<PAGE>
[PHOTO] SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
- SELECT HIGH GROWTH PORTFOLIO
[PHOTO] - SELECT GROWTH PORTFOLIO
- SELECT BALANCED PORTFOLIO
- SELECT CONSERVATIVE PORTFOLIO
- SELECT INCOME PORTFOLIO
[PHOTO] ANNUAL REPORT
JANUARY 31, 1998
INVESTMENT STRATEGIES FOR YOUR LIFE
[LOGO] SMITH BARNEY MUTUAL FUNDS
INVESTING FOR YOUR FUTURE.
EVERYDAY.-SM-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders.................................................... 1
The Concert Allocation Series Portfolios
The Select High Growth Portfolio...................................... 6
The Select Growth Portfolio........................................... 8
The Select Balanced Portfolio......................................... 10
The Select Conservative Portfolio..................................... 12
The Select Income Portfolio........................................... 14
Schedules of Investments.................................................. 16
Statements of Assets and Liabilities...................................... 21
Statements of Operations.................................................. 22
Statements of Changes in Net Assets....................................... 23
Notes to Financial Statements............................................. 24
Financial Highlights...................................................... 26
Independent Auditors' Report.............................................. 27
Directors and Officers.................................................... 28
</TABLE>
<PAGE>
Dear Shareholder:
[PHOTO]
Heath B. McLendon
CHAIRMAN
THE CONCERT ALLOCATION SERIES
[PHOTO]
Thomas B. Stiles II
VICE PRESIDENT AND INVESTMENT OFFICER
THE CONCERT ALLOCATION SERIES
We are pleased to present the annual report for the Smith Barney Concert
Allocation Series Inc. ("Concert Allocation Series") Select Portfolios for the
period ended January 31, 1998. The Concert Allocation Series Select Portfolios
("Portfolios") covered in this report for the most part delivered competitive
returns during the reporting period. The performance and current holdings of
each Portfolio are discussed in greater detail on the following pages.
THE PERFORMANCE OF THE CONCERT ALLOCATION SERIES
SELECT PORTFOLIOS*
TOTAL RETURNS FOR THE PERIOD FROM
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO TOTAL RETURN
- -------------------- -------------
<S> <C>
Select High Growth 10.60%
Select Growth 12.80
Select Balanced 12.80
Select Conservative 13.00
Select Income 12.90
</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.
NIRVANA'S ORIGINS HARDLY SEEM ASIAN...
In our last letter to you six months ago, we wrote of "an economy that has been
described as somewhere between perfection and nirvana." Growth was strong,
inflation low and all markets were headed upward.
It's interesting to note that "nirvana" is a word with Sanskrit roots, and
Sanskrit is an ancient language of India. But despite its roots on the
subcontinent, and the subcontinent's geographical location in Asia, we maintain
that nirvana is not an Asian word. No, we are not talking linguistics--we are
talking economics. The interruption of our economic nirvana emanated from Asia.
It was turmoil in the nations of Southeast Asia, particularly Thailand,
Indonesia and Korea that interrupted our perfect prospects. Although the
economic reverberations are still unfolding, market impacts were immediate:
bonds rallied, while stocks lagged.
1
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
IT'S TIME AND NOT
TIMING
GROWTH OF $10,000
INVESTED IN THE
STANDARD & POOR'S
500 COMPOSITE STOCK
INDEX, SALOMON
BROTHERS WORLD
GOVERNMENT BOND
INDEX,
LEHMAN
GOVERNMENT/CORPORATE
BOND INDEX, AND
MORGAN STANLEY
CAPITAL
INTERNATIONAL EAFE
INDEX
(JANUARY 31, 1988 --
JANUARY 31, 1998)
(UNAUDITED)
SALOMON BROTHERS LEHMAN
WORLD GOVERNMENT GOVERNMENT/CORPORATE
S&P 500 INDEX BOND INDEX BOND INDEX MSCI EAFE INDEX
<S> <C> <C> <C> <C>
Jan-88 $10,000 $10,000 $10,000 $10,000
Jan-89 12,004 10,647 10,540 12,855
Jan-90 13,736 11,289 11,719 13,476
Jan-91 14,886 12,343 13,011 11,099
Jan-92 18,258 13,721 14,719 11,171
Jan-93 20,186 15,083 16,424 10,061
Jan-94 22,779 16,703 18,115 14,506
Jan-95 22,898 16,291 17,552 13,898
Jan-96 31,741 19,151 20,662 16,189
Jan-97 40,098 20,798 21,156 16,548
Jan-98 50,886 23,307 23,171 18,277
</TABLE>
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX ("S&P 500") IS A
CAPITALIZATION-WEIGHTED INDEX OF 500 WIDELY HELD COMMON STOCKS. THE SALOMON
SMITH BARNEY WORLD GOVERNMENT BOND INDEX IS A MARKET-CAPITALIZATION-WEIGHTED
BENCHMARK THAT TRACKS THE PERFORMANCE OF THE GOVERNMENT BOND MARKETS OF 14
COUNTRIES. THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX IS A COMBINATION OF
PUBLICLY ISSUED INTERMEDIATE- AND LONG-TERM U.S. GOVERNMENT BONDS AND CORPORATE
BONDS. 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.
NIRVANA, PLEASE MEET POLLYANNA AND CASSANDRA
All of the reported economic numbers for the U.S. still look outstanding.
Inflation for calendar year 1997 was only at a 1.7% annual rate as measured by
the Consumer Price Index ("CPI"). (The CPI measures prices that consumers must
pay for goods and services.) Meanwhile, real economic growth was 3.8%. We have
continued to enjoy a nirvana-like economy, but forecasters are split as to
whether past will be prologue. Most agree that the Asian "contagion" will slow
growth worldwide; the question is to what degree. The Pollyannas argue such a
slowdown will prolong the low inflation for the U.S. economy, the Cassandras
believe that Asian economies will collapse and damage U.S. corporate
profitability.
Domestic markets have, until recently, behaved as if the Cassandras were right.
During the second half of 1997, stock markets were flat while bond prices rose
as a result of declining interest rates. This divergence, bonds rising while
stocks mark time, has not been typical market behavior over the last several
years. The more usual pattern has been bond and stock markets moving in tandem:
if bonds move up, then stocks follow. But the divergence in the latter part of
1997 was likely an indication that many investors feared an Asian-induced
economic slowdown.
Bonds reacted positively to this potential economic slowing. A slowing economy
would mean lower inflation, allowing interest rates to ease further. A
slower-than-expected economy is an unmitigated blessing for a bond investor.
2
<PAGE>
For a stock investor, however, the picture is mixed. The lower inflation that
often accompanies a slowing economy is a positive for stock valuations.
Investors will pay more for a given stream of earnings or dividends when
inflation is low, boosting stock prices. Offsetting this boost, however, are
fears about what that stream of earnings will actually be. A slowing economy
also puts corporate profitability at risk. So last year these two divergent
forces--higher valuations, but on a less certain earnings base-- offset each
other, leading to flat stock market performance.
As we write this letter, however, Pollyanna has reappeared and markets are
shifting once again. Stocks perked up in the beginning of 1998, as earnings
reports appeared more robust than analysts had thought likely. Domestic
companies have managed their Asian exposures in such a way that the earnings
impact has been far less than most investors like. But then again, it would not
be surprising to see the cycle repeat, as Asian economic difficulties or fears
of an Iraqi military conflict re-emerge.
AND THE WINNER IS...
Looking ahead is never easy. It is always much easier to say with precision what
has happened in the past than to even approximate what the future holds. But the
task today seems particularly daunting. There are the Asian and Mideast problems
referred to above, as well as markets that cannot decide whether it is Pollyanna
or Cassandra that has the better advice.
Nonetheless, it seems to us that inflation still looks terrific, that is, there
is none to be found! We are now in the seventh year of an economic recovery and
inflation is still extremely low. As noted previously, the CPI shows inflation
up just 1.7%. Wholesale prices are actually down, as the Producer Price Index
measured -0.7% for 1997. This past summer there were some fears that domestic
employment growth would trigger inflation pressures. But this fear dissipated
with the Asian economic turmoil. It seems clear that the Asian slowdown, if
nothing else, has dampened worldwide growth and demand. Commodity prices provide
striking evidence, for they all are pointed in one direction--down. It's hard to
imagine how prices can re-accelerate over the next six to twelve months, so
inflation should remain low, and provide support to bond prices and stock
valuations.
The economic growth picture is more mixed. We believe that the economic turmoil
in Asia may indeed slow growth more dramatically for domestic companies than
recent earnings reports, or stock market increases, may suggest. The used-to-
be-called "tiger" economies of Southeast Asia were the world's fastest-growing
countries over the past few years. Many Southeast Asian economies had growth
rates three times faster than the developed countries. So it seems to us that
the deceleration, or even cessation of growth in the ex-tigers will have more
meaningful effects than we have seen so far. Companies may not be able to
continue to manage their profitability as successfully as they have over the
last few months. Does this mean that we believe the stock market is headed for a
big decline? No. But it does mean that stock prices will probably be more
volatile as the market sorts through the various earnings impacts of a possible
worldwide slowdown. So, ultimately, while we think that while Pollyanna will
prevail, we also believe Cassandra is due for a few more appearances.
INTERNATIONAL STOCK MARKETS:
International markets experienced diametrically opposite performances in the
first and second halves of the year ended January 1998. International markets
achieved solid first half returns on the coattails of the ebullient U.S. capital
markets. The second half was marked by repeated crises as the Southeast Asian
currency collapse radiated outward, engulfing not only some of the strongest
regional economies such as Taiwan and Singapore, but also ultimately crushing
the Korean economy and its currency. And the effects on Japan, the largest Asian
stock market and economy and a major regional lender, were an added negative to
an already deteriorating local Japanese outlook.
3
<PAGE>
As noted, the Asian currency and economic collapse have far-reaching and as yet
not fully understood implications for global capital markets. Rescue efforts
have centered on stability and stemming further precipitous declines in
currencies as well as consumer and business confidence. The strength of the U.S.
dollar and bond market at the end of 1997, to some degree, reflected growing
investor preference for liquidity, stability and strength during a period of
global economic uncertainty.
European and U.S. companies will not escape untouched as exports to Asia decline
and Asian produced goods become even more competitive in domestic markets.
Nevertheless, we remain very positive overall on European investments for
several reasons, including:
- The push for the European Monetary Union ("EMU") has created favorable
macroeconomic conditions the likes of which have not been seen for two
decades. Interest rates and inflation are subdued and likely to remain so
and should heighten demand for stocks from both individuals and
institutions.
- Corporations in Europe are restructuring, boosting investor returns and,
for the first time, aligning management interests with external
shareholder interests through stock incentives.
- The recovery of the U.S. currency against its major trading partners of
the past 30 months has improved export competitiveness for major European
and Asian exporters and led to an upturn in the consolidated European
economy.
- Many industries, such as financial services and pharmaceuticals, have
improved their economies of scale and eliminated inefficient local and
regional goods and service providers. At the same time, innovative
mid-sized companies are finding access to capital and finding an open door
to technologies and processes that lower costs for businesses and
consumers.
GLOBAL BOND MARKETS:
Moderate U.S. economic growth, combined with historically low inflation and the
ongoing financial and economic turmoil in Southeast Asia, should provide more
than enough ammunition for U.S. interest rates to fall lower. With respect to
the high-yield bond market, we believe the uncertainties that exist in the
world's stock markets will tend to favor the higher-quality high-yield bonds
over the lower-quality bonds, which are usually more vulnerable in the event of
a market downturn. In the global government bond arena, the onset of the EMU
should continue to exert a positive influence on European bond markets. The
integration of Europe's key economies should help keep interest rates low and
encourage greater fiscal restraint from the member governments.
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 VICE PRESIDENT AND INVESTMENT
OFFICER
FEBRUARY 26, 1998
4
<PAGE>
A FEW WORDS ABOUT RECENT CHANGES TO THE MIX OF UNDERLYING FUNDS
Since the Smith Barney Concert Allocation Series Select Portfolios were
introduced in February 1997, one of our goals in developing the Portfolios was
to minimize risk for investors through diversification by participating in a
wide range of asset classes. Yet the asset mix within the five Concert
Allocation Series Select Portfolios is STRATEGIC, not tactical and designed for
a long-term investment horizon.
Some changes have been made recently with respect to the underlying funds that
make up the Concert Allocation Series Portfolios. The reason? We wanted to take
advantage of other Smith Barney Mutual Funds such as the Smith Barney Large
Capitalization Growth Fund, the Smith Barney Small Cap Blend Fund, Inc.
(formerly known as the Disciplined Small Cap Fund, Inc.) and the Concert
Peachtree Growth Fund (formerly known as the Smith Barney Growth Opportunity
Fund). For additional information about the actual breakdown of the underlying
funds within each Concert Allocation Series Portfolio as of January 31, 1998,
please refer to the schedules of investments showing the underlying funds that
begin on page 16.
5
<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 a large portion of its assets in aggressive equity 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.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 26.90%
RUSSELL 2000 18.07%
MSCI EAFE 10.29%
SALOMON SMITH BARNEY
HIGH YIELD MARKET 15.75%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1998.
.................................................................
PORTFOLIO UPDATE
1997 turned out to be another stellar year for the U.S. stock market. For the
first time ever, the U.S. stock market posted three consecutive years of gains
in excess of 20%. Stable economic growth, robust corporate earnings growth and
subdued inflation helped fuel the U.S. stock market's climb. So far in 1998, the
bull market in U.S. stocks has continued. Moreover, large-capitalization, blue-
chip domestic stocks that dominate the popular market averages did better than
most other types of stocks.
Yet behind the good news, stock market volatility also increased markedly during
the past twelve months. The currency and economic crisis in Southeast Asia that
started in the summer negatively affected the U.S. stock market. In the third
quarter of 1997, the Dow Jones Industrial Average registered its second-largest
point decline and its single largest daily gain within a three week period in
the middle of the third quarter. (The Dow Jones Industrial Average, or DJIA, is
a price-weighted average of 30 actively traded blue chip stocks of primarily
industrial companies.)
International markets experienced diametrically opposite performances in the
first and second halves of the year ended January 31, 1998. International
markets achieved solid first half returns on the coattails of the ebullient U.S.
capital markets. The second half was marked by repeated crises as the Southeast
Asian currency collapse radiated outward, engulfing not only some of the
strongest regional economies such as Taiwan and Singapore, but also ultimately
crushing the Korean economy and its currency. And the effects on Japan, the
largest Asian stock market and economy and a major regional lender, were an
added negative to an already deteriorating local Japanese outlook.
Because the ultimate impact of the Asian crisis on U.S. exports and corporate
earnings is still unknown, the rest of 1998 promises to be a year of greater
uncertainty and higher market volatility. As noted in this report's letter to
shareholders, we believe that the problems of Asia may slow growth more
dramatically than recent earnings reports, or stock market increases, may
suggest. The profit growth of many companies has been cast into doubt. With
current valuations in the stock market at fairly high levels, investors may be
intolerant of any earnings disappointment.
The Concert Allocation Series Select High Growth Portfolio generated a total
return of 10.60% for the period ended January 31, 1998. The chart that appears
on page 7 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 change from year to year. Each
Concert Allocation Series Select Portfolio is a long-term investment that has
been designed to reduce overall market volatility and will usually achieve a
rate of return roughly in the middle of the asset classes in which it invests.
- ------------------------------------------------------------------
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.
6
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT HIGH GROWTH PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, RUSSELL 2000 INDEX,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX AND SALOMON SMITH BARNEY HIGH
YIELD MARKET INDEX
...............................................................................
FEBRUARY 5, 1997 - JANUARY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S
SELECT HIGH 500 RUSSELL MSCI
COMPOSITE STOCK
GROWTH PORTFOLIO INDEX 2000 INDEX EAFE INDEX
2/5/97 $10,000 $10,000 $10,000 $10,000
2/97 $9,870 $10,079 $9,758 $10,164
<S> <C> <C> <C> <C>
3/97 $9,610 $9,666 $9,297 $10,201
4/97 $9,650 $10,242 $9,323 $10,255
5/97 $10,350 $10,868 $10,360 $10,922
6/97 $10,620 $11,351 $10,805 $11,524
7/97 $11,250 $12,254 $11,307 $11,711
8/97 $11,030 $11,567 $11,566 $10,836
9/97 $11,640 $12,200 $12,413 $11,443
10/97 $10,970 $11,793 $11,868 $10,563
11/97 $10,930 $12,339 $11,791 $10,455
12/97 $11,010 $12,551 $11,997 $10,546
1/31/98 $11,060 $12,689 $11,807 $11,028
<CAPTION>
SALOMON SMITH BARNEY
HIGH YIELD
MARKET INDEX
2/5/97 $10,000
2/97 $10,170
<S> <C>
3/97 $10,065
4/97 $10,137
5/97 $10,341
6/97 $10,516
7/97 $10,757
8/97 $10,784
9/97 $10,973
10/97 $11,060
11/97 $11,117
12/97 $11,234
1/31/98 $11,487
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1998. 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 SMITH BARNEY 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.
HISTORICAL PERFORMANCE--SELECT HIGH GROWTH PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN AVERAGE ANNUAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
2/5/97*-1/31/98 $10.00 $11.06 $0.00 $0.00 10.60%++
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT HIGH GROWTH PORTFOLIOS' POLICY TO DISTRIBUTE DIVIDENDS AND
CAPITAL GAINS, IF ANY, ANNUALLY.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS.
7
<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 Select Growth Portfolio is also allocated to bonds,
to help reduce volatility.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 26.90%
RUSSELL 2000 18.07%
MSCI EAFE 10.29%
LEHMAN GOVERNMENT/CORPORATE BOND 11.17%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1998.
.................................................................
PORTFOLIO UPDATE
1997 turned out to be another stellar year for the U.S. stock market. For the
first time ever, the U.S. stock market posted three consecutive years of gains
in excess of 20%. Stable economic growth, robust corporate earnings growth and
subdued inflation helped fuel the U.S. stock market's climb. So far in 1998, the
bull market in U.S. stocks has continued. Moreover, large-capitalization, blue-
chip domestic stocks that dominate the popular market averages did better than
most other types of stocks.
Yet behind the good news, stock market volatility also increased markedly during
the past twelve months. The currency and economic crisis in Southeast Asia that
started in the summer negatively affected the U.S. stock market. In the third
quarter of 1997, the Dow Jones Industrial Average registered its second-largest
point decline and its single largest daily gain within a three week period in
the middle of the third quarter. (The Dow Jones Industrial Average, or DJIA, is
a price-weighted average of 30 actively traded blue chip stocks of primarily
industrial companies.)
International markets experienced diametrically opposite performances in the
first and second halves of the year ended January 1998. International markets
achieved solid first half returns on the coattails of the ebullient U.S. capital
markets. The second half was marked by repeated crises as the Southeast Asian
currency collapse radiated outward, engulfing not only some of the strongest
regional economies such as Taiwan and Singapore, but also ultimately crushing
the Korean economy and its currency. And the effects on Japan, the largest Asian
stock market and economy and a major regional lender, were an added negative to
an already deteriorating local Japanese outlook.
Because the ultimate impact of the Asian crisis on U.S. exports and corporate
earnings is still unknown, the rest of 1998 promises to be a year of greater
uncertainty and higher market volatility. As noted in this report's letter to
shareholders, we believe that the problems of Asia may slow growth more
dramatically than recent earnings reports, or stock market increases, may
suggest. The profit growth of many companies has been cast into doubt. With
current valuations in the stock market at fairly high levels, investors may be
intolerant of any earnings disappointment.
During the second half of 1997, bond prices rose because of declining interest
rates and the potential economic slowdown from the problems in Southeast Asia.
For the year ended January 31, 1998, the Lehman Brothers Aggregate Bond Index
returned 11.17%. (The Lehman Brothers Aggregate Bond Index is composed of the
Government/Corporate Bond Index, the Asset-Backed Securities Index and includes
U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed
issues.)
The Concert Allocation Series Select Growth Portfolio generated a total return
of 12.80% for the period ended January 31, 1998. The chart that appears on page
9 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 change from year to year. Each Concert
Allocation Series Select Portfolio is a long-term investment that has been
designed to reduce overall market volatility and will usually achieve a rate of
return roughly in the middle of the asset classes in which it invests.
- ------------------------------------------------------------------
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.
8
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT 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, 1997 - JANUARY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S
SELECT GROWTH 500
COMPOSITE STOCK
PORTFOLIO INDEX RUSSELL 2000 INDEX MSCI EAFE INDEX
2/5/97 $10,000 $10,000 $10,000 $10,000
2/97 9,990 10,079 9,758 10,164
<S> <C> <C> <C> <C>
3/97 9,700 9,666 9,297 10,201
4/97 9,820 10,242 9,323 10,255
5/97 10,330 10,868 10,360 10,922
6/97 10,590 11,351 10,805 11,524
7/97 11,170 12,254 11,307 11,711
8/97 10,920 11,567 11,566 10,836
9/97 11,410 12,200 12,413 11,443
10/97 11,000 11,793 11,868 10,563
11/97 11,060 12,339 11,791 10,455
12/97 11,190 12,551 11,997 10,546
1/31/98 11,280 12,689 11,807 11,028
<CAPTION>
LEHMAN GOVERNMENT/
CORPORATE BOND INDEX
2/5/97 $10,000
2/97 10,021
<S> <C>
3/97 9,902
4/97 10,046
5/97 10,140
6/97 10,261
7/97 10,575
8/97 10,457
9/97 10,621
10/97 10,791
11/97 10,848
12/97 10,962
1/31/98 11,117
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1998. 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.
HISTORICAL PERFORMANCE--SELECT GROWTH PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN AVERAGE ANNUAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
2/5/97*-1/31/98 $10.00 $11.28 $0.00 $0.00 12.80%++
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT GROWTH PORTFOLIOS' POLICY TO DISTRIBUTE DIVIDENDS AND
CAPITAL GAINS, IF ANY, ANNUALLY.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS.
9
<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 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.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 26.90%
LEHMAN GOVERNMENT/CORPORATE BOND 11.17%
SALOMON SMITH BARNEY
ONE-YEAR TREASURY BILL 6.82%
SALOMON SMITH BARNEY
WORLD GOVERNMENT BOND 12.06%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1998.
.................................................................
PORTFOLIO UPDATE
1997 turned out to be another stellar year for the U.S. stock market. For the
first time ever, the U.S. stock market posted three consecutive years of gains
in excess of 20%. Stable economic growth, robust corporate earnings growth and
subdued inflation helped fuel the U.S. stock market's climb. So far in 1998, the
bull market in U.S. stocks has continued. Moreover, large-capitalization, blue-
chip domestic stocks that dominate the popular market averages did better than
most other types of stocks.
Yet behind the good news, stock market volatility also increased markedly during
the past twelve months. The currency and economic crisis in Southeast Asia that
started in the summer negatively affected the U.S. stock market. In the third
quarter of 1997, the Dow Jones Industrial Average registered its second-largest
point decline and its single largest daily gain within a three week period in
the middle of the third quarter. (The Dow Jones Industrial Average, or DJIA, is
a price-weighted average of 30 actively traded blue chip stocks of primarily
industrial companies.)
Because the ultimate impact of the Asian crisis on U.S. exports and corporate
earnings is still unknown, the rest of 1998 promises to be a year of greater
uncertainty and higher market volatility. As noted in this report's letter to
shareholders, we believe that the problems of Asia may slow growth more
dramatically than recent earnings reports, or stock market increases, may
suggest. The profit growth of many companies has been cast into doubt. With
current valuations in the stock market at fairly high levels, investors may be
intolerant of any earnings disappointment.
In contrast, the uncertainties surrounding the world's stock markets helped
ignite a bond market rally in the closing months of 1997. Following the sudden
collapse of many Southeast Asian stock markets and the currency devaluations of
several key economies such as Korea and Indonesia, many investors around the
world sought out the stability and liquidity of bonds. The U.S. dollar was a
clear beneficiary of this shift in investor sentiment and with the help of an
influx of foreign capital, the yield on the benchmark 30-year U.S. Treasury bond
fell to a historic low of 5.74% on January 5, 1998. Moreover, the continued
decline of interest rates has been supported by a moderately expanding U.S.
economy with a near absence of inflationary pressure.
The Concert Allocation Series Select Balanced Portfolio generated a total return
of 12.80% for the period ended January 31, 1998. The chart that appears on page
11 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 change from year to year. Each Concert
Allocation Series Portfolio is a long-term investment that has been designed to
reduce overall market volatility and will usually achieve a rate of return
roughly in the middle of the asset classes in which it invests.
- ------------------------------------------------------------------
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.
10
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT BALANCED PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, LEHMAN GOVERNMENT/CORPORATE
BOND INDEX,
SALOMON SMITH BARNEY ONE-YEAR TREASURY BILL INDEX AND SALOMON SMITH BARNEY WORLD
GOVERNMENT BOND INDEX
...............................................................................
FEBRUARY 5, 1997 - JANUARY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S LEHMAN
SELECT BALANCED 500 GOVERNMENT/CORPORATE SALOMON SMITH BARNEY
COMPOSITE STOCK ONE-YEAR TREASURY
PORTFOLIO INDEX BOND INDEX BILL INDEX
<S> <C> <C> <C> <C>
2/05/97 $10,000 $10,000 $10,000 $10,000
2/97 $10,040 $10,079 $10,021 $10,036
3/97 $9,920 $9,666 $9,902 $10,063
4/97 $10,080 $10,242 $10,046 $10,124
5/97 $10,390 $10,868 $10,140 $10,188
6/97 $10,650 $11,351 $10,261 $10,248
7/97 $11,050 $12,254 $10,575 $10,322
8/97 $10,750 $11,567 $10,457 $10,358
9/97 $11,130 $12,200 $10,621 $10,414
10/97 $10,960 $11,793 $10,791 $10,473
11/97 $11,080 $12,339 $10,848 $10,508
12/97 $11,200 $12,551 $10,962 $10,558
1/31/98 $11,280 $12,689 $11,117 $10,627
<CAPTION>
SALOMON SMITH BARNEY
WORLD GOVERNMENT
BOND INDEX
<S> <C>
2/05/97 $10,000
2/97 $10,044
3/97 $9,986
4/97 $10,096
5/97 $10,157
6/97 $10,309
7/97 $10,512
8/97 $10,488
9/97 $10,658
10/97 $10,770
11/97 $10,838
12/97 $10,964
1/31/98 $11,111
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1998. 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 SMITH BARNEY ONE-YEAR TREASURY BILL INDEX IS COMPOSED OF ONE 1-YEAR
UNITED STATES TREASURY BILL WHOSE RETURN IS TRACKED UNTIL ITS MATURITY. THE
SALOMON SMITH BARNEY 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 OR 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.
HISTORICAL PERFORMANCE--SELECT BALANCED PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN AVERAGE ANNUAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
2/5/97*-1/31/98 $10.00 $11.28 $0.00 $0.00 12.80%++
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT BALANCED PORTFOLIOS' POLICY TO DISTRIBUTE DIVIDENDS AND
CAPITAL GAINS, IF ANY, ANNUALLY.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS.
11
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C>
STOCK FUNDS BOND FUNDS
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 26.90%
LEHMAN GOVERNMENT/CORPORATE BOND 11.17%
SALOMON SMITH BARNEY
HIGH YIELD MARKET 15.75%
SALOMON SMITH BARNEY
ONE-YEAR TREASURY BILL 6.82%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1998.
.................................................................
PORTFOLIO UPDATE
During the second half of 1997, bond prices rose because of declining interest
rates and the potential economic slowdown from the problems in Southeast Asia.
For the year ended January 31, 1998, the Lehman Brothers Aggregate Bond Index
returned 11.17%. (The Lehman Brothers Aggregate Bond Index is composed of the
Government/Corporate Bond Index, the Asset-Backed Securities Index and includes
U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed
issues.)
The uncertainties surrounding the world's stock markets helped ignite a bond
market rally in the closing months of 1997. Following the sudden collapse of
many Southeast Asian stock markets and the currency devaluations of several key
economies such as Korea and Indonesia, many investors around the world sought
out the stability and liquidity of bonds. The U.S. dollar was a clear
beneficiary of this shift in investor sentiment and with the help of an influx
of foreign capital, the yield on the benchmark 30-year U.S. Treasury bond fell
to a historic low of 5.74% on January 5, 1998. Moreover, the continued decline
of interest rates has been supported by a moderately expanding U.S. economy with
a near absence of inflationary pressure.
The Concert Allocation Series Select Conservative Portfolio generated a total
return of 13.00% for the period ended January 31, 1998. The chart that appears
on page 13 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 change from year to year. Each
Concert Allocation Series Select Portfolio is a long-term investment that has
been designed to reduce overall market volatility and will usually achieve a
rate of return roughly in the middle of the asset classes in which it invests.
- ------------------------------------------------------------------
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.
12
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT CONSERVATIVE PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, LEHMAN GOVERNMENT/CORPORATE
BOND INDEX,
SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX AND SALOMON SMITH BARNEY ONE-YEAR
TREASURY BILL INDEX
...............................................................................
FEBRUARY 5, 1997 - JANUARY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S SALOMON SMITH BARNEY
SELECT 500 LEHMAN GOVERNMENT/ HIGH
CONSERVATIVE COMPOSITE STOCK
PORTFOLIO INDEX CORPORATE BOND INDEX YIELD MARKET INDEX
<S> <C> <C> <C> <C>
2/05/97 $10,000 $10,000 $10,000 $10,000
2/97 10,070 10,079 10,021 10,170
3/97 9,980 9,666 9,902 10,065
4/97 10,100 10,242 10,046 10,137
5/97 10,350 10,868 10,140 10,341
6/97 10,580 11,351 10,261 10,516
7/97 10,930 12,254 10,575 10,757
8/97 10,730 11,567 10,457 10,784
9/97 11,030 12,200 10,621 10,973
10/97 10,980 11,793 10,791 11,060
11/97 11,080 12,339 10,848 11,117
12/97 11,210 12,551 10,962 11,234
1/31/98 11,300 12,689 11,117 11,487
<CAPTION>
SALOMON SMITH BARNEY
ONE-YEAR
TREASURY BILL INDEX
<S> <C>
2/05/97 $10,000
2/97 10,036
3/97 10,063
4/97 10,124
5/97 10,188
6/97 10,248
7/97 10,322
8/97 10,358
9/97 10,414
10/97 10,473
11/97 10,508
12/97 10,558
1/31/98 10,627
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1998. 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 SMITH BARNEY HIGH YIELD MARKET INDEX COVERS A SIGNIFICANT PORTION OF THE
BELOW-INVESTMENT-GRADE U.S. CORPORATE BOND MARKET. THE SALOMON SMITH BARNEY 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.
HISTORICAL PERFORMANCE--SELECT CONSERVATIVE PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN AVERAGE ANNUAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
2/5/97*-1/31/98 $10.00 $11.30 $0.00 $0.00 13.00%++
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT CONSERVATIVE PORTFOLIOS' POLICY TO DISTRIBUTE DIVIDENDS AND
CAPITAL GAINS, IF ANY, ANNUALLY.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS.
13
<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 26.90%
LEHMAN GOVERNMENT/CORPORATE BOND 11.17%
SALOMON SMITH BARNEY
HIGH YIELD MARKET 15.75%
SALOMON SMITH BARNEY
ONE-YEAR TREASURY BILL 6.82%
</TABLE>
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1998.
.................................................................
PORTFOLIO UPDATE
During the second half of 1997, bond prices rose because of declining interest
rates and the potential economic slowdown from the problems in Southeast Asia.
For the year ended January 31, 1998, the Lehman Brothers Aggregate Bond Index
returned 11.17%. (The Lehman Brothers Aggregate Bond Index is composed of the
Government/Corporate Bond Index, the Asset-Backed Securities Index and includes
U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed
issues.)
The uncertainties surrounding the world's stock markets helped ignite a bond
market rally in the closing months of 1997. Following the sudden collapse of
many Southeast Asian stock markets and the currency devaluations of several key
economies such as Korea and Indonesia, many investors around the world sought
out the stability and liquidity of bonds. The U.S. dollar was a clear
beneficiary of this shift in investor sentiment and with the help of an influx
of foreign capital, the yield on the benchmark 30-year U.S. Treasury bond fell
to a historic low of 5.74% on January 5, 1998. Moreover, the continued decline
of interest rates has been supported by a moderately expanding U.S. economy with
a near absence of inflationary pressure.
The Concert Allocation Series Select Income Portfolio generated a total return
of 12.90% for the period ended January 31, 1998. The chart that appears on page
15 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 change from year to year. Each Concert
Allocation Series Portfolio is a long-term investment that has been designed to
reduce overall market volatility and will usually achieve a rate of return
roughly in the middle of the asset classes in which it invests.
- ------------------------------------------------------------------
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.
14
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT INCOME PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, LEHMAN GOVERNMENT/CORPORATE
BOND INDEX,
SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX AND SALOMON SMITH BARNEY ONE-YEAR
TREASURY BILL INDEX
...............................................................................
FEBRUARY 5, 1997 - JANUARY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S LEHMAN
SELECT 500 GOVERNMENT/CORPORATE SALOMON SMITH BARNEY
COMPOSITE STOCK HIGH YIELD MARKET
INCOME PORTFOLIO INDEX BOND INDEX INDEX
<S> <C> <C> <C> <C>
2/05/97 $10,000 $10,000 $10,000 $10,000
2/97 $10,050 $10,079 $10,021 $10,170
3/97 $9,980 $9,666 $9,902 $10,055
4/97 $10,120 $10,242 $10,046 $10,137
5/97 $10,320 $10,868 $10,140 $10,341
6/97 $10,520 $11,351 $10,261 $10,516
7/97 $10,850 $12,254 $10,575 $10,757
8/97 $10,680 $11,567 $10,457 $10,784
9/97 $10,910 $12,200 $10,621 $10,973
10/97 $10,940 $11,793 $10,791 $11,060
11/97 $11,040 $12,339 $10,848 $11,117
12/97 $11,170 $12,551 $10,962 $11,234
1/31/98 $11,290 $12,689 $11,117 $11,487
<CAPTION>
SALOMON SMITH BARNEY
ONE-YEAR
TREASURY BILL INDEX
<S> <C>
2/05/97 $10,000
2/97 $10,036
3/97 $10,063
4/97 $10,124
5/97 $10,188
6/97 $10,248
7/97 $10,322
8/97 $10,358
9/97 $10,414
10/97 $10,473
11/97 $10,508
12/97 $10,558
1/31/98 $10,627
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1998. 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 SMITH BARNEY HIGH YIELD MARKET INDEX COVERS A SIGNIFICANT PORTION OF THE
BELOW-INVESTMENT-GRADE U.S. CORPORATE BOND MARKET. THE SALOMON SMITH BARNEY 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.
HISTORICAL PERFORMANCE--SELECT INCOME PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------------- INCOME CAPITAL GAIN AVERAGE ANNUAL
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
2/5/97*-1/31/98 $10.00 $11.29 $0.00 $0.00 12.90%++
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT INCOME PORTFOLIOS' POLICY TO DISTRIBUTE DIVIDENDS AND
CAPITAL GAINS, IF ANY, ANNUALLY.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS.
15
<PAGE>
THE SELECT HIGH GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS JANUARY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
-------------------------------------------------------------------------
UNDERLYING FUNDS--98.4%
68,016 Smith Barney Aggressive Growth Fund $ 2,717,247
84,699 Smith Barney Equity Funds - Smith Barney Growth &
Income Fund 1,332,322
77,259 Smith Barney Funds, Inc. - Large Cap Value Fund 1,333,501
199,248 Smith Barney Investment Funds, Inc. - Concert
Peachtree Growth Fund 2,685,872
212,666 Smith Barney Investment Funds, Inc. - Smith
Barney High Income Fund 2,532,857
95,737 Smith Barney Investment Funds, Inc. - Smith
Barney Managed Growth Fund 1,346,069
103,966 Smith Barney Investment Funds, Inc. - Smith
Barney Special Equities Fund 2,674,007
211,636 Smith Barney Investment Trust - Smith Barney
Large Capitalization Growth Fund 2,713,174
300,652 Smith Barney Small Cap Blend Fund, Inc. 4,040,772
267,593 Smith Barney World Funds - International Equity
Portfolio 5,392,002
-------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$26,659,439) 26,767,823
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
-------------------------------------------------------------------------
REPURCHASE AGREEMENT--1.6%
$448,000 Chase Securities Inc., 5.520% due 2/2/98;
Proceeds at maturity--$448,206;
(Fully collateralized by U.S. Treasury Notes,
6.125% due 9/30/00; Market value--$456,961)
(Cost--$448,000) 448,000
-------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$27,107,439*) $27,215,823
-------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
THE SELECT GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS JANUARY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------------
UNDERLYING FUNDS--97.8%
115,227 Smith Barney Aggressive Growth Fund $ 4,603,342
285,993 Smith Barney Equity Funds - Smith Barney Growth & Income
Fund 4,498,683
260,860 Smith Barney Funds, Inc. - Large Cap Value Fund 4,502,456
338,791 Smith Barney Investment Funds, Inc. - Concert Peachtree
Growth Fund 4,566,913
460,163 Smith Barney Investment Funds, Inc. - Smith Barney
Government Securities Fund 4,523,403
357,871 Smith Barney Investment Funds, Inc. - Smith Barney High
Income Fund 4,262,248
342,479 Smith Barney Investment Funds, Inc. - Smith Barney
Investment Grade Bond Fund 4,565,256
161,635 Smith Barney Investment Funds, Inc. - Smith Barney Managed
Growth Fund 2,272,591
88,283 Smith Barney Investment Funds, Inc. - Smith Barney Special
Equities Fund 2,270,656
180,556 Smith Barney Investment Trust - Smith Barney Large
Capitalization Growth Fund 2,314,734
169,710 Smith Barney Small Cap Blend Fund, Inc. 2,280,908
223,910 Smith Barney World Funds - International Equity Portfolio 4,511,795
- --------------------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$44,997,353) 45,172,985
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------------
REPURCHASE AGREEMENT --2.2%
$1,022,000 Chase Securities Inc., 5.517% due 2/2/98; Proceeds at
maturity--$1,022,470;
(Fully collateralized by U.S. Treasury Notes, 6.125% due
9/30/00; Market value--$1,042,442)
(Cost--$1,022,000) 1,022,000
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$46,019,353*) $ 46,194,985
- --------------------------------------------------------------------------------------
</TABLE>
* AGGREGRATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
THE SELECT BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS JANUARY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------------
UNDERLYING FUNDS--98.3%
321,148 Smith Barney Appreciation Fund Inc. $ 4,508,927
143,050 Smith Barney Equity Funds - Smith Barney Growth and Income
Fund 2,250,186
447,105 Smith Barney Fundamental Value Fund Inc. 4,573,893
130,353 Smith Barney Funds, Inc. - Large Cap Value Fund 2,249,899
489,311 Smith Barney Funds, Inc. - Short-Term U.S. Treasury
Securities Fund 2,015,963
263,637 Smith Barney Income Funds - Smith Barney Convertible Fund 4,479,206
837,895 Smith Barney Income Funds - Smith Barney Diversified
Strategic Income Fund 6,728,301
202,387 Smith Barney Income Funds - Smith Barney Premium Total
Return Fund 4,484,906
229,854 Smith Barney Investment Funds, Inc. - Smith Barney
Government Securities Fund 2,259,466
348,994 Smith Barney Managed Governments Fund Inc. 4,505,521
191,964 Smith Barney World Funds, Inc. - Global Government Bond
Portfolio 2,245,986
349,008 Smith Barney World Funds, Inc. - International Balanced
Portfolio 4,491,736
- -----------------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$45,064,397) 44,793,990
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------------
REPURCHASE AGREEMENT--1.7%
$761,000 Chase Securities Inc., 5.517% due 2/2/98; Proceeds at
maturity--$761,350;
(Fully collaterlized by U.S. Treasury Notes, 6.125% due
9/30/00; Market value--$776,222)
(Cost--$761,000) 761,000
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$45,825,397*) $45,554,990
- -----------------------------------------------------------------------------------
</TABLE>
* AGGREGRATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS JANUARY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
-------------------------------------------------------------------------
UNDERLYING FUNDS--98.9%
76,379 Smith Barney Appreciation Fund Inc. $ 1,072,373
52,377 Smith Barney Fundamental Value Fund Inc. 535,823
116,321 Smith Barney Funds, Inc. - Short-Term U.S.
Treasury Securities Fund 479,244
62,117 Smith Barney Income Funds - Smith Barney
Convertible Fund 1,055,369
262,648 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 2,109,067
88,480 Smith Barney Income Funds - Smith Barney High
Income Fund 1,053,802
23,902 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 529,688
109,165 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 1,073,099
123,898 Smith Barney Managed Governments Fund Inc. 1,599,535
45,224 Smith Barney World Funds, Inc. - Global
Government Bond Portfolio 529,127
41,317 Smith Barney World Funds, Inc. - International
Balanced Portfolio 531,754
-------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$10,595,478) 10,568,881
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
-------------------------------------------------------------------------
REPURCHASE AGREEMENT-- 1.1%
$115,000 Chase Securities Inc., 5.520% due 2/2/98;
Proceeds at maturity--$115,053;
(Fully collateralized by U.S. Treasury Notes,
6.125% due 9/30/00; Market value--$117,300)
(Cost--$115,000) 115,000
-------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$10,710,478*) $10,683,881
-------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
THE SELECT INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS JANUARY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- ----------------------------------------------------------------------------------
UNDERLYING FUNDS--97.9%
15,712 Smith Barney Appreciation Fund Inc. $ 220,601
100,956 Smith Barney Funds, Inc. - Short-Term U.S. Treasury
Securities Fund 415,943
12,832 Smith Barney Income Funds - Smith Barney Convertible Fund 218,017
108,441 Smith Barney Income Funds - Smith Barney Diversified
Strategic Income Fund 870,784
73,107 Smith Barney Income Funds - Smith Barney High Income Fund 870,715
9,867 Smith Barney Income Funds - Smith Barney Premium Total
Return Fund 218,661
67,082 Smith Barney Investment Funds, Inc. - Smith Barney
Government Securities Fund 659,420
67,869 Smith Barney Managed Governments Fund Inc. 876,198
- ----------------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost--$4,318,829) 4,350,339
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
- ----------------------------------------------------------------------------------
REPURCHASE AGREEMENT--2.1%
$ 95,000 Chase Securities Inc., 5.520% due 2/2/98; Proceeds at
maturity--$95,044;
(Fully collateralized by U.S. Treasury Notes, 6.125% due
9/30/00; Market value--$96,900)
(Cost--$95,000) 95,000
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS--100% (Cost--$4,413,829*) $4,445,339
- ----------------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES JANUARY 31, 1998
...............................................................................
<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 $27,107,439 $46,019,353 $45,825,397 $ 10,710,478 $ 4,413,829
- -----------------------------------------------------------------------------------------------------------
Investments, at value $27,215,823 $46,194,985 $45,554,990 $ 10,683,881 $ 4,445,339
Cash 538 510 858 946 611
Receivable for Fund shares sold 89,430 111,179 -- 41,997 1,498
Receivable from manager -- -- -- 9,203 16,537
Dividend and interest receivables 69 157 6,301 1,505 1,278
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 27,305,860 46,306,831 45,562,149 10,737,532 4,465,263
- -----------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 221,498 293,263 317,797 39,289 24,697
Payable for Fund shares purchased 1,032 32 139,198 507 311
Accrued expenses 12,590 31,987 34,316 -- --
- -----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 235,120 325,282 491,311 39,796 25,008
- -----------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $27,070,740 $45,981,549 $45,070,838 $ 10,697,736 $ 4,440,255
- -----------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 2,447 $ 4,077 $ 3,997 $ 947 $ 393
Capital paid in excess of par value 26,637,578 44,410,650 43,218,715 10,263,569 4,235,320
Undistributed net investment income 259,643 689,661 1,058,984 290,574 124,186
Accumulated net realized gain on
security transactions 62,688 701,529 1,059,549 169,245 48,846
Net unrealized appreciation
(depreciation)
of investments 108,384 175,632 (270,407) (26,599) 31,510
- -----------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $27,070,740 $45,981,549 $45,070,838 $ 10,697,736 $ 4,440,255
- -----------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING 2,447,271 4,077,421 3,997,048 946,622 393,144
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE $11.06 $11.28 $11.28 $11.30 $11.29
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED JANUARY 31, 1998(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 $162,493 $ 515,675 $ 874,572 $257,527 $ 120,130
Short-term capital gains from
Underlying Funds 111,739 194,877 212,597 38,729 6,748
Interest 22,798 37,436 34,296 8,259 3,174
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 297,030 747,988 1,121,465 304,515 130,052
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES:
Other expenses 37,387 58,327 62,481 13,941 5,866
- ---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 37,387 58,327 62,481 13,941 5,866
- ---------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 259,643 689,661 1,058,984 290,574 124,186
- ---------------------------------------------------------------------------------------------------------------------
NET UNREALIZED GAIN (NOTE 3):
Realized Gain (Loss) From:
Security transactions (556,767) (429,734) 88,672 53,720 24,934
Capital gain distributions from
Underlying Funds 619,455 1,131,263 970,877 115,525 23,912
- ---------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN 62,688 701,529 1,059,549 169,245 48,846
- ---------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized
Appreciation (Depreciation)
of Investments:
Beginning of period -- -- -- -- --
End of period 108,384 175,632 (270,407) (26,599) 31,510
- ---------------------------------------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED
APPRECIATION (DEPRECIATION) 108,384 175,632 (270,407) (26,599) 31,510
- ---------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 171,072 877,161 789,142 142,646 80,356
- ---------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $430,715 $ 1,566,822 $ 1,848,126 $433,220 $ 204,542
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE PERIOD ENDED JANUARY 31, 1998(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 $ 259,643 $ 689,661 $ 1,058,984 $ 290,574 $ 124,186
Net realized gain 62,688 701,529 1,059,549 169,245 48,846
Increase in net unrealized
appreciation (depreciation) 108,384 175,632 (270,407) (26,599) 31,510
- -----------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS 430,715 1,566,822 1,848,126 433,220 204,542
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- --
Net realized gain -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares 27,068,949 44,701,278 43,860,501 10,936,593 4,630,140
Cost of shares reacquired (428,924) (286,551) (637,789) (672,077) (394,427)
- -----------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 26,640,025 44,414,727 43,222,712 10,264,516 4,235,713
- -----------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 27,070,740 45,981,549 45,070,838 10,697,736 4,440,255
NET ASSETS:
Beginning of period -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
END OF PERIOD* $27,070,740 $45,981,549 $45,070,838 $ 10,697,736 $ 4,440,255
- -----------------------------------------------------------------------------------------------------------
*INCLUDES UNDISTRIBUTED NET
INVESTMENT INCOME OF: $259,643 $689,661 $1,058,984 $290,574 $124,186
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
...............................................................................
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 six
other separate investment portfolios: High Growth, Growth, Balanced,
Conservative, Income and Global Portfolios. The Portfolios invest in other
mutual funds ("Underlying Funds") managed by Mutual Management Corp. ("MMC"),
formerly known as Smith Barney Mutual Funds Management Inc., or another
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 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
and short-term capital gains from Underlying Funds are recorded on the
ex-dividend date as investment income 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 and 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 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 Salomon 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 from commencement of operations to January 31, 1998, 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 $31,871,803 $4,655,597
Select Growth 53,991,106 8,562,504
Select Balanced 48,800,359 3,810,428
Select Conservative 11,970,919 1,427,335
Select Income 4,900,781 606,539
- -------------------------------------------------------------------
</TABLE>
At January 31, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Select High Growth $408,319 $(299,935) $ 108,384
Select Growth 575,440 (399,808) 175,632
Select Balanced 481,639 (752,046) (270,407)
Select Conservative 111,277 (137,876) (26,599)
Select Income 49,668 (18,158) 31,510
- ----------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (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 January 31, 1998, 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
JANUARY 31, 1998(a)
<S> <C>
- ----------------------------------------------------------------------
SELECT HIGH GROWTH PORTFOLIO
Shares sold 2,486,848
Shares redeemed (39,577)
- ----------------------------------------------------------------------
NET INCREASE 2,447,271
- ----------------------------------------------------------------------
SELECT GROWTH PORTFOLIO
Shares sold 4,103,840
Shares redeemed (26,419)
- ----------------------------------------------------------------------
NET INCREASE 4,077,421
- ----------------------------------------------------------------------
SELECT BALANCED PORTFOLIO
Shares sold 4,056,352
Shares redeemed (59,304)
- ----------------------------------------------------------------------
NET INCREASE 3,997,048
- ----------------------------------------------------------------------
SELECT CONSERVATIVE PORTFOLIO
Shares sold 1,009,487
Shares redeemed (62,865)
- ----------------------------------------------------------------------
NET INCREASE 946,622
- ----------------------------------------------------------------------
SELECT INCOME PORTFOLIO
Shares sold 429,622
Shares redeemed (36,478)
- ----------------------------------------------------------------------
NET INCREASE 393,144
- ----------------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
25
<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)(2) (1)(2) (1)(2) (1)(2) (1)(2)
<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 (3) 0.26 0.44 0.64 0.78 0.80
Net realized and unrealized
gain 0.80 0.84 0.64 0.52 0.49
- -----------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.06 1.28 1.28 1.30 1.29
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.06 $11.28 $11.28 $11.30 $11.29
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 10.60% 12.80% 12.80% 13.00% 12.90%
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S) $27,071 $ 45,982 $ 45,071 $ 10,698 $4,440
- -----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 0.35% 0.35% 0.35% 0.35% 0.35%
Net investment income 2.41 4.11 5.89 7.24 7.36
- -----------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 43% % 43 19% %35 11%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD, RATHER THAN THE UNDISTRIBUTED NET INVESTMENT INCOME METHOD, BECAUSE
IT MORE ACCURATELY REFLECTS THE PER SHARE DATA FOR THE PERIOD.
(3) NET INVESTMENT INCOME PER SHARE INCLUDES SHORT-TERM CAPITAL GAIN
DISTRIBUTIONS FROM UNDERLYING FUNDS.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
...............................................................................
THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
SMITH BARNEY CONCERT ALLOCATION SERIES INC.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Select High Growth, Select
Growth, Select Balanced, Select Conservative, and Select Income Portfolios
("Portfolios") of the Smith Barney Concert Allocation Series Inc. ("Fund") as of
January 31, 1998, and the related statements of operations, changes in net
assets and financial highlights for the period from February 5, 1997
(commencement of operations) to January 31, 1998. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1998, by correspondence with the custodian. As to securities
purchased but not received, we performed other appropriate auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
the aforementioned portfolios of the Smith Barney Concert Allocation Series Inc.
as of January 31, 1998, and the results of their operations, changes in their
net assets and financial highlights for the period from February 5, 1997 to
January 31, 1998, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 17, 1998
27
<PAGE>
DIRECTORS
Walter E. Auch
Martin Brody
Stephen E. Kaufman
Armon E. Kamesar
Heath B. McLendon,
CHAIRMAN
H. John Ellis
OFFICERS
Heath B. McLendon
CHIEF EXECUTIVE OFFICER
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND TREASURER
Thomas B. Stiles II
VICE PRESIDENT AND
INVESTMENT OFFICER
R. Jay Gerken
VICE PRESIDENT AND
INVESTMENT OFFICER
Thomas M. Reynolds
CONTROLLER
Christina T. Sydor
SECRETARY
INVESTMENT MANAGER
Travelers Investment
Adviser, Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER SERVICING
AGENT
First Data Investor
Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
388 Greenwich Street
New York, New York 10013
28
<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 FD01436 3/98
FUND, WHICH CONTAINS INFORMATION CONCERNING THE FUND'S
INVESTMENT POLICIES, FEES AND EXPENSES, AS WELL AS OTHER
PERTINENT INFORMATION.
</TABLE>
[PHOTO]
[PHOTO]
[PHOTO]
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
- - High Growth Portfolio
- - Growth Portfolio
- - Balanced Portfolio
- - Conservative Portfolio
- - Income Portfolio
ANNUAL REPORT
January 31, 1998
Investment Strategies for Your Life
[LOGO] Smith Barnet Mutual Funds
Investing for your future.
Every day/SM/.
<PAGE>
Table of Contents
Letter to Shareholders.........................................................1
The Concert Allocation Series Portfolios
The High Growth Portfolio...............................................10
The Growth Portfolio....................................................15
The Balanced Portfolio..................................................20
The Conservative Portfolio..............................................25
The Income Portfolio....................................................30
Schedules of Investments......................................................35
Statements of Assets and Liabilities..........................................40
Statements of Operations......................................................41
Statements of Changes in Net Assets...........................................42
Notes to Financial Statements.................................................44
Financial Highlights..........................................................49
Independent Auditors' Report..................................................54
Tax Information...............................................................55
Directors and Officers........................................................56
<PAGE>
Dear Shareholder:
[PHOTO]
Heath B. McLendon
Chairman
The Concert Allocation Series
[PHOTO]
Thomas B. Stiles II
Vice President and
Investment Officer
The Concert Allocation Series
We are pleased to present the annual report for the Smith Barney Concert
Allocation Series Inc. for the year ended January 31, 1998. The Concert
Allocation Series Inc. ("Portfolios") covered in this report for the most part
delivered competitive returns during the reporting period. In addition, we are
proud to announce the introduction of the new Global Portfolio, the sixth and
most aggressively managed offering in the Concert Allocation Series Inc.
(Commencement of Operations for the Global Portfolio will be March 9, 1998). The
performance and current holdings of each Portfolio are discussed in greater
detail on the following pages.
As of January 31, 1998, total assets in the Portfolios were approximately $1.7
billion and we are currently helping more than a quarter of a million
shareholders pursue their financial goals. Because different markets perform
differently at various times, we believe that the Portfolios continue to be an
extremely effective way to take advantage of the benefits of broad
diversification. By not putting all of their eggs in one basket, investors can
help to lower their risk, weather the ups and downs of the market and better
position themselves for long-term success.
The Performance of the Portfolios*
Class A shares Total Returns for the Year Ended January 31, 1998
With Sales Charge** Without Sales Charge***
------------------- -----------------------
High Growth Portfolio 2.86% 8.25%
Growth Portfolio 6.22 11.82
Balanced Portfolio 6.00 11.59
Conservative Portfolio 6.68 11.70
Income Portfolio 6.45 11.44
* Performance numbers for the other classes of shares can be found beginning on
page 12.
** These total return figures assume reinvestment of all dividends and reflect
the deduction of the maximum front-end sales charge for each Portfolio's Class A
shares: 5.00% for the High Growth, Growth and Balanced Portfolios and 4.50% for
the Conservative and Income Portfolios.
*** These total return figures do not reflect the deduction of a sales charge
for each Portfolio's Class A shares.
In addition, both columns of data represent past performance which is not
indicative of future results. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
1
<PAGE>
- --------------------------------------------------------------------------------
The Benefits of Long-Term Investing
Growth of $10,000 Invested in the Standard & Poor's 500 Composite Stock Index,
Salomon Smith Barney World Government Bond Index, Lehman Government/Corporate
Bond Index and Morgan Stanley Capital International EAFE Index
(January 31, 1988 - January 31, 1998)
(unaudited)
[Line Chart]
Salomon
World Lehman
Gov't. MSCI Gov't/
S&P 500 Bond EAFE Corp.
Index Index Index Bond Index
1/88 10000 10000 10000 10000
1/89 12004 10647 12855 10540
1/90 13736 11289 13476 11719
1/91 14886 12343 11099 13011
1/92 18258 13721 11171 14719
1/93 20186 15083 10061 16424
1/94 22779 16703 14506 18115
1/95 22898 16291 13898 17552
1/96 31741 19151 16189 20662
1/97 40098 20798 16548 21156
1/98 50886 23564 18277 23520
- --------------------------------------------------------------------------------
The Standard & Poor's 500 Composite Stock Index ("S&P 500") is a
capitalization-weighted index of 500 widely held common stocks. The Salomon
Smith Barney World Government Bond Index is a market-capitalization-weighted
benchmark that tracks the performance of the government bond markets of 14
countries. The Lehman Government/Corporate Bond Index is a combination of
publicly issued intermediate- and long-term U.S. government bonds and corporate
bonds. 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.
Nirvana's Origins Hardly Seem Asian...
In our last letter to you six months ago, we wrote of "an economy that has been
described as somewhere between perfection and nirvana." Growth was strong,
inflation low and all markets were headed upward.
It's interesting to note that "nirvana" is a word with Sanskrit roots, and
Sanskrit is an ancient language of India. But despite its roots on the
subcontinent, and the subcontinent's geographical location in Asia, we maintain
that nirvana is not an Asian word. No, we are not talking linguistics -- we are
talking economics. The interruption of our economic nirvana emanated from Asia.
It was turmoil in the nations of Southeast Asia, particularly Thailand,
Indonesia and Korea that interrupted our perfect prospects. Although the
economic reverberations are still unfolding, market impacts were immediate:
bonds rallied, while stocks lagged.
Nirvana, Please Meet Pollyanna and Cassandra
All of the reported economic numbers for the U.S. still look outstanding.
Inflation for calendar year 1997 was only at a 1.7% annual rate as measured by
the Consumer Price Index ("CPI"). (The CPI measures prices that consumers must
pay for goods and services.) Meanwhile, real economic growth was 3.8%. We have
continued to enjoy a nirvana-like economy, but forecasters are split as to
whether past will be prologue. Most agree that the Asian "contagion" will slow
2
<PAGE>
growth worldwide, the question is to what degree. The Pollyannas argue such a
slowdown will prolong the low inflation for the U.S. economy, while the
Cassandras believe that Asian economies will collapse and damage U.S. corporate
profitability.
Domestic markets have, until recently, behaved as if the Cassandras were right.
During the second half of 1997, stock markets were flat while bond prices rose
as a result of declining interest rates. This divergence, bonds rising while
stocks mark time, has not been typical market behavior over the last several
years. The more usual pattern has been bond and stock markets moving in tandem:
if bonds move up, then stocks follow. But the divergence in the latter part of
1997 was likely an indication that many investors feared an Asian-induced
economic slowdown.
Bonds reacted positively to this potential economic slowing. A slowing economy
would mean lower inflation, allowing interest rates to ease further. A
slower-than-expected economy is an unmitigated blessing for a bond investor.
For a stock investor, however, the picture is mixed. The lower inflation that
often accompanies a slowing economy is a positive for stock valuations.
Investors will pay more for a given stream of earnings or dividends when
inflation is low, boosting stock prices. Offsetting this boost, however, are
fears about what that stream of earnings will actually be. A slowing economy
also puts corporate profitability at risk. Over the last months of 1997, these
two conflicting forces -- higher valuations, but on a less certain earnings base
- -- offset each other, leading to flat stock market performance.
As we write this letter, however, Pollyanna has reappeared and markets are
shifting once again. Stocks perked up in the beginning of 1998, as earnings
reports appeared more robust than analysts had thought likely. Domestic
companies have managed their Asian exposures in such a way that the earnings
impact has been far less than most investors originally thought. But then again,
it would not be surprising to see the cycle repeat, as Asian economic
difficulties or fears of an Iraqi military conflict re-emerge.
And the Winner Is...
Looking ahead is never easy. It is always much easier to say with precision what
has happened in the past than to even approximate what the future holds. But the
task today seems particularly daunting. There are the Asian and Mideast problems
referred to above, as well as markets that cannot decide whether it is Pollyanna
or Cassandra that has the better advice.
Nonetheless, it seems to us that inflation still looks terrific, that is, there
is none to be found! We are now in the seventh year of an economic recovery and
inflation is still extremely low. As noted previously, the CPI shows inflation
at just 1.7%. Wholesale prices are actually down, as the Producer Price Index
measured -0.7% for 1997. This past summer there were some fears that domestic
employment growth would trigger inflation pressures. But this fear dissipated
with the Asian economic turmoil. It seems clear that the Asian slowdown, if
nothing else, has dampened worldwide growth and demand. Commodity prices provide
striking evidence, for they all are pointed in one direction -- down. It's hard
to imagine how prices can re-accelerate over the next six to twelve months, so
inflation should remain low, and provide support to bond prices and stock
valuations.
The economic growth picture is more mixed. We believe that the economic turmoil
in Asia may indeed slow growth more dramatically for domestic companies than
recent earnings reports, or stock market increases, may suggest. The
used-to-be-called "tiger" economies of Southeast Asia were the world's
fastest-growing countries over the past few years.
3
<PAGE>
Many Southeast Asian economies had growth rates three times faster than the
developed countries. It seems to us that the deceleration, or even cessation of
growth in the ex-tigers will have more meaningful effects than we have seen so
far. Companies may not be able to continue to manage their profitability as
successfully as they have over the last few months. Does this mean that we
believe the stock market is headed for a big decline? No. But it does mean that
stock prices will probably be more volatile as the market sorts through the
various earnings impacts of a possible worldwide slowdown. Ultimately, while we
think that while Pollyanna will prevail, we also believe Cassandra is due for a
few more appearances.
International Stock Markets
International markets experienced diametrically opposite performances in the
first and second halves of the year ended January 1998. International markets
achieved solid first half returns on the coattails of the ebullient U.S. capital
markets. The second half was marked by repeated crises as the Southeast Asian
currency collapse radiated outward, engulfing not only some of the strongest
regional economies such as Taiwan and Singapore, but also ultimately crushing
the Korean economy and its currency. And the effects on Japan, the largest Asian
stock market and economy and a major regional lender, were an added negative to
an already deteriorating local Japanese outlook.
As noted, the Asian currency and economic collapse have far-reaching and as yet
not fully understood implications for global capital markets. Rescue efforts
have centered on stability and stemming further precipitous declines in
currencies as well as consumer and business confidence. The strength of the U.S.
dollar and bond market at the end of 1997, to some degree, reflected growing
investor preference for liquidity, stability and strength during a period of
global economic uncertainty.
European and U.S. companies will not escape untouched as exports to Asia decline
and Asian produced goods become even more competitive in domestic markets.
Nevertheless, we remain very positive overall on European investments for
several reasons, including:
o The push for the European Monetary Union ("EMU") has created favorable
macroeconomic conditions the likes of which have not been seen for two
decades. Interest rates and inflation are subdued and likely to remain so
and should heighten demand for stocks from both individuals and
institutions.
o Corporations in Europe are restructuring, boosting investor returns and,
for the first time, aligning management interests with external
shareholder interests through stock incentives.
o The recovery of the U.S. currency against its major trading partners of
the past 30 months has improved export competitiveness for major European
and Asian exporters and led to an upturn in the consolidated European
economy.
o Many industries, such as financial services and pharmaceuticals, have
improved their economies of scale and eliminated inefficient local and
regional goods and service providers. At the same time, innovative
mid-sized companies are finding access to capital and finding an open door
to technologies and processes that lower costs for businesses and
consumers.
4
<PAGE>
Global Bond Markets
Moderate U.S. economic growth, combined with historically low inflation and the
ongoing financial and economic turmoil in Southeast Asia, should provide more
than enough ammunition for U.S. interest rates to fall lower. With respect to
the high-yield bond market in the U.S., we believe the uncertainties that exists
in the world's stock markets will tend to favor the higher-quality high yield
bonds over the lower-quality bonds, which are usually more vulnerable in the
event of a market downturn. In the global government bond arena, the onset of
the EMU should continue to exert a positive influence on European bond markets.
The integration of Europe's key economies should help keep interest rates low
and encourage greater fiscal restraint from the member governments.
As the Concert Allocation Series Inc. celebrates its second anniversary, we
would like to thank you for your support. We look forward to continuing to help
you pursue your financial goals in the years to come.
Sincerely,
/s/ Heath B. McLendon /s/ Thomas B. Stiles II
Heath B. McLendon Thomas B. Stiles II
Chairman Vice President and
Investment Officer
February 26, 1998
5
<PAGE>
Announcing important changes. . .
- --------------------------------------------------------------------------------
A Few Words About Recent Changes to the Mix of Underlying Funds
- --------------------------------------------------------------------------------
Since the Smith Barney Concert Allocation Series Inc. was introduced in February
of 1996, one of our goals in developing the Portfolios was to minimize risk for
investors through diversification by participating in a wide range of asset
classes. Yet the asset mix within the five Portfolios is strategic, not
tactical, and designed for a long-term investment horizon.
Some changes have been made recently with respect to the underlying funds that
make up the Portfolios. The reason? We wanted to take advantage of other Smith
Barney Mutual Funds such as the Smith Barney Large Capitalization Growth Fund,
the Smith Barney Small Cap Blend Fund, Inc. (formerly known as the Disciplined
Small Cap Fund, Inc.) and the Concert Peachtree Growth Fund (formerly known as
the Smith Barney Growth Opportunity Fund). For additional information about the
actual breakdown of the underlying funds within each Portfolio as of January 31,
1998, please refer to the pie charts showing the underlying funds that appear
after each "Portfolio Update" section.
Funds where the portfolio manager makes the asset allocation decisions and may
typically hold meaningful cash positions for defensive purposes, such as the
Fundamental Value Fund and Appreciation Fund, have been replaced in the Concert
Allocation High Growth and Growth Portfolios by the funds listed on page seven.
Yet, the Fundamental Value Fund and Appreciation Fund are being utilized more in
the Balanced, Conservative and Income Portfolios.
While some of these new underlying Smith Barney Mutual Funds may be fully
invested and utilize different investment management philosophies than were
available in the past, we believe these Smith Barney Mutual Funds fit well into
the existing Concert Allocation Series framework. We are very excited about the
contribution that these Smith Barney Mutual Funds will play in the Concert
Allocation Series Portfolios going forward. Our commitment to providing our
shareholders with a simple and less administratively burdensome program of broad
diversification and competitive performance remains stronger than ever before.
6
<PAGE>
- --------------------------------------------------------------------------------
New Underlying Funds in the Concert Allocation Series Inc.
- --------------------------------------------------------------------------------
Smith Barney Large Capitalization Growth Fund seeks long-term growth of capital
by investing in equity securities of companies with large market capitalization.
Portfolio Manager
Alan Blake currently manages over $5.5 billion in private client and
institutional assets. Mr. Blake had developed his large-cap growth style of
investing through his 20 years in the industry, 15 years as a money manager. He
joined Smith Barney in 1991.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. seeks long-term capital appreciation by
investing primarily in common stock of companies with relatively small market
capitalization.
Portfolio Manager
Sandip A. Bhagat, CFA is the senior portfolio manager for the Smith Barney Small
Cap Blend Fund, Inc. He has extensive portfolio management experience in
quantitative investment management involving stocks, asset allocation,
currencies and derivatives. Mr. Bhagat received his B.S. in Chemical Engineering
from the University of Bombay in 1981 and a M.S. in Chemical Engineering from
the University of Connecticut in 1984. He later received a M.B.A. from the
University of Connecticut in 1985.
- --------------------------------------------------------------------------------
Concert Peachtree Growth Fund seeks capital appreciation through investments in
securities believed to have above-average potential for capital appreciation.
Portfolio Manager
Dennis A. Johnson, CFA is President and CIO of Peachtree Asset Manage-ment, a
division of Mutual Management Corp., formerly known as Smith Barney Mutual Funds
Management Inc. Prior to joining the firm, he was Vice President and portfolio
manager of Trusco Capital, and Assistant Director of Research at Capitoline
Investment Services, Inc. and a Treasury Analyst at Blue Cross and Blue Shield
of Virginia. Mr. Johnson has a B.S. degree in Economics from Virginia Military
Institute and a M.S. degree in Finance from Virginia Commonwealth University.
7
<PAGE>
THE GLOBAL PORTFOLIO
- --------------------------------------------------------------------------------
Introducing the New Global Portfolio
- --------------------------------------------------------------------------------
Today's global stock markets can offer investors unprecedented opportunities for
long-term growth. However, the knowledge, experience and hard work required for
successful global investing can be challenging even for seasoned investors.
That's why we are pleased to announce the introduction of the sixth Portfolio of
the Concert Allocation Series Inc. -- The Global Portfolio.
Launched on March 9, 1998, the Global Portfolio seeks capital appreciation by
investing 100% of its assets in global, international and U.S. stock funds
managed by Smith Barney. The Portfolio is the most aggressively managed one of
the Concert Allocation Series and has been designed for investors who are
willing to tolerate short-term market fluctuations for potential long-term
gains. In addition, please note that investing in international markets involves
certain risks including but not limited to illiquid markets and political and
economic instability. Before investing overseas, you should understand the risks
as well as the opportunities and be prepared for substantial market volatility,
especially when investing in emerging markets.
- --------------------------------------------------------------------------------
Portfolio's Target Allocation
- --------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
100% Stock Funds
The Global Portfolio seeks capital appreciation by investing 100% of its assets
in international and U.S. stock funds.
- --------------------------------------------------------------------------------
The Global Portfolio at a Glance
- --------------------------------------------------------------------------------
Investment Objective
The Global Portfolio seeks capital appreciation.
Key Smith Barney Funds in the Global Portfolio Include:
Smith Barney World Funds, Inc. -- International Equity Portfolio seeks total
return from growth of capital and income by investing in a diversified portfolio
of equity securities of established non-U.S. companies.
Portfolio Manager
Jeffrey J. Russell is a Managing Director of Smith Barney and portfolio manager
of the Smith Barney International Equity Portfolio. Prior to joining the firm in
1990, he worked for Drexel Burnham Lambert. Mr. Russell holds an undergraduate
degree from Massachusetts Institute of Technology and a M.B.A. from the
University of Pennsylvania's Wharton School of Finance.
8
<PAGE>
Smith Barney Hansberger Global Value Fund seeks long-term capital growth by
investing in the stocks of U.S. and foreign companies that are believed to be
undervalued by the fund's management team.
Smith Barney Hansberger Global Small Cap Value Fund seeks long-term capital
growth by investing in the stocks of U.S. and foreign companies with relatively
small market capitalizations that are believed to be undervalued by the fund's
management team.
Portfolio Management Team
Thomas Hansberger, CFA, CIC, is Chairman and Chief Executive Officer of
Hansberger Global Investors ("HGI"). Before forming HGI, he served as Chairman,
President and Chief Executive Officer of Templeton Worldwide, Inc.
James E. Chaney is Chief Investment Officer of HGI. Prior to joining the firm,
he was Executive Vice President for the Templeton organization and a senior
member of its Portfolio Management/Strategy Committee.
Lauretta (Retz) Reeves, CFA, serves as Senior Portfolio Manager and Director of
Research at HGI. Prior to joining the firm, she was Senior Vice President at
Templeton in its research and portfolio management area.
- --------------------------------------------------------------------------------
Smith Barney Small Cap Blend Fund, Inc. (Please refer to page seven for Fund
objective and portfolio manager biography.)
- --------------------------------------------------------------------------------
Smith Barney Large Capitalization Growth Fund (Please refer to page seven for
Fund objective and portfolio manager biography.)
- --------------------------------------------------------------------------------
The Target Asset Allocation set forth on pages eight and nine represents an
approximate mix of investments for the Global 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 Inc.'s Board of Directors.
9
<PAGE>
THE HIGH GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[The following information was represented
as a pie chart in the printed material.]
10% Bond Funds
90% Stock Funds
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 Inc., the High Growth Portfolio invests a large
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
- --------------------------------------------------------------------------------
1997 turned out to be another stellar year for the U.S. stock market. For the
first time ever, the U.S. stock market posted three consecutive years of gains
in excess of 20%. Stable economic growth, robust corporate earnings growth and
subdued inflation helped fuel the U.S. stock market's climb. So far in 1998, the
bull market in U.S. stocks has continued. Moreover, large-capitalization,
blue-chip domestic stocks that dominate the popular market averages did better
than most other types of stocks.
Yet behind the good news, stock market volatility also increased markedly during
the past twelve months. The currency and economic crisis in Southeast Asia that
started in the summer negatively affected the U.S. stock market. In the third
quarter of 1997, the Dow Jones Industrial Average registered its second-largest
point decline and its single largest daily gain within a three week period in
the middle of the third quarter. (The Dow Jones Industrial Average, or DJIA, is
a price-weighted average of 30 actively traded blue chip stocks of primarily
industrial companies.)
International markets experienced diametrically opposite performances in the
first and second halves of the year ended January 31, 1998. International
markets achieved solid first half returns on the coattails of the ebullient U.S.
capital markets. The second half was marked by repeated crises as the Southeast
Asian currency collapse radiated outward, engulfing not only some of the
strongest regional economies such as Taiwan and Singapore, but also ultimately
crushing the Korean economy and its currency. And the effects on Japan, the
largest Asian stock market, economy and a major regional lender, were an added
negative to an already deteriorating local Japanese outlook.
Because the ultimate impact of the Asian crisis on U.S. exports and corporate
earnings is still unknown, the rest of 1998 promises to be a year of greater
uncertainty and higher market volatility. As noted in this report's letter to
shareholders, we believe that the problems of Asia may slow growth more
dramatically than recent earnings reports, or stock market increases, may
suggest. The profit growth of many companies has been cast into doubt. With
current valuations in the stock market at fairly high levels, investors may be
intolerant of any earnings disappointment.
The High Growth Portfolio's Class A shares generated a total return of 8.25% for
the year ended January 31, 1998, before the effect of any sales charges is
deducted. The chart that appears on page 14 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
change from year to year. Each Concert Allocation Series Portfolio is a
long-term investment that has been designed to reduce overall market volatility
and will usually achieve a rate of return roughly in the middle of the asset
classes in which it invests.
- --------------------------------------------------------------------------------
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 Inc.'s Board of Directors.
10
<PAGE>
The Concert Allocation Series High Growth Portfolio Breakdown (as of 1/31/98)
[The following information was represented
as a pie chart in the printed material.]
-----------------------------------------
10% Smith Barney
Aggressive Growth Fund Inc.
-----------------------------------------
Top 5 Holdings:
Intel Corp.
Tyco International Ltd.
Quantum Corp. Delaware
CBS Corp.
Forest Laboratories Inc., Class A Shares
-----------------------------------------
-----------------------------------------
10% Smith Barney
Investment Funds Inc. -
Smith Barney Special Equities Fund
-----------------------------------------
Top 5 Holdings:
Starbucks Corp.
WinStar Communications, Inc.
Safeskin Corp.
Chancellor Media Corp.
Univision Communications Inc.
-----------------------------------------
-----------------------------------------
20% Smith Barney World Funds, Inc.
International Equity Portfolio
-----------------------------------------
Top 5 Holdings:
Telefonaktiebolaget LM Ericsson
Novartis AG
Misys PLC
Nokia Oyj
Bank of Ireland
-----------------------------------------
-----------------------------------------
5% Smith Barney Funds, Inc.-
Large Cap Value Fund
-----------------------------------------
Top 5 Holdings:
Bristol-Myers Squibb Co.
American Home Products Corp.
Sprint Corp.
Xerox Corp.
Unilever NV
-----------------------------------------
-----------------------------------------
10% Smith Barney Investment Funds
Inc.- Concert Peachtree Growth Fund
-----------------------------------------
Top 5 Holdings:
Tyco International Ltd.
Crane Co.
Conseco Inc.
Compaq Computer Corp.
General Electric Co.
-----------------------------------------
-----------------------------------------
10% Smith Barney Investment Trust-
Smith Barney Large Capitalization
Growth Fund
-----------------------------------------
Top 5 Holdings:
The Walt Disney Co.
The Coca-Cola Co.
Wells Fargo & Co.
Intel Corp.
Texas Instruments Inc.
-----------------------------------------
-----------------------------------------
5% Smith Barney Equity Funds-
Smith Barney Growth & Income Fund
-----------------------------------------
Top 5 Holdings:
Hewlett-Packard Co.
Eli Lilly & Co.
The Walt Disney Co.
Mercury General Corp.
General Electric Co.
-----------------------------------------
-----------------------------------------
15% Smith Barney
Small Cap Blend Fund, Inc.
-----------------------------------------
Top 5 Holdings:
Arterial Vascular Engineering, Inc.
Century Telephone Enterprises, Inc.
Rio Hotel & Casino, Inc.
HSN Inc.
Watson Pharmaceuticals, Inc.
-----------------------------------------
-----------------------------------------
10% Smith Barney Income Funds-
Smith Barney High Income Fund
-----------------------------------------
Top 5 Holdings:
Time Warner Inc.
Unisys Corp.
HMH Properties, Inc.
Cablevision Systems Corp.
First Nationwide Bank
-----------------------------------------
-----------------------------------------
5% Smith Barney Investment Funds Inc.-
Smith Barney Managed Growth Fund
-----------------------------------------
Top 5 Holdings:
Forest Laboratories Inc., Class A Shares
Amgen. Inc.
Tupperware Corp.
United Healthcare Corp.
Wellpoint Health Networks Inc.
-----------------------------------------
11
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.41 $12.97 $0.13 $0.33 8.25%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.41 0.20 0.04 11.04+
=====================================================================================
Total $0.33 $0.37
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.41 $12.95 $0.05 $0.33 7.44%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.41 0.07 0.04 9.91+
=====================================================================================
Total $0.12 $0.37
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.42 $12.96 $0.05 $0.33 7.44%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.42 0.07 0.04 10.00+
=====================================================================================
Total $0.12 $0.37
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.41 $12.97 $0.17 $0.33 8.58%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 12.24 12.41 0.00 0.00 1.39+
=====================================================================================
Total $0.17 $0.33
=====================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
12
<PAGE>
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 8.25% 7.44% 7.44% 8.58%
- --------------------------------------------------------------------------------
Inception*-1/31/98 9.71 8.73 8.77 9.69
================================================================================
With Sales Charge(2)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 2.86% 2.44% 6.44% 8.58%
- --------------------------------------------------------------------------------
Inception*-1/31/98 6.91 6.86 8.77 9.69
================================================================================
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 1/31/98) 20.20%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/98) 18.09
- --------------------------------------------------------------------------------
Class C (Inception* through 1/31/98) 18.18
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/98) 10.08
================================================================================
(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 for
Class Z shares is January 17, 1997.
13
<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 Smith Barney
High Yield Market Index
- --------------------------------------------------------------------------------
February 5, 1996 -- January 31, 1998 (unaudited)
[Line chart]
<TABLE>
<CAPTION>
Standard & Salomon
High Growth High Growth High Growth Poor's 500 Brothers
Portfolio - Portfolio - Portfolio - Composite Russell MSCI EAFE High Yield
Class A Class B Class C Stock Index 2000 Index Index Market Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9500 10000 10000 10000 10000 10000 10000
4/96 10042 10026 10426 10340 11085 10552 10009
7/96 9142 9083 9466 10175 10084 10119 10208
10/96 9791 9719 10128 11277 10916 10311 10676
1/97 10549 10491 10900 12630 11897 10220 11049
4/97 9996 9998 10398 12935 11092 10480 11201
7/97 11671 11716 12125 15476 13452 11968 11886
10/97 11339 11353 11753 14894 14119 10796 12221
1/31/98 11419 11409 11818 16652 13384 12495 12345
</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 January 31, 1998. 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 Smith Barney 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.
14
<PAGE>
THE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[The following information was represented
as a pie chart in the printed material.]
30% Bond Funds
70% Stock Funds
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 Inc., the Growth Portfolio invests a large
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.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
1997 turned out to be another stellar year for the U.S. stock market. For the
first time ever, the U.S. stock market posted three consecutive years of gains
in excess of 20%. Stable economic growth, robust corporate earnings growth and
subdued inflation helped fuel the U.S. stock market's climb. So far in 1998, the
bull market in U.S. stocks has continued. Moreover, large-capitalization,
blue-chip domestic stocks that dominate the popular market averages did better
than most other types of stocks.
Yet behind the good news, stock market volatility also increased markedly the
past twelve months. The currency and economic crisis in Southeast Asia that
started in the summer negatively affected the U.S. stock market. In the third
quarter of 1997, the Dow Jones Industrial Average registered its second-largest
point decline and its single largest daily gain within a three week period in
the middle of the third quarter. (The Dow Jones Industrial Average, or DJIA, is
a price-weighted average of 30 actively traded blue chip stocks of primarily
industrial companies.)
International markets experienced diametrically opposite performances in the
first and second halves of the year ended January 31, 1998. International
markets achieved solid first half returns on the coattails of the ebullient U.S.
capital markets. The second half was marked by repeated crises as the Southeast
Asian currency collapse radiated outward, engulfing not only some of the
strongest regional economies such as Taiwan and Singapore, but also ultimately
crushing the Korean economy and its currency. And the effects on Japan, the
largest Asian stock market, economy and a major regional lender, were an added
negative to an already deteriorating local Japanese outlook.
Because the ultimate impact of the Asian crisis on U.S. exports and corporate
earnings is still unknown, the rest of 1998 promises to be a year of greater
uncertainty and higher market volatility. As noted in this report's letter to
shareholders, we believe that the problems of Asia may slow growth more
dramatically than recent earnings reports, or stock market increases, may
suggest. The profit growth of many companies has been cast into doubt. With
current valuations in the stock market at fairly high levels, investors may be
intolerant of any earnings disappointment.
During the second half of 1997, bond prices rose because of declining interest
rates and the potential economic slowdown from the problems in Southeast Asia.
For the year ended January 31, 1998, the Lehman Brothers Aggregate Bond Index
returned 11.17%. (The Lehman Brothers Aggregate Bond Index is composed of the
Government/Corporate Bond Index, the Asset-Backed Securities Index and includes
U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed
issues.)
The Portfolio's Class A shares generated a total return of 11.82% for the year
ended January 31, 1998, before the effect of any sales charges is deducted. The
chart that appears on page 19 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
change from year to year. Each Concert Allocation Series Portfolio is a
long-term investment that has been designed to reduce overall market volatility
and will usually achieve a rate of return roughly in the middle of the asset
classes in which it invests.
- --------------------------------------------------------------------------------
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 Inc.'s Board of Directors.
15
<PAGE>
The Concert Allocation Series Growth Portfolio Breakdown (as of 1/31/98)
--------------------------------------
10% Smith Barney Investment Funds
Inc.-Concert Peachtree Growth Fund
--------------------------------------
Top 5 Holdings:
Tyco International Ltd.
Crane Co.
Conseco Inc.
Compaq Computer Corp.
General Electric Co.
--------------------------------------
--------------------------------------
10% Smith Barney Funds, Inc.-
Large Cap Value Fund
--------------------------------------
Top 5 Holdings:
Bristol-Myers Squibb Co.
American Home Products Corp.
Sprint Corp.
Xerox Corp.
Unilever NV
--------------------------------------
--------------------------------------
5% Smith Barney Investment Funds Inc.-
Smith Barney Managed Growth Fund
--------------------------------------
Top 5 Holdings:
Forest Laboratories Inc., Class A Shares
Amgen. Inc.
Tupperware Corp.
United Healthcare Corp.
Wellpoint Health Networks Inc.
--------------------------------------
--------------------------------------
10% Smith Barney World Funds,
Inc.- International Equity Portfolio
--------------------------------------
Top 5 Holdings:
Telefonaktiebolaget LM Ericsson
Novartis AG
Misys PLC
Nokia Oyj
Bank of Ireland
--------------------------------------
--------------------------------------
10% Smith Barney
Aggressive Growth Fund Inc.
--------------------------------------
Top 5 Holdings:
Intel Corp.
Tyco International Ltd.
Quantum Corp. Delaware
CBS Corp.
Forest Laboratories Inc., Class A Shares
--------------------------------------
--------------------------------------
5% Smith Barney Investment Funds Inc.-
Smith Barney Special Equities Fund
--------------------------------------
Top 5 Holdings:
Starbucks Corp.
WinStar Communications, Inc.
Safeskin Corp.
Chancellor Media Corp.
Univision Communications Inc.
--------------------------------------
--------------------------------------
10% Smith Barney Equity Funds-
Smith Barney Growth & Income Fund
--------------------------------------
Top 5 Holdings:
Hewlett-Packard Co.
Eli Lilly &Co.
The Walt Disney Co.
Mercury General Corp.
General Electric Co.
--------------------------------------
--------------------------------------
10% Smith Barney Income Funds-
Smith Barney High Income Fund
--------------------------------------
Top 5 Holdings:
Time Warner Inc.
Unisys Corp.
HMHProperties, Inc.
Cablevision Systems Corp.
First Nationwide Bank
--------------------------------------
--------------------------------------
10% Smith Barney Investment
Funds Inc-Smith Barney
Investment Grade Bond Fund
--------------------------------------
Top 5 Holdings:
US Treasury Strip
NationsBank
The Walt Disney Co.
IBM Corp.
Amgen Inc.
--------------------------------------
--------------------------------------
5% Smith Barney Investment
Trust-Smith Barney Large
Capitalization Growth Fund
--------------------------------------
Top 5 Holdings:
The Walt Disney Co.
The Coca-Cola Co.
Wells Fargo & Co.
Intel Corp.
Texas Instruments Inc.
--------------------------------------
--------------------------------------
10% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
--------------------------------------
Sector Breakdown:
24.0% U.S. Treasuries
44.2% U.S. Government Agencies
31.8% Other
Credit Quality:
100% AAA-Rated
Average Maturity:
15.1 Years
--------------------------------------
--------------------------------------
5% Smith Barney Small Cap
Blend Fund, Inc.
--------------------------------------
Top 5 Holdings:
Arterial Vascular Engineering, Inc.
Century Telephone Enterprises, Inc.
Rio Hotel & Casino, Inc.
HSN Inc.
Watson Pharmaceuticals, Inc.
--------------------------------------
16
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.32 $12.99 $0.32 $0.46 11.82%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.32 0.31 0.02 11.08+
=====================================================================================
Total $0.63 $0.48
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.33 $13.00 $0.21 $0.46 10.93%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.33 0.22 0.02 10.32+
=====================================================================================
Total $0.43 $0.48
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.33 $13.00 $0.21 $0.46 10.92%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.33 0.22 0.02 10.32+
=====================================================================================
Total $0.43 $0.48
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.32 $12.99 $0.35 $0.46 12.08%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 12.18 12.32 0.00 0.00 1.15+
=====================================================================================
Total $0.35 $0.46
=====================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
17
<PAGE>
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 11.82% 10.93% 10.92% 12.08%
- --------------------------------------------------------------------------------
Inception*-1/31/98 11.53 10.70 10.70 12.85
================================================================================
- --------------------------------------------------------------------------------
With Sales Charge(2)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 6.22% 5.93% 9.92% 12.08%
- --------------------------------------------------------------------------------
Inception*-1/31/98 8.69 8.87 10.70 12.85
================================================================================
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 1/31/98) 24.21%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/98) 22.38
- --------------------------------------------------------------------------------
Class C (Inception* through 1/31/98) 22.37
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/98) 13.37
================================================================================
(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 for
Class Z shares is January 17, 1997.
18
<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 -- January 31, 1998 (unaudited)
[Line Chart]
<TABLE>
<CAPTION>
Standard
& Poor's
500 Lehman
Growth Growth Growth Composite Russell MSCI Government/
Portfolio-Class Portfolio-Class Portfolio-Class Stock 2000 EAFE Corporate
A B C Index Index INDEX Bond Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9500 10000 10000 10000 10000 10000 10000
4/96 9775 9772 10172 10340 11085 10552 9639
7/96 9258 9225 9613 10175 10084 10119 9473
10/96 9875 9833 10242 11277 10916 10311 9064
1/97 10552 10532 10932 12630 11897 10220 9118
4/97 10270 10310 10740 12935 11092 10400 9160
7/97 11700 11787 12187 15476 13452 11968 9643
10/97 11503 11554 11963 14894 14119 10796 9839
1/31/98 11800 11838 12237 16652 13384 12495 9934
</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 January 31, 1998. 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.
19
<PAGE>
THE BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[The following information was represented
as a pie chart in the printed material.]
50% Bond Funds
50% Stock Funds
The Balanced Portfolio seeks a balance of capital growth and income by placing
equal emphasis on funds investing in stocks and bonds.
- --------------------------------------------------------------------------------
The Balanced Portfolio
The Balanced Portfolio seeks long-term growth of capital and income, placing
equal emphasis on current income and capital appreciation. The Balanced
Portfolio, as its name states, divides its assets roughly between equity and
fixed-income mutual funds. The equity funds are primarily large-capitalization,
dividend-paying stock funds. The fixed income portion of the Portfolio is mainly
invested in funds that invest in U.S. government and Agency securities, as well
as mortgage-backed securities.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
1997 turned out to be another stellar year for the U.S. stock market. For the
first time ever, the U.S. stock market posted three consecutive years of gains
in excess of 20%. Stable economic growth, robust corporate earnings growth and
subdued inflation helped fuel the U.S. stock market's climb. So far in 1998, the
bull market in U.S. stocks has continued. Moreover, large-capitalization,
blue-chip domestic stocks that dominate the popular market averages did better
than most other types of stocks.
Yet behind the good news, stock market volatility also increased markedly the
past twelve months. The currency and economic crisis in Southeast Asia that
started in the summer negatively affected the U.S. stock market. In the third
quarter of 1997, the Dow Jones Industrial Average registered its second-largest
point decline and its single largest daily gain within a three week period in
the middle of the third quarter. (The Dow Jones Industrial Average, or DJIA, is
a price-weighted average of 30 actively traded blue chip stocks of primarily
industrial companies.)
Because the ultimate impact of the Asian crisis on U.S. exports and corporate
earnings is still unknown, the rest of 1998 promises to be a year of greater
uncertainty and higher market volatility. As noted in this report's letter to
shareholders, we believe that the problems of Asia may slow growth more
dramatically than recent earnings reports, or stock market increases, may
suggest. The profit growth of many companies has been cast into doubt. With
current valuations in the stock market at fairly high levels, investors may be
intolerant of any earnings disappointment.
In contrast, the uncertainties surrounding the world's stock markets helped
ignite a bond market rally in the closing months of 1997. Following the sudden
collapse of many Southeast Asian stock markets and the currency devaluations of
several key economies such as Korea and Indonesia, many investors around the
world sought out the stability and liquidity of bonds. The U.S. dollar was a
clear beneficiary of this shift in investor sentiment and with the help of an
influx of foreign capital, the yield on the benchmark 30-year U.S. Treasury bond
fell to a historic low of 5.74% on January 5, 1998. Moreover, the continued
decline of interest rates has been supported by a moderately expanding U.S.
economy with a near absence of inflationary pressure.
The Portfolio's Class A shares generated a total return of 11.59% for the year
ended January 31, 1998, before the effect of any sales charges is deducted. The
chart that appears on page 24 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
change from year to year. Each Concert Allocation Series Portfolio is a
long-term investment that has been designed to reduce overall market volatility
and will usually achieve a rate of return roughly in the middle of the asset
classes in which it invests.
- --------------------------------------------------------------------------------
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 Inc.'s Board of Directors.
20
<PAGE>
The Concert Allocation Series Balanced Portfolio Breakdown (as of 1/31/98)
[The following information was represented
as a pie chart in the printed material.]
----------------------------------
5% Smith Barney Equity Funds-
Smith Barney Growth & Income Fund
----------------------------------
Top 5 Holdings:
Hewlett-Packard Co.
Eli Lilly & Co.
The Walt Disney Co.
Mercury General Corp.
General Electric Co.
----------------------------------
----------------------------------
5% Smith Barney Funds, Inc.-
Large Cap Value Fund
----------------------------------
Top 5 Holdings:
Bristol-Myers Squibb Co.
American Home Products Corp.
Sprint Corp.
Xerox Corp.
Unilever NV
----------------------------------
----------------------------------
10% Smith Barney Income
Funds-Smith Barney Premium
Total Return Fund
----------------------------------
Top 5 Holdings:
SLH Corp.
Loews Corp.
Lehman Brothers Holdings Inc.
Bristol-Myers Squibb Co.
MCI Communications Corp.
----------------------------------
----------------------------------
15% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
----------------------------------
Sector Breakdown:
28.0% U.S. Government Agencies
5.5% U.S. Treasuries
26.6% High Yield Corporate Bonds
32.9% Foreign Government Bonds
7.0% Other
Top 5 Holdings:
GNMA
FHLMC
CS First Boston Corp.
U.K. Treasury
Deutschland Republic
Top 5 Country Holdings:
United States Germany
United Kingdom Spain
Ireland
Average Weighted Maturity:
5.0 Years
----------------------------------
----------------------------------
10% Smith Barney World Funds,
Inc.-International Balanced
Portfolio
----------------------------------
Top 5 Country Holdings:
Japan Italy
United Kingdom Sweden
Germany
----------------------------------
----------------------------------
10% Smith Barney
Managed Governments Fund Inc.
----------------------------------
Sector Breakdown:
20.4% U.S. Treasuries
54.3% Mortgage-Backed Securities
25.3% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
12.7 Years
----------------------------------
----------------------------------
5% Smith Barney Funds, Inc.-
Short-Term U.S. Treasury
Securities Fund
----------------------------------
Sector Breakdown:
98.8% U.S. Treasuries
1.2% Repurchase Agreement
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
2.4 Years
----------------------------------
----------------------------------
10% Smith Barney
Appreciation Fund Inc.
----------------------------------
Top 5 Holdings:
Allstate Corp.
Johnson & Johnson
General Electric Co.
Bristol-Myers Squibb Co.
Mobil Corp.
----------------------------------
----------------------------------
10% Smith Barney
Fundamental Value Fund Inc.
----------------------------------
Top 5 Holdings:
Aluminum Co. of America
Wal-Mart Stores, Inc.
Adobe Systems Inc.
American International Group, Inc.
AMR Corp.
----------------------------------
----------------------------------
10% Smith Barney Income Funds-
Smith Barney Convertible Fund
----------------------------------
Top 5 Holdings:
Cendant Corp.
Nascotech Inc.
International Paper Co.
Thermo Electron Corp.
ALZA Corp.
----------------------------------
----------------------------------
5% Smith Barney World Funds, Inc.-
Global Government Bond Portfolio
----------------------------------
Top 5 Country Holdings:
United States
Japan
Germany
United Kingdom
Italy
----------------------------------
----------------------------------
5% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
----------------------------------
Sector Breakdown:
24.0% U.S. Treasuries
44.2% U.S. Government Agencies
31.8% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
15.1 Years
----------------------------------
21
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.14 $12.62 $0.54 $0.36 11.59%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.14 0.45 0.00 10.64+
=====================================================================================
Total $0.99 $0.36
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.14 $12.61 $0.45 $0.36 10.67%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.14 0.37 0.00 9.90+
=====================================================================================
Total $0.82 $0.36
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.14 $12.61 $0.45 $0.36 10.67%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.40 12.14 0.37 0.00 9.90+
=====================================================================================
Total $0.82 $0.36
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $12.13 $12.61 $0.57 $0.36 11.82%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 12.10 12.13 0.00 0.00 0.25+
=====================================================================================
Total $0.57 $0.36
=====================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
22
<PAGE>
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 11.59% 10.67% 10.67% 11.82%
- --------------------------------------------------------------------------------
Inception*-1/31/98 11.19 10.36 10.36 11.62
================================================================================
With Sales Charge(2)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 6.00% 5.67% 9.67% 11.82%
- --------------------------------------------------------------------------------
Inception*-1/31/98 8.36 8.52 10.36 11.62
================================================================================
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 1/31/98) 23.46%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/98) 21.63
- --------------------------------------------------------------------------------
Class C (Inception* through 1/31/98) 21.63
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/98) 12.09
================================================================================
(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 for
Class Z shares is January 17, 1997.
23
<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 Smith Barney One-Year Treasury Bill Index and Salomon Smith
Barney World Government Bond Index
- --------------------------------------------------------------------------------
February 5, 1996 -- January 31, 1998 (unaudited)
[Line chart]
<TABLE>
<CAPTION>
Standard Salomon
& Poor's Lehman S/B Salomon
500 Government/ One-Year S/B
Composite Corporation Treasury World
Balanced Balanced Balanced Stock Bond Bill Government
Portfolio-Class A Portfolio-Class B Portfolio-Class C Index Index Index Bond Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9500 10000 10000 10000 10000 10000 10000
4/96 9533 9520 9920 10340 9639 10078 9895
7/96 9513 9486 9881 10175 9473 10214 10167
10/96 10062 10037 10437 11277 9064 10410 10440
1/97 10511 10490 10890 12630 9118 10551 10568
4/97 10562 10615 11015 12935 9160 10683 10760
7/97 11587 11664 12064 15476 9643 10892 11204
10/97 11499 11551 11951 14894 9839 11051 11479
1/31/98 11729 11763 12163 16652 9934 11053 11558
</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 January 31, 1998. 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 Smith Barney One-Year Treasury
Bill Index consists of one 1-Year United States Treasury bill whose return is
tracked until its maturity. The Salomon Smith Barney 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.
24
<PAGE>
THE CONSERVATIVE PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[The following information was represented
as a pie chart in the printed material.]
70% Bond Funds
30% Stock Funds
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 Inc., 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
- --------------------------------------------------------------------------------
During the second half of 1997, bond prices rose because of declining interest
rates and the potential economic slowdown from the problems in Southeast Asia.
For the year ended January 31, 1998, the Lehman Brothers Aggregate Bond Index
returned 11.17%. (The Lehman Brothers Aggregate Bond Index is composed of the
Government/Corporate Bond Index, the Asset-Backed Securities Index and includes
U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed
issues.)
The uncertainties surrounding the world's stock markets helped ignite a bond
market rally in the closing months of 1997. Following the sudden collapse of
many Southeast Asian stock markets and the currency devaluations of several key
economies such as Korea and Indonesia, many investors around the world sought
out the stability and liquidity of bonds. The U.S. dollar was a clear
beneficiary of this shift in investor sentiment and with the help of an influx
of foreign capital, the yield on the benchmark 30-year U.S. Treasury bond fell
to a historic low of 5.74% on January 5, 1998. Moreover, the continued decline
of interest rates has been supported by a moderately expanding U.S. economy with
a near absence of inflationary pressure.
The Portfolio's Class A shares generated a total return of 11.70% for the year
ended January 31, 1998, before the effect of any sales charges was deducted. The
chart that appears on page 29 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
change from year to year. Each Concert Allocation Series Portfolio is a
long-term investment that has been designed to reduce overall market volatility
and will usually achieve a rate of return roughly in the middle of the asset
classes in which it invests.
- --------------------------------------------------------------------------------
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 Inc.'s Board of Directors.
25
<PAGE>
The Concert Allocation Series Conservative Portfolio Breakdown (as of 1/31/98)
-----------------------------------
15% Smith Barney
Managed Governments Fund Inc.
-----------------------------------
Sector Breakdown:
20.4% U.S. Treasuries
54.3% Mortgage-Backed Securities
25.3% Other
Credit Quality:
100% AAA-Rated
Average Maturity:
12.7 Years
-----------------------------------
-----------------------------------
10% Smith Barney Income Funds-
Smith Barney Convertible Fund
-----------------------------------
Top 5 Holdings:
Cendant Corp.
Nascotech Inc.
International Paper Co.
Thermo Electron Corp.
ALZA Corp.
-----------------------------------
-----------------------------------
5% Smith Barney Income Funds-
Smith Barney Premium Total
Return Fund
-----------------------------------
Top 5 Holdings:
SLHCorp.
Loews Corp.
Lehman Brothers Holding Inc.
Bristol-Myers Squibb Co.
MCI Communications Corp.
-----------------------------------
-----------------------------------
20% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
-----------------------------------
Sector Breakdown:
28.0% U.S. Government Agencies
5.5% U.S. Treasuries
26.6% High Yield Corporate Bonds
32.9% Foreign Government Bonds
7.0% Other
Top 5 Holdings:
GNMA
FHLMC
CS FirstBoston Corp.
U.K. Treasury
Deutschland Republic
Top 5 Country Holdings:
United States Germany
United Kingdom Spain
Ireland
Average Weighted Maturity:
5.0 Years
-----------------------------------
-----------------------------------
5% Smith Barney
Fundamental Value Fund Inc.
-----------------------------------
Top 5 Holdings:
Aluminum Co. of America
Wal-Mart Stores, Inc.
Adobe Systems Inc.
American International
Group, Inc.
AMRCorp.
-----------------------------------
-----------------------------------
10% Smith Barney
Appreciation Fund Inc.
-----------------------------------
Top 5 Holdings:
Allstate Corp.
Johnson & Johnson
General Electric Co.
Bristol-Myers Squibb Co.
Mobil Corp.
-----------------------------------
-----------------------------------
10% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
-----------------------------------
Sector Breakdown:
24.0% U.S. Treasuries
44.2% U.S. Government Agencies
31.8% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
15.1 Years
-----------------------------------
-----------------------------------
5% Smith Barney Funds, Inc.-
Short-Term U.S. Treasury Securities
Fund
-----------------------------------
Sector Breakdown:
98.8% U.S. Treasuries
1.2% Repurchase Agreement
Credit Quality:
100% AAA-Rated
Average Maturity:
2.4 Years
-----------------------------------
-----------------------------------
10% Smith Barney Income
Funds-Smith Barney
High Income Fund
-----------------------------------
Top 5 Holdings:
Time Warner Inc.
Unisys Corp.
HMH Properties, Inc.
Cablevision Systems Corp.
First Nationwide Bank
-----------------------------------
-----------------------------------
5% Smith Barney World Funds,
Inc.-International Balanced
Portfolio
-----------------------------------
Top 5 Country Holdings:
Japan
United Kingdom
Germany
Italy
Sweden
-----------------------------------
-----------------------------------
5% Smith Barney World Funds,
Inc.-Global Government Bond
Portfolio
-----------------------------------
Top 5 Country Holdings:
United States
Japan
Germany
United Kingdom
Italy
-----------------------------------
26
<PAGE>
THE CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $11.90 $12.17 $0.69 $0.40 11.70%
=====================================================================================
Inception*-1/31/97 11.46 11.90 0.52 0.00 8.57+
- -------------------------------------------------------------------------------------
Total $1.21 $0.40
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $11.89 $12.16 $0.63 $0.40 11.21%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.89 0.47 0.00 8.03+
=====================================================================================
Total $1.10 $0.40
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $11.89 $12.16 $0.64 $0.40 11.25%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.89 0.47 0.00 8.08+
=====================================================================================
Total $1.11 $0.40
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $11.90 $12.17 $0.73 $0.40 12.09%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.89 11.90 0.00 0.00 0.08+
=====================================================================================
Total $0.73 $0.40
=====================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
27
<PAGE>
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 11.70% 11.21% 11.25% 12.09%
- --------------------------------------------------------------------------------
Inception*-1/31/98 10.19 9.68 9.72 11.71
================================================================================
With Sales Charge(2)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 6.68% 6.71% 10.25% 12.09%
- --------------------------------------------------------------------------------
Inception*-1/31/98 7.67 7.83 9.72 11.71
================================================================================
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 1/31/98) 21.27%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/98) 20.14
- --------------------------------------------------------------------------------
Class C (Inception* through 1/31/98) 20.24
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/98) 12.18
================================================================================
(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 for
Class Z shares is January 17, 1997.
28
<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 Smith Barney High Yield Market Index
and Salomon Smith Barney One-Year Treasury Bill Index
- --------------------------------------------------------------------------------
February 5, 1996 -- January 31, 1998 (unaudited)
[Line chart omitted]
<TABLE>
<CAPTION>
Standard
& Poor's
Conservative Conservative Conservative 500
Portfolio-Class A Portfolio-Class B Portfolio-Class C Composite Stock Index
<S> <C> <C> <C> <C>
2/5/96 9550 10000 10000 10000
4/96 9526 9515 9872 10340
7/96 9560 9542 9888 10175
10/96 10039 10023 10385 11277
1/97 10369 10353 10708 12630
4/97 10424 10448 10854 12935
7/97 11277 11323 11731 15476
10/97 11581 11614 12024 14894
1/31/98 11581 11614 12024 16652
</TABLE>
Salomon Salomon
S/B High S/B One-
Lehman Yield Year
Government/Corporation Market Treasury
Bond Index Index Index
2/5/96 10000 10000 10000
4/96 9639 10009 10078
7/96 9473 10206 10214
10/96 9064 10676 10410
1/97 9118 11049 10551
4/97 9160 11201 10683
7/97 9643 11886 10892
10/97 9839 12221 11051
1/31/98 9934 12345 11053
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 January 31, 1998. 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 Smith Barney High Yield Market
Index covers a significant portion of the below-investment-grade U.S. corporate
bond market. The Salomon Smith Barney One-Year Treasury Bill Index consists of
one 1-Year United States Treasury bill whose return is tracked until its
maturity. These indices are unmanaged and are not subject to the same management
and trading expenses as a mutual fund. The performance of the Portfolio's other
classes may be greater or less than the performance indicated on this chart,
depending on whether greater or lesser sales charges and fees were incurred by
shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
29
<PAGE>
THE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[The following information was represented
as a pie chart in the printed material.]
90% Bond Funds
10% Stock Funds
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 Inc., 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
- --------------------------------------------------------------------------------
During the second half of 1997, bond prices rose because of declining interest
rates and the potential economic slowdown from the problems in Southeast Asia.
For the year ended January 31, 1998, the Lehman Brothers Aggregate Bond Index
returned 11.17%. (The Lehman Brothers Aggregate Bond Index is composed of the
Government/Corporate Bond Index, the Asset-Backed Securities Index and includes
U.S. Treasury issues, agency issues, corporate bond issues and mortgage-backed
issues.)
The uncertainties surrounding the world's stock markets helped ignite a bond
market rally in the closing months of 1997. Following the sudden collapse of
many Southeast Asian stock markets and the currency devaluations of several key
economies such as Korea and Indonesia, many investors around the world sought
out the stability and liquidity of bonds. The U.S. dollar was a clear
beneficiary of this shift in investor sentiment and with the help of an influx
of foreign capital, the yield on the benchmark 30-year U.S. Treasury bond fell
to a historic low of 5.74% on January 5, 1998. Moreover, the continued decline
of interest rates has been supported by a moderately expanding U.S. economy with
a near absence of inflationary pressure.
The Portfolio's Class A shares generated a total return of 11.44% for the year
ended January 31, 1998, before the effect of any sales charges was deducted. The
chart that appears on page 34 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
change from year to year. Each Concert Allocation Series Portfolio is a
long-term investment that has been designed to reduce overall market volatility
and will usually achieve a rate of return roughly in the middle of the asset
classes in which it invests.
- --------------------------------------------------------------------------------
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 Inc.'s Board of Directors.
30
<PAGE>
The Concert Allocation Series Income Portfolio Breakdown (as of 1/31/98)
-----------------------------------
10% Smith Barney Funds, Inc.-Short-
Term U.S. Treasury Securities Fund
-----------------------------------
Sector Breakdown:
98.8% U.S. Treasuries
1.2% Repurchase Agreement
Credit Quality:
100% AAA-Rated
Average Maturity:
2.4 Years
-----------------------------------
-----------------------------------
15% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
-----------------------------------
Sector Breakdown:
24.0% U.S. Treasuries
44.2% U.S. Government Agencies
31.8% Other
Credit Quality:
100% AAA-Rated
Average Maturity:
15.1 Years
-----------------------------------
-----------------------------------
20% Smith Barney
Managed Governments Fund Inc.
-----------------------------------
Sector Breakdown:
20.4% U.S. Treasuries
54.3% Mortgage-Backed Securities
25.3% Other
Credit Quality:
100% AAA-Rated
Average Maturity:
12.7 Years
-----------------------------------
-----------------------------------
20% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
-----------------------------------
Sector Breakdown:
28.0% U.S. Government Agencies
5.5% U.S. Treasuries
26.6% High Yield Corporate Bonds
32.9% Foreign Government Bonds
7.0% Other
Top 5 Holdings:
GNMA
FHLMC
CSFirst Boston Corp.
U.K. Treasury
Deutschland Republic
Top 5 Country Holdings:
United States Germany
United Kingdom Spain
Ireland
Average Weighted Maturity:
5.0 Years
-----------------------------------
-----------------------------------
5% Smith Barney Income Funds-
Smith Barney Premium Total
Return Fund
-----------------------------------
Top 5 Holdings:
SLH Corp.
Loews Corp.
Lehman Brothers Holding Inc.
Bristol-Myers Squibb Co.
MCI Communications Corp.
-----------------------------------
-----------------------------------
5% Smith Barney
Appreciation Fund Inc.
-----------------------------------
Top 5 Holdings:
Allstate Corp.
Johnson & Johnson
General Electric Co.
Bristol-Myers Squibb Co.
Mobil Corp.
-----------------------------------
-----------------------------------
5% Smith Barney Income Funds-
Smith Barney Convertible Fund
-----------------------------------
Top 5 Holdings:
Cendant Corp.
Nascotech Inc.
International Paper Co.
Thermo Electron Corp.
ALZA Corp.
-----------------------------------
-----------------------------------
20% Smith Barney Income Funds-
Smith Barney High Income Fund
-----------------------------------
Top 5 Holdings:
Time Warner Inc.
Unisys Corp.
HMH Properties, Inc.
Cablevision Systems Corp.
First Nationwide Bank
-----------------------------------
31
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $11.53 $11.75 $0.77 $0.29 11.44%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.53 0.63 0.00 6.39+
=====================================================================================
Total $1.40 $0.29
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class B Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $11.53 $11.76 $0.70 $0.29 10.93%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.53 0.58 0.00 5.89+
=====================================================================================
Total $1.28 $0.29
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class C Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $11.53 $11.76 $0.71 $0.29 10.98%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.46 11.53 0.59 0.00 5.94+
=====================================================================================
Total $1.30 $0.29
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance--Class Z Shares
- -------------------------------------------------------------------------------------
Net Asset Value
------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividend Distribution Return(1)
=====================================================================================
<S> <C> <C> <C> <C> <C>
1/31/98 $11.53 $11.75 $0.82 $0.29 11.88%
- -------------------------------------------------------------------------------------
Inception*-1/31/97 11.55 11.53 0.06 0.00 0.35+
=====================================================================================
Total $0.88 $0.29
=====================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
32
<PAGE>
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 11.44% 10.93% 10.98% 11.88%
- --------------------------------------------------------------------------------
Inception*-1/31/98 8.95 8.44 8.49 11.79
================================================================================
With Sales Charge(2)
----------------------------------
Class A Class B Class C Class Z
================================================================================
Year Ended 1/31/98 6.45% 6.43% 9.98% 11.88%
- --------------------------------------------------------------------------------
Inception*-1/31/98 6.45 6.57 8.49 11.79
================================================================================
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 1/31/98) 18.55%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/98) 17.46
- --------------------------------------------------------------------------------
Class C (Inception* through 1/31/98) 17.58
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/98) 12.27
================================================================================
(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 for
Class Z shares is January 17, 1997.
33
<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 Smith Barney High Yield Market Index and Salomon Smith
Barney One-Year Treasury Bill Index
- --------------------------------------------------------------------------------
February 5, 1996 -- January 31, 1998 (unaudited)
[Line chart]
<TABLE>
<CAPTION>
Salomon
Standard Salomon S/B
& Poor's Lehman S/B One-
Income Income Income 500 Government/Corporate High Yield Year
Portfolio-Class Portfolio-Class Portfolio-Class Composite Bond Market Treasury
A Shares B Shares C Shares Stock Index Index Index Bill Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9550 10000 10000 10000 10000 10000 10000
4/96 9429 9425 9768 10340 9639 10009 10078
7/96 9482 9472 9812 10175 9473 10208 10214
10/96 9923 9907 10259 11277 9064 10676 10410
1/97 10160 10139 10494 12630 9118 11049 10551
4/97 10216 10236 10641 12935 9160 11201 10683
7/97 10939 10973 11381 15476 9643 11886 10892
10/97 11322 11347 11758 14894 9839 12221 11051
1/31/97 11322 11347 11758 16652 9934 12345 11053
</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 January 31, 1998. 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 Smith Barney High Yield Market
Index covers a significant portion of the below-investment-grade U.S. corporate
bond market. The Salomon Smith Barney One-Year Treasury Bill Index consists 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.
34
<PAGE>
THE HIGHGROWTH PORTFOLIO
Schedule of Investments January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
=============================================================================================================
<S> <C> <C>
Underlying Funds--99.3%
1,305,286 Smith Barney Aggressive Growth Fund Inc. $ 52,146,176
1,622,325 Smith Barney Equity Funds - Smith Barney Growth and Income Fund 25,519,171
1,492,393 Smith Barney Funds, Inc. - Large Cap Value Fund 25,758,705
4,065,004 Smith Barney Income Funds - Smith Barney High Income Fund 48,414,200
3,844,220 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 51,820,089
1,842,389 Smith Barney Investment Funds Inc. - Smith Barney Managed Growth Fund 25,903,996
1,969,733 Smith Barney Investment Funds Inc. - Smith Barney Special Equities Fund 50,661,527
4,161,337 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 53,348,344
5,775,839 Smith Barney Small Cap Blend Fund, Inc. 77,627,273
5,275,866 Smith Barney World Funds, Inc. - International Equity Portfolio 106,308,705
- -------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$491,973,756) 517,508,186
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Description Value
=============================================================================================================
<S> <C> <C>
Repurchase Agreement--0.7%
$ 3,591,000 Chase Securities Inc., 5.517% due 2/2/98; Proceeds at maturity--$3,592,651;
(Fully collateralized by U.S. Treasury Notes, 6.125% due 9/30/00;
Market value--$3,662,828) (Cost--$3,591,000) 3,591,000
=============================================================================================================
Total Investments--100% (Cost--$495,564,756*) $521,099,186
=============================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
35
<PAGE>
THE GROWTH PORTFOLIO
Schedule of Investments January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
=============================================================================================================
<S> <C> <C>
Underlying Funds--99.5%
1,696,927 Smith Barney Aggressive Growth Fund Inc. $ 67,792,253
4,206,604 Smith Barney Equity Funds - Smith Barney Growth and Income Fund 66,169,888
3,861,433 Smith Barney Funds, Inc. - Large Cap Value Fund 66,648,334
5,246,172 Smith Barney Income Funds - Smith Barney High Income Fund 62,481,911
4,995,013 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 67,332,787
6,719,414 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 66,051,844
4,998,575 Smith Barney Investment Funds Inc. - Smith Barney Investment Grade Bond Fund 66,631,009
2,377,252 Smith Barney Investment Funds Inc. - Smith Barney Managed Growth Fund 33,424,175
1,295,488 Smith Barney Investment Funds Inc. - Smith Barney Special Equities Fund 33,319,977
2,655,462 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 34,043,023
2,500,599 Smith Barney Small Cap Blend Fund, Inc. 33,608,063
3,398,089 Smith Barney World Funds, Inc. - International Equity Portfolio 68,471,510
- -------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$632,338,332) 665,974,774
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Description Value
=============================================================================================================
<S> <C> <C>
Repurchase Agreement--0.5%
$ 3,156,000 Chase Securities Inc., 5.517% due 2/2/98; Proceeds at maturity--$3,157,451;
(Fully collateralized by U.S. Treasury Notes, 6.125% due 9/30/00;
Market value--$3,219,127) (Cost--$3,156,000) 3,156,000
=============================================================================================================
Total Investments--100% (Cost--$635,494,332*) $669,130,774
=============================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
36
<PAGE>
THE BALANCED PORTFOLIO
Schedule of Investments January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
=============================================================================================================
<S> <C> <C>
Underlying Funds--99.2%
2,800,321 Smith Barney Appreciation Fund Inc. $ 39,316,511
1,241,121 Smith Barney Equity Funds - Smith Barney Growth and Income Fund 19,522,836
3,835,450 Smith Barney Fundamental Value Fund Inc. 39,236,662
1,136,415 Smith Barney Funds, Inc. - Large Cap Value Fund 19,614,536
4,248,984 Smith Barney Funds, Inc. - Short-Term U.S. Treasury Securities Fund 17,505,814
2,285,614 Smith Barney Income Funds - Smith Barney Convertible Fund 38,832,591
7,258,253 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 58,283,779
1,756,507 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 38,924,214
1,986,440 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 19,526,710
3,019,758 Smith Barney Managed Governments Fund Inc. 38,985,085
1,747,519 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 20,445,979
3,032,189 Smith Barney World Funds, Inc. - International Balanced Portfolio 39,024,277
- -------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$380,925,230) 389,218,994
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Description Value
=============================================================================================================
<S> <C> <C>
Repurchase Agreement--0.8%
$3,303,000 Chase Securities Inc., 5.517% due 2/2/98; Proceeds at maturity--$3,304,519;
(Fully collateralized by U.S. Treasury Notes, 6.125% due 9/30/00;
Market value--$3,369,068) (Cost--$3,303,000) 3,303,000
=============================================================================================================
Total Investments--100% (Cost--$384,228,230*) $392,521,994
=============================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
37
<PAGE>
THE CONSERVATIVE PORTFOLIO
Schedule of Investments January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
=============================================================================================================
<S> <C> <C>
Underlying Funds--99.0%
758,351 Smith Barney Appreciation Fund Inc. $ 10,647,251
520,063 Smith Barney Fundamental Value Fund Inc. 5,320,252
1,153,304 Smith Barney Funds, Inc. - Short-Term U.S. Treasury Securities Fund 4,751,615
618,095 Smith Barney Income Funds - Smith Barney Convertible Fund 10,501,435
2,615,310 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 21,000,940
881,700 Smith Barney Income Funds - Smith Barney High Income Fund 10,501,055
237,462 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 5,262,158
1,081,613 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 10,632,265
1,229,578 Smith Barney Managed Governments Fund Inc. 15,873,853
449,957 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 5,264,498
416,763 Smith Barney World Funds, Inc. - International Balanced Portfolio 5,363,750
- -------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$104,005,055) 105,119,072
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Description Value
=============================================================================================================
<S> <C> <C>
Repurchase Agreement--1.0%
$1,087,000 Chase Securities Inc., 5.517% due 2/2/98; Proceeds at maturity--$1,087,500;
(Fully collateralized by U.S. Treasury Notes, 6.125% due 9/30/00;
Market value--$1,108,743) (Cost--$1,087,000) 1,087,000
=============================================================================================================
Total Investments--100% (Cost--$105,092,055*) $106,206,072
=============================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
38
<PAGE>
THE INCOME PORTFOLIO
Schedule of Investments January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
=============================================================================================================
<S> <C> <C>
Underlying Funds--99.0%
218,356 Smith Barney Appreciation Fund Inc. $ 3,065,719
1,393,314 Smith Barney Funds, Inc. - Short-Term U.S. Treasury Securities Fund 5,740,453
176,496 Smith Barney Income Funds - Smith Barney Convertible Fund 2,998,669
1,493,052 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 11,989,204
1,006,211 Smith Barney Income Funds - Smith Barney High Income Fund 11,983,976
135,774 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 3,008,750
928,846 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 9,130,553
937,439 Smith Barney Managed Governments Fund Inc. 12,102,338
- ------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$58,906,083) 60,019,662
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Description Value
=============================================================================================================
<S> <C> <C>
Repurchase Agreement--1.0%
$595,000 Chase Securities Inc., 5.517% due 2/2/98; Proceeds at maturity--$595,274;
(Fully collateralized by U.S. Treasury Notes, 6.125% due 9/30/00;
Market value--$606,900) (Cost--$595,000) 595,000
=============================================================================================================
Total Investments--100% (Cost--$59,501,083*) $60,614,662
=============================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
39
<PAGE>
Statements of Assets and Liabilities January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at cost $495,564,756 $635,494,332 $384,228,230 $105,092,055 $ 59,501,083
==========================================================================================================================
Investments, at value $521,099,186 $669,130,774 $392,521,994 $106,206,072 $ 60,614,662
Cash 462 643 14 160 582
Receivable for Fund shares sold 852,742 1,178,173 545,435 290,262 56,133
Dividends and interest receivable 550 1,194,864 55,389 14,999 18,020
Receivable from manager -- -- -- -- 70,128
Other Assets 127,652 106,186 71,515 27,919 13,279
- --------------------------------------------------------------------------------------------------------------------------
Total Assets 522,080,592 671,610,640 393,194,347 106,539,412 60,772,804
- --------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased 1,139,998 1,109,189 1,332,794 561,593 321,782
Payable for Fund shares purchased 419,327 491,578 381,070 109,054 15,060
Dividends payable -- -- -- -- 39,665
Accrued expenses 285,346 802,609 491,417 28,090 --
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,844,671 2,403,376 2,205,281 698,737 376,507
==========================================================================================================================
Total Net Assets $520,235,921 $669,207,264 $390,989,066 $105,840,675 $ 60,396,297
==========================================================================================================================
Net Assets:
Par value of capital shares $ 40,134 $ 51,494 $ 30,995 $ 8,701 $ 5,137
Capital paid in excess of par value 487,651,986 623,962,411 371,189,801 102,385,448 58,832,427
Undistributed net investment income -- 698,689 1,216,914 425,584 --
Accumulated net realized gain
on investments 7,009,371 10,858,228 10,257,592 1,906,925 445,154
Net unrealized appreciation
of investments 25,534,430 33,636,442 8,293,764 1,114,017 1,113,579
==========================================================================================================================
Total Net Assets $520,235,921 $669,207,264 $390,989,066 $105,840,675 $ 60,396,297
==========================================================================================================================
Shares Outstanding:
Class A 19,983,548 21,545,068 13,220,760 4,208,606 2,516,106
Class B 17,767,475 26,419,492 15,363,946 3,996,496 2,258,883
Class C 2,148,712 3,305,493 2,178,436 443,011 303,442
Class Z 234,195 223,943 231,377 52,431 58,781
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 12.97 $ 12.99 $ 12.62 $ 12.17 $ 11.75
Class B* $ 12.95 $ 13.00 $ 12.61 $ 12.16 $ 11.76
Class C** $ 12.96 $ 13.00 $ 12.61 $ 12.16 $ 11.76
Class Z (and redemption price) $ 12.97 $ 12.99 $ 12.61 $ 12.17 $ 11.75
- --------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.71% of
net asset value per share) -- -- -- $ 12.74 $ 12.30
(net asset value plus 5.26% of
net asset value per share) $ 13.65 $ 13.67 $ 13.28 -- --
==========================================================================================================================
</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 Note 2).
See Notes to Financial Statements.
40
<PAGE>
Statements of Operations For the Year Ended January 31, 1998
- --------------------------------------------------------------------------------
<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 $ 5,147,883 $14,317,566 $14,142,620 $5,115,496 $3,348,390
Short-term capital gain distributions
from Underlying Funds 1,394,162 3,531,566 2,581,064 605,651 139,248
Interest 284,197 335,729 183,108 53,054 24,141
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Income 6,826,242 18,184,861 16,906,792 5,774,201 3,511,779
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Distribution fees (Note 2) 2,662,674 3,750,315 2,144,655 427,689 241,455
Other expenses (Note 2) 1,494,425 1,905,460 1,102,666 297,381 169,641
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 4,157,099 5,655,775 3,247,321 725,070 411,096
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income 2,669,143 12,529,086 13,659,471 5,049,131 3,100,683
- ---------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Note 3):
Capital gain distributions from
Underlying Funds 9,294,472 14,903,123 11,336,276 2,150,263 486,661
Realized gain on sale of Underlying Funds 8,481,479 14,590,109 5,463,767 2,053,158 896,756
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized Gain 17,775,951 29,493,232 16,800,043 4,203,421 1,383,417
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of year 14,056,549 16,726,046 6,344,266 1,130,684 378,418
End of year 25,534,430 33,636,442 8,293,764 1,114,017 1,113,579
- ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Unrealized
Appreciation 11,477,881 16,910,396 1,949,498 (16,667) 735,161
===========================================================================================================================
Net Gain on Investments 29,253,832 46,403,628 18,749,541 4,186,754 2,118,578
===========================================================================================================================
Increase in Net Assets From Operations $31,922,975 $58,932,714 $32,409,012 $9,235,885 $5,219,261
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
Statements of Changes in Net Assets For the Year Ended January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 2,669,143 $ 12,529,086 $ 13,659,471 $ 5,049,131 $ 3,100,683
Net realized gain 17,775,951 29,493,232 16,800,043 4,203,421 1,383,417
Increase (decrease) in
net unrealized appreciation 11,477,881 16,910,396 1,949,498 (16,667) 735,161
- ------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets
From Operations 31,922,975 58,932,714 32,409,012 9,235,885 5,219,261
- ------------------------------------------------------------------------------------------------------------------------
Distributions to
Shareholders From:
Net investment income (2,809,546) (12,438,206) (12,443,765) (4,682,272) (3,100,202)
Net realized gain (13,312,592) (22,116,042) (10,546,267) (3,245,447) (1,379,897)
- ------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (16,122,138) (34,554,248) (22,990,032) (7,927,719) (4,480,099)
- ------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 247,787,678 288,173,524 191,523,747 50,928,148 32,582,708
Net asset value of shares issued
for reinvestment of dividends 15,986,768 34,055,452 22,287,746 7,648,480 3,947,812
Cost of shares reacquired (73,993,785) (81,145,273) (55,067,476) (16,949,496) (14,603,848)
- ------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 189,780,661 241,083,703 158,744,017 41,627,132 21,926,672
- ------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 205,581,498 265,462,169 168,162,997 42,935,298 22,665,834
Net Assets:
Beginning of year 314,654,423 403,745,095 222,826,069 62,905,377 37,730,463
========================================================================================================================
End of year* $520,235,921 $669,207,264 $390,989,066 $105,840,675 $60,396,297
========================================================================================================================
* Includes undistributed
net investment income of: -- $ 698,689 $ 1,216,914 $ 425,584 --
========================================================================================================================
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
Statements of Changes in Net Assets For the Period Ended January 31, 1997(a)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 3,591,883 $ 8,447,855 $ 4,704,927 $ 1,685,111 $ 1,199,882
Net realized capital gain distribution 3,081,396 3,809,172 4,003,816 948,951 441,634
Increase in net unrealized appreciation 14,056,549 16,726,046 6,344,266 1,130,684 378,418
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets
From Operations 20,729,828 28,983,073 15,053,009 3,764,746 2,019,934
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to
Shareholders From:
Net investment income (3,499,937) (7,905,908) (4,740,122) (1,634,350) (1,205,277)
Net realized gains (535,384) (328,134) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (4,035,321) (8,234,042) (4,740,122) (1,634,350) (1,205,277)
- ---------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 312,840,370 393,822,423 218,875,840 65,095,637 41,434,601
Net asset value of shares issued
for reinvestment of dividends 4,014,986 8,128,066 4,542,233 1,547,780 1,026,312
Cost of shares reacquired (18,995,440) (18,954,425) (10,904,891) (5,868,436) (5,545,107)
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 297,859,916 382,996,064 212,513,182 60,774,981 36,915,806
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 314,554,423 403,745,095 222,826,069 62,905,377 37,730,463
Net Assets:
Beginning of period 100,000 -- -- -- --
===========================================================================================================================
End of period* $314,654,423 $403,745,095 $222,826,069 $62,905,377 $37,730,463
===========================================================================================================================
* Includes undistributed (overdistributed)
net investment income of: $ 91,946 $ 541,947 $ (35,195) $ 50,761 $ (5,395)
===========================================================================================================================
</TABLE>
(a) For the period from February 5, 1996 (commencement of operations) to
January 31, 1997.
See Notes to Financial Statements.
43
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 Mutual Management Corp. ("MMC"),
formerly known as Smith Barney Mutual Funds Management Inc., a subsidiary of
Salomon Smith Barney Holdings Inc. ("SSBH"). The financial statements and
financial highlights for the other portfolios are presented in a separate 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) Income
distributions and short-term capital gain distributions from Underlying Funds
are recorded on the ex-dividend date as investment income and interest income is
recorded on an 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) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Accordingly,
overdistributed net investment income in the amounts of $48,457, $65,862,
$36,403, $7,964 and $4,914 have been reclassified to paid-in capital for the
High Growth, Growth, Balanced, Conservative and Income Portfolios, respectively,
for the year ended January 31, 1998. Net Investment income, net realized gains
and net assets were not affected by these adjustments: (g) 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 (h) 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
MMC is the investment manager for the Fund. Each Portfolio pays MMC 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 MMC.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Fund shares. For the year ended January 31, 1998, SB received sales charges of
approximately $1,163,000 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. In certain cases, Class A shares also have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase. This CDSC only applies
to those purchases of Class A shares, which when combined with current holdings
of Class A shares, equal or exceed $500,000 in the aggregate. These purchases do
not incur an initial sales charge. For the year ended January 31, 1998, CDSCs
paid to SB were approximately:
Portfolio Class A Class B Class C
- --------------------------------------------------------------------------------
High Growth -- $260,000 $11,000
Growth -- 404,000 11,000
Balanced $1,000 194,000 5,000
Conservative -- 41,000 --
Income -- 32,000 1,000
- --------------------------------------------------------------------------------
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to their Class A, B and C shares calculated at an 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 each pays a distribution fee
with respect to their Class B and C shares calculated at an annual rate of 0.75%
of the average daily net assets of each class. The Conservative Portfolio and
Income Portfolio each pays 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.
44
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the year ended January 31, 1998, total Distribution Plan fees were as
follows:
Portfolio Class A Class B Class C
- --------------------------------------------------------------------------------
High Growth $531,389 $1,892,285 $239,000
Growth 560,372 2,815,048 374,895
Balanced 331,374 1,569,471 243,810
Conservative 102,331 292,108 33,250
Income 58,968 163,187 19,300
- --------------------------------------------------------------------------------
All officers and one Director of the Fund are employees of SB.
3. Investments
During the year ended January 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Portfolio Purchases Sales
- --------------------------------------------------------------------------------
High Growth $351,892,545 $166,735,305
Growth 460,387,015 225,996,903
Balanced 234,551,630 72,671,936
Conservative 64,133,346 23,322,656
Income 34,181,537 13,303,176
- --------------------------------------------------------------------------------
At January 31, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Net Unrealized
Portfolio Appreciation Depreciation Appreciation
- --------------------------------------------------------------------------------
High Growth $29,286,884 $(3,752,454) $25,534,430
Growth 38,673,891 (5,037,449) 33,636,442
Balanced 13,603,312 (5,309,548) 8,293,764
Conservative 2,894,557 (1,780,540) 1,114,017
Income 1,439,700 (326,121) 1,113,579
- --------------------------------------------------------------------------------
4. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
5. Capital Shares
At January 31, 1998, 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.
45
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At January 31, 1998, total paid-in capital amounted to the following for each
class:
Portfolio Class A Class B Class C Class Z
- --------------------------------------------------------------------------------
High Growth $243,265,019 $215,428,761 $25,901,255 $3,097,085
Growth 262,167,411 319,414,664 39,479,732 2,952,098
Balanced 158,857,969 183,748,228 25,651,859 2,962,740
Conservative 49,520,525 47,065,851 5,168,399 639,374
Income 28,829,355 25,832,061 3,482,595 693,553
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended January 31, 1998 Period Ended January 31, 1997+
--------------------------- ------------------------------
Shares Amount Shares Amount
===================================================================================================
<S> <C> <C> <C> <C>
High Growth Portfolio:
Class A
Shares sold 10,010,305 $128,519,682 13,124,757 $154,592,156
Shares issued on reinvestment 674,466 8,707,357 224,774 2,687,404
Shares redeemed (3,113,531) (40,195,802) (937,223) (11,121,654)
- ------------------------------------------------------------------------------------------------
Net Increase 7,571,240 $ 97,031,237 12,412,308 $146,157,906
================================================================================================
Class B
Shares sold 8,083,651 $103,764,047 11,836,415 $138,836,232
Shares issued on reinvestment 496,177 6,400,681 97,776 1,166,635
Shares redeemed (2,190,222) (28,152,547) (556,322) (6,564,813)
- ------------------------------------------------------------------------------------------------
Net Increase 6,389,606 $ 82,012,181 11,377,869 $133,438,054
================================================================================================
Class C
Shares sold 967,197 $ 12,449,955 1,654,072 $ 19,404,342
Shares issued on reinvestment 60,158 776,640 13,489 160,947
Shares redeemed (435,887) (5,582,392) (110,317) (1,305,526)
- ------------------------------------------------------------------------------------------------
Net Increase 591,468 $ 7,644,203 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 230,648 $ 3,053,994 340 $ 4,193
Shares issued on reinvestment 7,908 102,090 -- --
Shares redeemed (4,701) (63,044) -- --
- ------------------------------------------------------------------------------------------------
Net Increase 233,855 $ 3,093,040 340 $ 4,193
================================================================================================
</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 the period ended January 31, 1997, Class Z shares' transactions are
for the period from January 17, 1997 (inception date) to January 31, 1997.
46
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended January 31, 1998 Period Ended January 31, 1997+
--------------------------- ------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GROWTH PORTFOLIO:
Class A
Shares sold 10,133,515 $130,849,284 13,495,334 $158,086,985
Shares issued on reinvestment 1,205,901 15,556,116 325,034 3,912,736
Shares redeemed (2,864,046) (37,262,268) (750,670) (8,948,320)
- -----------------------------------------------------------------------------------------------
Net Increase 8,475,370 $109,143,132 13,069,698 $153,051,401
===============================================================================================
Class B
Shares sold 10,828,351 $139,348,855 17,577,354 $205,297,381
Shares issued on reinvestment 1,263,705 16,327,065 304,841 3,665,936
Shares redeemed (2,826,910) (36,586,917) (727,849) (8,603,603)
- -----------------------------------------------------------------------------------------------
Net Increase 9,265,146 $119,089,003 17,154,346 $200,359,714
===============================================================================================
Class C
Shares sold 1,167,870 $ 15,084,743 2,610,438 $ 30,432,078
Shares issued on reinvestment 155,822 2,013,222 45,684 549,394
Shares redeemed (555,673) (7,192,671) (118,648) (1,402,502)
- -----------------------------------------------------------------------------------------------
Net Increase 768,019 $9,905,294 2,537,474 $ 29,578,970
===============================================================================================
Class Z*
Shares sold 218,816 $ 2,890,642 488 $ 5,979
Shares issued on reinvestment 12,339 159,049 -- --
Shares redeemed (7,700) (103,417) -- --
- -----------------------------------------------------------------------------------------------
Net Increase 223,455 $ 2,946,274 488 $ 5,979
===============================================================================================
Balanced Portfolio:
Class A
Shares sold 7,062,248 $ 89,012,976 7,749,149 $89,908,388
Shares issued on reinvestment 812,798 10,223,473 175,557 2,069,938
Shares redeemed (2,144,347) (27,210,876) (434,645) (5,130,613)
- -----------------------------------------------------------------------------------------------
Net Increase 5,730,699 $ 72,025,573 7,490,061 $ 86,847,713
===============================================================================================
Class B
Shares sold 7,134,949 $ 89,763,171 9,437,519 $109,225,248
Shares issued on reinvestment 834,347 10,489,664 180,806 2,129,887
Shares redeemed (1,826,017) (23,166,035) (397,658) (4,675,573)
- -----------------------------------------------------------------------------------------------
Net Increase 6,143,279 $ 77,086,800 9,220,667 $106,679,562
===============================================================================================
Class C
Shares sold 776,967 $ 9,788,923 1,709,183 $ 19,739,648
Shares issued on reinvestment 114,791 1,442,518 29,105 342,408
Shares redeemed (358,733) (4,560,118) (92,877) (1,098,705)
- -----------------------------------------------------------------------------------------------
Net Increase 533,025 $ 6,671,323 1,645,411 $ 18,983,351
===============================================================================================
Class Z*
Shares sold 230,880 $ 2,958,677 211 $ 2,556
Shares issued on reinvestment 10,474 132,091 -- --
Shares redeemed (10,188) (130,447) -- --
- -----------------------------------------------------------------------------------------------
Net Increase 231,166 $ 2,960,321 211 $ 2,556
===============================================================================================
</TABLE>
+ For the period from February 5, 1996 (inception date) to January 31, 1997.
* For the period ended January 31, 1997, Class Z shares' transactions are
for the period from January 17, 1997 (inception date) to January 31, 1997.
47
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended January 31, 1998 Period Ended January 31, 1997+
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Conservative Portfolio:
Class A
Shares sold 2,101,072 $25,731,997 2,705,133 $ 31,087,958
Shares issued on reinvestment 317,020 3,840,702 70,128 813,639
Shares redeemed (771,353) (9,452,258) (213,394) (2,497,676)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase 1,646,739 $20,120,441 2,561,867 $ 29,403,921
==========================================================================================================================
Class B
Shares sold 1,817,304 $22,221,744 2,565,271 $ 29,522,662
Shares issued on reinvestment 279,308 3,380,940 55,499 643,899
Shares redeemed (480,509) (5,906,489) (240,377) (2,793,254)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase 1,616,103 $19,696,195 2,380,393 $ 27,373,307
==========================================================================================================================
Class C
Shares sold 171,125 $ 2,100,179 389,145 $ 4,483,964
Shares issued on reinvestment 31,837 385,261 7,781 90,242
Shares redeemed (107,293) (1,313,296) (49,584) (577,506)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase 95,669 $ 1,172,144 347,342 $ 3,996,700
==========================================================================================================================
Class Z*
Shares sold 70,965 $ 874,228 89 $ 1,053
Shares issued on reinvestment 3,420 41,577 -- --
Shares redeemed (22,043) (277,453) -- --
- --------------------------------------------------------------------------------------------------------------------------
Net Increase 52,342 $ 638,352 89 $ 1,053
==========================================================================================================================
Income Portfolio:
Class A
Shares sold 1,518,353 $17,876,653 1,686,791 $ 19,048,638
Shares issued on reinvestment 179,710 2,105,847 46,330 526,416
Shares redeemed (727,648) (8,590,070) (187,430) (2,135,737)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase 970,415 $11,392,430 1,545,691 $ 17,439,317
==========================================================================================================================
Class B
Shares sold 1,016,644 $11,985,471 1,777,131 $ 20,069,722
Shares issued on reinvestment 138,552 1,623,669 39,677 450,386
Shares redeemed (440,392) (5,187,806) (272,729) (3,107,175)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase 714,804 $ 8,421,334 1,544,079 $ 17,412,933
==========================================================================================================================
Class C
Shares sold 161,208 $ 1,904,319 205,441 $ 2,315,807
Shares issued on reinvestment 15,043 176,293 4,366 49,510
Shares redeemed (56,114) (660,859) (26,502) (302,195)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase 120,137 $ 1,419,753 183,305 $ 2,063,122
==========================================================================================================================
Class Z*
Shares sold 68,905 $ 816,265 38 $ 434
Shares issued on reinvestment 3,572 42,003 -- --
Shares redeemed (13,734) (165,113) -- --
- --------------------------------------------------------------------------------------------------------------------------
Net Increase 58,743 $ 693,155 38 $ 434
==========================================================================================================================
</TABLE>
+ For the period from February 5, 1996 (inception date) to January 31, 1997.
* For the period ended January 31, 1997, Class Z shares' transactions are
for the period from January 17, 1997 (inception date) to January 31, 1997.
48
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the year:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------- -------------------
HIGH GROWTH PORTFOLIO 1998 1997(1) 1998 1997(1)
=================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.41 $ 11.40 $ 12.41 $ 11.40
- ---------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.11 0.20 0.03 0.08
Net realized and unrealized gain 0.91 1.05 0.89 1.04
- ---------------------------------------------------------------------------------
Total Income From Operations 1.02 1.25 0.92 1.12
- ---------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.13) (0.20) (0.05) (0.07)
Net realized gains (0.33) (0.04) (0.33) (0.04)
- ---------------------------------------------------------------------------------
Total Distributions (0.46) (0.24) (0.38) (0.11)
- ---------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.97 $ 12.41 $ 12.95 $ 12.41
- ---------------------------------------------------------------------------------
Total Return 8.25% 11.04%++ 7.44% 9.91%++
- ---------------------------------------------------------------------------------
Net Assets, End of Year (000's) $259,212 $154,069 $230,142 $141,241
- ---------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60%+ 1.35% 1.35%+
Net investment income 1.00 2.79+ 0.25 2.04+
- ---------------------------------------------------------------------------------
Portfolio Turnover Rate 39% 0% 39% 0%
- ---------------------------------------------------------------------------------
<CAPTION>
Class C Shares Class Z Shares
------------------- -------------------
1998 1997(1) 1998(3) 1997(4)
=================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.42 $ 11.40 $ 12.41 $ 12.24
- ---------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.03 0.08 0.17 0.01
Net realized and unrealized gain 0.89 1.05 0.89 0.16
- ---------------------------------------------------------------------------------
Total Income From Operations 0.92 1.13 1.06 0.17
- ---------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.05) (0.07) (0.17) --
Net realized gains (0.33) (0.04) (0.33) --
- ---------------------------------------------------------------------------------
Total Distributions (0.38) (0.11) (0.50) --
- ---------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.96 $ 12.42 $ 12.97 $ 12.41
- ---------------------------------------------------------------------------------
Total Return 7.44% 10.00%++ 8.58% 1.39%++
- ---------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 27,845 $ 19,340 $ 3,037 $4
- ---------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35%+ 0.35% 0.35%+
Net investment income 0.25 2.04+ 1.25 3.33*
- ---------------------------------------------------------------------------------
Portfolio Turnover Rate 39% 0% 39% 0%
=================================================================================
</TABLE>
(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
(2) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
(3) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(4) For the period from January 17, 1997 (inception date) to January 31, 1997.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
* Not annualized.
49
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the year:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------- -------------------
GROWTH PORTFOLIO 1998 1997(1) 1998 1997(1)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.32 $ 11.40 $ 12.33 $ 11.40
- ---------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.31 0.33 0.22 0.23
Net realized and unrealized gain 1.14 0.92 1.12 0.94
- ---------------------------------------------------------------------------------
Total Income From Operations 1.45 1.25 1.34 1.17
- ---------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.31) (0.21) (0.22)
Net realized gains (0.46) (0.02) (0.46) (0.02)
- ---------------------------------------------------------------------------------
Total Distributions (0.78) (0.33) (0.67) (0.24)
- ---------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.99 $ 12.32 $ 13.00 $ 12.33
Total Return 11.82% 11.08%++ 10.93% 10.32%++
- ---------------------------------------------------------------------------------
Net Assets, End of Year (000's) $279,842 $161,026 $343,474 $211,434
- ---------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60%+ 1.35% 1.35%+
Net investment income 2.77 4.79+ 1.96 4.04+
- ---------------------------------------------------------------------------------
Portfolio Turnover Rate 41% 0% 41% 0%
=================================================================================
<CAPTION>
Class C Shares Class Z Shares
------------------- -------------------
1998 1997(1) 1998(3) 1997(4)
=================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.33 $ 11.40 $ 12.32 $ 12.18
- ---------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.22 0.24 0.73 0.02
Net realized and unrealized gain 1.12 0.93 0.75 0.12
- ---------------------------------------------------------------------------------
Total Income From Operations 1.34 1.17 1.48 0.14
- ---------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.21) (0.22) (0.35) --
Net realized gains (0.46) (0.02) (0.46) --
- ---------------------------------------------------------------------------------
Total Distributions (0.67) (0.24) (0.81) --
- ---------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.00 $ 12.33 $ 12.99 $ 12.32
- ---------------------------------------------------------------------------------
Total Return 10.92% 10.32%++ 12.08% 1.15%++
- ---------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 42,983 $ 31,279 $ 2,908 $ 6
- ---------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35%+ 0.35% 0.35%+
Net investment income 1.81 4.04+ 5.24 5.30*
- ---------------------------------------------------------------------------------
Portfolio Turnover Rate 41% 0% 41% 0%
=================================================================================
</TABLE>
(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
(2) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
(3) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(4) For the period from January 17, 1997 (inception date) to January 31, 1997.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
* Not annualized.
50
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the year:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------- -----------------------
BALANCED PORTFOLIO 1998 1997(1) 1998 1997(1)
===========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.14 $ 11.40 $ 12.14 $ 11.40
- -------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.58 0.45 0.48 0.37
Net realized and unrealized gain 0.80 0.74 0.80 0.74
- -------------------------------------------------------------------------------------------
Total Income From Operations 1.38 1.19 1.28 1.11
- -------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.54) (0.45) (0.45) (0.37)
Net realized gains (0.36) -- (0.36) --
- -------------------------------------------------------------------------------------------
Total Distributions (0.90) (0.45) (0.81) (0.37)
- -------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.62 $ 12.14 $ 12.61 $ 12.14
- -------------------------------------------------------------------------------------------
Total Return 11.59% 10.64%++ 10.67% 9.90%++
- -------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $166,806 $90,938 $193,791 $111,918
- -------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60%+ 1.35% 1.35%+
Net investment income 4.79 4.88+ 3.96 4.14+
- -------------------------------------------------------------------------------------------
Portfolio Turnover Rate 23% 0% 23% 0%
===========================================================================================
<CAPTION>
Class C Shares Class Z Shares
---------------------- -----------------------
1998 1997(1) 1998(3) 1997(4)
===========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.14 $ 11.40 $ 12.13 $ 12.10
- -------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.46 0.37 1.11 0.00
Net realized and unrealized gain 0.82 0.74 0.30 0.03
- -------------------------------------------------------------------------------------------
Total Income From Operations 1.28 1.11 1.41 0.03
- -------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.45) (0.37) (0.57) --
Net realized gains (0.36) -- (0.36) --
- -------------------------------------------------------------------------------------------
Total Distributions (0.81) (0.37) (0.93) --
- -------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.61 $ 12.14 $ 12.61 $ 12.13
- -------------------------------------------------------------------------------------------
Total Return 10.67% 9.90%++ 11.82% 0.25%++
- -------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 27,473 $19,968 $ 2,919 $ 2
- -------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35%+ 0.35% 0.35%+
Net investment income 3.69 4.14+ 8.31 5.39*
- -------------------------------------------------------------------------------------------
Portfolio Turnover Rate 23% 0% 23% 0%
===========================================================================================
</TABLE>
(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
(2) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
(3) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(4) For the period from January 17, 1997 (inception date) to January 31, 1997.
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.
* Not annualized.
51
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the year:
Class A Shares Class B Shares
----------------- -----------------
CONSERVATIVE PORTFOLIO 1998 1997(1) 1998 1997(1)
================================================================================
Net Asset Value, Beginning of Year $ 11.90 $ 11.46 $ 11.89 $ 11.46
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.73 0.53 0.66 0.48
Net realized and unrealized gain 0.63 0.43 0.64 0.42
- --------------------------------------------------------------------------------
Total Income From Operations 1.36 0.96 1.30 0.90
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.69) (0.52) (0.63) (0.47)
Net realized gains (0.40) -- (0.40) --
- --------------------------------------------------------------------------------
Total Distributions (1.09) (0.52) (1.03) (0.47)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.17 $ 11.90 $ 12.16 $ 11.89
- --------------------------------------------------------------------------------
Total Return 11.70% 8.57%++ 11.21% 8.03%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000's) $51,233 $30,478 $48,584 $28,297
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60%+ 1.10% 1.10%+
Net investment income 6.17 5.66+ 5.67 5.16+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 28% 0% 28% 0%
================================================================================
Class C Shares Class Z Shares
----------------- -----------------
1998 1997(1) 1998(3) 1997(4)
================================================================================
Net Asset Value, Beginning of Year $ 11.89 $ 11.46 $ 11.90 $ 11.89
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.69 0.48 0.84 0.01
Net realized and unrealized gain 0.62 0.42 0.56 --
- --------------------------------------------------------------------------------
Total Income From Operations 1.31 0.90 1.40 0.01
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.64) (0.47) (0.73) --
Net realized gains (0.40) -- (0.40) --
- --------------------------------------------------------------------------------
Total Distributions (1.04) (0.47) (1.13) --
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.16 $ 11.89 $ 12.17 $ 11.90
- --------------------------------------------------------------------------------
Total Return 11.25% 8.08%++ 12.09% 0.08%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 5,386 $ 4,129 $638 $1
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05% 1.05%+ 0.35% 0.35%+
Net investment income 5.72 5.21+ 6.42 6.15*
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 28% 0% 28% 0%
================================================================================
(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
(2) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
(3) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(4) For the period from January 17, 1997 (inception date) to January 31, 1997.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
* Not annualized.
52
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the year:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------- ---------------------
INCOME PORTFOLIO 1998 1997(1) 1998 1997(1)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 11.53 $ 11.46 $ 11.53 $ 11.46
- -----------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.76 0.63 0.70 0.58
Net realized and unrealized gain 0.52 0.07 0.52 0.07
- -----------------------------------------------------------------------------------------------
Total Income From Operations 1.28 0.70 1.22 0.65
- -----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.77) (0.63) (0.70) (0.58)
Net realized gains (0.29) -- (0.29) --
- -----------------------------------------------------------------------------------------------
Total Distributions (1.06) (0.63) (0.99) (0.58)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 11.75 $ 11.53 $ 11.76 $ 11.53
- -----------------------------------------------------------------------------------------------
Total Return 11.44% 6.39%++ 10.93% 5.89%++
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $29,574 $17,817 $26,563 $17,800
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60%+ 1.10% 1.10%+
Net investment income 6.62 6.32+ 6.12 5.82+
- -----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 28% 0% 28% 0%
===============================================================================================
<CAPTION>
Class C Shares Class Z Shares
1998 1997(1) 1998(3) 1997(4)
===============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 11.53 $ 11.46 $ 11.53 $ 11.55
- -----------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.71 0.59 0.84 0.07
Net realized and unrealized gain (loss) 0.52 0.07 0.49 (0.03)
- -----------------------------------------------------------------------------------------------
Total Income From Operations 1.23 0.66 1.33 0.04
- -----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.71) (0.59) (0.82) (0.06)
Net realized gains (0.29) -- (0.29) --
- -----------------------------------------------------------------------------------------------
Total Distributions (1.00) (0.59) (1.11) (0.06)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 11.76 $ 11.53 $ 11.75 $ 11.53
- -----------------------------------------------------------------------------------------------
Total Return 10.98% 5.94%++ 11.88% 0.35%++
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 3,568 $ 2,113 $ 691 $ 0.2
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05% 1.05%+ 0.35% 0.35%+
Net investment income 6.17 5.87+ 6.85 6.86*
- -----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 28% 0% 28% 0%
===============================================================================================
</TABLE>
(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
(2) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
(3) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(4) For the period from January 17, 1997 (inception date) to January 31, 1997.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
* Not annualized.
53
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of Smith Barney Concert Allocation
Series Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the High Growth, Growth, Balanced,
Conservative, and Income Portfolios ("Portfolios") of Smith Barney Concert
Allocation Series Inc. ("Fund") as of January 31, 1998, the related statements
of operations for the year then ended, and statements of changes in net assets
and financial highlights for the year then ended and for the period from
February 5, 1996 (commencement of operations) to January 31, 1997. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1998, by correspondence with the custodian. As to securities
purchased but not yet received, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
aforementioned portfolios of Smith Barney Concert Allocation Series Inc. as of
January 31, 1998, and the results of their operations for the year then ended,
and changes in their net assets and financial highlights for the year then ended
and for the period from February 5, 1996 to January 31, 1997, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
March 16, 1998
54
<PAGE>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
January 31, 1998:
o Percentage of ordinary dividends paid as qualifying for the corporate
dividends received deduction:
High Growth Portfolio ..................................... 9.35%
Growth Portfolio .......................................... 8.37
Balanced Portfolio ........................................ 15.19
Conservative Portfolio .................................... 7.22
Income Portfolio .......................................... 4.34
o The Taxpayer Relief Act of 1997 enacted differing rates of tax on various
long term capital gain transactions. As a result, the Fund designates:
o Total long term capital gain distributions paid of:
Total 28% rate gains 20% rate gains
----- -------------- --------------
High Growth Portfolio $ 8,395,820 $ 6,595,756 $1,800,064
Growth Portfolio 14,423,506 11,567,652 2,855,854
Balanced Portfolio 7,395,781 5,273,931 2,121,850
Conservative Portfolio 2,271,813 1,630,253 641,560
Income Portfolio 1,031,791 916,147 115,644
The following percentages of ordinary dividends paid are derived from Federal
obligations and may be exempt from taxation at the state level:
Growth Portfolio ............................................ 4.73%
Balanced Portfolio .......................................... 11.76
Conservative Portfolio ...................................... 12.12
Income Portfolio ............................................ 22.36
55
<PAGE>
DIRECTORS
Walter E. Auch
Martin Brody
H. John Ellis
Armon E. Kamesar
Stephen E. Kaufman
Heath B. McLendon, Chairman
OFFICERS
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Thomas B. Stiles II
Vice President and
Investment Officer
R. Jay Gerken
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
Mutual Management Corp.
DISTRIBUTORS
Smith Barney Inc.
PFS Distributors, Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER SERVICING AGENT
First Data Investor Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
SMITH BARNEY CONCERT ALLOCATION
SERIES INC.
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
56
<PAGE>
This report is submitted for the general information of the shareholders of
Smith Barney Concert Allocation Series Inc. It is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
SMITH BARNEY
- ------------
A Member of TravelersGroup[LOGO]
Member NASD, SIPC
(C) 1996 Smith Barney Inc.
FD01278 3/98
