ 29,522,662
Shares issued on reinvestment 60,854 730,011 55,499 643,899
Shares redeemed (214,329) (2,587,374) (240,377) (2,793,254)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 813,588 $ 9,753,588 2,380,393 $ 27,373,307
- -----------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 95,215 $ 1,158,018 389,145 $ 4,483,964
Shares issued on reinvestment 7,716 92,415 7,781 90,242
Shares redeemed (47,138) (566,529) (49,584) (577,506)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 55,793 $ 683,904 347,342 $ 3,996,700
- -----------------------------------------------------------------------------------------------------------------------------------
Class Z*
Shares sold 42,793 $ 521,146 89 $ 1,053
Shares issued on reinvestment 377 4,617 -- --
Shares redeemed (8,315) (103,165) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 34,855 $ 422,598 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 17, 1997
(inception date) to January 31, 1997.
(45)
<PAGE>
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Six Months Ended July 31, 1997 Period Ended January 31, 1997+
------------------------------ ------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME PORTFOLIO:
Class A
Shares sold 769,980 $ 8,947,356 1,686,791 $ 19,048,638
Shares issued on reinvestment 50,165 581,087 46,330 526,416
Shares redeemed (340,402) (3,957,747) (187,430) (2,135,737)
Net Increase 479,743 $ 5,570,696 1,545,691 $ 17,439,317
- ------------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 479,567 $ 5,568,907 1,777,131 $ 20,069,722
Shares issued on reinvestment 37,827 438,067 39,677 450,386
Shares redeemed (218,598) (2,537,000) (272,729) (3,107,175)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 298,796 $ 3,469,974 1,544,079 $ 17,412,933
- ------------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 72,952 $ 854,044 205,441 $ 2,315,807
Shares issued on reinvestment 3,557 41,134 4,366 49,510
Shares redeemed (21,405) (247,249) (26,502) (302,195)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 55,104 $ 647,929 183,305 $ 2,063,122
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z*
Shares sold 22,863 $ 266,139 38 $ 434
Shares issued on reinvestment 451 5,245
Shares redeemed (498) (5,895)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 22,816 $ 265,489 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.
(46)
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------- ----------------------------
HIGH GROWTH PORTFOLIO 1997(1) 1997(2) 1997(1) 1997(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.41 $11.40 $12.41 $11.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss) 0.03 0.20 (0.02) 0.08
Net realized and unrealized gain 1.29 1.05 1.29 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.32 1.25 1.27 1.12
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.20) -- (0.07)
Net realized gains -- (0.04) -- (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.24) -- (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.73 $12.41 $13.68 $12.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 10.64% 11.04% 10.23% 9.91%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $226,715 $154,069 $200,472 $141,241
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.60% 0.60% 1.35% 1.35%
Net investment income 0.48 2.79 (0.27) 2.04
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
<CAPTION>
Class C Shares Class Z Shares
---------------------------- ---------------------------
1997(1) 1997(2) 1997(1) 1997(3)
==================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.42 $11.40 $12.41 $12.24
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss) (0.02) 0.08 0.05 0.01
Net realized and unrealized gain 1.29 1.05 1.29 0.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.27 1.13 1.34 0.17
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income -- (0.07) -- --
Net realized gains -- (0.04) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.11) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.69 $12.42 $13.75 $12.41
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return++ 10.23% 10.00% 10.80% 1.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $25,684 $19,340 $1,263 $4
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.35% 1.35% 0.35% 0.35%
Net investment income (loss) (0.27) 2.04 0.73 3.33*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) 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.
(47)
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------- -------------------------
GROWTH PORTFOLIO 1997(1) 1997(2) 1997(1) 1997(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.32 $11.40 $12.33 $11.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.11 0.33 0.07 0.23
Net realized and unrealized gain 1.23 0.92 1.22 0.94
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.34 1.25 1.29 1.17
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.31) -- (0.22)
Net realized gains -- (0.02) -- (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.33) -- (0.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.66 $12.32 $13.62 $12.33
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 10.88% 11.08% 10.46% 10.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $235,108 $161,026 $297,701 $211,434
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.60% 0.60% 1.35% 1.35%
Net investment income 2.00 4.79 1.25 4.04
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
<CAPTION>
Class C Shares Class Z Shares
-------------------------- ------------------------
1997(1) 1997(2) 1997(1) 1997(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.33 $11.40 $12.32 $12.18
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.07 0.24 0.15 0.02
Net realized and unrealized gain 1.22 0.93 1.20 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.29 1.17 1.35 0.14
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.22) -- --
Net realized gains -- (0.02) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions -- (0.24) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.62 $12.33 $13.67 $12.32
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 10.46% 10.32% 10.96% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $39,536 $31,279 $1,292 $6
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.35% 1.35% 0.35% 0.35%
Net investment income 1.25 4.04 2.25 5.30*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) 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.
(48)
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------- -------------------------
BALANCED PORTFOLIO 1997(1) 1997(2) 1997(1) 1997(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.14 $11.40 $12.14 $11.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.26 0.45 0.22 0.37
Net realized and unrealized gain 0.97 0.74 0.95 0.74
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.23 1.19 1.17 1.11
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.24) (0.45) (0.19) (0.37)
Net realized gains -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.24) (0.45) (0.19) (0.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.13 $12.14 $13.12 $12.14
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 10.23% 10.64% 9.77% 9.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $139,493 $90,938 $164,500 $111,918
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.60% 0.60% 1.35% 1.35%
Net investment income 4.34 4.88 3.60 4.14
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
<CAPTION>
Class C Shares Class Z Shares
---------------------------- --------------------------
1997(1) 1997(2) 1997(1) 1997(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.14 $11.40 $12.13 $12.10
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.22 0.37 0.25 0.00**
Net realized and unrealized gain 0.95 0.74 0.99 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.17 1.11 1.24 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.19) (0.37) (0.25) --
Net realized gains -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.19) (0.37) (0.25) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.12 $12.14 $13.12 $12.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 9.77% 9.90% 10.38% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $25,471 $19,968 $1,028 $2
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.35% 1.35% 0.35% 0.35%
Net investment income 3.60 4.14 4.60 5.39*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) 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.
(49)
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------- -------------------------
CONSERVATIVE PORTFOLIO 1997(1) 1997(2) 1997(1) 1997(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.90 $11.46 $11.89 $11.46
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.34 0.53 0.31 0.48
Net realized and unrealized gain 0.68 0.43 0.68 0.42
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.02 0.96 0.99 0.90
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.30) (0.52) (0.27) (0.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.52) (0.27) (0.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.62 $11.90 $12.61 $11.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 8.76% 8.57% 8.51% 8.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $42,255 $30,478 $40,274 $28,297
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.60% 0.60% 1.10% 1.10%
Net investment income 5.85 5.66 5.35 5.16
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
<CAPTION>
Class C Shares Class Z Shares
---------------------------- -------------------------
1997(1) 1997(2) 1997(1) 1997(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.89 $11.46 $11.90 $11.89
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.32 0.48 0.37 0.01
Net realized and unrealized gain 0.68 0.42 0.68 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.00 0.90 1.05 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.47) (0.32) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.28) (0.47) (0.32) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.61 $11.89 $12.63 $11.90
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 8.54% 8.08% 8.98% 0.08%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $5,083 $4,129 $441 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.05% 1.05% 0.35% 0.35%
Net investment income 5.40 5.21 6.10 6.15*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) 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.
(50)
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------- -------------------------
INCOME PORTFOLIO 1997(1) 1997(2) 1997(1) 1997(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.53 $11.46 $11.53 $11.46
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.35 0.63 0.32 0.58
Net realized and unrealized gain 0.51 0.07 0.51 0.07
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.86 0.70 0.83 0.65
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.63) (0.31) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.63) (0.31) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.05 $11.53 $12.05 $11.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 7.67% 6.39% 7.40% 5.89%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $24,399 $17,817 $22,201 $17,800
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.60% 0.60% 1.10% 1.10%
Net investment income 6.20 6.32 5.70 5.82
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
<CAPTION>
Class C Shares Class Z Shares
------------------------- ------------------------
1997(1) 1997(2) 1997(1) 1997(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.53 $11.46 $11.53 $11.55
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.33 0.59 0.38 0.07
Net realized and unrealized gain (loss) 0.51 0.07 0.51 (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.84 0.66 0.89 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.59) (0.36) (0.06)
Total Distributions (0.32) (0.59) (0.36) (0.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.05 $11.53 $12.06 $11.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return++ 7.43% 5.94% 7.88% 0.35%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $2,872 $2,113 $276 $0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.05% 1.05% 0.35% 0.35%
Net investment income 5.75 5.87 6.45 6.86*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2)For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) 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.
(51)
<PAGE>
Directors Investment Manager
Walter E. Auch Smith Barney Mutual Funds
Martin Brody Management Inc.
Stephen E. Kaufman
Armon E. Kamesar
Heath B. McLendon, Chairman
H. John Ellis, Jr. Distributors
Smith Barney Inc.
PFS Distributors, Inc.
Officers
Heath B. McLendon
Chief Executive Officer Custodian
PNC Bank, N.A.
Lewis E. Daidone
Senior Vice President
and Treasurer
Shareholder Servicing Agent
Thomas B. Stiles II First Data Investor Services Group, Inc.
Investment Officer P.O. Box 9134
Boston, MA 02205-9134
R. Jay Gerken
Vice President and
Investment Officer
Smith Barney Concert Allocation Series Inc.
Thomas M. Reynolds 388 Greenwich Street
Controller New York, New York 10013
Christina T. Sydor
Secretary
(52)
<PAGE>
SMITHBARNEY
This report is for the information of -----------
shareholders of Smith Barney Concert A Member of TravelersGroup[LOGO]
Allocation Series Inc., but it may also be Member NASD, SIPC
used as sales literature when preceded or (C) 1996 Smith Barney Inc.
accompanied by the current prospectus, which FD01324 9/97
gives details about charges, expenses,
investment objectives and operating policies
of the Fund. If used as sales material after
September 30, 1997, this report must be
accompanied by performance for the most
recently completed calendar quarter.
