<PAGE>
================================================================================
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
[PHOTO] [PHOTO] [PHOTO]
================================================================================
Global Portfolio
High Growth Portfolio
Growth Portfolio
Balanced Portfolio
Conservative Portfolio
Income Portfolio
========================================
SEMI-ANNUAL REPORT
July 31, 1998
========================================
Investment Strategies for Your Life
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
Table of Contents
Letter to Shareholders.........................................................1
The Concert Allocation Series Portfolios
The Global Portfolio....................................................6
The High Growth Portfolio...............................................9
The Growth Portfolio...................................................14
The Balanced Portfolio.................................................19
The Conservative Portfolio.............................................24
The Income Portfolio...................................................29
Schedules of Investments......................................................34
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
Additional Shareholder Information............................................60
Directors and Officers........................................................61
<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 provide the semi-annual report for the Smith Barney Concert
Allocation Series Inc. for the period ended July 31, 1998. The Concert
Allocation Series Portfolios, Inc. ("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 beginning on page six. As of July 31, 1998, total assets in the Concert
Allocation Series were approximately $2.1 billion and we are currently helping
more than a quarter of a million shareholders pursue their financial goals. We
hope you find this report to be useful and informative.
The Benefits of Broad Diversification
As we stated in our first report two years ago, successful investing requires
discipline and patience. Investors must have the ability to maintain a long-term
perspective and develop a broadly diversified portfolio made up of different
investments. Because no two investors are alike, each has different short- and
long-term investment goals, tolerances for risk and investment time horizons.
Especially in light of increasing market volatility, we believe that the Concert
Allocation Series Portfolios remain an extremely effective way to take advantage
of the benefits of broad diversification.
Our original goal in developing the Concert Allocation Portfolios was to
maximize reward potential and minimize risk through diversification by investing
in a wide range of asset classes and investment styles. As you know, unlike
ordinary mutual funds, the six Concert Allocation Series Portfolios do not
invest directly in stocks, bonds or other securities. Instead, they invest in
carefully selected groups of Smith Barney Mutual Funds that work to achieve the
investment objective of each respective Portfolio.
By design, an investment in a particular Concert Allocation Series Portfolio is
likely to be less volatile than an investment in a single asset type, a
particular mutual fund or a specific financial market. With respect to
investment returns, the performance of each Concert Allocation Series Portfolio
is designed to rank somewhere in the middle of the asset classes in which it
invests, performing below the best markets but better than the worst ones. We
created the Concert Allocation Series to be something of a risk-control
investment. Our main goal is to provide investors with attractive, long-term
risk-adjusted returns.
1
<PAGE>
<TABLE>
<CAPTION>
The Performance of Five Concert Allocation Series Portfolios*
Class A Share Total Returns for the Six Months Ended 7/31/98+
Class A** Class A***
With sales charges Without sales charges
------------------ ---------------------
<S> <C> <C>
High Growth Portfolio 3.39% 8.81%
Growth Portfolio 2.13 7.48
Balanced Portfolio (0.36) 4.86
Conservative Portfolio (1.64) 2.97
Income Portfolio (1.75) 2.85
</TABLE>
<TABLE>
<CAPTION>
The Performance of the Global Portfolio
Class A Share Total Return Since March 9, 1998 (Inception) through 7/31/98+
Class A** Class A***
With sales charges Without sales charges
------------------ ---------------------
<S> <C>
(7.00%) (2.11%)
</TABLE>
Global Portfolio
The Global Portfolio began on March 9, 1998 and has had a challenging start due
to its emerging markets exposure and the fact that it is more aggressively
managed than the other five Portfolios. While the other five Concert Allocation
Series Portfolios can serve as complete investment programs, the Global
Portfolio, which invests primarily in Funds that invest in overseas equities,
was designed to be an aggressive way for investors to tap into global
opportunities. Therefore, the Global Portfolio is only suitable for aggressive
investors who are seeking capital appreciation and who have a long-term
investment horizon.
* Performance numbers for the other classes of shares can be found beginning
on page 11.
** 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 Global, 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, all total return
information represents 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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
2
<PAGE>
- --------------------------------------------------------------------------------
The Benefits of Long-Term Investing
Growth of $10,000 Invested in the Standard & Poor's 500 Composite
Stock Index, Lehman Government/Corporate Bond Index,
Salomon Smith Barney World Government Bond Index, and
Morgan Stanley Capital International EAFE Index
(July 31, 1988 - July 31, 1998)
(unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Salomon Smith Barney
World Gov't. Lehman Gov't./Corp.
S&P 500 Index Bond Index MSCI EAFE Index Bond Index
------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
7/88 $10,000 $10,000 $10,000 $10,000
1/89 $11,142 $10,488 $11,485 $10,482
1/90 $12,750 $11,120 $12,040 $11,655
1/91 $13,817 $12,159 $ 9,916 $12,939
1/92 $16,946 $13,516 $ 9,980 $14,638
1/93 $18,736 $14,858 $ 8,988 $16,333
1/94 $21,144 $16,454 $12,960 $18,016
1/95 $21,254 $16,048 $12,417 $17,455
1/96 $29,462 $18,865 $14,464 $20,548
1/97 $37,219 $20,488 $14,785 $21,040
1/98 $47,232 $22,959 $16,329 $23,391
7/98 $54,411 $23,946 $18,285 $24,048
</TABLE>
The Standard & Poor's 500 Composite Stock Index ("S&P 500") is a
capitalization-weighted index of 500 widely held common stocks. The Lehman
Government/Corporate Bond Index is a combination of publicly issued
intermediate- and long-term U.S. government bonds and corporate bonds. The
Salomon 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 Morgan Stanley Capital International EAFE Index ("MSCI EAFE")
consists of the equity total returns for Europe, Australia and the Far East.
These indices are unmanaged and are not subject to the same management and
trading expenses as a mutual fund.
The U.S. Markets
During the six months ended July 31, 1998, the U.S. financial markets have
proven quite resilient. Despite woes in Asia and signs of rising labor costs at
home, most stock and bond markets provided positive returns. Stock returns were
highly dependent on market capitalization: the bigger the company, the higher
the return. Bond market performance was more homogeneous, with the overall bond
market, as measured by the Lehman Brothers Aggregate Bond Index, up some 2.81%.
(The Lehman Aggregate Bond Index is an unmanaged index composed of the Lehman
Intermediate Government/Corporate Bond Index and the Mortgage-Backed Securities
Index and includes treasury issues, agency issues, corporate bond issues and
mortgage-backed securities.)
The performance of the U.S. stock market was particularly noteworthy, as there
was a dramatic distinction between the popular averages and the broader stock
market. For example, the Standard & Poor's 500 Composite Stock Index ("S&P
500"), a measure of large-capitalization domestic stocks, returned 15.18% for
the period. In contrast, the Russell 2000 Index(R), a measure of
smaller-capitalization stocks, was actually down 2.02%. So although the popular
averages were up handsomely, there were some sharp reversals both in the broader
market and in smaller-sized company stocks.
3
<PAGE>
Investors in larger-capitalization stocks have enjoyed returns greater than the
"average" year, but in half the time! A benign interest rate environment and
strong corporate earnings reports supported this increase. And although the rate
of earnings growth has not been overwhelming, most companies' earnings came in
ahead of analysts' expectations, supporting stock prices. In contrast,
smaller-sized companies stumbled from their April highs, following earnings
fears triggered by Asia's slowdown. These stocks proved vulnerable to investors'
"flight to safety" into larger-capitalization stocks.
Bonds benefited from an extremely tame inflation environment. Reported
inflation, as measured by the Consumer Price Index, was only about 1% over the
past six months. And the economic woes in Asia have unleashed a torrent of cheap
imported goods to our shores, adding more downward pressure to prices. Asian
weakness also dispelled Federal Reserve Board ("Fed") concerns that U.S.
economic growth was too strong, and quashed any thoughts of raising interest
rates.
International Stock Markets
Three trends predominated in the international stock markets through the
reporting period:
o Large-capitalization stocks materially outperformed mid- and
small-capitalization stocks.
o The stock markets of relatively mature, developed economies outperformed
the more volatile and less liquid emerging markets.
o The strength of the U.S. dollar versus the currencies of the United States'
major trading partners largely negated returns earned in local currencies.
There has been a sense of crisis in the international stock markets during the
reporting period. 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. In
Japan, the largest Asian stock market, the region's largest economy and a major
regional lender, the crisis contributed to an already deteriorating local
Japanese outlook. Global equity markets, as measured by the MSCI World Index,
lost 0.2% during July as weakness in North America, the U.K. and Japan offset
the relatively strong performance in continental Europe. As of this writing, the
unexpected devaluation of Russia's ruble has further roiled the international
stock markets, particularly those in the emerging markets. In light of this
turmoil, the strength of the U.S. dollar and U.S. bond market, to some degree,
have reflected investor preferences for liquidity, stability and strength.
International Bond Markets
The world's major government bond markets all performed well in the last year.
The key macro-economic factor behind the fall in global bond yields was the
continuing favorable inflation environment with weak commodity prices,
especially in the energy industries. The strong performance by major currencies
in North America and Europe helped counteract inflationary influences of strong
growth and low unemployment.
The deteriorating economic situation in Japan and unfavorable developments in
several of the emerging markets were additional drivers of bond market behavior
in the first half of 1998. The core European bond markets (i.e., Germany, France
and the United Kingdom), the U.S. Treasury bond market and the U.S. dollar were
the main flight-to-quality beneficiaries of the uncertain investment conditions
elsewhere.
4
<PAGE>
Looking Forward
Looking toward the next six months, we anticipate a positive inflation and
interest rate backdrop. Asian economic troubles should slow the U.S. economy
somewhat, with two effects -- one favorable, one not. A slowing economy further
diminishes the chance of a Fed rate hike. Corporate profitability, however, is a
potential stock market concern as investors have begun to question the earnings
outlook. Many company managements are now warning of weaker results in the
second half of the year. The Asian weakness may have begun to offset some of the
strength in the previously unstoppable U.S. economy. There are, however, no
signs that corporate managements have lost their focus on the bottom line. We
anticipate that despite the challenges outlined above, corporations should
report decent, though not spectacular, earnings increases through the rest of
the year -- providing support to U.S. stock prices.
The intermediate effects of the financial woes plaguing Asia cannot be denied:
Economic contraction and decline, massive bankruptcies and debt
restructurings/reschedulings, potential labor and civil unrest have resulted in
an investment climate of much greater risk. Whether or not government and
business policy-makers have the will and flexibility to make the correct
rehabilitative choices remains unanswerable and we believe another six to twelve
months of uncertainties in Asia and the rest of the emerging markets is very
likely.
As global markets become more volatile and investor uncertainty rises, we
believe that investors should try to maintain a long-term perspective. Because
market turbulence can often be a short-term occurrence, this may be an opportune
time to review your original investment goals. The longer your investment time
horizon, the less concerned you should be about the short-term ups and downs of
the global markets.
We think the significant advantages of diversifying across a broad range of
asset classes and investment styles that the Concert Allocation Series
Portfolios offer will become even more apparent in the days ahead. Thank you for
your continued confidence in our investment management approach.
Sincerely,
/s/ Heath B. McLendon /s/ Thomas B. Stiles II
Heath B. McLendon Thomas B. Stiles II
Chairman Vice President and
Investment Officer
August 27, 1998
5
<PAGE>
THE GLOBAL PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING PERCENTAGE WAS REPRESENTED
BY A PIE CHART IN THE PRINTED MATERIAL.]
100% Stock Funds
The Global Portfolio seeks capital appreciation by investing 100% of its assets
in global, international and U.S. stock funds.
................................................................................
The Global Portfolio
The Global Portfolio seeks capital appreciation by investing 100% of its assets
in global, international and U.S. stock funds. The Global 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, investors should understand the risks as well as the opportunities and
be prepared for substantial market volatility, especially when investing in
emerging markets.
================================================================================
Portfolio Update
================================================================================
Since the Global Portfolio's inception on March 9, 1998 through July 31, 1998,
its Class A shares posted a negative total return of 2.11% before the effect of
any sales charge is deducted. 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. Additional performance
information can be found on page eight.
Global equity markets have underperformed the U.S. stock market during the
reporting period. Weakness in North America, the U.K. and Japan offset the
relatively strong performance in continental Europe. European stocks have been
among the strongest performing issues in the world so far this year. However,
the valuations of many Continental European stocks are near all-time highs and
investors are pricing in very optimistic earnings growth prospects. Further
complicating the investment environment is the market's preoccupation with
earnings momentum and investors' seeming neglect of valuation measures. Whereas
many companies in North America and Europe are trading near all-time
price/earnings ratios during a period of near peak profitability levels, other
areas of the world -- particularly the emerging markets -- have been negatively
impacted by growing investor fears.
Japan's new government, led by Prime Minister Obuchi, remains a wild card that
will influence near-term performance of markets in the region. Japan is in
desperate need of financial industry reform and a legitimate economic stimulus
package. The credibility and timeliness of the Japanese government's policies
will greatly influence the timing of a recovery in the region.
A strong U.S. dollar and continued turmoil in global markets helped fuel a
robust bond market rally in the U.S. during the reporting period. As a number of
developing countries braced themselves for another possible round of currency
devaluations, many investors sought the relative safety of U.S. government
bonds.
................................................................................
The Target Asset Allocation set forth above 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' Board of Directors.
6
<PAGE>
The Concert Allocation Series Global Portfolio Breakdown (as of 7/31/98)
[THE FOLLOWING PERCENTAGES WERE REPRESENTED BY
A PIE CHART IN THE PRINTED MATERIAL.]
=============================
10% Smith Barney
Small Cap Blend Fund, Inc.
=============================
Top 5 Holdings:
Legato Systems Inc.
Arterial Vascular Engine
Allegiance Corp.
Ciber Inc.
Network Appliance Inc.
=============================
=============================
25% Smith Barney
Investment Funds Inc.-
Smith Barney Hansberger
Global Value Fund
=============================
Top 5 Holdings:
Broken Hill Proprietary
Scor SA
Pfleiderer AG
Telstra Corp.
Sparebanken NOR
=============================
=============================
10% Smith Barney
Investment Funds Inc.-
Smith Barney Hansberger
Global Small Cap Value Fund
=============================
Top 5 Holdings:
Somerfield
Cafe de Coral Holdings Ltd.
Ownes & Minor Inc.
Tecumseh Products Co.
Fin Marc Di Lacharriere
=============================
=============================
5% Smith Barney
Investment Funds Inc.-
Concert Peachtree Growth Fund
=============================
Top 5 Holdings:
Tyco International Ltd.
General Electric Co.
Bristol-Myers Squibb Co.
Scherring-Plough Corp.
American Express Co.
==============================
==============================
25% Smith Barney
World Funds, Inc.-
International Equity Portfolio
==============================
Top 5 Holdings:
Nokia
Compass Group PLC
Bank of Ireland
Rentokil Initial PLC
Misys PLC
==============================
=============================
5% Smith Barney
World Funds, Inc.-
Emerging Markets Portfolio
=============================
Top 5 Holdings:
Telebras - Sponsor ADR
Elektrim
Telec De Sao Paulo SA PR
Telefonica Argentina ADR
Plessey Corporation Ltd.
=============================
=============================
15% Smith Barney
Investment Trust-
Smith Barney
Large Capitalization Growth Fund
=============================
Top 5 Holdings:
Intel Corp.
Coca-Cola Co.
America Online Inc.
Texas Instruments Inc.
Wells Fargo & Co.
=============================
=============================
5% Smith Barney
Funds, Inc.-
Large Cap Value Fund
=============================
Top 5 Holdings:
American Howe Products
Bristol-Myers Squibb Co.
Xerox Corp.
Enron Corp.
Sprint Corp.
=============================
7
<PAGE>
THE GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
....................................................................................................................................
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-7/31/98 $11.40 $11.16 $0.00 $0.00 (2.11)%+
====================================================================================================================================
<CAPTION>
Historical Performance--Class B Shares
....................................................................................................................................
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-7/31/98 $11.40 $11.13 $0.00 $0.00 (2.37)%+
====================================================================================================================================
<CAPTION>
Historical Performance--Class L Shares++
....................................................................................................................................
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-7/31/98 $11.40 $11.13 $0.00 $0.00 (2.37)%+
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
....................................................................................................................................
Without Sales Charge(1)
---------------------------------------------------------------------------------
Class A Class B Class L++
====================================================================================================================================
<S> <C> <C> <C>
Inception* through 7/31/98+ (2.11)% (2.37)% (2.37)%
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
---------------------------------------------------------------------------------
Class A Class B Class L++
====================================================================================================================================
<S> <C> <C> <C>
Inception* through 7/31/98+ (7.00)% (7.25)% (4.35)%
====================================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
++ On June 12, 1998, Class C shares were renamed Class L shares.
+ 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 L shares is March 9, 1998.
8
<PAGE>
THE HIGH GROWTH PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING PERCENTAGES WERE REPRESENTED
BY A PIE CHART IN THE PRINTED MATERIAL.]
10% Bonds 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 that focus on
smaller, more speculative companies as well as mid-sized (or larger) companies
with the potential for rapid growth. Moreover, a significant portion of the
Portfolio is invested in international or emerging markets funds in order to
achieve a greater level of diversification.
================================================================================
Portfolio Update
================================================================================
The Concert Allocation Series High Growth Portfolio's Class A shares generated a
total return of 8.81% for the six months ended July 31, 1998, before the effect
of any sales charges is deducted. The chart that appears on page 13 compares the
Portfolio's performance to broad-based indices that track three 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 U.S. stock market performed strongly in the first quarter of 1998. However,
conflicting signals in the domestic economy and increased uncertainty in many of
the world's financial markets led to considerable volatility during the second
quarter of 1998. As discussed earlier, investors responded to this volatility
with a decided preference toward the stocks of very large, well-established
companies because of their greater liquidity and more predictable earnings. The
stock performance disparity between large and small companies became even more
pronounced as the year progressed. For example, after gaining roughly 10% in the
first quarter, the Russell 2000 Index posted a negative return of 2.02% for the
six months ended July 31, 1998. In contrast, the S&P 500 rose approximately 15%
in the same period. In addition, growth stocks generally outperformed value
stocks during the first half of the year.
The Portfolio especially benefited from its exposure to large-capitalization
growth stocks during the reporting period. While smaller company stocks lagged
larger ones, the Portfolio's holdings in this asset class also performed well,
either meeting or outperforming their respective indices. Moreover, the
Portfolio's international exposure was a major contributor to its performance in
the last six months. In particular, the major stock exchanges of Europe led the
way with dramatic gains in recent months as economic convergence and ongoing
corporate restructuring have helped give rise to a true equity culture in
Europe.
................................................................................
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.
9
<PAGE>
The Concert Allocation Series High Growth Portfolio Breakdown (as of 7/31/98)
[THE FOLLOWING PERCENTAGES WERE REPRESENTED
BY A PIE CHART IN THE PRINTED MATERIAL.]
==================================
10% Smith Barney
Aggressive Growth Fund Inc.
==================================
Top 5 Holdings:
Tyco International Ltd.
Intel Corp.
Forest Labs Inc.
CBS Corp.
Lehman Brothers Holdings
==================================
==================================
10% Smith Barney
Investment Funds Inc.-
Smith Barney Special Equities Fund
==================================
Top 5 Holdings:
Abercrombie & Fitch Co.
Safeskin Corp.
Chancellor Media Corp.
Starbucks Corp.
Beringer Wine Estates
==================================
==================================
10% Smith Barney
World Funds, Inc.-
International Equity Portfolio
==================================
Top 5 Holdings:
Nokia
Compass Group PLC
Bank of Ireland
Rentokil Initial PLC
Misys PLC
==================================
==================================
5% Smith Barney Funds, Inc.-
Large Cap Value Fund
==================================
Top 5 Holdings:
American Howe Products
Bristol-Myers Squibb Co.
Xerox Corp.
Enron Corp.
Sprint Corp.
==================================
==================================
10% Smith Barney Investment Funds
Inc.-Concert Peachtree Growth Fund
==================================
Top 5 Holdings:
Tyco International Ltd.
General Electric Co.
Bristol-Myers Squibb Co.
Scherring-Plough Corp.
American Express Co.
==================================
==================================
11% Smith Barney Investment
Trust-Smith Barney Large
Capitalization Growth Fund
==================================
Top 5 Holdings:
Intel Corp.
Coca-Cola Co.
American Online Inc.
Texas Instruments Inc.
Wells Fargo & Co.
==================================
==================================
5% Smith Barney Equity Funds, Inc.-
Smith Barney Large Cap Blend Fund
==================================
Top 5 Holdings:
Household International
General Electric Co.
Rite Aid Corp.
Hewlett-Packard
Ericsson Telephone
==================================
==================================
10% Smith Barney Investment
Funds Inc.- Smith Barney
Hansberger Global Value Fund
==================================
Top 5 Holdings:
Broken Hill Proprietary
Scor SA
Pfleiderer AG
Telstra Corp.
Sparebanken NOR
==================================
==================================
5% Smith Barney
Investment Funds Inc.-
Smith Barney Contrarian Fund
==================================
Top 5 Holdings:
Tupperware Corp.
Seagram Co. Ltd.
Forest Labs Inc.
Scholastic Corp.
UST, Inc.
==================================
==================================
9% Smith Barney Income Funds-
Smith Barney High Income Fund
==================================
Top 5 Holdings:
Magellan Health Services
First Nationwide Bank
United International Holdings
Unisys Corp.
CSC Holdings
==================================
==================================
15% Smith Barney
Small Cap Blend Fund, Inc.
==================================
Top 5 Holdings:
Legato Systems Inc.
Arterial Vascular Engine
Allegiance Corp.
Ciber Inc.
Network Appliance Inc.
==================================
10
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
....................................................................................................................................
Net Asset Value
--------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.97 $13.95 $0.00 $0.16 8.81%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.53
====================================================================================================================================
<CAPTION>
Historical Performance--Class B Shares
....................................................................................................................................
Net Asset Value
--------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.95 $13.87 $0.00 $0.16 8.36%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.53
====================================================================================================================================
<CAPTION>
Historical Performance--Class L Shares++
....................................................................................................................................
Net Asset Value
--------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.96 $13.88 $0.00 $0.16 8.36%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.53
====================================================================================================================================
<CAPTION>
Historical Performance--Class Z Shares
....................................................................................................................................
Net Asset Value
--------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.97 $13.96 $0.00 $0.16 8.89%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.49
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
11
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
....................................................................................................................................
Without Sales Charge(1)
-----------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 8.81% 8.36% 8.36% 8.89%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 6.47 5.62 5.61 6.71
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 11.41 10.43 10.46 12.54
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
-----------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 3.39% 3.36% 6.28% 8.89%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 1.16 0.62 3.54 6.71
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 9.13 9.38 10.00 12.54
====================================================================================================================================
<CAPTION>
Cumulative Total Return
....................................................................................................................................
Without Sales Charge(1)
====================================================================================================================================
<S> <C>
Class A (Inception* through 7/31/98) 30.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 7/31/98) 27.97
- ------------------------------------------------------------------------------------------------------------------------------------
Class L++ (Inception* through 7/31/98) 28.05
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 7/31/98) 19.87
====================================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
++ On June 12, 1998, Class C Shares were renamed Class L shares.
+ 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 L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
12
<PAGE>
Growth of $10,000 Invested in Class A, B and L 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 -- July 31, 1998 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
High Growth High Growth High Growth Salomon Smith
Portfolio- Portfolio- Portfolio- Standard & Poor's Russell Barney
Class A Class B Class L 500 Composite 2000 MSCI EAFE High Yield
Shares Shares Shares Stock Index Index Index Market Index
------- ------- ------- ----------- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 $ 9,500 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
7/96 $ 9,142 $ 9,083 $ 9,462 $10,175 $10,084 $10,119 $10,208
1/97 $10,549 $10,491 $10,886 $12,630 $11,897 $10,220 $11,049
7/97 $11,671 $11,716 $11,999 $15,476 $13,452 $11,968 $11,886
1/98 $11,419 $11,409 $11,695 $16,026 $14,047 $11,272 $12,693
7/31/98 $12,426 $12,497 $12,672 $18,462 $13,764 $12,622 $13,152
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 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.
13
<PAGE>
THE GROWTH PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING PERCENTAGES WERE REPRESENTED
BY 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 allocated to bonds, to help reduce
volatility.
================================================================================
Portfolio Update
================================================================================
The Concert Allocation Series Growth Portfolio's Class A shares generated a
total return of 7.48% for the six months ended July 31, 1998, before the effect
of any sales charges is deducted. The chart that appears on page 18 compares the
Portfolio's performance to broad-based indices that track three 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 U.S. stock market performed strongly in the first quarter of 1998. However,
conflicting signals in the domestic economy and increased uncertainty in many of
the world's financial markets led to considerable volatility during the second
quarter of 1998. As discussed earlier, investors responded to this volatility
with a decided preference toward the stocks of very large, well-established
companies because of their greater liquidity and more predictable earnings. The
stock performance disparity between large and smaller companies became even more
pronounced as the year progressed. For example, after gaining roughly 10% in the
first quarter, the Russell 2000 Index posted a negative return of 2.02% for the
six months ended July 31, 1998. In contrast, the S&P 500 rose approximately 15%
in the same period. In addition, growth stocks generally outperformed value
stocks during the first half of the year.
A strong U.S. dollar and continued turmoil in foreign markets helped fuel a
robust bond market rally during the reporting period. As a number of developing
countries braced themselves for another possible round of currency devaluations,
many investors sought the relative safety of U.S. government bonds. This
heightened demand combined with diminished supply helped send the yield on the
bellwether 30-year U.S. Treasury bond to a record low yield of 5.62% during the
past six months.
The Portfolio especially benefited from its exposure to large-capitalization
growth stocks during the reporting period. While smaller company stocks lagged
large ones, the Portfolio's holdings in this asset class also performed well,
either meeting or outperforming their respective indices.
................................................................................
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.
14
<PAGE>
The Concert Allocation Series Growth Portfolio Breakdown (as of 7/31/98)
[THE FOLLOWING PERCENTAGES WERE REPRESENTED
BY A PIE CHART IN THE PRINTED MATERIAL.]
======================================
10% Smith Barney Investment Funds
Inc.-Concert Peachtree Growth Fund
======================================
Top 5 Holdings:
Tyco International Ltd.
General Electric Co.
Bristol-Myers Squibb Co.
Scherring-Plough Corp.
American Express Co.
======================================
======================================
10% Smith Barney Funds, Inc.-
Large Cap Value Fund
======================================
Top 5 Holdings:
American Howe Products
Bristol-Myers Squibb Co.
Xerox Corp.
Enron Corp.
Sprint Corp.
======================================
======================================
5% Smith Barney Investment Funds Inc.-
Smith Barney Contrarian Fund
======================================
Top 5 Holdings:
Tupperware Corp.
Seagram Co. Ltd.
Forest Labs Inc.
Scholastic Corp.
UST, Inc.
======================================
======================================
10% Smith Barney World Funds, Inc.-
International Equity Portfolio
======================================
Top 5 Holdings:
Nokia
Compass Group PLC
Bank of Ireland
Rentokil Initial PLC
Misys PLC
======================================
======================================
5% Smith Barney
Aggressive Growth Fund Inc.
======================================
Top 5 Holdings:
Tyco International Ltd.
Intel Corp.
Forests Labs Inc.
CBS Corp.
Lehman Brothers Holdings
======================================
======================================
5% Smith Barney Investment Funds Inc.-
Smith Barney Special Equities Fund
======================================
Top 5 Holdings:
Abercrombie & Fitch Co.
Safeskin Corp.
Chancellor Media Corp.
Starbucks Corp.
Beringer Wine Estates
======================================
======================================
10% Smith Barney Equity Funds, Inc.-
Smith Barney Large Cap Blend Fund
======================================
Top 5 Holdings:
Household International
General Electric Co.
Rite Aid Corp.
Hewlett-Packard
Ericsson Telephone
======================================
======================================
5% Smith Barney Investment
Funds Inc.-Smith Barney
Hansberger Global Value Fund
======================================
Top 5 Holdings:
Broken Hill Proprietary
Scor SA
Pfleiderer AG
Telstra Corp.
Sparebanken NOR
======================================
======================================
10% Smith Barney Income Funds-
Smith Barney High Income Fund
======================================
Top 5 Holdings:
Magellan Health Services
First Nationwide Bank
United International Holdings
Unisys Corp.
CSC Holdings
======================================
======================================
10% Smith Barney Investment
Funds Inc.-Smith Barney Government
Securities Fund
======================================
Sector Breakdown:
27.1% U.S. Treasurys
34.6% U.S. Government Agencies
38.3% Other
Credit Quality:
100% AAA-Rated
Average Maturity:
8.7 Years
======================================
======================================
5% Smith Barney Investment
Trust-Smith Barney Large
Capitalization Growth Fund
======================================
Top 5 Holdings:
Intel Corp.
Coca-Cola Co.
American Online Inc.
Texas Instruments Inc.
Wells Fargo & Co.
======================================
======================================
10% Smith Barney Investment
Funds Inc.-Smith Barney
Investment Grade Bond Fund
======================================
Top 5 Holdings:
Boeing Co.
Walt Disney Co.
NationsBank Corp.
Republic New York Corp.
IBM Corp.
======================================
======================================
5% Smith Barney Small Cap
Blend Fund, Inc.
======================================
Top 5 Holdings:
Legato Systems Inc.
Arterial Vascular Engine
Allegiance Corp.
Ciber Inc.
Network Appliance Inc.
======================================
15
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
....................................................................................................................................
Net Asset Value
----------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.99 $13.74 $0.03 $0.19 7.48%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.66 $0.67
====================================================================================================================================
<CAPTION>
Historical Performance--Class B Shares
....................................................................................................................................
Net Asset Value
----------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $13.00 $13.73 $0.00 $0.19 7.10%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.67
====================================================================================================================================
<CAPTION>
Historical Performance--Class L Shares++
....................................................................................................................................
Net Asset Value
----------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $13.00 $13.73 $0.00 $0.19 7.10%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.67
====================================================================================================================================
<CAPTION>
Historical Performance--Class Z Shares
....................................................................................................................................
Net Asset Value
----------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.99 $13.74 $0.04 $0.19 7.61%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.39 $0.65
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
16
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
....................................................................................................................................
Without Sales Charge(1)
------------------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 7.48% 7.10% 7.10% 7.61%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 8.40 7.56 7.54 8.70
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 12.33 11.50 11.50 13.83
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
------------------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 2.13% 2.10% 5.04% 7.61%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 2.97 2.56 5.45 8.70
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 10.04 10.47 11.03 13.83
====================================================================================================================================
<CAPTION>
Cumulative Total Return
....................................................................................................................................
Without Sales Charge(1)
====================================================================================================================================
<S> <C>
Class A (Inception* through 7/31/98) 33.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 7/31/98) 31.07
- ------------------------------------------------------------------------------------------------------------------------------------
Class L++ (Inception* through 7/31/98) 31.06
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 7/31/98) 21.99
====================================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
++ On June 12, 1998, Class C shares were renamed Class L shares.
+ 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 L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
17
<PAGE>
Growth of $10,000 Invested in Class A, B and L Shares of the Growth Portfolio
vs. the Standard & Poor's 500 Composite Stock Index, Russell 2000 Index, Morgan
Stanley Capital International EAFE Index and Lehman Government/Corporate Bond
Index
................................................................................
February 5, 1996 -- July 31, 1998 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Growth Growth Growth
Portfolio- Portfolio- Portfolio- Standard & Poor's Russell MSCI Lehman
Class A Class B Class L 500 Composite 2000 EAFE Government/Corporate
Shares Shares Shares Stock Index Index Index Bond Index
------- ------- ------- ----------- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 $ 9,500 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
7/96 $ 9,258 $ 9,225 $ 9,609 $10,175 $10,084 $10,119 $ 9,473
1/97 $10,552 $10,532 $10,917 $12,630 $11,897 $10,220 $ 9,118
7/97 $11,700 $11,787 $12,060 $15,476 $13,452 $11,968 $ 9,643
1/98 $11,800 $11,738 $12,109 $16,026 $14,047 $11,272 $10,136
7/31/98 $12,683 $12,807 $12,969 $18,462 $13,764 $12,622 $10,421
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 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.
18
<PAGE>
THE BALANCED PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING PERCENTAGES WERE REPRESENTED
BY 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
================================================================================
The Concert Allocation Series Balanced Portfolio's Class A shares generated a
total return of 4.86% for the six months ended July 31, 1998, before the effect
of any sales charges is deducted. The chart that appears on page 23 compares the
Portfolio's performance to broad-based indices that track three 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 U.S. stock market performed strongly in the first quarter of 1998. However,
conflicting signals in the domestic economy and increased uncertainty in many of
the world's financial markets led to considerable volatility during the second
quarter of 1998. As discussed earlier, investors responded to this volatility
with a decided preference toward the stocks of very large, well-established
companies because of their greater liquidity and more predictable earnings. The
stock performance disparity between large and smaller companies became even more
pronounced as the year progressed. For example, after gaining roughly 10% in the
first quarter, the Russell 2000 Index posted a negative return of 2.02% for the
six months ended July 31, 1998. In contrast, the S&P 500 rose approximately 15%
in the same period. In addition, growth stocks generally outperformed value
stocks during the first half of the year.
A strong U.S. dollar and continued turmoil in foreign markets helped fuel a
robust bond market rally during the reporting period. As a number of developing
countries braced themselves for another possible round of currency devaluations,
many investors sought the relative safety of U.S. government bonds. This
heightened demand combined with diminished supply helped send the yield on the
bellwether 30-year U.S. Treasury bond to a record low yield of 5.62% during the
past six months.
During the reporting period, the Portfolio benefited from its holdings of
large-capitalization stocks as well as its exposure to U.S. government bonds.
................................................................................
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.
19
<PAGE>
The Concert Allocation Series Balanced Portfolio Breakdown (as of 7/31/98)
[THE FOLLOWING PERCENTAGES WERE REPRESENTED
BY A PIE CHART IN THE PRINTED MATERIAL.]
===================================
5% Smith Barney Funds, Inc.-
Large Cap Value Fund
===================================
Top 5 Holdings:
American Howe Products
Bristol-Myers Squibb Co.
Xerox Corp.
Enron Corp.
Sprint Corp.
===================================
===================================
10% Smith Barney Income
Funds-Smith Barney Premium
Total Return Fund
===================================
Top 5 Holdings:
SLM Holding Corp.
MCI Communications Corp.
Loews Corp.
Bristol-Myers Squibb Co.
Telebras
===================================
===================================
10% Smith Barney
Appreciation Fund Inc.
===================================
Top 5 Holdings:
Allstate Corp.
General Electric Co.
American International Group Inc.
Bristol-Myers Squibb Co.
General Electric Corp.
===================================
===================================
10% Smith Barney Fundamental
Value Fund Inc.
===================================
Top 5 Holdings:
Walmart Corp.
American International Group
American Express Co.
Telecommunications Inc.
Bank America Corp.
===================================
===================================
5% Smith Barney Equity Funds, Inc.-
Smith Barney Large Cap Blend Fund
===================================
Top 5 Holdings:
Household International
General Electric Co.
Rite Aid Corp.
Hewlett-Packard
Ericsson Telephone
===================================
===================================
10% Smith Barney Income
Funds-Smith Barney
Convertible Fund
===================================
Top 5 Holdings:
Mascotech Inc.
Alpharma Inc.
Kmart Financing
Hilton Hotels Corp.
Inco Ltd.
===================================
===================================
5% Smith Barney World Funds,
Inc.-Global Government
Bond Portfolio
===================================
Top 5 Holdings:
U.S. Treasurys
Bundesobligation
France OAT
U.S. Treasury Note
United Kingdom Treasurys
===================================
10% Smith Barney Managed
Governments Fund Inc.
===================================
Sector Breakdown:
22.0% U.S. Treasurys
78.0% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
6.8 Years
===================================
===================================
15% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
===================================
Sector Breakdown:
2.0% U.S. Treasurys
41.0% U.S. Government Agencies
28.0% High Yield Corporate Bonds
25.0% Foreign Government Bonds
4.0% Other
Top 5 Holdings:
GNMA
FNMA
FHLMC
United Kingdom Treasurys
Kingdom of Denmark
Top 5 Country Holdings:
United States
Germany
United Kingdom
Denmark
Spain
Average Weighted Maturity:
5.0 Years
===================================
10% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
===================================
Sector Breakdown:
27.1% U.S. Treasurys
34.6% U.S. Government Agencies
38.3% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
8.7 Years
===================================
===================================
5% Smith Barney World Funds, Inc.-
International Equity Portfolio
===================================
Top 5 Holdings:
Nokia
Compass Group PLC
Bank of Ireland
Rentokil Initial PLC
Misys PLC
===================================
===================================
5% Smith Barney Funds, Inc.-
Short-Term High Grade Bond Fund
===================================
Sector Breakdown:
32.0% U.S. Treasurys
2.0% Repurchase Agreements
66.0% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
5.67 Years
20
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
....................................................................................................................................
Net Asset Value
----------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.62 $12.70 $0.24 $0.29 4.86%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.23 $0.65
====================================================================================================================================
<CAPTION>
Historical Performance--Class B Shares
....................................................................................................................................
Net Asset Value
----------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.61 $12.70 $0.20 $0.29 4.48%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.02 $0.65
====================================================================================================================================
<CAPTION>
Historical Performance--Class L Shares++
....................................................................................................................................
Net Asset Value
----------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.61 $12.69 $0.20 $0.29 4.48%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.02 $0.65
====================================================================================================================================
<CAPTION>
Historical Performance--Class Z Shares
....................................................................................................................................
Net Asset Value
----------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.61 $12.70 $0.26 $0.29 5.07%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.83 $0.65
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
21
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
....................................................................................................................................
Without Sales Charge(1)
--------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 4.86% 4.48% 4.48% 5.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 6.14 5.33 5.33 6.44
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 10.95 10.12 10.12 11.25
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
--------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ (0.36)% (0.52)% 2.42% 5.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 0.84 0.50 3.34 6.44
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 8.68 9.07 9.66 11.25
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
....................................................................................................................................
Without Sales Charge(1)
====================================================================================================================================
<S> <C>
Class A (Inception* through 7/31/98) 29.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 7/31/98) 27.08
- ------------------------------------------------------------------------------------------------------------------------------------
Class L++ (Inception* through 7/31/98) 27.08
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 7/31/98) 17.77
====================================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
++ On June 12, 1998, Class C shares were renamed Class L shares.
+ 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 L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
22
<PAGE>
Growth of $10,000 Invested in Class A, B and L 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 -- July 31, 1998 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Salomon
Balanced Balanced Balanced Lehman Smith Barney Salomon
Portfolio- Portfolio- Portfolio- Standard & Poor's Government/ One-Year Smith Barney
Class A Class B Class L 500 Composite Corporation Treasury World Global
Shares Shares Shares Stock Index Bond Index Bill Index Bond Index
------- ------- ------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 $ 9,500 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
7/96 $ 9,513 $ 9,486 $ 9,876 $10,175 $ 9,473 $10,214 $10,167
1/97 $10,511 $10,490 $10,876 $12,630 $ 9,118 $10,551 $10,568
7/97 $11,587 $11,664 $11,939 $15,476 $ 9,643 $10,892 $11,204
1/98 $11,729 $11,763 $12,036 $16,026 $10,136 $11,214 $11,842
7/31/98 $12,298 $12,408 $12,575 $18,462 $10,421 $11,511 $12,351
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 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.
23
<PAGE>
THE CONSERVATIVE PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING PERCENTAGES WERE REPRESENTED
BY 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
================================================================================
The Concert Allocation Series Conservative Portfolio's Class A shares generated
a total return of 2.97% for the six months ended July 31, 1998, before the
effect of any sales charges is deducted. The chart that appears on page 28
compares the Portfolio's performance to broad-based indices that track three 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 U.S. stock market performed strongly in the first quarter of 1998. However,
conflicting signals in the domestic economy and increased uncertainty in many of
the world's financial markets led to considerable volatility during the second
quarter of 1998. As discussed earlier, investors responded to this volatility
with a decided preference toward the stocks of very large, well-established
companies because of their greater liquidity and more predictable earnings. The
stock performance disparity between large and smaller companies became even more
pronounced as the year progressed.
A strong U.S. dollar and continued turmoil in foreign markets helped fuel a
robust bond market rally during the reporting period. As a number of developing
countries braced themselves for another possible round of currency devaluations,
many investors sought the relative safety of U.S. government bonds. This
heightened demand combined with diminished supply helped send the yield on the
bellwether 30-year U.S. Treasury bond to a record low yield of 5.62% during the
past six months.
In contrast with collapsing demand in Asia, domestic consumer spending remains
strong. As result, upward pressure on wages increased, especially among service
industries. However, productivity gains and falling commodity prices helped to
offset any emerging inflationary pressures in the U.S. economy. In the absence
of evidence of higher inflationary pressure and continued uncertainties plaguing
worldwide financial markets, the Fed has so far refrained from changing
short-term interest rates.
During the reporting period, the Portfolio maintained a diverse exposure to a
broad range of bonds. The combination of low inflation and a moderating U.S.
economy helped to provide a near ideal backdrop for both government and
corporate bonds. The Portfolio's Class A shares return of 2.97% for the six
months ended July 31, 1998 slightly outperformed the Lehman Brothers
Corporate/Government Index, a benchmark of the performance of a wide range of
bonds with varying maturities, return of 2.81% for the same period.
................................................................................
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.
24
<PAGE>
The Concert Allocation Series Conservative Portfolio Breakdown (as of 7/31/98)
[THE FOLLOWING PERCENTAGES WERE REPRESENTED BY
A PIE CHART IN THE PRINTED MATERIAL.]
==================================
15% Smith Barney
Managed Governments Fund Inc.
==================================
Sector Breakdown:
22.0% U.S. Treasurys
78.0% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Maturity:
6.8 Years
==================================
==================================
10% Smith Barney Income Funds-
Smith Barney Convertible Fund
==================================
Top 5 Holdings:
Mascotech Inc.
Alpharma Inc.
Kmart Financing
Hilton Hotels Corp.
Inco Ltd.
==================================
==================================
5% Smith Barney Income Funds-
Smith Barney Premium Total
Return Fund
==================================
Top 5 Holdings:
SLM Holding Corp.
MCI Communications Corp.
Loews Corp.
Bristol-Myers Squibb Co.
Telebras
==================================
==================================
20% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
==================================
Sector Breakdown:
2.0% U.S. Treasurys
41.0% U.S. Government Agencies
28.0% High Yield Corporate Bonds
25.0% Foreign Government Bonds
4.0% Other
Top 5 Holdings:
GNMA
FNMA
FHLMC
United Kingdom Treasurys
Kingdom of Denmark
Top 5 Country Holdings:
United States
Germany
United Kingdom
Denmark
Spain
Average Weighted Maturity:
5.0 Years
==================================
==================================
10% Smith Barney
Appreciation Fund Inc.
==================================
Top 5 Holdings:
Allstate Corp.
General Electric Co.
American International Group Inc.
Bristol-Myers Squibb Co.
General Electric Corp.
==================================
==================================
10% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
==================================
Sector Breakdown:
27.1% U.S. Treasurys
34.6% U.S. Government Agencies
38.3% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
8.7 Years
==================================
==================================
5% Smith Barney Investment
Funds Inc.-Smith Barney
Hansberger Global Value Fund
==================================
Top 5 Holdings:
Broken Hill Proprietary
Scor SA
Pfleiderer AG
Telstra Corp.
Sparebanken NOR
==================================
==================================
5% Smith Barney Funds, Inc.-Short-
Term High Grade Bond Fund
==================================
Sector Breakdown:
32.0% U.S. Treasurys
2.0% Repurchase Agreement
66.0% Other
Credit Quality:
100% AAA-Rated
Average Maturity:
5.67 Years
==================================
==================================
5% Smith Barney Fundamental
Value Fund Inc.
==================================
Top 5 Holdings:
Walmart Corp.
American International Group
American Express Co.
Telecommunications Inc.
Bank America Corp.
==================================
==================================
10% Smith Barney Income
Funds-Smith Barney
High Income Fund
==================================
Top 5 Holdings:
Magellan Health Services
First Nationwide Bank
United International Holdings
Unisys Corp.
CSC Holdings
==================================
==================================
5% Smith Barney World Funds,
Inc.-Global Government Bond
Portfolio
==================================
Top 5 Holdings:
U.S. Treasurys
Bundesobligation
France OAT
U.S. Treasury Note
United Kingdom Treasurys
==================================
25
<PAGE>
THE CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
....................................................................................................................................
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.17 $12.04 $0.30 $0.19 2.97%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.51 $0.59
====================================================================================================================================
<CAPTION>
Historical Performance--Class B Shares
....................................................................................................................................
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.16 $12.02 $0.27 $0.19 2.62%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.37 $0.59
====================================================================================================================================
<CAPTION>
Historical Performance--Class L Shares++
....................................................................................................................................
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.16 $12.02 $0.28 $0.19 2.65%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.39 $0.59
====================================================================================================================================
<CAPTION>
Historical Performance--Class Z Shares
....................................................................................................................................
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $12.17 $12.03 $0.32 $0.19 3.02%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.05 $0.59
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
26
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
....................................................................................................................................
Without Sales Charge(1)
----------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 2.97% 2.62% 2.65% 3.02%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 5.74 5.17 5.22 5.96
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 9.35 8.79 8.84 9.89
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
----------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ (1.64)% (1.83)% 0.67% 3.02%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 1.02 0.88 3.20 5.96
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 7.34 7.72 8.39 9.89
====================================================================================================================================
<CAPTION>
Cumulative Total Return
....................................................................................................................................
Without Sales Charge(1)
====================================================================================================================================
<S> <C>
Class A (Inception* through 7/31/98) 24.86%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 7/31/98) 23.29
- ------------------------------------------------------------------------------------------------------------------------------------
Class L++ (Inception* through 7/31/98) 23.43
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 7/31/98) 15.57
====================================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.50% and 1.00%,
respectively; Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from 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 L shares also reflect the deduction
of a 1.00% CDSC, which applies if shares are redeemed within the first year
of purchase.
++ On June 12, 1998, Class C shares were renamed Class L shares.
+ 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 L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
27
<PAGE>
Growth of $10,000 Invested in Class A, B and L 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 -- July 31, 1998 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Salomon
Conservative Conservative Conservative Standard & Lehman Salomon Smith Barney
Portfolio- Portfolio- Portfolio- Poor's 500 Government/ Smith Barney One- Year
Class A Class B Class L Composite Corporate High Yield Treasury
Shares Shares Shares Stock Index Bond Index Market Index Bill Index
------- ------- ------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 $ 9,550 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
7/96 $ 9,560 $ 9,542 $ 9,883 $10,175 $ 9,473 $10,208 $10,214
1/97 $10,369 $10,353 $10,696 $12,630 $ 9,118 $11,049 $10,551
7/97 $11,277 $11,323 $11,609 $15,476 $ 9,643 $11,886 $10,892
1/98 $11,581 $11,614 $11,900 $16,026 $10,136 $12,693 $11,214
7/31/98 $11,925 $12,029 $12,215 $18,462 $10,421 $13,152 $11,511
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 4.50% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 4.50% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 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.
28
<PAGE>
THE INCOME PORTFOLIO
================================================================================
Target Asset Allocation
================================================================================
[THE FOLLOWING PERCENTAGES WERE REPRESENTED BY
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
================================================================================
The Concert Allocation Series Income Portfolio's Class A shares generated a
total return of 2.85% for the six months ended July 31, 1998, before the effect
of any sales charges is deducted. The chart that appears on page 33 compares the
Portfolio's performance to broad-based indices that track three 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.
A strong U.S. dollar and continued turmoil in foreign markets helped fuel a
robust bond market rally during the reporting period. As a number of developing
countries braced themselves for another possible round of currency devaluations,
many investors sought the relative safety of U.S. government bonds. This
heightened demand combined with diminished supply helped send the yield on the
bellwether 30-year U.S. Treasury bond to a record low yield of 5.62% during the
past six months.
In contrast with collapsing demand in Asia, domestic consumer spending remains
strong. As result, upward pressure on wages increased, especially among service
industries. However, productivity gains and falling commodity prices helped to
offset any emerging inflationary pressures in the U.S. economy. In the absence
of evidence of higher inflationary pressure and continued uncertainties plaguing
worldwide financial markets, the Fed has so far refrained from changing
short-term interest rates.
During the reporting period, the Portfolio maintained a diverse exposure to a
broad range of bonds. The combination of low inflation and a moderating U.S.
economy helped to provide a near ideal backdrop for both government and
corporate bonds. The Portfolio's Class A shares return of 2.85% for the six
months ended July 31, 1998 slightly outperformed the Lehman Brothers
Corporate/Government Index, a benchmark of the performance of a wide range of
bonds with varying maturities, return of 2.81% for the same period.
................................................................................
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.
29
<PAGE>
The Concert Allocation Series Income Portfolio Breakdown (as of 7/31/98)
[THE FOLLOWING PERCENTAGES WERE REPRESENTED BY
A PIE CHART IN THE PRINTED MATERIAL.]
==================================
10% Smith Barney Funds, Inc.-
Short-Term High Grade Bond Fund
==================================
Sector Breakdown:
32.0% U.S. Treasurys
2.0% Repurchase Agreements
66.0% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
5.67 Years
==================================
==================================
15% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
==================================
Sector Breakdown:
27.1% U.S. Treasurys
34.6% U.S. Government Agencies
38.3% Other
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
8.7 Years
==================================
==================================
20% Smith Barney
Managed Governments Fund Inc.
==================================
Sector Breakdown:
22.0% U.S. Treasurys
78.0% Mortgage-Backed Securities
Credit Quality:
100% AAA-Rated
Average Weighted Maturity:
6.8 Years
==================================
==================================
20% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
==================================
Sector Breakdown:
2.0% U.S. Treasurys
41.0% U.S. Government Agencies
28.0% High Yield Corporate Bonds
25.0% Foreign Government Bonds
4.0% Other
Top 5 Holdings:
GNMA
FNMA
FHLMC
United Kingdom Treasurys
Kingdom of Denmark
Top 5 Country Holdings:
United States
United Kingdom
Spain
Germany
Denmark
Average Weighted Maturity:
5.0 Years
==================================
==================================
5% Smith Barney Income Funds-
Smith Barney Premium Total
Return Fund
==================================
Top 5 Holdings:
SLM Holding Corp.
MCI Communications Corp.
Loews Corp.
Bristol-Myers Squibb Co.
Telebras
==================================
==================================
5% Smith Barney
Appreciation Fund Inc.
==================================
Top 5 Holdings:
Allstate Corp.
General Electric Co.
American International Group Inc.
Bristol-Myers Squibb Co.
General Electric Corp.
==================================
==================================
5% Smith Barney Income Funds-
Smith Barney Convertible Fund
==================================
Top 5 Holdings:
Mascotech Inc.
Alpharma Inc.
Kmart Financing
Hilton Hotels Corp.
Inco Ltd.
==================================
==================================
20% Smith Barney Income Funds-
Smith Barney High Income Fund
==================================
Top 5 Holdings:
Magellan Health Services
First Nationwide
United International Holdings
Unisys Corp.
CSC Holdings
==================================
30
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance--Class A Shares
....................................................................................................................................
Net Asset Value
------------------------------------------------ Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $11.75 $11.64 $0.36 $0.08 2.85%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.76 $0.37
====================================================================================================================================
<CAPTION>
Historical Performance--Class B Shares
....................................................................................................................................
Net Asset Value
------------------------------------------------ Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $11.76 $11.65 $0.34 $0.08 2.58%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.62 $0.37
====================================================================================================================================
<CAPTION>
Historical Performance--Class L Shares++
....................................................................................................................................
Net Asset Value
------------------------------------------------ Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $11.76 $11.64 $0.34 $0.08 2.52%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.64 $0.37
====================================================================================================================================
<CAPTION>
Historical Performance--Class Z Shares
....................................................................................................................................
Net Asset Value
------------------------------------------------ Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $11.75 $11.63 $0.39 $0.08 2.97%+
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.27 $0.37
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
31
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return
....................................................................................................................................
Without Sales Charge(1)
----------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 2.85% 2.58% 2.52% 2.97%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 6.45 5.95 5.91 6.78
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 8.30 7.79 7.81 9.91
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
----------------------------------------------------------------------------
Class A Class B Class L++ Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ (1.75)% (1.87)% 0.51% 2.97%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 1.64 1.60 3.91 6.78
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 6.32 6.70 7.36 9.91
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
....................................................................................................................................
Without Sales Charge(1)
====================================================================================================================================
<S> <C>
Class A (Inception* through 7/31/98) 21.93%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 7/31/98) 20.50
- ------------------------------------------------------------------------------------------------------------------------------------
Class L++ (Inception* through 7/31/98) 20.54
- ------------------------------------------------------------------------------------------------------------------------------------
Class Z (Inception* through 7/31/98) 15.60
====================================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.50% and 1.00%,
respectively; and Class B shares reflect the deduction of a 4.50% CDSC,
which applies if shares are redeemed less than one year from 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 L shares also reflect the
deduction of a 1.00% CDSC, which applies if shares are redeemed within the
first year of purchase.
++ On June 12, 1998, Class C shares were renamed Class L shares.
+ 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 L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
32
<PAGE>
Growth of $10,000 Invested in Class A, B and L 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 -- July 31, 1998 (unaudited)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Salomon
Income Income Income Standard & Lehman Salomon Smith Barney
Portfolio- Portfolio- Portfolio- Poor's 500 Government/ Smith Barney One-Year
Class A Class B Class L Composite Corporate High Yield Treasury
Shares Shares Shares Stock Index Bond Index Market Index Bill Index
------- ------- ------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 $ 9,550 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
7/96 $ 9,482 $ 9,472 $ 9,807 $10,175 $ 9,473 $10,208 $10,214
1/97 $10,160 $10,139 $10,485 $12,630 $ 9,118 $11,049 $10,551
7/97 $10,939 $10,973 $11,263 $15,476 $ 9,643 $11,886 $10,892
1/98 $11,322 $11,297 $11,636 $16,026 $10,136 $12,693 $11,214
7/31/98 $11,644 $11,750 $11,929 $18,462 $10,421 $13,152 $11,511
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 4.50% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 4.50% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 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.
33
<PAGE>
THE GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) July 31, 1998
....................................................................................................................................
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--100%
23,062 Smith Barney Funds, Inc. - Large Cap Value Fund $ 425,277
24,820 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 382,727
78,490 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Small Cap Value 851,618
190,827 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 2,150,624
78,553 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 1,291,420
65,184 Smith Barney Small Cap Blend Fund, Inc. 851,305
45,494 Smith Barney World Funds, Inc. - Emerging Markets Portfolio 429,468
90,895 Smith Barney World Funds, Inc. - International Equity Portfolio 2,162,400
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$8,883,952*) $8,544,839
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
34
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) July 31, 1998
....................................................................................................................................
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--94.7%
1,429,338 Smith Barney Aggressive Growth Fund Inc. $ 62,390,615
1,829,640 Smith Barney Equity Funds, Inc. - Smith Barney Large Cap Blend Fund 30,445,216
1,679,560 Smith Barney Funds, Inc. - Large Cap Value Fund 30,971,082
5,064,316 Smith Barney Income Funds - Smith Barney High Income Fund 59,606,998
4,066,585 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 62,706,737
2,310,357 Smith Barney Investment Funds Inc. - Smith Barney Contrarian Fund 31,374,654
5,640,494 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 63,568,372
2,303,545 Smith Barney Investment Funds Inc. - Smith Barney Special Equities Fund 62,725,522
4,161,337 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 68,412,386
7,275,207 Smith Barney Small Cap Blend Fund, Inc. 95,014,205
2,709,049 Smith Barney World Funds, Inc. - International Equity Portfolio 64,448,275
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$578,653,579) 631,664,062
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--5.3%
$ 35,078,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds at maturity--$35,094,365;
(Fully collateralized by U.S. Treasury Notes, 5.375% due 7/31/00; Market value--$35,795,889)
(Cost--$35,078,000) 35,078,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$613,731,579*) $666,742,062
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
35
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) July 31, 1998
....................................................................................................................................
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.9%
938,071 Smith Barney Aggressive Growth Fund Inc. $ 40,946,838
4,623,802 Smith Barney Equity Funds, Inc. - Smith Barney Large Cap Blend Fund 76,940,073
4,195,722 Smith Barney Funds, Inc. - Large Cap Value Fund 77,369,118
6,482,965 Smith Barney Income Funds - Smith Barney High Income Fund 76,304,499
5,093,933 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 78,548,456
2,835,936 Smith Barney Investment Funds Inc. - Smith Barney Contrarian Fund 38,512,020
8,242,484 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 80,364,221
3,484,339 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 39,268,502
6,002,020 Smith Barney Investment Funds Inc. - Smith Barney Investment Grade Bond Fund 80,307,035
1,413,611 Smith Barney Investment Funds Inc. - Smith Barney Special Equities Fund 38,492,643
2,671,759 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 43,923,733
2,928,091 Smith Barney Small Cap Blend Fund, Inc. 38,240,901
3,399,502 Smith Barney World Funds, Inc. - International Equity Portfolio 80,874,172
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$724,513,925) 790,092,211
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.1%
$666,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds at maturity--$666,311;
(Fully collateralized by U.S. Treasury Notes, 5.375% due 7/31/00; Market value--$679,630)
(Cost--$666,000) 666,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$725,179,925*) $790,758,211
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
36
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) July 31, 1998
....................................................................................................................................
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--94.4%
3,025,037 Smith Barney Appreciation Fund Inc. $ 45,678,070
1,371,689 Smith Barney Equity Funds, Inc. - Smith Barney Large Cap Blend Fund 22,824,906
4,188,488 Smith Barney Fundamental Value Fund Inc. 45,654,519
1,227,270 Smith Barney Funds, Inc. - Large Cap Value Fund 22,630,872
4,944,865 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 20,224,500
2,734,491 Smith Barney Income Funds - Smith Barney Convertible Fund 46,431,661
8,573,138 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 68,242,181
2,068,297 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 46,660,785
4,765,129 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 46,460,009
3,597,007 Smith Barney Managed Governments Fund Inc. 45,825,877
2,070,325 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 23,953,662
1,005,301 Smith Barney World Funds, Inc. - International Equity Portfolio 23,916,123
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$441,396,486) 458,503,165
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--5.6%
$26,980,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds at maturity--$26,992,588;
(Fully collateralized by U.S. Treasury Notes, 5.375% due 7/31/00; Market value--$27,532,160)
(Cost--$26,980,000) 26,980,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$468,376,486*) $485,483,165
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
37
<PAGE>
THE CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) July 31, 1998
....................................................................................................................................
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.3%
815,172 Smith Barney Appreciation Fund Inc. $ 12,309,103
565,771 Smith Barney Fundamental Value Fund Inc. 6,166,907
1,367,434 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 5,592,806
728,975 Smith Barney Income Funds - Smith Barney Convertible Fund 12,378,009
3,119,015 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 24,827,361
1,053,751 Smith Barney Income Funds - Smith Barney High Income Fund 12,402,658
278,582 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 6,284,824
1,271,621 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 12,398,307
565,752 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 6,376,036
1,460,239 Smith Barney Managed Governments Fund Inc. 18,603,452
538,426 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 6,229,593
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$122,681,378) 123,569,056
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.7%
$886,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds at maturity--$886,413;
(Fully collateralized by U.S. Treasury Notes, 5.375% due 7/31/00; Market value--$904,132)
(Cost--$886,000) 886,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$123,567,378*) $124,455,056
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
38
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) July 31, 1998
....................................................................................................................................
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds--99.1%
225,579 Smith Barney Appreciation Fund Inc. $ 3,406,245
1,601,017 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 6,548,164
215,844 Smith Barney Income Funds - Smith Barney Convertible Fund 3,665,041
1,727,420 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 13,750,270
1,164,259 Smith Barney Income Funds - Smith Barney High Income Fund 13,703,333
151,897 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 3,426,803
1,057,263 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 10,308,320
1,079,604 Smith Barney Managed Governments Fund Inc. 13,754,158
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost--$67,748,033) 68,562,334
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--0.9%
$622,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds at maturity--$622,290;
(Fully collateralized by U.S. Treasury Notes, 5.375% due 7/31/00; Market value--$634,730)
(Cost--$622,000) 622,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments--100% (Cost--$68,370,033*) $ 69,184,334
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
39
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (unaudited) July 31, 1998
....................................................................................................................................
Global High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at cost $8,883,952 $613,731,579 $725,179,925 $468,376,486 $123,567,378 $68,370,033
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $8,544,839 $666,742,062 $790,758,211 $485,483,165 $124,455,056 $69,184,334
Cash 291,801 966 5,994,022 540 190 642
Receivable for Fund shares sold 8,662 279,200 436,338 152,314 63,201 21,197
Receivable from manager 28,048 -- -- -- -- 25,187
Dividends and interest receivable -- 5,455 -- 66,633 17,365 20,229
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 8,873,350 667,027,683 797,188,571 485,702,652 124,535,812 69,251,589
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased 129,618 32,780,353 3,263,882 24,145,292 226,761 246,495
Payable for Fund shares purchased -- -- -- 47,441 -- --
Dividends payable -- -- 698,855 -- -- 337,897
Capital gains payable -- 7,336,771 10,984,524 10,266,259 1,906,977 446,635
Distribution fees payable 5,093 -- -- -- 33,844 --
Accrued expenses 20,962 656,324 1,328,433 816,567 106,613 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 155,673 40,773,448 16,275,694 35,275,559 2,274,195 1,031,027
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $8,717,677 $626,254,235 $780,912,877 $450,427,093 $122,261,617 $68,220,562
====================================================================================================================================
Net Assets:
Par value of capital shares $ 782 $ 45,023 $ 56,859 $ 35,478 $ 10,163 $ 5,860
Capital paid in excess of par value 9,061,561 557,879,458 699,508,571 429,962,413 120,472,627 67,365,288
Undistributed (overdistributed)
net investment income (5,553) 1,377,532 5,551,419 333,466 416,868 (55,898)
Accumulated net realized gain
on investments -- 13,941,739 10,217,742 2,989,057 474,281 91,011
Net unrealized appreciation
(depreciation) of investments (339,113) 53,010,483 65,578,286 17,106,679 887,678 814,301
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $8,717,677 $626,254,235 $780,912,877 $450,427,093 $122,261,617 $68,220,562
====================================================================================================================================
Shares Outstanding:
Class A 413,357 22,323,819 24,081,129 15,396,268 4,958,706 2,850,494
Class B 356,757 19,904,600 28,964,795 17,303,890 4,666,188 2,591,480
Class L 11,788 2,439,854 3,464,970 2,406,701 457,899 294,285
Class Z -- 353,723 348,500 371,507 80,370 123,605
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $11.16 $13.95 $13.74 $12.70 $12.04 $11.64
Class B * $11.13 $13.87 $13.73 $12.70 $12.02 $11.65
Class L ** $11.13 $13.88 $13.73 $12.69 $12.02 $11.64
Class Z (and redemption price) -- $13.96 $13.74 $12.70 $12.03 $11.63
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of
net asset value per share) $11.75 $14.68 $14.46 $13.37 -- --
Class A (net asset value plus 4.71% of
net asset value per share) -- -- -- -- $12.61 $12.19
Class L (net asset value plus 1.01% of
net asset value per share) $11.24 $14.02 $13.87 $12.82 $12.14 $11.76
- ------------------------------------------------------------------------------------------------------------------------------------
</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 purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements
40
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations (unaudited) For the Six Months Ended July 31, 1998
....................................................................................................................................
Global High Growth Growth Balanced Conservative Income
Portfolio(1) Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Income distributions from
Underlying Funds $ 8,273 $ 4,187,517 $ 9,239,593 $8,275,693 $3,129,499 $2,104,844
Short-term capital gain distributions
from Underlying Funds -- 9,350 52,224 221,397 58,353 16,071
Interest -- 124,573 160,821 95,448 28,507 28,061
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 8,273 4,321,440 9,452,638 8,592,538 3,216,359 2,148,976
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Distribution fees (Note 2) 8,790 1,128,500 2,574,292 1,452,781 289,673 80,064
Other expenses 5,036 1,815,408 1,326,761 761,623 203,845 192,342
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 13,826 2,943,908 3,901,053 2,214,404 493,518 272,406
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (5,553) 1,377,532 5,551,585 6,378,134 2,722,841 1,876,570
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments (Note 3):
Realized gain on
sale of Underlying Funds -- 13,239,496 7,859,080 1,373,723 235,473 --
Capital gain distributions from
Underlying Funds -- 1,029,643 2,484,958 1,624,001 238,860 92,492
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain -- 14,269,139 10,344,038 2,997,724 474,333 92,492
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation) of Investments:
Beginning of period -- 25,534,430 33,636,442 8,293,764 1,114,017 1,113,579
End of period (339,113) 53,010,483 65,578,286 17,106,679 887,678 814,301
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net
Unrealized Appreciation (339,113) 27,476,053 31,941,844 8,812,915 (226,339) (299,278)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments (339,113) 41,745,192 42,285,882 11,810,639 247,994 (206,786)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations $(344,666) $43,122,724 $47,837,467 $18,188,773 $2,970,835 $1,669,784
====================================================================================================================================
</TABLE>
(1) For the period March 9, 1998 (commencement of operations) to July 31, 1998.
See Notes to Finanical Statements.
41
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (unaudited)
....................................................................................................................................
For the Six Months Ended July 31, 1998
Global High Growth Growth Balanced Conservative Income
Portfolio(1) Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (5,553) $ 1,377,532 $ 5,551,585 $ 6,378,134 $ 2,722,841 $ 1,876,570
Net realized gain -- 14,269,139 10,344,038 2,997,724 474,333 92,492
Increase (decrease) in
net unrealized appreciation (339,113) 27,476,053 31,941,844 8,812,915 (226,339) (299,278)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations (344,666) 43,122,724 47,837,467 18,188,773 2,970,835 1,669,784
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to
Shareholders From:
Net investment income -- -- (698,855) (7,261,582) (2,731,557) (1,932,468)
Net realized gains -- (7,336,771) (10,984,524) (10,266,259) (1,906,977) (446,635)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders -- (7,336,771) (11,683,379) (17,527,841) (4,638,534) (2,379,103)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 9,463,186 139,074,781 149,434,391 100,250,140 29,734,583 15,835,251
Net asset value of shares issued
for reinvestment of dividends -- -- -- 6,964,210 2,641,694 1,402,239
Cost of shares reacquired (400,843) (68,842,420) (73,882,866) (48,437,255) (14,287,636) (8,703,906)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 9,062,343 70,232,361 75,551,525 58,777,095 18,088,641 8,533,584
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 8,717,677 106,018,314 111,705,613 59,438,027 16,420,942 7,824,265
Net Assets:
Beginning of period -- 520,235,921 669,207,264 390,989,066 105,840,675 60,396,297
- ------------------------------------------------------------------------------------------------------------------------------------
End of period* $8,717,677 $626,254,235 $780,912,877 $450,427,093 $122,261,617 $68,220,562
====================================================================================================================================
* Includes undistributed (overdistributed)
net investment income of: $(5,553) $1,377,532 $5,551,419 $333,466 $416,868 $(55,898)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period March 9, 1998 (commencement of operations) to July 31, 1998.
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets For the Year Ended January 31, 1998
....................................................................................................................................
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 gains (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.
43
<PAGE>
Notes to Financial Statements (unaudited)
................................................................................
1. Significant Accounting Policies
The Global, 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"), a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"). The financial
statements and financial highlights for the other portfolios are presented in a
separate semi-annual report.
The significant accounting policies consistently followed by the Fund are: (a)
investments in the Underlying Funds are valued at the closing net asset value
per share of each Underlying Fund on the day of valuation; (b) 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.
On June 12, 1998, the Fund's Board of Directors approved the renaming of
existing Class C shares as Class L shares. Effective June 15, 1998, Class L
shares are being sold at the net asset value plus a maximum initial sales charge
of 1.00%. Class L shares also have a 1.00% contingent deferred sales charge
("CDSC"), which applies if redemption occurs within the first year of purchase.
The Global, High Growth, Growth and Balanced Portfolios have a CDSC of 5.00% on
Class B shares, which applies if redemption occurs less than one year from
purchase and declines thereafter by 1.00% per year until no CDSC is incurred.
The Conservative and Income Portfolios have a CDSC of 4.50% on Class B shares,
which applies if redemption occurs less than one year from purchase and declines
by 0.50% the first year after purchase and thereafter by 1.00% per year until no
CDSC is incurred.
For the six months ended July 31, 1998, SB received sales charges of
approximately $223,000 and $19,000 on sales of the Portfolios' Class A and L
shares, respectively. In addition, CDSCs paid to SB were approximately:
<TABLE>
<CAPTION>
Portfolio Class B Class L
- ---------------------------------------------------------------------------------
<S> <C> <C>
Global $164,000 $1,000
High Growth 266,000 4,000
Growth 134,000 1,000
Balanced 8,000 --
Conservative 20,000 --
Income -- --
- ---------------------------------------------------------------------------------
</TABLE>
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to their Class A, B and L shares calculated at an annual rate of 0.25% of the
average daily net assets of each respective class. In addition, the Global, High
Growth, Growth and Balanced Portfolios each pays a distribution fee with respect
to their Class B and L shares calculated at an annual rate of 0.75% of the
average daily net assets of each class. The Conservative and Income Portfolios
each pays a distribution fee with respect to their Class B and L 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 (unaudited) (continued)
................................................................................
For the six months ended July 31, 1998, total Distribution Plan fees were as
follows:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class L
================================================================================
<S> <C> <C> <C>
Global $ 1,866 $ 6,569 $ 355
High Growth -- 1,005,760 122,740
Growth 398,575 1,940,137 235,580
Balanced 234,448 1,068,728 149,605
Conservative 71,220 198,654 19,799
Income -- 71,994 8,070
================================================================================
</TABLE>
All officers and one Director of the Fund are employees of SB.
3. Investments
During the six months ended July 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>
Global $ 8,883,952 $ --
High Growth 134,440,326 61,000,000
Growth 117,816,515 33,500,000
Balanced 102,506,274 43,408,741
Conservative 24,313,733 5,872,884
Income 10,150,833 --
================================================================================
</TABLE>
At July 31, 1998, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
Net Unrealized
Portfolio Appreciation Depreciation Appreciation/
(Depreciation)
================================================================================
<S> <C> <C> <C>
Global $ 60,092 $ (399,205) $ (339,113)
High Growth 61,900,815 (8,890,332) 53,010,483
Growth 71,020,188 (5,441,902) 65,578,286
Balanced 19,856,702 (2,750,023) 17,106,679
Conservative 2,216,115 (1,328,437) 887,678
Income 894,310 (80,009) 814,301
================================================================================
</TABLE>
4. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
5. Capital Shares
At July 31, 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.
Effective June 12, 1998, the Fund adopted the renaming of existing Class C
shares as Class L shares.
45
<PAGE>
<TABLE>
<CAPTION>
Notes to Financial Statements (unaudited) (continued)
....................................................................................................................................
At July 31, 1998, total paid-in capital amounted to the following for each class:
Portfolio Class A Class B Class L Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Global $ 4,791,196 $ 4,132,972 $ 138,175 $ --
High Growth 277,033,938 246,020,766 30,065,420 4,804,357
Growth 297,952,462 355,179,511 41,737,560 4,695,897
Balanced 187,385,808 209,169,734 28,639,049 4,803,300
Conservative 58,800,075 55,344,182 5,352,748 985,785
Income 32,778,212 29,760,363 3,373,860 1,458,713
====================================================================================================================================
</TABLE>
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Six Months Ended July 31, 1998 Year Ended January 31, 1998
------------------------------ ---------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
GLOBAL PORTFOLIO*:
Class A
Shares sold 425,263 $ 4,927,145 -- --
Shares issued on reinvestment -- -- -- --
Shares redeemed (11,906) (135,949) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 413,357 $ 4,791,196 -- --
====================================================================================================================================
Class B
Shares sold 380,006 $ 4,397,866 -- --
Shares issued on reinvestment -- -- -- --
Shares redeemed (23,249) (264,894) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 356,757 $ 4,132,972 -- --
====================================================================================================================================
Class L**
Shares sold 11,788 $ 138,175 -- --
Shares issued on reinvestment -- -- -- --
Shares redeemed -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 11,788 $ 138,175 -- --
====================================================================================================================================
HIGH GROWTH PORTFOLIO:
Class A
Shares sold 5,084,865 $ 72,930,712 10,010,305 $ 128,519,682
Shares issued on reinvestment -- -- 674,466 8,707,357
Shares redeemed (2,744,594) (39,161,793) (3,113,531) (40,195,802)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,340,271 $ 33,768,919 7,571,240 $ 97,031,237
====================================================================================================================================
Class B
Shares sold 3,966,998 $ 56,678,142 8,083,651 $ 103,764,047
Shares issued on reinvestment -- -- 496,177 6,400,681
Shares redeemed (1,829,873) (26,086,137) (2,190,222) (28,152,547)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,137,125 $ 30,592,005 6,389,606 $ 82,012,181
====================================================================================================================================
Class L**
Shares sold 535,042 $ 7,646,480 967,197 $ 12,449,955
Shares issued on reinvestment -- -- 60,158 776,640
Shares redeemed (243,900) (3,482,315) (435,887) (5,582,392)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 291,142 $ 4,164,165 591,468 $ 7,644,203
====================================================================================================================================
Class Z
Shares sold 127,269 $ 1,819,447 230,648 $ 3,053,994
Shares issued on reinvestment -- -- 7,908 102,090
Shares redeemed (7,741) (112,175) (4,701) (63,044)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 119,528 $ 1,707,272 233,855 $ 3,093,040
====================================================================================================================================
</TABLE>
* For the Global Portfolio, transactions are for the period from March 9,
1998 (inception date) to July 31, 1998.
** On June 12, 1998, Class C shares were renamed Class L shares.
46
<PAGE>
<TABLE>
<CAPTION>
Notes to Financial Statements (unaudited) (continued)
....................................................................................................................................
Six Months Ended July 31, 1998 Year Ended January 31, 1998
------------------------------- ---------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
GROWTH PORTFOLIO:
Class A
Shares sold 5,048,411 $ 71,050,375 10,133,515 $ 130,849,284
Shares issued on reinvestment -- -- 1,205,901 15,556,116
Shares redeemed (2,512,350) (35,265,324) (2,864,046) (37,262,268)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,536,061 $ 35,785,051 8,475,370 $ 109,143,132
====================================================================================================================================
Class B
Shares sold 4,876,301 $ 68,457,071 10,828,351 $ 139,348,855
Shares issued on reinvestment -- -- 1,263,705 16,327,065
Shares redeemed (2,330,998) (32,692,224) (2,826,910) (36,586,917)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,545,303 $ 35,764,847 9,265,146 $ 119,089,003
====================================================================================================================================
Class L*
Shares sold 570,032 $ 8,013,077 1,167,870 $ 15,084,743
Shares issued on reinvestment -- -- 155,822 2,013,222
Shares redeemed (410,555) (5,755,249) (555,673) (7,192,671)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 159,477 $ 2,257,828 768,019 $ 9,905,294
====================================================================================================================================
Class Z
Shares sold 136,561 $ 1,913,868 218,816 $ 2,890,642
Shares issued on reinvestment -- -- 12,339 159,049
Shares redeemed (12,004) (170,069) (7,700) (103,417)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 124,557 $ 1,743,799 223,455 $ 2,946,274
====================================================================================================================================
BALANCED PORTFOLIO:
Class A
Shares sold 3,735,190 $ 49,013,946 7,062,248 $ 89,012,976
Shares issued on reinvestment 265,286 3,480,346 812,798 10,223,473
Shares redeemed (1,824,968) (23,966,453) (2,144,347) (27,210,876)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,175,508 $ 28,527,839 5,730,699 $ 72,025,573
====================================================================================================================================
Class B
Shares sold 3,282,156 $ 43,036,762 7,134,949 $ 89,763,171
Shares issued on reinvestment 235,620 3,091,177 834,347 10,489,664
Shares redeemed (1,577,832) (20,706,433) (1,826,017) (23,166,035)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,939,944 $ 25,421,506 6,143,279 $ 77,086,800
====================================================================================================================================
Class L*
Shares sold 475,743 $ 6,244,705 776,967 $ 9,788,923
Shares issued on reinvestment 29,932 392,687 114,791 1,442,518
Shares redeemed (277,410) (3,650,202) (358,733) (4,560,118)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 228,265 $ 2,987,190 533,025 $ 6,671,323
====================================================================================================================================
Class Z
Shares sold 148,863 $ 1,954,727 230,880 $ 2,958,677
Shares issued on reinvestment -- -- 10,474 132,091
Shares redeemed (8,733) (114,167) (10,188) (130,447)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 140,130 $ 1,840,560 231,166 $ 2,960,321
====================================================================================================================================
</TABLE>
*On June 12, 1998, Class C shares were renamed Class L shares.
47
<PAGE>
<TABLE>
<CAPTION>
Notes to Financial Statements (unaudited) (continued)
....................................................................................................................................
Six Months Ended July 31, 1998 Year Ended January 31, 1998
------------------------------ ---------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
CONSERVATIVE PORTFOLIO:
Class A
Shares sold 1,181,314 $ 14,626,205 2,101,072 $ 25,731,997
Shares issued on reinvestment 113,297 1,395,559 317,020 3,840,702
Shares redeemed (544,511) (6,742,214) (771,353) (9,452,258)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 750,100 $ 9,279,550 1,646,739 $ 20,120,441
====================================================================================================================================
Class B
Shares sold 1,079,088 $ 13,347,923 1,817,304 $ 22,221,744
Shares issued on reinvestment 90,396 1,112,579 279,308 3,380,940
Shares redeemed (499,792) (6,182,171) (480,509) (5,906,489)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 669,692 $ 8,278,331 1,616,103 $ 19,696,195
====================================================================================================================================
Class L*
Shares sold 108,540 $ 1,341,932 171,125 $ 2,100,179
Shares issued on reinvestment 9,004 110,829 31,837 385,261
Shares redeemed (102,656) (1,268,412) (107,293) (1,313,296)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 14,888 $ 184,349 95,669 $ 1,172,144
====================================================================================================================================
Class Z
Shares sold 33,750 $ 418,523 70,965 $ 874,228
Shares issued on reinvestment 1,847 22,727 3,420 41,577
Shares redeemed (7,658) (94,839) (22,043) (277,453)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 27,939 $ 346,411 52,342 $ 638,352
====================================================================================================================================
INCOME PORTFOLIO:
Class A
Shares sold 679,653 $ 8,027,557 1,518,353 $ 17,876,653
Shares issued on reinvestment 63,304 745,461 179,710 2,105,847
Shares redeemed (408,569) (4,824,161) (727,648) (8,590,070)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 334,388 $ 3,948,857 970,415 $ 11,392,430
====================================================================================================================================
Class B
Shares sold 536,987 $ 6,343,242 1,016,644 $ 11,985,471
Shares issued on reinvestment 48,228 568,410 138,552 1,623,669
Shares redeemed (252,618) (2,983,350) (440,392) (5,187,806)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 332,597 $ 3,928,302 714,804 $ 8,421,334
====================================================================================================================================
Class L*
Shares sold 58,655 $ 692,717 161,208 $ 1,904,319
Shares issued on reinvestment 5,276 62,186 15,043 176,293
Shares redeemed (73,088) (863,638) (56,114) (660,859)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (9,157) $ (108,735) 120,137 $ 1,419,753
====================================================================================================================================
Class Z
Shares sold 65,378 $ 771,735 68,905 $ 816,265
Shares issued on reinvestment 2,224 26,182 3,572 42,003
Shares redeemed (2,778) (32,757) (13,734) (165,113)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 64,824 $ 765,160 58,743 $ 693,155
====================================================================================================================================
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
48
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
GLOBAL PORTFOLIO(1) Class A Shares Class B Shares Class L Shares(2)
====================================================================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $11.40 $11.40 $11.40
- ------------------------------------------------------------------------------------------------------------------------------------
Loss From Operations:
Net investment income (loss)(3) 0.00* (0.01) (0.03)
Net realized and unrealized loss (0.24) (0.26) (0.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Loss From Operations (0.24) (0.27) (0.27)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- --
Net realized gains -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.00) (0.00) (0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.16 $11.13 $11.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (2.11)%++ (2.37)%++ (2.37)%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $4,614 $3,972 $131
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 1.35%+ 1.35%+
Net investment income 0.00+ (0.62)+ (0.71)+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0%
====================================================================================================================================
</TABLE>
(1) For the period from March 9, 1998 (inception date) to July 31, 1998
(unaudited).
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Net investment income/(loss) 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.
* Amount represents less than $0.01.
49
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class A Shares Class B Shares
------------------------------------ -----------------------------------
High Growth Portfolio 1998(1) 1998 1997(2) 1998(1) 1998 1997(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.97 $12.41 $11.40 $12.95 $12.41 $11.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.05 0.11 0.20 0.00* 0.03 0.08
Net realized and unrealized gain 1.09 0.91 1.05 1.08 0.89 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.14 1.02 1.25 1.08 0.92 1.12
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.13) (0.20) -- (0.05) (0.07)
Net realized gains (0.16) (0.33) (0.04) (0.16) (0.33) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.16) (0.46) (0.24) (0.16) (0.38) (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.95 $12.97 $12.41 $13.87 $12.95 $12.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.81%++ 8.25% 11.04%++ 8.36%++ 7.44% 9.91%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $311,315 $259,212 $154,069 $276,137 $230,142 $141,241
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60%+ 1.35%+ 1.35% 1.35%+
Net investment income 1.17+ 1.00 2.79+ 0.41+ 0.25 2.04+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 39% 0% 10% 39% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(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.
* Amount represents less than $0.01.
50
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class L Shares(1) Class Z Shares
------------------------------------- ------------------------------------
HIGH GROWTH PORTFOLIO 1998(2) 1998 1997(3) 1998(2) 1998(4) 1997(5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.96 $12.42 $11.40 $12.97 $12.41 $12.24
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(6) 0.00# 0.03 0.08 0.07 0.17 0.01
Net realized and unrealized gain 1.08 0.89 1.05 1.08 0.89 0.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.08 0.92 1.13 1.15 1.06 0.17
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.05) (0.07) -- (0.17) --
Net realized gains (0.16) (0.33) (0.04) (0.16) (0.33) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.16) (0.38) (0.11) (0.16) (0.50) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.88 $12.96 $12.42 $13.96 $12.97 $12.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.36%++ 7.44% 10.00%++ 8.89%++ 8.58% 1.39%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $33,864 $27,845 $19,340 $4,938 $3,037 $4
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35%+ 0.35%+ 0.35% 0.35%+
Net investment income 0.42+ 0.25 2.04+ 1.48+ 1.25 3.33*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 39% 0% 10% 39% 0%
====================================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended July 31, 1998 (unaudited).
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) 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.
(5) For the period from January 17, 1997 (inception date) to January 31, 1997.
(6) 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.
* Not annualized.
# Amount represents less than $0.01.
51
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class A Shares Class B Shares
------------------------------------- -----------------------------------
GROWTH PORTFOLIO 1998(1) 1998 1997(2) 1998(1) 1998 1997(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.99 $12.32 $11.40 $13.00 $12.33 $11.40
- -----------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.13 0.31 0.33 0.07 0.22 0.23
Net realized and unrealized gain 0.84 1.14 0.92 0.85 1.12 0.94
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.97 1.45 1.25 0.92 1.34 1.17
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03) (0.32) (0.31) -- (0.21) (0.22)
Net realized gains (0.19) (0.46) (0.02) (0.19) (0.46) (0.02)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.22) (0.78) (0.33) (0.19) (0.67) (0.24)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.74 $12.99 $12.32 $13.73 $13.00 $12.33
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 7.48%++ 11.82% 11.08%++ 7.10%++ 10.93% 10.32%++
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $330,878 $279,842 $161,026 $397,667 $343,474 $211,434
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60%+ 1.35%+ 1.35% 1.35%+
Net investment income 1.91+ 2.77 4.79+ 1.14+ 1.96 4.04+
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 41% 0% 4% 41% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(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.
52
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class L Shares(1) Class Z Shares
------------------------------------- -----------------------------------
GROWTH PORTFOLIO 1998(2) 1998 1997(3) 1998(2) 1998(4) 1997(5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.00 $12.33 $11.40 $12.99 $12.32 $12.18
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(6) 0.07 0.22 0.24 0.15 0.73 0.02
Net realized and unrealized gain 0.85 1.12 0.93 0.83 0.75 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.92 1.34 1.17 0.98 1.48 0.14
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.21) (0.22) (0.04) (0.35) --
Net realized gains (0.19) (0.46) (0.02) (0.19) (0.46) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.19) (0.67) (0.24) (0.23) (0.81) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.73 $13.00 $12.33 $13.74 $12.99 $12.32
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 7.10%++ 10.92% 10.32%++ 7.61%++ 12.08% 1.15%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $47,581 $42,983 $31,279 $4,787 $2,908 $6
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35%+ 0.35%+ 0.35% 0.35%+
Net investment income 1.12+ 1.81 4.04+ 2.26+ 5.24 5.30*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 41% 0% 4% 41% 0%
====================================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended July 31, 1998 (unaudited).
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) 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.
(5) For the period from January 17, 1997 (inception date) to January 31, 1997.
(6) 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.
* Not annualized.
53
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class A Shares Class B Shares
-------------------------------------- ---------------------------------------
BALANCED PORTFOLIO 1998(1) 1998 1997(2) 1998(1) 1998 1997(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.62 $12.14 $11.40 $12.61 $12.14 $11.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.21 0.58 0.45 0.17 0.48 0.37
Net realized and unrealized gain 0.40 0.80 0.74 0.41 0.80 0.74
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.61 1.38 1.19 0.58 1.28 1.11
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.24) (0.54) (0.45) (0.20) (0.45) (0.37)
Net realized gains (0.29) (0.36) -- (0.29) (0.36) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.90) (0.45) (0.49) (0.81) (0.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.70 $12.62 $12.14 $12.70 $12.61 $12.14
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 4.86%++ 11.59% 10.64%++ 4.48%++ 10.67% 9.90%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $195,520 $166,806 $90,938 $219,646 $193,791 $111,918
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60%+ 1.35%+ 1.35% 1.35%+
Net investment income 3.37+ 4.79 4.88+ 2.60+ 3.96 4.14+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 23% 0% 10% 23% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(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.
54
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class L Shares(1) Class Z Shares
------------------------------------- -----------------------------------
BALANCED PORTFOLIO 1998(2) 1998 1997(3) 1998(2) 1998(4) 1997(5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.61 $12.14 $11.40 $12.61 $12.13 $12.10
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(6) 0.17 0.46 0.37 0.20 1.11 0.00#
Net realized and unrealized gain 0.40 0.82 0.74 0.44 0.30 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.57 1.28 1.11 0.64 1.41 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.20) (0.45) (0.37) (0.26) (0.57) --
Net realized gains (0.29) (0.36) -- (0.29) (0.36) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.81) (0.37) (0.55) (0.93) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.69 $12.61 $12.14 $12.70 $12.61 $12.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 4.48%++ 10.67% 9.90%++ 5.07%++ 11.82% 0.25%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $30,544 $27,473 $19,968 $4,717 $2,919 $2
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35%+ 0.35%+ 0.35% 0.35%+
Net investment income 2.60+ 3.69 4.14+ 3.74+ 8.31 5.39*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 23% 0% 10% 23% 0%
====================================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended July 31, 1998 (unaudited).
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) 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.
(5) For the period from January 17, 1997 (inception date) to January 31, 1997.
(6) 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.
* Not annualized.
# Amount represents less than $0.01.
55
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class A Shares Class B Shares
------------------------------------ ----------------------------------
CONSERVATIVE PORTFOLIO 1998(1) 1998 1997(2) 1998(1) 1998 1997(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.17 $11.90 $11.46 $12.16 $11.89 $11.46
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.30 0.73 0.53 0.27 0.66 0.48
Net realized and unrealized gain 0.06 0.63 0.43 0.05 0.64 0.42
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.36 1.36 0.96 0.32 1.30 0.90
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.30) (0.69) (0.52) (0.27) (0.63) (0.47)
Net realized gains (0.19) (0.40) -- (0.19) (0.40) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (1.09) (0.52) (0.46) (1.03) (0.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.04 $12.17 $11.90 $12.02 $12.16 $11.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 2.97%++ 11.70% 8.57%++ 2.62%++ 11.21% 8.03%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $59,693 $51,233 $30,478 $56,097 $48,584 $28,297
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60%+ 1.10%+ 1.10% 1.10%+
Net investment income 5.35+ 6.17 5.66+ 4.85+ 5.67 5.16+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 28% 0% 5% 28% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(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.
56
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class L Shares(1) Class Z Shares
------------------------------------- -----------------------------------
CONSERVATIVE PORTFOLIO 1998(2) 1998 1997(3) 1998(2) 1998(4) 1997(5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.16 $11.89 $11.46 $12.17 $11.90 $11.89
- -----------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(6) 0.28 0.69 0.48 0.33 0.84 0.01
Net realized and unrealized gain 0.05 0.62 0.42 0.04 0.56 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.33 1.31 0.90 0.37 1.40 0.01
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.64) (0.47) (0.32) (0.73) --
Net realized gains (0.19) (0.40) -- (0.19) (0.40) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (1.04) (0.47) (0.51) (1.13) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.02 $12.16 $11.89 $12.03 $12.17 $11.90
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 2.65%++ 11.25% 8.08%++ 3.02%++ 12.09% 0.08%++
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $5,505 $5,386 $4,129 $967 $638 $1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05%+ 1.05% 1.05%+ 0.35%+ 0.35% 0.35%+
Net investment income 4.90+ 5.72 5.21+ 5.60+ 6.42 6.15*
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 28% 0% 5% 28% 0%
====================================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended July 31, 1998 (unaudited).
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) 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.
(5) For the period from January 17, 1997 (inception date) to January 31, 1997.
(6) 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.
* Not annualized.
57
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class A Shares Class B Shares
------------------------------------- ----------------------------------
INCOME PORTFOLIO 1998(1) 1998 1997(2) 1998(1) 1998 1997(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.75 $11.53 $11.46 $11.76 $11.53 $11.46
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.37 0.76 0.63 0.35 0.70 0.58
Net realized and unrealized gain (loss) (0.04) 0.52 0.07 (0.04) 0.52 0.07
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.33 1.28 0.70 0.31 1.22 0.65
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.77) (0.63) (0.34) (0.70) (0.58)
Net realized gains (0.08) (0.29) -- (0.08) (0.29) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.44) (1.06) (0.63) (0.42) (0.99) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.64 $11.75 $11.53 $11.65 $11.76 $11.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 2.85%++ 11.44% 6.39%++ 2.58%++ 10.93% 5.89%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $33,178 $29,574 $17,817 $30,179 $26,563 $17,800
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60%+ 1.10%+ 1.10% 1.10%+
Net investment income 6.10+ 6.62 6.32+ 5.60+ 6.12 5.82+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 28% 0% 0% 28% 0%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(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.
58
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
....................................................................................................................................
For a share of each class of capital stock outstanding throughout each period:
Class L Shares(1) Class Z Shares
------------------------------------- ------------------------------------
INCOME PORTFOLIO 1998(2) 1998 1997(3) 1998(2) 1998(4) 1997(5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.76 $11.53 $11.46 $11.75 $11.53 $11.55
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(6) 0.34 0.71 0.59 0.39 0.84 0.07
Net realized and unrealized gain (loss) (0.04) 0.52 0.07 (0.04) 0.49 (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.30 1.23 0.66 0.35 1.33 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.71) (0.59) (0.39) (0.82) (0.06)
Net realized gains (0.08) (0.29) - (0.08) (0.29) -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (1.00) (0.59) (0.47) (1.11) (0.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.64 $11.76 $11.53 $11.63 $11.75 $11.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 2.52%++ 10.98% 5.94%++ 2.97%++ 11.88% 0.35%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $3,427 $3,568 $2,113 $1,437 $691 $0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05%+ 1.05% 1.05%+ 0.35%+ 0.35% 0.35%+
Net investment income 5.55+ 6.17 5.87+ 6.30+ 6.85 6.86*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 28% 0% 0% 28% 0%
====================================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended July 31, 1998 (unaudited).
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) 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.
(5) For the period from January 17, 1997 (inception date) to January 31, 1997.
(6) 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.
* Not annualized.
59
<PAGE>
Additional Shareholder Information (unaudited)
................................................................................
On March 9, 1998, a special meeting of shareholders of the Fund was held for the
purpose of voting on the following matters:
1. To Elect Directors of the Fund; and
2. To approve or disapprove the reclassification, modification
and/or elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Percentage Percentage
Shares Voted of Shares Shares Voted of Shares
Name of Directors For Voted Against Voted
=================================================================================================================================
<S> <C> <C> <C> <C>
Walter E. Auch 84,619,503.676 97.425% 2,236,735.674 2.575%
Martin Brody 84,551,046.663 97.346 2,305,192.687 2.654
H. John Ellis 84,667,389.466 97.480 2,188,849.884 2.520
Armon E. Karnesar 84,634,316.373 97.442 2,221,922.977 2.558
Stephen E. Kaufman 84,596,251.231 97.398 2,259,988.119 2.602
Heath B. McLendon 84,674,485.335 97.488 2,181,754.015 2.512
=================================================================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain modifications to the
fundamental investment policies of the Portfolios in order to modernize them in
view of certain regulatory, business or industry developments that have occurred
since original adoption of these policies by the Portfolios. The following chart
demonstrates that all proposals were approved by the shareholders.
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Senior Securities Approved
- --------------------------------------------------------------------------------
Borrowing Approved
- --------------------------------------------------------------------------------
Lending by the Fund Approved
- --------------------------------------------------------------------------------
Underwriting Approved
- --------------------------------------------------------------------------------
Real Estate Approved
================================================================================
</TABLE>
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Portfolios on all proposals.*
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
2,789,103.084 86.804% 71,944.707 2.239% 362,102.180 11.270%
====================================================================================================================================
</TABLE>
* Broker non-votes constituted less than one percent of the shares voted.
60
<PAGE>
Directors Investment Manager
Walter E. Auch Mutual Management Corp.
Martin Brody
H. John Ellis
Armon E. Kamesar
Stephen E. Kaufman Distributors
Heath B. McLendon, Chairman Smith Barney Inc.
PFS Distributors, Inc.
Officers
Heath B. McLendon Custodian
Chief Executive Officer PNC Bank, N.A.
Lewis E. Daidone
Senior Vice President Shareholder Servicing Agent
and Treasurer First Data Investor Services
Group, Inc.
P.O. Box 9134
Thomas B. Stiles II Boston, MA 02205-9134
Vice President and
Investment Officer
Smith Barney Concert Allocation
R. Jay Gerken Series Inc.
Vice President and 388 Greenwich Street
Investment Officer New York, New York 10013
Thomas M. Reynolds www.smithbarney.com
Controller
Christina T. Sydor
Secretary
61
<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 a
current 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) 1998 Smith Barney Inc.
FD01185 9/98
<PAGE>
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
[PHOTO OF WOMAN]
- -- SELECT HIGH GROWTH PORTFOLIO
- -- SELECT GROWTH PORTFOLIO
- -- SELECT BALANCED PORTFOLIO
- -- SELECT CONSERVATIVE PORTFOLIO
- -- SELECT INCOME PORTFOLIO
[PHOTO OF MAN AND BOY]
SEMI-ANNUAL REPORT
JULY 31, 1998
INVESTMENT STRATEGIES FOR YOUR LIFE
[PHOTO OF COUPLE]
[LOGO] Smith Barney Mutual Funds
INVESTING FOR YOUR FUTURE.
EVERY DAY.-SERVICE MARK-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders.................................................... 1
The Concert Allocation Series Portfolios
The Select High Growth Portfolio...................................... 5
The Select Growth Portfolio........................................... 7
The Select Balanced Portfolio......................................... 9
The Select Conservative Portfolio..................................... 11
The Select Income Portfolio........................................... 13
Schedules of Investments.................................................. 15
Statements of Assets and Liabilities...................................... 20
Statements of Operations.................................................. 21
Statements of Changes in Net Assets....................................... 22
Notes to Financial Statements............................................. 24
Financial Highlights...................................................... 26
Additional Shareholder Information........................................ 31
Directors and Officers.................................................... 32
</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 semi-annual report for the Smith Barney Concert
Allocation Series Inc. ("Concert Allocation Series") Select Portfolios for the
period ended July 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 SIX MONTHS ENDED JULY 31, 1998(+)
<TABLE>
<CAPTION>
PORTFOLIO TOTAL RETURN
- -------------------- -------------
<S> <C>
Select High Growth 8.48%
Select Growth 7.36
Select Balanced 5.02
Select Conservative 3.06
Select Income 2.93
</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.
+ TOTAL RETURNS ARE NOT ANNUALIZED, AS THEY MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
THE U.S. MARKETS
During the period ended July 31, 1998, the U.S. financial markets have proven
quite resilient. Despite woes in Asia and signs of rising labor costs at home,
most stock and bond markets provided positive returns. Stock returns were highly
dependent on market capitalization: the bigger the company, the higher the
return. Bond market performance was more homogeneous, with the overall bond
market, as measured by the Lehman Brothers Aggregate Bond Index, up some 2.81%.
(The Lehman Aggregate Bond Index is an unmanaged index composed of the Lehman
Intermediate Government/Corporate Bond Index and the Mortgage-Backed Securities
Index and includes Treasury issues, agency issues, corporate bond issues and
mortgage-backed securities.)
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, LEHMAN GOVERNMENT/CORPORATE BOND
INDEX,
SALOMON SMITH BARNEY WORLD GOVERNMENT BOND INDEX AND MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
(JULY 31, 1988 -- JULY 31, 1998)
(UNAUDITED)
SALOMON SMITH BARNEY LEHMAN GOVERNMENT/
WORLD GOVERNMENT CORPORATE
S&P 500 INDEX BOND INDEX BOND INDEX MSCI EAFE INDEX
<S> <C> <C> <C> <C>
7/88 $10,000 $10,000 $10,000 $10,000
1/89 $11,142 $10,488 $10,482 $11,485
1/90 $12,750 $11,120 $11,655 $12,040
1/91 $13,817 $12,159 $12,939 $9,916
1/92 $16,946 $13,516 $14,638 $9,980
1/93 $18,736 $14,858 $16,333 $8,988
1/94 $21,144 $16,454 $18,016 $12,960
1/95 $21,254 $16,048 $17,455 $12,417
1/96 $29,462 $18,865 $20,548 $14,464
1/97 $37,219 $20,488 $21,040 $14,785
1/98 $47,232 $22,959 $23,391 $16,329
7/98 $54,411 $23,946 $24,048 $18,285
</TABLE>
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX ("S&P 500") IS A
CAPITALIZATION-WEIGHTED INDEX OF 500 WIDELY HELD COMMON STOCKS. THE LEHMAN
GOVERNMENT/CORPORATE BOND INDEX IS A COMBINATION OF PUBLICLY ISSUED
INTERMEDIATE- AND LONG-TERM U.S. GOVERNMENT BONDS AND CORPORATE BONDS. THE
SALOMON 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 MORGAN STANLEY CAPITAL
INTERNATIONAL EAFE INDEX ("MSCI EAFE") CONSISTS OF THE EQUITY TOTAL RETURNS FOR
EUROPE, AUSTRALIA AND THE FAR EAST. THESE INDICES ARE UNMANAGED AND ARE NOT
SUBJECT TO THE SAME MANAGEMENT AND TRADING EXPENSES AS A MUTUAL FUND.
The performance of the U.S. stock market was particularly noteworthy, as there
was a dramatic distinction between the popular averages and the broader stock
market. For example, the Standard & Poor's 500 Composite Stock Price Index ("S&P
500"), a measure of large-capitalization domestic stocks, returned 15.20% for
the period. In contrast, the Russell 2000 Index-Registered Trademark-, a measure
of smaller-capitalization stocks, was actually down 2.02%. So although the
popular averages were up handsomely, there were some sharp reversals both in the
broader market and in smaller-sized company stocks.
Investors in larger-capitalization stocks have enjoyed returns greater than the
"average" year, but in half the time! A benign interest rate environment and
strong corporate earnings reports supported this increase. And although the rate
of earnings growth has not been overwhelming, most companies' earnings came in
ahead of analysts' expectations, supporting stock prices. In contrast,
smaller-sized companies stumbled from their April highs, following earnings
fears triggered by Asia's slowdown. These stocks proved vulnerable to investors'
"flight to safety" into larger-capitalization stocks.
2
<PAGE>
Bonds benefited from an extremely tame inflation environment. Reported
inflation, as measured by the Consumer Price Index ("CPI"), was only about 1%
over the past six months. And the economic woes in Asia have unleashed a torrent
of cheap imported goods to our shores, adding more downward pressure to prices.
Asian weakness also dispelled Federal Reserve Board ("Fed") concerns that U.S.
economic growth was too strong, and squashed any thoughts of raising interest
rates.
INTERNATIONAL STOCK MARKETS
Three trends predominated in the international stock markets through the
reporting period:
- Large-capitalization stocks materially outperformed mid- and
small-capitalization stocks.
- The stock markets of relatively mature, developed economies outperformed
the more volatile and less liquid emerging markets.
- The strength of the U.S. dollar versus the currencies of the United
States' major trading partners largely negated returns earned in local
currencies.
There has been a sense of crisis in the international stock markets during the
reporting period. 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. In
Japan, the largest Asian stock market, the region's largest economy and a major
regional lender, the crisis contributed to an already deteriorating local
Japanese outlook. Global equity markets, as measured by the MSCI World Index,
lost 0.2% during July as weakness in North America, the U.K. and Japan offset
the relatively strong performance in continental Europe. As of this writing, the
unexpected devaluation of Russia's ruble has further roiled the international
stock markets, particularly those in the emerging markets. In light of this
turmoil, the strength of the U.S. dollar and U.S. bond market, to some degree,
have reflected investor preferences for liquidity, stability and strength.
INTERNATIONAL BOND MARKETS
The world's major government bond markets all performed well in the last year.
The key macro-economic factor behind the fall in global bond yields was the
continuing favorable inflation environment with weak commodity prices,
especially in the energy industries. The strong performance by major currencies
in North America and Europe helped counteract inflationary influences of strong
growth and low unemployment.
The deteriorating economic situation in Japan and unfavorable developments in
several of the emerging markets were additional drivers of bond market behavior
in the first half of 1998. The core European bond markets (i.e., Germany, France
and the United Kingdom), the U.S. Treasury bond market and the U.S. dollar were
the main flight-to-quality beneficiaries of the uncertain investment conditions
elsewhere.
3
<PAGE>
LOOKING FORWARD
Looking toward the next six months, we anticipate a positive inflation and
interest rate backdrop. Asian economic troubles should slow the U.S. economy
somewhat, with two effects -- one favorable, one not. A slowing economy further
diminishes the chance of a Fed rate hike. Corporate profitability, however, is a
potential stock market concern as investors have begun to question the earnings
outlook. Many company managements are now warning of weaker results in the
second half of the year. The Asian weakness may have begun to offset some of the
strength in the previously unstoppable U.S. economy. There are, however, no
signs that corporate managements have lost their focus on the bottom line. We
anticipate that despite the challenges outlined above, corporations should
report decent, though not spectacular, earnings increases through the rest of
the year -- providing support to U.S. stock prices.
The intermediate effects of the financial woes plaguing Asia cannot be denied:
Economic contraction and decline, massive bankruptcies and debt
restructurings/reschedulings, potential labor and civil unrest have resulted in
an investment climate of much greater risk. Whether or not government and
business policy-makers have the will and flexibility to make the correct
rehabilitative choices remains unanswerable and we believe another six to twelve
months of uncertainties in Asia and the rest of the emerging markets is very
likely.
As global markets become more volatile and investor uncertainty rises, we
believe that investors should try to maintain a long-term perspective. Because
market turbulence can often be a short-term occurrence, this may be an opportune
time to review your original investment goals. The longer your investment time
horizon, the less concerned you should be about the short-term ups and downs of
the global markets.
Thank you for your continued confidence in our investment management approach.
Sincerely,
/s/ Heath B. McLendon /s/ Thomas B. Stiles II
Heath B. McLendon Thomas B. Stiles II
CHAIRMAN VICE PRESIDENT AND INVESTMENT
OFFICER
AUGUST 27, 1998
4
<PAGE>
THE SELECT HIGH GROWTH PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
10% 90%
</TABLE>
THE SELECT HIGH GROWTH PORTFOLIO SEEKS CAPITAL APPRECIATION BY INVESTING A HIGH
PERCENTAGE OF ITS ASSETS IN AGGRESSIVE EQUITY FUNDS.
.................................................................
THE SELECT HIGH GROWTH PORTFOLIO
The Select High Growth Portfolio seeks capital appreciation. Among the
Portfolios of the Concert Allocation Series, the Select High Growth Portfolio
invests 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 15.20%
RUSSELL 2000 -2.02%
MSCI EAFE 11.98%
SALOMON SMITH BARNEY
HIGH YIELD MARKET 3.62%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1998.
PORTFOLIO UPDATE
The U.S. stock market performed strongly in the first quarter of 1998. However,
conflicting signals in the domestic economy and increased uncertainty in many of
the world's financial markets led to considerable volatility during the second
quarter of 1998. As discussed earlier, investors responded to this volatility
with a decided preference toward the stocks of very large, well-established
companies because of their greater liquidity and more predictable earnings. The
stock performance disparity between large and smaller companies became even more
pronounced as the year progressed. The Select High Growth Portfolio returned
8.48% for the six months ended July 31, 1998. After gaining roughly 10% in the
first quarter, the Russell 2000 Index posted a return of a negative 2.02% for
the six months ended July 31, 1998. In contrast, the S&P 500 rose approximately
15% in the same period. In addition, growth stocks generally outperformed value
stocks during the first half of the year.
The Portfolio especially benefited from its exposure to large-capitalization
growth stocks during the reporting period. While smaller company stocks lagged
large ones, the Portfolio's holdings in this asset class also performed well,
either meeting or outperforming their respective indices. Moreover, the
Portfolio's international exposure was a major contributor to its performance in
the last six months. In particular, the major stock exchanges of Europe led the
way with dramatic gains in recent months as economic convergence and ongoing
corporate restructuring have helped give rise to a true equity culture in
Europe.
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT HIGH GROWTH PORTFOLIO. THE ALLOCATION AND INVESTMENT
MIX OF THE PORTFOLIO MAY VARY DEPENDING UPON MARKET CONDITIONS, CASH FLOWS IN
AND OUT OF THE PORTFOLIO AND OTHER FACTORS. IN ADDITION, THE ALLOCATION AND
INVESTMENT RANGES OF THE PORTFOLIO MAY BE CHANGED FROM TIME TO TIME UPON THE
APPROVAL OF THE CONCERT ALLOCATION SERIES' BOARD OF DIRECTORS.
5
<PAGE>
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 -- JULY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S SALOMON SMITH BARNEY
SELECT HIGH 500 COMPOSITE RUSSELL MSCI HIGH YIELD
GROWTH PORTFOLIO STOCK INDEX 2000 INDEX EAFE INDEX MARKET INDEX
<S> <C> <C> <C> <C> <C>
2/5/97 $10,000 $10,000 $10,000 $10,000 $10,000
4/97 $9,650 $10,242 $9,323 $10,255 $10,137
7/97 $11,250 $12,254 $11,307 $11,711 $10,757
10/97 $10,970 $11,793 $11,868 $10,563 $11,060
1/98 $11,060 $12,689 $11,807 $11,028 $11,487
4/98 $12,550 $14,446 $13,276 $12,193 $11,754
7/31/98 $11,998 $14,618 $11,569 $12,349 $11,906
</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 JULY 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>
- -------------------------------------------------------------------------------------------------------------------------
7/31/98 $11.06 $11.89 $0.07 $0.04 8.48%
- -------------------------------------------------------------------------------------------------------------------------
2/5/97* -- 1/31/98 10.00 11.06 0.00 0.00 10.60
- -------------------------------------------------------------------------------------------------------------------------
Total $0.07 $0.04
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT HIGH GROWTH PORTFOLIO
...............................................................................
<TABLE>
<S> <C>
2/5/97* -- 7/31/98 19.98%
- --------------------------------------------------------------------------------------------------------------------
</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.
6
<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 15.20%
RUSSELL 2000 -2.02%
MSCI EAFE 11.98%
LEHMAN GOVERNMENT/CORPORATE BOND 2.81%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1998.
PORTFOLIO UPDATE
The U.S. stock market performed strongly in the first quarter of 1998. However,
conflicting signals in the domestic economy and increased uncertainty in many of
the world's financial markets led to considerable volatility during the second
quarter of 1998. As discussed earlier, investors responded to this volatility
with a decided preference toward the stocks of very large, well-established
companies because of their greater liquidity and more predictable earnings. The
stock performance disparity between large and smaller companies became even more
pronounced as the year progressed. The Select Growth Portfolio generated a total
return of 7.36% for the six months ended July 31, 1998. After gaining roughly
10% in the first quarter, the Russell 2000 Index posted a return of a negative
2.02% for the six months ended July 31, 1998. In contrast, the S&P 500 rose
approximately 15% in the same period. In addition, growth stocks generally
outperformed value stocks during the first half of the year.
A strong U.S. dollar and continued turmoil in foreign markets helped fuel a
robust bond market rally during the reporting period. As a number of developing
countries braced themselves for another possible round of currency devaluations,
many investors sought the relative safety of U.S. government bonds. This
heightened demand combined with diminished supply helped send the yield on the
bellwether 30-year U.S. Treasury bond to a record low yield of 5.62% during the
past six months.
The Portfolio especially benefited from its exposure to large-capitalization
growth stocks during the reporting period. While smaller company stocks lagged
large ones, the Portfolio's holdings in this asset class also performed well,
either meeting or outperforming their respective indices.
- ------------------------------------------------------------------
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.
7
<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 -- JULY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT STANDARD & POOR'S LEHMAN GOVERNMENT/
GROWTH 500 COMPOSITE RUSSELL 2000 MSCI EAFE CORPORATE
PORTFOLIO STOCK INDEX INDEX INDEX BOND INDEX
<S> <C> <C> <C> <C> <C>
2/5/97 $10,000 $10,000 $10,000 $10,000 $10,000
4/97 $9,820 $10,242 $9,323 $10,255 $10,046
7/97 $11,170 $12,254 $11,307 $11,711 $10,575
10/97 $11,000 $11,793 $11,868 $10,563 $10,791
1/98 $11,280 $12,689 $11,807 $11,028 $11,117
4/98 $12,390 $14,446 $13,276 $12,193 $11,185
7/31/98 $12,111 $14,618 $11,569 $12,349 $11,428
</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 JULY 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>
- -------------------------------------------------------------------------------------------------------------------------
7/31/98 $11.28 $11.88 $0.11 $0.12 7.36%
- -------------------------------------------------------------------------------------------------------------------------
2/5/97* -- 1/31/98 10.00 11.28 0.00 0.00 12.80
- -------------------------------------------------------------------------------------------------------------------------
Total $0.11 $0.12
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT GROWTH PORTFOLIO
...............................................................................
<TABLE>
<S> <C>
2/5/97* -- 7/31/98 21.11%
- --------------------------------------------------------------------------------------------------------------------
</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.
8
<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 15.20%
MSCI EAFE 11.98%
LEHMAN GOVERNMENT/CORPORATE BOND 2.81%
SALOMON SMITH BARNEY
WORLD GOVERNMENT BOND 4.30%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1998.
PORTFOLIO UPDATE
The U.S. stock market performed strongly in the first quarter of 1998. However,
conflicting signals in the domestic economy and increased uncertainty in many of
the world's financial markets led to considerable volatility during the second
quarter of 1998. As discussed earlier, investors responded to this volatility
with a decided preference toward the stocks of very large, well-established
companies because of their greater liquidity and more predictable earnings. The
stock performance disparity between large and smaller companies became even more
pronounced as the year progressed. For the six months ended July 31, 1998, the
Select Balanced Portfolio had a total return of 5.02%. After gaining roughly 10%
in the first quarter, the Russell 2000 Index posted a return of a negative 2.02%
for the six months ended July 31, 1998. In contrast, the S&P 500 rose
approximately 15% in the same period. In addition, growth stocks generally
outperformed value stocks during the first half of the year.
A strong U.S. dollar and continued turmoil in foreign markets helped fuel a
robust bond market rally during the reporting period. As a number of developing
countries braced themselves for another possible round of currency devaluations,
many investors sought the relative safety of U.S. government bonds. This
heightened demand combined with diminished supply helped send the yield on the
bellwether 30-year U.S. Treasury bond to a record low yield of 5.62% during the
past six months.
During the reporting period, the Portfolio benefited from its holdings of large-
capitalization stocks as well as its exposure to U.S. government bonds.
- ------------------------------------------------------------------
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.
9
<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,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX AND SALOMON SMITH BARNEY WORLD
GOVERNMENT BOND INDEX
...............................................................................
FEBRUARY 5, 1997 -- JULY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S LEHMAN GOVERNMENT/ SALOMON SMITH BARNEY
SELECT BALANCED 500 COMPOSITE CORPORATE MSIC WORLD GOVERNMENT
PORTFOLIO STOCK INDEX BOND INDEX EAFE INDEX BOND INDEX
<S> <C> <C> <C> <C> <C>
2/05/97 $10,000 $10,000 $10,000 $10,000 $10,000
4/97 $10,080 $10,242 $10,046 $10,255 $10,096
7/97 $11,050 $12,254 $10,575 $11,711 $10,512
10/97 $10,960 $11,793 $10,791 $10,563 $10,770
1/98 $11,280 $12,689 $11,117 $11,028 $11,111
4/98 $11,930 $14,446 $11,185 $12,193 $11,297
7/31/98 $11,846 $14,618 $11,428 $12,349 $11,589
</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 JULY 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 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 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>
- -------------------------------------------------------------------------------------------------------------------------
7/31/98 $11.28 $11.52 $0.16 $0.16 5.02%
- -------------------------------------------------------------------------------------------------------------------------
2/5/97* -- 1/31/98 10.00 11.28 0.00 0.00 12.80
- -------------------------------------------------------------------------------------------------------------------------
Total $0.16 $0.16
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT BALANCED PORTFOLIO
...............................................................................
<TABLE>
<S> <C>
2/5/97* -- 7/31/98 18.46%
- --------------------------------------------------------------------------------------------------------------------
</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.
10
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STOCK FUNDS BOND FUNDS
<S> <C>
30% 70%
</TABLE>
THE SELECT CONSERVATIVE PORTFOLIO SEEKS INCOME AND, SECONDARILY, LONG-TERM
GROWTH OF CAPITAL BY INVESTING THE MAJORITY OF ITS ASSETS IN FUNDS THAT INVEST
IN BONDS.
.................................................................
THE SELECT CONSERVATIVE PORTFOLIO
The Select Conservative Portfolio primarily seeks income and secondarily,
long-term capital growth. Among the Portfolios of the Concert Allocation Series,
the Select Conservative Portfolio consists primarily of taxable fixed-income
funds, with a significant portion invested in stock funds that invest primarily
in large-capitalization U.S. stocks.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 15.20%
LEHMAN GOVERNMENT/CORPORATE BOND 2.81%
SALOMON SMITH BARNEY
HIGH YIELD MARKET 3.62%
SALOMON SMITH BARNEY
ONE-YEAR TREASURY BILL 2.65%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1998.
PORTFOLIO UPDATE
The U.S. stock market performed strongly in the first quarter of 1998. However,
conflicting signals in the domestic economy and increased uncertainty in many of
the world's financial markets led to considerable volatility during the second
quarter of 1998. As discussed earlier, investors responded to this volatility
with a decided preference toward the stocks of very large, well-established
companies because of their greater liquidity and more predictable earnings. The
stock performance disparity between large and smaller companies became even more
pronounced as the year progressed.
A strong U.S. dollar and continued turmoil in foreign markets helped fuel a
robust bond market rally during the reporting period. As a number of developing
countries braced themselves for another possible round of currency devaluations,
many investors sought the relative safety of U.S. government bonds. This
heightened demand combined with diminished supply helped send the yield on the
bellwether 30-year U.S. Treasury bond to a record low yield of 5.62% during the
past six months.
In contrast with collapsing demand in Asia, domestic consumer spending remains
strong. As result, upward pressure on wages increased, especially among service
industries. However, productivity gains and falling commodity prices helped to
offset any emerging inflationary pressures in the U.S. economy. In the absence
of evidence of higher inflationary pressure and continued uncertainties plaguing
worldwide financial markets, the Fed has so far refrained from changing
short-term interest rates.
During the reporting period, the Portfolio maintained a diverse exposure to a
broad range of bonds. The combination of a low inflation and a moderating U.S.
economy helped to provide a near ideal backdrop for both government and
corporate bonds. The Portfolio had a return of 3.06% for the six months ended
July 31, 1998 and was slightly ahead of the Lehman Brothers Corporate/
Government Index, a benchmark of the performance of a wide range of bonds with
varying maturities, which returned 2.81% for the same period.
- ------------------------------------------------------------------
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.
11
<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 -- JULY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT STANDARD & POOR'S LEHMAN GOVERNMENT/ SALOMON SMITH BARNEY SALOMON SMITH BARNEY
CONSERVATIVE 500 COMPOSITE CORPORATE HIGH YIELD ONE-YEAR TREASURY
PORTFOLIO STOCK INDEX BOND INDEX MARKET INDEX BILL INDEX
<S> <C> <C> <C> <C> <C>
2/5/97 $10,000 $10,000 $10,000 $10,000 $10,000
4/97 $10,100 $10,242 $10,046 $10,137 $10,124
7/97 $10,930 $12,254 $10,575 $10,757 $10,322
10/97 $10,980 $11,793 $10,791 $11,060 $10,473
1/98 $11,300 $12,689 $11,117 $11,487 $10,627
4/98 $11,710 $14,446 $11,185 $11,754 $10,758
7/31/98 $11,646 $14,618 $11,428 $11,906 $10,910
</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 JULY 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>
- -------------------------------------------------------------------------------------------------------------------------
7/31/98 $11.30 $11.38 $0.17 $0.10 3.06%
- -------------------------------------------------------------------------------------------------------------------------
2/5/97* -- 1/31/98 10.00 11.30 0.00 0.00 13.00
- -------------------------------------------------------------------------------------------------------------------------
Total $0.17 $0.10
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT CONSERVATIVE PORTFOLIO
...............................................................................
<TABLE>
<S> <C>
2/5/97* -- 7/31/98 16.46%
- --------------------------------------------------------------------------------------------------------------------
</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.
12
<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 15.20%
LEHMAN GOVERNMENT/CORPORATE BOND 2.81%
SALOMON SMITH BARNEY
HIGH YIELD MARKET 3.62%
SALOMON SMITH BARNEY
ONE-YEAR TREASURY BILL 2.65%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
1998.
PORTFOLIO UPDATE
A strong U.S. dollar and continued turmoil in foreign markets helped fuel a
robust bond market rally during the reporting period. As a number of developing
countries braced themselves for another possible round of currency devaluations,
many investors sought the relative safety of U.S. government bonds. This
heightened demand combined with diminished supply helped send the yield on the
bellwether 30-year U.S. Treasury bond to a record low yield of 5.62% during the
past six months.
In contrast with collapsing demand in Asia, domestic consumer spending remains
strong. As a result, upward pressure on wages increased, especially among
service industries. However, productivity gains and falling commodity prices
helped to offset any emerging inflationary pressures in the U.S. economy. In the
absence of evidence of higher inflationary pressure and continued uncertainties
plaguing worldwide financial markets, the Fed has so far refrained from changing
short-term interest rates.
During the reporting period, the Portfolio maintained a diverse exposure to a
broad range of bonds. The combination of a low inflation and a moderating U.S.
economy helped to provide a near ideal backdrop for both government and
corporate bonds. The Portfolio's return of 2.93% for the six months ended July
31, 1998 was slightly ahead of the Lehman Brothers Corporate/Government Index, a
benchmark of the performance of a wide range of bonds with varying maturities,
return of 2.81% for the same period.
- ------------------------------------------------------------------
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.
13
<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 -- JULY 31, 1998 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD & POOR'S LEHMAN GOVERNMENT/ SALOMON SMITH BARNEY SALOMON SMITH BARNEY
SELECT 500 COMPOSITE CORPORATE HIGH YIELD ONE-YEAR TREASURY
INCOME PORTFOLIO STOCK INDEX BOND INDEX MARKET INDEX BILL INDEX
<S> <C> <C> <C> <C> <C>
2/5/97 $10,000 $10,000 $10,000 $10,000 $10,000
4/97 $10,120 $10,242 $10,046 $10,137 $10,124
7/97 $10,850 $12,254 $10,575 $10,757 $10,322
10/97 $10,940 $11,793 $10,791 $11,060 $10,473
1/98 $11,290 $12,689 $11,117 $11,487 $10,627
4/98 $11,500 $14,446 $11,185 $11,754 $10,758
7/31/98 $11,620 $14,618 $11,428 $11,906 $10,910
</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 JULY 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>
- -------------------------------------------------------------------------------------------------------------------------
7/31/98 $11.29 $11.41 $0.06 $0.15 2.93%
- -------------------------------------------------------------------------------------------------------------------------
2/5/97* -- 1/31/98 10.00 11.29 0.00 0.00 12.90
- -------------------------------------------------------------------------------------------------------------------------
Total $0.06 $0.15
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT INCOME PORTFOLIO
...............................................................................
<TABLE>
<S> <C>
2/5/97* -- 7/31/98 16.20%
- --------------------------------------------------------------------------------------------------------------------
</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.
14
<PAGE>
THE SELECT HIGH GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
---------------------------------------------------------------------------
UNDERLYING FUNDS -- 97.5%
106,889 Smith Barney Aggressive Growth Fund $ 4,665,700
137,721 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 2,291,677
125,012 Smith Barney Funds, Inc. - Large Cap Value Fund 2,305,226
381,840 Smith Barney Income Funds - Smith Barney High
Income Fund 4,494,262
300,783 Smith Barney Investment Funds, Inc. - Concert
Peachtree Growth Fund 4,638,077
171,718 Smith Barney Investment Funds, Inc. - Smith
Barney Contrarian Fund 2,331,929
414,964 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value Fund 4,676,645
170,630 Smith Barney Investment Funds, Inc. - Smith
Barney Special Equities Fund 4,646,258
283,343 Smith Barney Investment Trust - Smith Barney
Large Capitalization Growth Fund 4,658,152
532,739 Smith Barney Small Cap Blend Fund, Inc. 6,957,568
205,743 Smith Barney World Funds - International Equity
Portfolio 4,894,621
---------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $45,090,595) 46,560,115
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
---------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.5%
$1,181,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds
at maturity -- $1,181,551;
(Fully collateralized by U.S. Treasury Notes,
5.375% due 7/31/00; Market value -- $1,205,170)
(Cost -- $1,181,000) 1,181,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $46,271,595*) $47,741,115
---------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
THE SELECT GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
---------------------------------------------------------------------------
UNDERLYING FUNDS -- 98.6%
88,674 Smith Barney Aggressive Growth Fund $ 3,870,651
466,667 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 7,765,351
414,420 Smith Barney Funds, Inc. - Large Cap Value Fund 7,641,920
636,984 Smith Barney Income Funds - Smith Barney High
Income Fund 7,497,311
492,334 Smith Barney Investment Funds, Inc. - Concert
Peachtree Growth Fund 7,591,791
284,121 Smith Barney Investment Funds, Inc. - Smith
Barney Contrarian Fund 3,858,365
811,477 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 7,911,905
346,021 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value Fund 3,899,666
591,239 Smith Barney Investment Funds, Inc. - Smith
Barney Investment Grade Bond Fund 7,910,789
140,200 Smith Barney Investment Funds, Inc. - Smith
Barney Special Equities Fund 3,817,662
233,718 Smith Barney Investment Trust - Smith Barney
Large Capitalization Growth Fund 3,842,328
291,576 Smith Barney Small Cap Blend Fund, Inc. 3,807,983
329,680 Smith Barney World Funds - International Equity
Portfolio 7,843,108
---------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $75,116,422) 77,258,830
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
---------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.4%
$1,066,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds
at maturity -- $1,066,497;
(Fully collateralized by U.S. Treasury Notes,
5.375% due 7/31/00; Market value -- $1,087,816)
(Cost -- $1,066,000) 1,066,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $76,182,422*) $78,324,830
---------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
THE SELECT BALANCED FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
---------------------------------------------------------------------------
UNDERLYING FUNDS -- 95.7%
512,695 Smith Barney Appreciation Fund Inc. $ 7,741,708
226,073 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 3,761,857
705,365 Smith Barney Fundamental Value Fund Inc. 7,688,480
207,182 Smith Barney Funds, Inc. - Large Cap Value Fund 3,820,441
854,288 Smith Barney Funds, Inc. - Short-Term High Grade
Bond Fund 3,494,038
457,125 Smith Barney Income Funds - Smith Barney
Convertible Fund 7,761,988
1,456,713 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 11,595,438
344,106 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 7,763,045
790,920 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 7,711,477
606,330 Smith Barney Managed Governments Fund Inc. 7,724,651
341,998 Smith Barney World Funds, Inc. - Global
Government Bond Portfolio 3,956,922
166,149 Smith Barney World Funds - International Equity
Portfolio 3,952,690
---------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $76,576,081) 76,972,735
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
---------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.3%
$3,499,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds
at maturity -- $3,500,632;
(Fully collateralized by U.S. Treasury Notes,
5.375% due 7/31/00; Market value -- $3,570,609)
(Cost -- $3,499,000) 3,499,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $80,075,081*) $80,471,735
---------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
-------------------------------------------------------------------------
UNDERLYING FUNDS -- 98.0%
137,624 Smith Barney Appreciation Fund Inc. $ 2,078,127
91,263 Smith Barney Fundamental Value Fund Inc. 994,769
221,796 Smith Barney Funds, Inc. - Short-Term High Grade
Bond Fund 907,144
124,655 Smith Barney Income Funds - Smith Barney
Convertible Fund 2,116,641
506,470 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 4,031,499
170,823 Smith Barney Income Funds - Smith Barney High
Income Fund 2,010,585
44,166 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 996,388
206,585 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 2,014,201
88,615 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value Fund 998,691
237,069 Smith Barney Managed Governments Fund Inc. 3,020,259
87,195 Smith Barney World Funds, Inc. - Global
Government Bond Portfolio 1,008,849
-------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $20,347,000) 20,177,153
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
-------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.0%
$412,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds
at maturity -- $412,192;
(Fully collateralized by U.S. Treasury Notes,
5.375% due 7/31/00; Market value -- $420,432)
(Cost -- $412,000) 412,000
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $20,759,000*) $20,589,153
-------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
THE SELECT INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 1998
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
------------------------------------------------------------------------
UNDERLYING FUNDS -- 98.4%
32,602 Smith Barney Appreciation Fund Inc. $ 492,297
220,030 Smith Barney Funds, Inc. - Short-Term High Grade
Bond Fund 899,922
30,653 Smith Barney Income Funds - Smith Barney
Convertible Fund 520,486
237,434 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 1,889,978
160,049 Smith Barney Income Funds - Smith Barney High
Income Fund 1,883,778
20,817 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 469,629
145,274 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 1,416,424
148,368 Smith Barney Managed Governments Fund Inc. 1,890,206
------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $9,491,847) 9,462,720
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
---------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.6%
$153,000 Goldman, Sachs & Co., 5.599% due 8/3/98; Proceeds
at maturity -- $153,071;
(Fully collateralized by U.S. Treasury Notes,
5.375% due 7/31/00; Market value -- $156,131)
(Cost -- $153,000) 153,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $9,644,847*) $9,615,720
---------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JULY 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 $46,271,595 $76,182,422 $80,075,081 $ 20,759,000 $ 9,644,847
- -----------------------------------------------------------------------------------------------------------
Investments, at value $47,741,115 $78,324,830 $80,471,735 $ 20,589,153 $ 9,615,720
Cash 246 491 978 234 347
Receivable from manager -- -- -- 17,390 33,311
Dividends and interest receivable 184 165 284,750 2,853 2,762
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 47,741,545 78,325,486 80,757,463 20,609,630 9,652,140
- -----------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 850,791 388,178 3,000,000 227,560 78,057
Dividend payable 259,791 689,890 1,059,089 290,574 124,156
Capital gains payable 157,661 786,615 1,074,808 169,756 48,846
Accrued expenses 35,811 90,337 93,176 -- --
- -----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,304,054 1,955,020 5,227,073 687,890 251,053
- -----------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $46,437,491 $76,370,466 $75,530,390 $ 19,921,740 $ 9,401,087
- -----------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 3,905 $ 6,429 $ 6,557 $ 1,750 $ 824
Capital paid in excess of par value 44,457,610 73,115,049 73,506,355 19,617,884 9,194,796
Undistributed net investment income 265,741 706,869 1,149,870 408,100 223,042
Accumulated net realized gain on
security transactions 240,715 399,711 470,954 63,853 11,552
Net unrealized appreciation
(depreciation)
of investments 1,469,520 2,142,408 396,654 (169,847) (29,127)
- -----------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $46,437,491 $76,370,466 $75,530,390 $ 19,921,740 $ 9,401,087
- -----------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING 3,904,930 6,429,391 6,557,108 1,750,176 823,682
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE $11.89 $11.88 $11.52 $11.38 $11.41
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JULY 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>
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income distributions from Underlying Funds $ 314,056 $ 782,503 $ 1,195,463 $ 417,525 $ 228,879
Short-term capital gains from Underlying Funds 627 5,100 34,925 8,750 1,993
Interest 17,009 29,380 28,474 8,565 4,140
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 331,692 816,983 1,258,862 434,840 235,012
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Other expenses 65,803 109,885 108,887 26,740 12,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 65,803 109,885 108,887 26,740 12,000
- ------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 265,889 707,098 1,149,975 408,100 223,012
- ------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3):
Realized Gain From:
Security transactions 302,978 243,556 226,434 28,466 --
Capital gain distributions from Underlying Funds 32,710 241,241 259,779 35,898 11,546
- ------------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN 335,688 484,797 486,213 64,364 11,546
- ------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of period 108,384 175,632 (270,407) (26,599) 31,510
End of period 1,469,520 2,142,408 396,654 (169,847) (29,127)
- ------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 1,361,136 1,966,776 667,061 (143,248) (60,637)
- ------------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 1,696,824 2,451,573 1,153,274 (78,884) (49,091)
- ------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 1,962,713 $ 3,158,671 $ 2,303,249 $ 329,216 $ 173,921
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JULY
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>
- ----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 265,889 $ 707,098 $ 1,149,975 $ 408,100 $ 223,012
Net realized gain 335,688 484,797 486,213 64,364 11,546
Change in net unrealized
appreciation (depreciation) 1,361,136 1,966,776 667,061 (143,248) (60,637)
- ----------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS 1,962,713 3,158,671 2,303,249 329,216 173,921
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (259,791) (689,890) (1,059,089) (290,574) (124,156)
Net realized gain (157,661) (786,615) (1,074,808) (169,756) (48,840)
- ----------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (417,452) (1,476,505) (2,133,897) (460,330) (172,996)
- ----------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 17,928,325 29,377,940 31,217,173 9,860,499 5,684,131
Cost of shares reacquired (106,835) (671,189) (926,973) (505,381) (724,224)
- ----------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 17,821,490 28,706,751 30,290,200 9,355,118 4,959,907
- ----------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 19,366,751 30,388,917 30,459,552 9,224,004 4,960,832
NET ASSETS:
Beginning of period 27,070,740 45,981,549 45,070,838 10,697,736 4,440,255
- ----------------------------------------------------------------------------------------------------------------------
END OF PERIOD* $ 46,437,491 $ 76,370,466 $ 75,530,390 $ 19,921,740 $ 9,401,087
- ----------------------------------------------------------------------------------------------------------------------
*INCLUDES UNDISTRIBUTED NET
INVESTMENT INCOME OF: $265,741 $706,869 $1,149,870 $408,100 $223,042
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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
Change 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 (NOTE 5):
Net proceeds from sale of shares 27,068,949 44,701,278 48,860,501 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 (UNAUDITED)
...............................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Select High Growth, Select Growth, Select Balanced, Select Conservative and
Select Income Portfolios ("Portfolios") are separate investment portfolios of
the Smith Barney Concert Allocation Series Inc. ("Fund"). The Fund, a Maryland
corporation, is registered under the Investment Act of 1940, as amended, as an
open-end management investment company and consists of these portfolios and 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"), 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 semi-annual report.
The significant accounting policies consistently followed by the Fund are: (a)
investments in the Underlying Funds are valued at the closing net asset value
per share of each Underlying Fund on the day of valuation; (b) dividend income
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 Adviser, 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 six months ended July 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 $20,628,178 $2,500,000
Select Growth 32,175,513 2,300,000
Select Balanced 37,311,400 6,026,151
Select Conservative 1,940,062 --
Select Income 5,173,018 --
- -------------------------------------------------------------------
</TABLE>
At July 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 $2,534,036 $ (1,064,516) $1,469,520
Select Growth 3,157,039 (1,014,631) 2,142,408
Select Balanced 826,726 (430,072) 396,654
Select Conservative 90,901 (260,748) (169,847)
Select Income 16,973 (46,100) (29,127)
- ----------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
...............................................................................
4. REPURCHASE AGREEMENTS
The Portfolios purchase (and their custodian takes possession of ) U.S.
government securities from banks and security dealers subject to agreements to
resell the securities to sellers at a future date (generally, the next business
day) at an agreed-upon higher repurchase price. The Portfolios require continual
maintenance of the market value of the collateral in amounts at lease equal to
the repurchase price.
5. CAPITAL SHARES
At July 31, 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>
SIX MONTHS ENDED PERIOD ENDED
JULY 31, 1998 JANUARY 31, 1998(a)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
SELECT HIGH GROWTH PORTFOLIO
Shares sold 1,466,340 2,486,848
Shares redeemed (8,681) (39,577)
- ------------------------------------------------------------------------------------------
NET INCREASE 1,457,659 2,447,271
- ------------------------------------------------------------------------------------------
SELECT GROWTH PORTFOLIO
Shares sold 2,407,693 4,103,840
Shares redeemed (55,723) (26,419)
- ------------------------------------------------------------------------------------------
NET INCREASE 2,351,970 4,077,421
- ------------------------------------------------------------------------------------------
SELECT BALANCED PORTFOLIO
Shares sold 2,638,615 4,056,352
Shares redeemed (78,555) (59,304)
- ------------------------------------------------------------------------------------------
NET INCREASE 2,560,060 3,997,048
- ------------------------------------------------------------------------------------------
SELECT CONSERVATIVE PORTFOLIO
Shares sold 847,020 1,009,487
Shares redeemed (43,466) (62,865)
- ------------------------------------------------------------------------------------------
NET INCREASE 803,554 946,622
- ------------------------------------------------------------------------------------------
SELECT INCOME PORTFOLIO
Shares sold 493,354 429,622
Shares redeemed (62,816) (36,478)
- ------------------------------------------------------------------------------------------
NET INCREASE 430,538 393,144
- ------------------------------------------------------------------------------------------
</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 EACH PERIOD:
<TABLE>
<CAPTION>
1998 1998
SELECT HIGH GROWTH PORTFOLIO (1) (2)(3)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $11.06 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(4) 0.03 0.26
Net realized and unrealized
gain 0.91 0.80
- ------------------------------------------------------------
Total Income From Operations 0.94 1.06
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.07) --
Net realized gains (0.04) --
- ------------------------------------------------------------
Total Distributions (0.11) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.89 $11.06
- ------------------------------------------------------------
TOTAL RETURN++ 8.48% 10.60%
- ------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S) $46,437 $27,071
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 0.35% 0.35%
Net investment income 1.42 2.41
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 7% 43%
- ------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED).
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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) 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>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
1998 1998
SELECT GROWTH PORTFOLIO (1) (2)(3)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $11.28 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(4) 0.05 0.44
Net realized and unrealized
gain 0.78 0.84
- ------------------------------------------------------------
Total Income From Operations 0.83 1.28
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.11) --
Net realized gains (0.12) --
- ------------------------------------------------------------
Total Distributions (0.23) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.88 $11.28
- ------------------------------------------------------------
TOTAL RETURN++ 7.36% 12.80%
- ------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S) $76,370 $45,982
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 0.35% 0.35%
Net investment income 2.26 4.11
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 4% 43%
- ------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED).
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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) 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.
27
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
1998 1998
SELECT BALANCED PORTFOLIO (1) (2)(3)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $11.28 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(4) 0.07 0.64
Net realized and unrealized
gain 0.49 0.64
- ------------------------------------------------------------
Total Income From Operations 0.56 1.28
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.16) --
Net realized gains (0.16) --
- ------------------------------------------------------------
Total Distributions (0.32) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.52 $11.28
- ------------------------------------------------------------
TOTAL RETURN++ 5.02% 12.80%
- ------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S) $75,530 $45,071
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 0.35% 0.35%
Net investment income 3.70 5.89
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 9% 19%
- ------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED).
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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) 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.
28
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
1998 1998
SELECT CONSERVATIVE PORTFOLIO (1) (2)(3)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $11.30 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(4) 0.10 0.78
Net realized and unrealized
gain 0.25 0.52
- ------------------------------------------------------------
Total Income From Operations 0.35 1.30
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.17) --
Net realized gains (0.10) --
- ------------------------------------------------------------
Total Distributions (0.27) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.38 $11.30
- ------------------------------------------------------------
TOTAL RETURN++ 3.06% 13.00%
- ------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S) $19,922 $10,698
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 0.35% 0.35%
Net investment income 5.81 7.24
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 0% 35%
- ------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED).
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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) 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.
29
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
1998 1998
SELECT INCOME PORTFOLIO (1) (2)(3)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $11.29 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(4) 0.10 0.80
Net realized and unrealized
gain 0.23 0.49
- ------------------------------------------------------------
Total Income From Operations 0.33 1.29
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.06) --
Net realized gains (0.15) --
- ------------------------------------------------------------
Total Distributions (0.21) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.41 $11.29
- ------------------------------------------------------------
TOTAL RETURN++ 2.93% 12.90%
- ------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S) $9,401 $4,440
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 0.35% 0.35%
Net investment income 6.50 7.36
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 0% 11%
- ------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED).
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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) 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.
30
<PAGE>
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED)
...............................................................................
On March 9, 1998, a special meeting of shareholders of the Fund was held for the
purpose of voting on the following matters:
1. To elect Directors of the Fund; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED PERCENTAGE OF
NAME OF DIRECTORS FOR VOTED AGAINST SHARES VOTED
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Walter E. Auch 84,619,503.676 97.425% 2,236,735.674 2.575%
Martin Brody 84,551,046.663 97.346 2,305,192.687 2.654
Armon E. Kamesar 84,634,316.373 97.442 2,221,922.977 2.558
Stephen E. Kaufman 84,596,251.231 97.398 2,259,988.119 2.602
H. John Ellis 84,667,389.466 97.480 2,188,849.884 2.520
Heath B. McLendon 84,674,485.335 97.488 2,181,754.015 2.512
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Proposal 2 requested that shareholders approve certain modifications to the
fundamental investment policies of the Portfolios in order to modernize them in
view of certain regulatory, business or industry developments that have occurred
since original adoption of these policies by the Portfolios. The following chart
demonstrates that all proposals were approved by the shareholders.
- --------------------------------------------------------------
Senior Securities Approved
Borrowing Approved
Lending by the Fund Approved
Underwriting Approved
Real Estate Approved
- --------------------------------------------------------------
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Portfolios on all proposals.
<TABLE>
<CAPTION>
PERCENTAGE SHARES PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINING ABSTAINED
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
2,789,103.084 86.804% 71,944.707 2.239% 362,102.180 11.270%
- ------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
DIRECTORS
Walter E. Auch
Martin Brody
Armon E. Kamesar
Stephen E. Kaufman
H. John Ellis
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
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
32
<PAGE>
<TABLE>
<S> <C>
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE
OWNERS 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 A CURRENT PROSPECTUS FOR THE FUND, FD01325 9/98
WHICH CONTAINS INFORMATION CONCERNING THE FUND'S INVESTMENT
POLICIES, FEES AND EXPENSES, AS WELL AS OTHER PERTINENT
INFORMATION.
</TABLE>
