<PAGE>
[GRAPHIC] SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
-- SELECT HIGH GROWTH PORTFOLIO
-- SELECT GROWTH PORTFOLIO
-- SELECT BALANCED PORTFOLIO
-- SELECT CONSERVATIVE PORTFOLIO
-- SELECT INCOME PORTFOLIO
ANNUAL REPORT
JANUARY 31, 1999
INVESTMENT STRATEGIES FOR YOUR LIFE
[LOGO] SMITH BARNEY MUTUAL FUNDS
INVESTING FOR YOUR FUTURE.
EVERY DAY -Registration Trademark-.
<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...................................................... 27
Independent Auditors' Report.............................................. 32
Tax Information........................................................... 33
Additional Shareholder Information........................................ 34
Directors and Officers.................................................... 35
</TABLE>
<PAGE>
Dear Shareholder:
[PHOTO]
Heath B. McLendon
CHAIRMAN
THE CONCERT ALLOCATION SERIES
[PHOTO]
Thomas B. Stiles II
VICE PRESIDENT AND INVESTMENT OFFICER
THE CONCERT ALLOCATION SERIES
We are pleased to present the annual report for the Smith Barney Concert
Allocation Series Inc. ("Concert Allocation Series") Select Portfolios
("Portfolios") for the period ended January 31, 1999. The 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 YEAR ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
PORTFOLIO TOTAL RETURN
- -------------------- -------------
<S> <C>
Select High Growth 18.79%
Select Growth 16.31
Select Balanced 9.76
Select Conservative 6.05
Select Income 5.18
</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.
THE U.S. MARKETS
The year 1998 set records across the financial markets. It was broad-based, for
we enjoyed all-time highs in the popular stock market averages, while the bond
market yields touched levels last seen in the 1960s. Records were set as large-
capitalization stocks, as measured by the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500"), an index of mostly large-capitalization domestic
stocks, exceeded a 20% return for the fourth year in a row. (Market
capitalization is the value of a company's outstanding shares of common stock,
determined by multiplying the number of shares outstanding by the share price.)
Yet 1998 was also a tumultuous year and we expect 1999 to be no different. In
1998, emerging markets "submerged". Small-capitalization stock indices, such as
the Russell 2000 Index,-Registered Trademark- were actually down for the year.
Even large-capitalization stock indices dipped into negative territory twice. At
the end of August 1998 and again in the beginning of October 1998, stocks traded
at levels below that of January 1, 1998. In a turn of events, however, these
stocks recovered and rallied strongly through year-end.
1
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SALUTING THE
LONG-TERM INVESTOR
GROWTH OF $10,000
INVESTED IN THE
STANDARD & POOR'S
500 COMPOSITE STOCK
INDEX, SALOMON SMITH
BARNEY WORLD
GOVERNMENT BOND
INDEX,
LEHMAN
GOVERNMENT/CORPORATE
BOND INDEX AND
MORGAN STANLEY
CAPITAL
INTERNATIONAL EAFE
INDEX
(JANUARY, 1989 --
JANUARY, 1999)
(UNAUDITED)
SALOMON SMITH BARNEY
LEHMAN
WORLD GOVERNMENT GOVERNMENT/CORPORATE
S&P 500 INDEX BOND INDEX MSCI EAFE INDEX BOND INDEX
<S> <C> <C> <C> <C>
1/89 10,000 10,080 10,000 10,000
1/90 11,443 10,603 10,483 11,119
1/91 12,401 11,593 8,634 12,344
1/92 15,210 12,887 8,690 13,965
1/93 16,816 14,187 7,826 15,582
1/94 16,977 15,686 11,285 17,187
1/95 19,075 15,301 10,812 16,653
1/96 26,442 17,988 12,593 19,604
1/97 33,404 19,535 12,873 20,072
1/98 42,391 21,890 14,218 22,315
1/99 56,169 25,341 16,290 24,261
</TABLE>
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX ("S&P 500") IS A
CAPITALIZATION-WEIGHTED INDEX OF 500 WIDELY HELD COMMON STOCKS. THE SALOMON
SMITH BARNEY WORLD GOVERNMENT BOND INDEX IS A MARKET-CAPITALIZATION-WEIGHTED
BENCHMARK THAT TRACKS THE PERFORMANCE OF THE GOVERNMENT BOND MARKETS OF 14
COUNTRIES. THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX IS A COMBINATION OF
PUBLICLY ISSUED INTERMEDIATE- AND LONG-TERM U.S. GOVERNMENT BONDS AND CORPORATE
BONDS. THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("MSCI EAFE")
CONSISTS OF THE EQUITY TOTAL RETURNS FOR EUROPE, AUSTRALIA AND THE FAR EAST.
THESE INDICES ARE UNMANAGED AND ARE NOT SUBJECT TO THE SAME MANAGEMENT AND
TRADING EXPENSES AS A MUTUAL FUND.
The year 1998 also continued a trend that we have seen over the past few years:
the outperformance of the very largest-capitalization stocks. This trend was
evident whether looking at large-capitalization indices, such as the S&P 500, or
at indices perceived as being small cap, such as NASDAQ. As was the case over
the last several years, the largest stocks, or the "elephants" of the stock
market, garnered the out-sized returns.
As measured by the price change in the S&P 500, large-cap stocks were up an
impressive 26.7% in 1998. However, last year's 26.7% index return is an average,
one that is market-weighted. Put simply, in a market-weighted index those stocks
with higher market capitalization (large caps) have a greater impact on the
index's performance than those with a lower market value (small caps).
2
<PAGE>
An average also implies that returns are randomly distributed. Last year, they
were anything but. For the largest-capitalization stocks outperformed the
average stock, creating a situation where the largest market cap companies once
again had a major impact on the indices. In a sense, they had a double impact.
Their market size ensured they would affect a market-weighted index. That effect
was compounded by their strong price action during the year. In fact, the top 25
S&P stocks (as measured by market capitalization) returned 33.8% versus the
overall index performance of 26.7%. Removing the top 25 stocks from the index
would have resulted in a return of 23.4% for the remaining 475 stocks. (Price
change only and not total return.)
Another underlying theme in last year's market was a flight to quality. As
previously noted, large stocks outperformed small ones. High-quality bonds
outperformed lower-quality ones. In fact quality, not maturity or duration, was
the main factor distinguishing bond performance last year. Government bonds
outperformed corporate bonds, which in turn outperformed high-yield bonds. This
reluctance on the part of many investors to take on risk was due to problems in
emerging markets, as well as liquidity concerns caused by major, troubled hedge
funds.
The Federal Reserve Board ("Fed"), well aware of the growing liquidity problems
in the bond market, engineered three moves starting on September 29, 1998, to
reduce the federal funds rate to 4.75% and the discount rate to 4.50%. After
falling to the historic low of 4.70% on the long U.S. Treasury bond in early
October interest rates have bounced around in a rather narrow trading range. The
Lehman Brothers Government/Corporate Bond index returned 8.72% for the year
ended January 31, 1999.
INTERNATIONAL STOCK MARKETS
Powerful forces buffeted global equity markets during 1998. Some of these
factors included:
- The economic convergence of eleven European countries to form "Euroland"
with a common functional currency, the euro,
- Significant political change in Asia and Europe and the U.S. Presidential
impeachment process,
- Russian debt default, the instability of hedge funds, massive debt trading
losses from major financial institutions and withdrawal of trading
liquidity,
- Ongoing global disinflation (in many cases deflation) which applied
downward pressure to both commodity prices and the developing economies,
- Massive mergers and acquisitions in several global industries.
The first half of the year was characterized by strongly positive returns from
the developed markets while emerging market performance lagged. The financial
crisis of late summer engulfed equity markets, negating virtually all gains from
the early part of the year and driving emerging market returns sharply negative.
Coordinated central bank monetary stimulus allowed a sharp recovery in most
equity markets over the past few months.
Market volatility during the year was higher than in recent years, providing
discomfort to many investors during the late summer and early fall bear market.
Many high-quality stocks fell sharply as investors fled equities for the
perceived safety of U.S. dollar-denominated fixed-income instruments. This
provided great buying opportunities in stocks and again illustrated the benefit
of having a long-term investment perspective.
For other sectors of the market -- specifically those companies oriented to
resources and commodities -- the global economic deceleration and looming
overcapacity, combined with strong downward price pressures from end users,
increased the prospect of poor earnings in 1998 and 1999. We see very little
attraction in these sectors until a major contraction in capital spending occurs
leading to less capacity. Interestingly, corporate managements also took
advantage of the sharp decline during the period under review to initiate merger
and acquisition activity, which reached record levels globally in 1998.
3
<PAGE>
LOOKING FORWARD
Over the next twelve months we anticipate more volatility in the U.S. stock
market. Some sectors, such as Internet-related stocks, should swing wildly over
the next year. But we expect the underlying fundamentals of the economy and
markets to remain solid. Corporate earnings should accelerate in 1999 versus
1998, while inflation remains low.
We also believe that 1999 should be a positive year for bond investors. Last
year excess cash seems to have poured into stocks and U.S. Treasurys. We expect
that 1999 may see a shift away from U.S. Treasurys and into other kinds of
bonds.
During the variable conditions of the reporting period, the international equity
markets proved resilient to numerous adverse economic and political
developments. We think that Europe should be the regional earnings star
performer, especially in Euroland, which adopted a common currency on January 1,
1999. We think that Europe's investment attractions will continue in 1999 from
the combination of:
- Corporate restructuring
- Increasing consumer confidence, due to declining unemployment
- Attentive management, due to the award of equity incentives
- Deregulation in financial markets, such as share repurchases
- Growing flexibility of labor markets
We encourage you to visit our web site at WWW.SMITHBARNEY.COM to find out more
about the Concert Allocation Series Portfolios. Thank you for your participation
and the confidence you have placed in us.
Sincerely,
/s/ Heath B. McLendon /s/ Thomas B. Stiles II
Heath B. McLendon Thomas B. Stiles II
CHAIRMAN VICE PRESIDENT AND
INVESTMENT OFFICER
FEBRUARY 25, 1999
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 32.51 %
RUSSELL 2000 0.33 %
MSCI EAFE 14.41 %
SALOMON SMITH BARNEY
HIGH YIELD MARKET 2.83 %
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1999.
PORTFOLIO UPDATE
During the past year, the Select High Growth Portfolio ("Portfolio") benefited
from its exposure to large-capitalization growth stocks, generating a total
return of 18.79% for the year ended January 31, 1999. In particular, the Smith
Barney Large Capitalization Growth Fund and Concert Peachtree Growth Fund all
performed very well during the period (63.42% and 40.65% total returns,
respectively). The Smith Barney Aggressive Growth Fund, which also counts some
large-sized companies among its holdings, turned in an impressive performance as
well with a total return of 45.41% during the year. Although, the
small-capitalization funds in the Portfolio outperformed their respective
benchmarks, their absolute returns lagged the outsized gains achieved by
large-cap growth stocks.
In addition, investors continued their decided preference for growth stocks over
value stocks. Funds with more of a value bias, such as the Smith Barney Large
Cap Value Fund and the Smith Barney Contrarian Fund tended not to perform as
well as their growth stock counterparts. (Growth stocks are generally considered
to be company shares that have exhibited above-average earnings growth and are
expected to continue to grow faster than other similar-sized companies. Value
investing attempts to identify stocks that are selling at relatively low prices
compared to their earnings or book value with the belief that the market will
eventually recognize their value, therefore, causing their share price to
increase.)
In the international arena, funds that emphasized European companies tended to
perform better than funds that invested more heavily in Asia and other emerging
markets. Moreover, the performance disparity between growth and value stocks
also extended to international stocks.
In addition, since our last report we added the Smith Barney Mid-Cap Blend Fund
to the Select High Growth Portfolio's mix. The Smith Barney Mid-Cap Blend Fund
seeks companies that are more established than small-capitalization companies
but have not yet acquired the size of large-capitalization companies. Since its
inception on September 1, 1998, the Smith Barney Mid-Cap Blend Fund has returned
41.75% through January 31, 1999.
As we noted in our main letter, the past twelve months were an unusual period
for financial markets, with large-capitalization growth stocks leading the way
for the third consecutive year. We believe this narrow market leadership cannot
continue indefinitely and further reinforces the importance of maintaining broad
diversification in your investment portfolio.
- ------------------------------------------------------------------
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 ("MSCI") EAFE INDEX AND SALOMON SMITH
BARNEY HIGH YIELD MARKET INDEX
...............................................................................
FEBRUARY 5, 1997 -- JANUARY 31, 1999 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT HIGH STANDARD & POOR'S 500 RUSSELL MSCI SALOMON SMITH BARNEY HIGH YIELD
GROWTH PORTFOLIO COMPOSITE 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
7/97 11,250 12,264 11,307 11,711 10,757
1/98 11,060 12,689 11,607 11,028 11,487
7/98 11,998 14,618 11,569 12,349 11,906
1/99 13,138 16,814 11,851 12,636 11,812
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1999. 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.
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
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
1/31/99 $11.06 $13.02 $0.07 $0.04 18.79%
- ----------------------------------------------------------------------------------------------------------------------
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* -- 1/31/99 31.38%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT HIGH GROWTH PORTFOLIO'S 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 32.51%
RUSSELL 2000 0.33%
MSCI EAFE 14.41%
LEHMAN GOVERNMENT/CORPORATE BOND 8.72%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1999.
PORTFOLIO UPDATE
Investors retained their preference for stocks of large, well-established
companies for most of 1998. The Underlying Funds in the Select Growth Portfolio
("Portfolio") that invest in these companies, primarily Concert Peachtree Growth
Fund and Smith Barney Large Capitalization Growth Fund, also performed quite
well, returning 40.65% and 63.42%, respectively. In addition, the Smith Barney
Aggressive Growth Fund, which also counts some large companies among its
holdings, turned in an impressive performance as well with a total return of
nearly 45.41% over the reporting period. The Select Growth Portfolio returned
16.31% for the year ended January 31, 1999.
Moreover, investors continued to favor growth stocks over value stocks in the
last year and the returns of Funds with more a value bias, such as Smith Barney
Large Cap Value Fund and Smith Barney Contrarian Fund, trailed that of large
company growth stocks. (Growth stocks are generally considered to be company
shares that have exhibited above-average earnings growth and are expected to
continue to grow faster than other similar-sized companies. Value investing
attempts to identify stocks that are selling at relatively low prices compared
to their earnings or book value with the belief that the market will eventually
recognize their value, hence, causing the price to increase.)
Funds in your Portfolio that invest in smaller-capitalized companies
outperformed their respective indices, but nevertheless trailed the unusually
strong performance of large company shares.
International stocks largely followed the same pattern as domestic stocks with
large-capitalization growth stocks leading the way. The Smith Barney World
Funds--International Equity Portfolio performed roughly in line with its
benchmark while the return of the Smith Barney Hansberger Global Value Fund was
negatively impacted by international investor preference for growth stocks.
The bond funds in the Portfolio, with their emphasis on credit quality in their
respective asset classes, also posted returns comparable to their indices.
In addition, since our last report we added the Smith Barney Mid-Cap Blend Fund
to the Select Growth Portfolio. The Mid-Cap Blend Fund seeks companies that are
more established than small-capitalization companies but have not yet acquired
the size of large-capitalization companies. Since its inception on September 1,
1998, the Smith Barney Mid-Cap Blend Fund has returned 41.75% through January
31, 1999.
The past twelve months represented an unusual period for financial markets, with
large-capitalization growth stocks leading the market for the third consecutive
year. We believe this narrow market leadership cannot continue indefinitely and
further reinforces the importance of maintaining broad diversification in your
investment portfolio.
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT GROWTH PORTFOLIO. THE ALLOCATION AND INVESTMENT MIX
OF THE PORTFOLIO MAY VARY DEPENDING UPON MARKET CONDITIONS, CASH FLOWS IN AND
OUT OF THE PORTFOLIO AND OTHER FACTORS. IN ADDITION, THE ALLOCATION AND
INVESTMENT RANGES OF THE PORTFOLIO MAY BE CHANGED FROM TIME TO TIME UPON THE
APPROVAL OF THE CONCERT ALLOCATION SERIES' BOARD OF DIRECTORS.
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 ("MSCI") EAFE INDEX AND LEHMAN
GOVERNMENT/CORPORATE BOND INDEX
...............................................................................
FEBRUARY 5, 1997 -- JANUARY 31, 1999 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT GROWTH STANDARD & POOR'S 500 LEHMAN GOVERNMENT/
PORTFOLIO COMPOSITE STOCK INDEX RUSSELL 2000 INDEX MSCI EAFE INDEX CORPORATE BOND INDEX
<S> <C> <C> <C> <C> <C>
2/5/97 10,000 10,000 10,000 10,000 10,000
7/97 11,170 12,254 11,307 11,711 10,575
1/98 11,280 12,689 11,807 11,028 11,117
7/98 12,111 14,618 11,569 12,349 11,428
1/99 13,120 16,814 11,851 12,635 12,086
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1999. 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.
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
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
1/31/99 $11.28 $12.87 $0.11 $0.12 16.31%
- --------------------------------------------------------------------------------------------------------------------------------
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* -- 1/31/99 31.20%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT GROWTH PORTFOLIO'S 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 32.51 %
LEHMAN GOVERNMENT/CORPORATE BOND 8.72 %
SALOMON SMITH BARNEY ONE-YEAR TREASURY BILL 5.60 %
SALOMON SMITH BARNEY
WORLD GOVERNMENT BOND 13.13 %
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1999.
PORTFOLIO UPDATE
The stock funds in the Select Balanced Portfolio ("Portfolio") that focus
primarily on large companies (Smith Barney Large Cap Value Fund, Smith Barney
Appreciation Fund, Smith Barney Fundamental Value Fund and Smith Barney Large
Cap Blend Fund) posted solid gains during the period. However, in a year in
which investors showed a decided preference for growth stocks, their value bias
caused their returns to lag the outsized gains of the very narrow group of
large-capitalization growth stocks that drove the performance of the major
indices. (Growth stocks are generally considered to be company shares that have
exhibited above-average earnings growth and are expected to continue to grow
faster than other similar-sized companies. Value investing attempts to identify
stocks that are selling at relatively low prices compared to their earnings or
book value with the belief that the market will eventually recognize their
value, therefore, causing the price to increase.)
The Portfolio also benefited from the funds with high-quality bonds in their
holdings. Like stock markets, bond markets worldwide experienced significant
volatility during much of 1998. The bond funds in the Portfolio emphasize very
strong credit quality and focus largely on U.S. government debt and the debt of
other developed nations. During the Portfolio's fiscal year, the returns of
these bonds consisted mostly of coupon interest with very little price
appreciation or depreciation. The Select Balanced Portfolio returned 9.76% for
the year ended January 31, 1999.
- ------------------------------------------------------------------
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 ("MSCI") EAFE INDEX AND SALOMON SMITH
BARNEY WORLD GOVERNMENT BOND INDEX
...............................................................................
FEBRUARY 5, 1997 -- JANUARY 31, 1999 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT BALANCED STANDARD & POOR'S 500 LEHMAN GOVERNMENT/CORPORATE MSCI
PORTFOLIO COMPOSITE STOCK INDEX BOND INDEX EAFE INDEX
<S> <C> <C> <C> <C>
2/5/97 10,000 10,000 10,000 10,000
7/97 11,050 12,254 10,575 11,711
1/98 11,280 12,689 11,117 11,028
7/98 11,846 14,618 11,428 12,349
1/99 12,381 16,814 12,086 12,635
<CAPTION>
SALOMON SMITH BARNEY
WORLD GOVERNMENT BOND INDEX
<S> <C>
2/5/97 10,000
7/97 10,512
1/98 11,111
7/98 11,589
1/99 12,863
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1999. 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.
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
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
1/31/99 $11.28 $12.04 $0.16 $0.16 9.76%
- -----------------------------------------------------------------------------------------------------------------------
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* -- 1/31/99 23.81%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT BALANCED PORTFOLIO'S 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>
BOND FUNDS STOCK FUNDS
<S> <C>
70% 30%
</TABLE>
THE SELECT CONSERVATIVE PORTFOLIO PRIMARILY 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 portion invested in stock funds that invest primarily in
large-capitalization U.S. stocks.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 32.51%
LEHMAN GOVERNMENT/CORPORATE BOND 8.72%
SALOMON SMITH BARNEY
HIGH YIELD MARKET 2.83%
SALOMON SMITH BARNEY
ONE-YEAR TREASURY BILL 5.60%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1999.
PORTFOLIO UPDATE
In keeping with its investment objective, the Select Conservative Portfolio
("Portfolio") consists largely of bond funds with the remainder invested in
stock funds. Investor doubt and uncertainty clouded almost every financial
market during the latter half of 1998, causing many investors to seek some safe
haven from the turmoil. For bond investors, this meant U.S. Treasury bonds. The
Portfolio generally emphasizes very high-credit quality bonds and focuses on
U.S. government debt as well as the bonds of other developed nations. During the
Portfolio's fiscal year, the returns of these funds consisted mostly of coupon
interest with very little price appreciation or depreciation. The Portfolio's
exposure to high-quality foreign national debt also contributed to its returns
achieved during the period.
The portion of the Portfolio devoted to stocks was invested primarily in large
company stocks. While their absolute returns were quite strong for the most
part, the value bias of these funds caused them to lag the major indices. For
the third consecutive year, returns of most major stock indices were driven by a
handful of very large-capitalization growth stocks. (Growth stocks are generally
considered to be company shares that have exhibited above-average earnings
growth and are expected to continue to grow faster than other similar-sized
companies. Value investing attempts to identify stocks that are selling at
relatively low prices compared to their earnings or book value with the belief
that the market will eventually recognize their value, hence, causing their
share price to increase.) The Select Conservative Portfolio returned 6.05% for
the year ended January 31, 1999.
- ------------------------------------------------------------------
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 -- JANUARY 31, 1999 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT STANDARD & POOR'S 500 LEHMAN GOVERNMENT/ SALOMON SMITH BARNEY HIGH
CONSERVATIVE PORTFOLIO COMPOSITE STOCK INDEX CORPORATE BOND INDEX YIELD MARKET INDEX
<S> <C> <C> <C> <C>
2/5/97 10,000 10,000 10,000 10,000
7/97 10,930 12,254 10,575 10,757
1/98 11,300 12,689 11,117 11,487
7/98 11,646 14,618 11,428 11,906
1/99 11,984 16,814 12,088 11,812
<CAPTION>
SALOMON SMITH BARNEY ONE-YEAR
TREASURY BILL INDEX
<S> <C>
2/5/97 10,000
7/97 10,322
1/98 10,627
7/98 10,910
1/99 11,222
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1999. 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.
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
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
1/31/99 $11.30 $11.71 $0.17 $0.10 6.05%
- -----------------------------------------------------------------------------------------------------------------------
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* -- 1/31/99 19.84%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT CONSERVATIVE PORTFOLIO'S 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 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 32.51%
Lehman Government/
Corporate Bond 8.72%
Salomon Smith Barney
High Yield Market 2.83%
Salomon Smith Barney
One-Year Treasury Bill 5.60%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 1999.
PORTFOLIO UPDATE
The Select Income Portfolio ("Portfolio") which had a total return of 5.18% for
the year ended January 31, 1999, devotes a large portion of its assets to bond
funds that invest in the debt obligations of the U. S. government and other
developed nations. The year 1998 was a volatile one for financial markets. The
market turmoil led many investors to shun most corporate bonds in favor of U.S.
Treasury bonds, considered to be the global benchmark for credit quality. The
Portfolio benefited from its emphasis on high-credit quality during this period
of investor doubt and uncertainty. In contrast to a gyrating corporate bond
market, these funds in the Portfolio remained relatively stable, with returns
coming mostly from coupon interest, with very little price appreciation or
depreciation.
The Portfolio also allocates a portion of its assets to the Smith Barney High
Income Fund which invests in high-yield corporate bonds. After the collapse of
Russia's economy and the near failure of a prominent leveraged hedge fund last
summer, many investors suddenly became risk averse and retreated to safer havens
such as U.S. Treasury bonds.
High-yield bonds, in particular, came under pressure during this time and these
market conditions negatively impacted the Smith Barney High Income Fund's
performance. However, the Smith Barney High Income Fund held up better than many
other funds in its category because of its emphasis on credit quality relative
to its peers. Despite the disappointing results of high-yield bonds as an asset
class, the Smith Barney High Income Fund substantially outperformed the average
total return of its peer group during the reporting period according to Lipper,
Inc., a major fund-tracking organization. The Smith Barney High Income Fund
returned roughly 0.57% for the year ended January 31, 1999 versus the negative
0.93% average total return for funds in its category.
- ------------------------------------------------------------------
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 -- JANUARY 31, 1999 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT STANDARD & POOR'S 500 LEHMAN GOVERNMENT/CORPORATE SALOMON SMITH BARNEY
INCOME PORTFOLIO COMPOSITE STOCK INDEX BOND INDEX HIGH YIELD MARKET INDEX
<S> <C> <C> <C> <C>
2/5/97 10,000 10,000 10,000 10,000
7/97 10,850 12,254 10,575 10,757
1/98 11,290 12,689 11,117 11,487
7/98 11,620 14,618 11,428 11,906
1/99 11,875 16,814 12,086 11,812
<CAPTION>
SALOMON SMITH BARNEY ONE-YEAR
TREASURY BILL INDEX
<S> <C>
2/5/97 10,000
7/97 10,322
1/98 10,627
7/98 10,910
1/99 11,222
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
1999. 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.
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
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDED DISTRIBUTION TOTAL RETURN
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
1/31/99 $11.29 $11.66 $0.15 $0.06 5.18%
- ----------------------------------------------------------------------------------------------------------------------
2/5/97* -- 1/31/98 10.00 11.29 0.00 0.00 12.90++
- ----------------------------------------------------------------------------------------------------------------------
Total $0.15 $0.06
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT INCOME PORTFOLIO
...............................................................................
<TABLE>
<S> <C>
2/5/97* -- 1/31/99 18.75%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT INCOME PORTFOLIO'S 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 JANUARY 31, 1999
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
---------------------------------------------------------------------------
UNDERLYING FUNDS -- 99.1%
137,908 Smith Barney Aggressive Growth Fund $ 7,859,393
213,238 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 3,823,360
205,776 Smith Barney Funds, Inc. - Large Cap Value Fund 3,788,341
649,677 Smith Barney Income Funds - Smith Barney High
Income Fund 7,074,981
412,885 Smith Barney Investment Funds, Inc. - Concert
Peachtree Growth Fund 7,766,373
267,947 Smith Barney Investment Funds, Inc. - Smith
Barney Contrarian Fund 3,740,541
703,982 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value Fund 7,398,854
370,880 Smith Barney Investment Trust - Smith Barney
Large Capitalization Growth Fund 7,769,932
236,182 Smith Barney Investment Trust - Smith Barney Mid
Cap Blend Fund 3,826,151
1,115,990 Smith Barney Small Cap Blend Fund, Inc. 14,998,904
328,954 Smith Barney World Funds, Inc. - International
Equity Portfolio 7,463,956
---------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $67,526,183) 75,510,786
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
---------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.9%
$ 684,000 Morgan Stanley Dean Witter & Co., 4.700% due
2/1/99; Proceeds at maturity -- $684,268;
(Fully collateralized by U.S. Treasury Notes and
Bonds, 5.375% to 7.875% due 4/15/99 to 11/15/26;
Market value -- $701,101)(Cost -- $684,000) 684,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $68,210,183*) $76,194,786
---------------------------------------------------------------------------
</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 JANUARY 31, 1999
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
----------------------------------------------------------------------------
UNDERLYING FUNDS -- 98.4%
118,394 Smith Barney Aggressive Growth Fund $ 6,747,285
729,250 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 13,075,449
707,422 Smith Barney Funds, Inc. - Large Cap Value Fund 13,023,634
1,122,695 Smith Barney Income Funds, Inc. - Smith Barney
High Income Fund 12,226,153
704,655 Smith Barney Investment Funds - Concert Peachtree
Growth Fund 13,254,568
463,290 Smith Barney Investment Funds, Inc. - Smith
Barney Contrarian Fund 6,467,530
1,288,784 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 12,862,066
610,657 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value Fund 6,418,010
977,438 Smith Barney Investment Funds, Inc. - Smith
Barney Investment Grade Bond Fund 12,911,950
316,897 Smith Barney Investment Trust - Smith Barney
Large Capitalization Growth Fund 6,639,001
404,807 Smith Barney Investment Trust - Smith Barney Mid
Cap Blend Fund 6,557,879
481,364 Smith Barney Small Cap Blend Fund, Inc. 6,469,527
567,335 Smith Barney World Funds, Inc. - International
Equity Portfolio 12,872,837
----------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $119,183,997) 129,525,889
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.6%
$2,091,000 Morgan Stanley Dean Witter & Co., 4.700% due
2/1/99; Proceeds at maturity -- $2,091,819;
(Fully collateralized by U.S. Treasury Notes,
5.375% to 7.875% due 4/15/99 to 11/15/26;
Market value -- $2,143,278) (Cost -- $2,091,000) 2,091,000
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $121,274,997*) $131,616,889
----------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
THE SELECT BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS JANUARY 31, 1999
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
----------------------------------------------------------------------------
UNDERLYING FUNDS -- 98.3%
873,201 Smith Barney Appreciation Fund Inc. $ 13,560,804
380,049 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 6,814,278
1,154,194 Smith Barney Fundamental Value Fund Inc. 13,365,571
366,316 Smith Barney Funds, Inc. - Large Cap Value Fund 6,743,881
1,448,510 Smith Barney Funds, Inc. - Smith Barney
Short-Term High Grade Bond Fund 5,982,348
848,877 Smith Barney Income Funds - Smith Barney
Convertible Fund Inc. 13,327,364
2,530,567 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 19,966,171
640,043 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 13,338,497
1,333,411 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 13,307,439
1,042,677 Smith Barney Managed Governments Fund Inc. 13,294,128
564,747 Smith Barney World Funds, Inc. - Global
Government Bond Portfolio 6,635,775
293,125 Smith Barney World Funds, Inc. - International
Equity Portfolio 6,651,001
----------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $131,215,599) 132,987,257
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.7%
$2,373,000 Morgan Stanley Dean Witter & Co., 4.700% due
2/1/99; Proceeds at maturity -- $2,373,929;
(Fully collateralized by U.S. Treasury Notes,
5.375% to 7.875% due 4/15/99 to 11/15/26;
Market value -- $2,432,329) (Cost -- $2,373,000) 2,373,000
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $133,588,599*) $135,360,257
----------------------------------------------------------------------------
</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 JANUARY 31, 1999
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
-------------------------------------------------------------------------
UNDERLYING FUNDS -- 97.8%
252,153 Smith Barney Appreciation Fund Inc. $ 3,915,936
168,358 Smith Barney Fundamental Value Fund Inc. 1,949,587
420,245 Smith Barney Funds, Inc. - Short-Term High Grade
Bond Fund 1,735,614
386,846 Smith Barney Government Securities Fund 3,860,719
246,255 Smith Barney Income Funds - Smith Barney
Convertible Fund Inc. 3,866,211
978,836 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 7,723,019
354,800 Smith Barney Income Funds - Smith Barney High
Income Fund 3,863,770
92,843 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 1,934,841
183,848 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value 1,932,246
453,745 Smith Barney Managed Governments Fund Inc. 5,785,246
163,819 Smith Barney World Funds, Inc. - Global
Government Bond Portfolio 1,924,875
-------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $38,677,793) 38,492,064
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
-------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.2%
$852,000 Morgan Stanley Dean Witter & Co., 4.700% due
2/1/99; Proceeds at maturity -- $852,334;
(Fully collateralized by U.S. Treasury Notes,
5.375% to 7.875% due 4/15/99 to 11/15/26;
Market value -- $873,301) (Cost -- $852,000) 852,000
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- 39,529,793*) $39,344,064
-------------------------------------------------------------------------
</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 JANUARY 31, 1999
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
-------------------------------------------------------------------------
UNDERLYING FUNDS -- 99.2%
67,171 Smith Barney Appreciation Fund Inc. $ 1,043,169
472,027 Smith Barney Funds, Inc. - Short-Term High Grade
Bond Fund 1,949,472
65,123 Smith Barney Income Funds - Smith Barney
Convertible Fund Inc. 1,022,428
518,015 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 4,087,142
374,973 Smith Barney Income Funds - Smith Barney High
Income Fund 4,083,458
49,397 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 1,029,437
307,399 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 3,067,838
320,534 Smith Barney Managed Governments Fund Inc. 4,086,811
-------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $20,454,533) 20,369,755
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
<C> <S> <C>
---------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
$169,000 Morgan Stanley Dean Witter & Co., 4.700% due
2/1/99; Proceeds at maturity -- $169,066;
(Fully collateralized by U.S. Treasury Notes,
5.375% to 7.875% due 4/15/99 to 11/15/26;
Market value -- $173,225) (Cost -- $169,000) 169,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $20,623,533*) $20,538,755
---------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES JANUARY 31, 1999
...............................................................................
<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 $68,210,183 $121,274,997 $133,588,599 $ 39,529,793 $ 20,623,533
- --------------------------------------------------------------------------------------------------------------
Investments, at value $76,194,786 $131,616,889 $135,360,257 $ 39,344,064 $ 20,538,755
Cash 414 68 -- 900 35
Receivable for Fund shares sold 38,728 19,902 380,950 143,751 37,797
Receivable from manager -- -- -- -- 21,761
Dividends and interest receivable 89 273 17,218 4,999 5,534
- --------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 76,234,017 131,637,132 135,758,425 39,493,714 20,603,882
- --------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 328,819 1,445,956 1,675,400 659,930 --
Payable to bank -- -- 32,784 -- --
Payable for Fund shares purchased 7,003 19,627 148 697 6,826
Accrued expenses 118,060 242,574 254,575 17,832 --
- --------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 453,882 1,708,157 1,962,907 678,459 6,826
- --------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $75,780,135 $129,928,975 $133,795,518 $ 38,815,255 $ 20,597,056
- --------------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 5,820 $ 10,097 $ 11,109 $ 3,314 $ 1,767
Capital paid in excess of par value 66,064,606 115,410,620 125,583,926 37,276,182 19,938,382
Undistributed net investment income 513,147 1,844,375 3,039,216 1,172,731 681,738
Accumulated net realized gain on
security transactions 1,211,959 2,321,991 3,389,609 548,757 59,947
Net unrealized appreciation
(depreciation)
of investments 7,984,603 10,341,892 1,771,658 (185,729) $ (84,778)
- --------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $75,780,135 $129,928,975 $133,795,518 $ 38,815,255 $ 20,597,056
- --------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING 5,820,310 10,096,641 11,108,833 3,313,806 1,767,044
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE $13.02 $12.87 $12.04 $11.71 $11.66
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JANUARY 31, 1999
...............................................................................
<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 $ 627,943 $ 2,036,923 $ 3,104,257 $1,196,957 $ 700,920
Short-term capital gains from Underlying Funds 8,837 17,219 149,870 29,512 3,717
Interest 40,979 70,473 74,389 23,219 13,607
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 677,759 2,124,615 3,328,516 1,249,688 718,244
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Other expenses 164,464 280,011 289,300 76,957 36,506
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 164,464 280,011 289,300 76,957 36,506
- ------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 513,295 1,844,604 3,039,216 1,172,731 681,738
- ------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3):
Realized Gain (Loss) From:
Security transactions 678,825 670,926 239,394 29,742 (72,137)
Capital gain distributions from Underlying Funds 628,107 1,736,151 3,165,579 519,526 132,084
- ------------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN 1,306,932 2,407,077 3,404,973 549,268 59,947
- ------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of year 108,384 175,632 (270,407) (26,599) 31,510
End of year 7,984,603 10,341,892 1,771,658 (185,729) (84,778)
- ------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 7,876,219 10,166,260 2,042,065 (159,130) (116,288)
- ------------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 9,183,151 12,573,337 5,447,038 390,138 (56,341)
INCREASE IN NET ASSETS FROM OPERATIONS $ 9,696,446 $ 14,417,941 $ 8,486,254 $1,562,869 $ 625,397
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED JANUARY 31, 1999
...............................................................................
<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 $ 513,295 $ 1,844,604 $ 3,039,216 $ 1,172,731 $ 681,738
Net realized gain 1,306,932 2,407,077 3,404,973 549,268 59,947
Increase in net unrealized
appreciation (depreciation) 7,876,219 10,166,260 2,042,065 (159,130) (116,288)
- -------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS 9,696,446 14,417,941 8,486,254 1,562,869 625,397
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (259,791) (689,890) (1,058,984) (290,574) (124,156)
Net realized gain (157,661) (786,615) (1,074,913) (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 40,984,630 71,729,729 82,964,105 28,219,439 19,481,318
Net asset value of shares issued for
reinvestment of dividends 417,452 1,476,505 2,133,897 460,330 172,996
Cost of shares reacquired (1,971,681) (2,200,244) (2,725,679) (1,664,789) (3,949,914)
- -------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 39,430,401 71,005,990 82,372,323 27,014,980 15,704,400
- -------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 48,709,395 83,947,426 88,724,680 28,117,519 16,156,801
NET ASSETS:
Beginning of year 27,070,740 45,981,549 45,070,838 10,697,736 4,440,255
- -------------------------------------------------------------------------------------------------------------------------
END OF YEAR* $ 75,780,135 $ 129,928,975 $ 133,795,518 $ 38,815,255 $ 20,597,056
- -------------------------------------------------------------------------------------------------------------------------
*INCLUDES UNDISTRIBUTED NET
INVESTMENT INCOME OF: $513,147 $1,844,375 $3,039,216 $1,172,731 $681,738
- -------------------------------------------------------------------------------------------------------------------------
</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 43,860,501 10,936,593 4,630,140
Cost of shares reacquired (428,924) (286,551) (637,789) (672,077) (394,427)
- ----------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 26,640,025 44,414,727 43,222,712 10,264,516 4,235,713
- ----------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 27,070,740 45,981,549 45,070,838 10,697,736 4,440,255
NET ASSETS:
Beginning of period -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
END OF PERIOD* $ 27,070,740 $ 45,981,549 $ 45,070,838 $ 10,697,736 $ 4,440,255
- ----------------------------------------------------------------------------------------------------------------------
*INCLUDES UNDISTRIBUTED NET
INVESTMENT INCOME OF: $259,643 $689,661 $1,058,984 $290,574 $124,186
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
...............................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Select High Growth, Select Growth, Select Balanced, Select Conservative and
Select Income Portfolios ("Portfolios") are separate investment portfolios of
the Smith Barney Concert Allocation Series Inc. ("Fund"). The Fund, a Maryland
corporation, is registered under the Investment Act of 1940, as amended, as an
open-end management investment company and consists of these portfolios and six
other separate investment portfolios: High Growth, Growth, Balanced,
Conservative, Income and Global Portfolios. The Portfolios invest in other
mutual funds ("Underlying Funds") managed by SSBC Fund Management Inc. ("SSBC"),
formerly known as Mutual Management Corp., or another affiliate of Salomon Smith
Barney Inc. Shares of the Portfolios are offered to separate accounts sponsored
by certain life insurance companies and qualified pension and retirement plans.
The financial statements and financial highlights for the other portfolios are
presented in a separate annual report.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) investments in the
Underlying Funds are valued at the closing net asset value per share of each
Underlying Fund on the day of valuation; (c) 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; (d)
long-term capital gains from Underlying Funds are recorded on the ex-dividend
date as realized gains; (e) gains or losses on the sale of Underlying Funds are
calculated by using the specific identification method; (f) dividends and
distributions to shareholders are recorded on the ex-dividend date; (g) 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; (h) 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. At January 31, 1999
reclassifications were made to the Select Income Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, a portion of
accumulated net investment income and accumulated net realized gains amounting
to $30 and $6, respectively, has been reclassified to paid-in capital. Net
investment income, net realized gains and net assets were not affected by this
adjustment; and (i) 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 Salomon Smith Barney
Inc.
3. INVESTMENTS
During the year ended January 31, 1999, 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 $49,259,341 $9,071,422
Select Growth 81,741,385 8,225,667
Select Balanced 91,937,959 6,026,151
Select Conservative 28,764,376 711,803
Select Income 17,636,064 1,428,223
- -------------------------------------------------------------------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
...............................................................................
At January 31, 1999, 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 $9,110,615 $ (1,126,012) $7,984,603
Select Growth 11,583,038 (1,241,146) 10,341,892
Select Balanced 3,333,326 (1,561,668) 1,771,658
Select Conservative 455,521 (641,250) (185,729)
Select Income 112,230 (197,008) (84,778)
- ----------------------------------------------------------------------------------------
</TABLE>
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 least equal to
the repurchase price.
5. CAPITAL SHARES
At January 31, 1999, 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>
YEAR ENDED PERIOD ENDED
JANUARY 31, 1999 JANUARY 31, 1998(a)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
SELECT HIGH GROWTH PORTFOLIO
Shares sold 3,511,232 2,486,848
Shares issued on reinvestment 35,109 --
Shares reacquired (173,302) (39,577)
- ------------------------------------------------------------------------------------------
NET INCREASE 3,373,039 2,447,271
- ------------------------------------------------------------------------------------------
SELECT GROWTH PORTFOLIO
Shares sold 6,086,424 4,103,840
Shares issued on reinvestment 124,285 --
Shares reacquired (191,489) (26,419)
- ------------------------------------------------------------------------------------------
NET INCREASE 6,019,220 4,077,421
- ------------------------------------------------------------------------------------------
SELECT BALANCED PORTFOLIO
Shares sold 7,161,383 4,056,352
Shares issued on reinvestment 185,234 --
Shares reacquired (234,832) (59,304)
- ------------------------------------------------------------------------------------------
NET INCREASE 7,111,785 3,997,048
- ------------------------------------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
...............................................................................
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JANUARY 31, 1999 JANUARY 31, 1998(a)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
SELECT CONSERVATIVE PORTFOLIO
Shares sold 2,472,258 1,009,487
Shares issued on reinvestment 40,441 --
Shares reacquired (145,515) (62,865)
- ------------------------------------------------------------------------------------------
NET INCREASE 2,367,184 946,622
- ------------------------------------------------------------------------------------------
SELECT INCOME PORTFOLIO
Shares sold 1,703,327 429,622
Shares issued on reinvestment 15,162 --
Shares reacquired (344,589) (36,478)
- ------------------------------------------------------------------------------------------
NET INCREASE 1,373,900 393,144
- ------------------------------------------------------------------------------------------
</TABLE>
(a) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
26
<PAGE>
FINANCIAL HIGHLIGHTS
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
1999 1998
SELECT HIGH GROWTH PORTFOLIO (1) (1)(2)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $11.06 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.13 0.26
Net realized and unrealized
gain 1.94 0.80
- ------------------------------------------------------------
Total Income From Operations 2.07 1.06
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.07) --
Net realized gains (0.04) --
- ------------------------------------------------------------
Total Distributions (0.11) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.02 $11.06
- ------------------------------------------------------------
TOTAL RETURN 18.79% 10.60%++
- ------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $75,780 $27,071
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35%+
Net investment income 1.08 2.41+
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 19% 43%
- ------------------------------------------------------------
</TABLE>
(1) 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.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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.
27
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
1999 1998
SELECT GROWTH PORTFOLIO (1) (1)(2)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $11.28 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.27 0.44
Net realized and unrealized
gain 1.55 0.84
- ------------------------------------------------------------
Total Income From Operations 1.82 1.28
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.11) --
Net realized gains (0.12) --
- ------------------------------------------------------------
Total Distributions (0.23) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.87 $11.28
- ------------------------------------------------------------
TOTAL RETURN 16.31% 12.80%++
- ------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $129,929 $45,982
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35%+
Net investment income 2.29 4.11+
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 10% 43%
- ------------------------------------------------------------
</TABLE>
(1) 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.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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.
28
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
1999 1998
SELECT BALANCED PORTFOLIO (1) (1)(2)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $11.28 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.42 0.64
Net realized and unrealized
gain 0.66 0.64
- ------------------------------------------------------------
Total Income From Operations 1.08 1.28
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.16) --
Net realized gains (0.16) --
- ------------------------------------------------------------
Total Distributions (0.32) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.04 $11.28
- ------------------------------------------------------------
TOTAL RETURN 9.76% 12.80%++
- ------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $133,796 $45,071
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35%+
Net investment income 3.64 5.89+
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 7% 19%
- ------------------------------------------------------------
</TABLE>
(1) 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.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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.
29
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
1999 1998
SELECT CONSERVATIVE PORTFOLIO (1) (1)(2)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $11.30 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.60 0.78
Net realized and unrealized
gain 0.08 0.52
- ------------------------------------------------------------
Total Income From Operations 0.68 1.30
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.17) --
Net realized gains (0.10) --
- ------------------------------------------------------------
Total Distributions (0.27) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.71 $11.30
- ------------------------------------------------------------
TOTAL RETURN 6.05% 13.00%++
- ------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $38,815 $10,698
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35%+
Net investment income 5.27 7.24+
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 3% 35%
- ------------------------------------------------------------
</TABLE>
(1) 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.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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.
30
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
1999 1998
SELECT INCOME PORTFOLIO (1) (1)(2)
<S> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $11.29 $10.00
- ------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.74 0.80
Net realized and unrealized
gain (0.16) 0.49
- ------------------------------------------------------------
Total Income From Operations 0.58 1.29
- ------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.15) --
Net realized gains (0.06) --
- ------------------------------------------------------------
Total Distributions (0.21) --
- ------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.66 $11.29
- ------------------------------------------------------------
TOTAL RETURN 5.18% 12.90%++
- ------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $20,597 $4,440
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35%+
Net investment income 6.45 7.36+
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 14% 11%
- ------------------------------------------------------------
</TABLE>
(1) 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.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(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.
31
<PAGE>
INDEPENDENT AUDITORS' REPORT
...............................................................................
THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
SMITH BARNEY CONCERT ALLOCATION SERIES INC.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Select High Growth, Select Growth, Select
Balanced, Select Conservative and Select Income Portfolios ("Portfolios") of the
Smith Barney Concert Allocation Series Inc. ("Fund") as of January 31, 1999, the
related statements of operations for the year then ended, the statements of
changes in net assets and the financial highlights for the year ended January
31, 1999 and for the period from February 5, 1997 (commencement of operations)
to January 31, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1999, by correspondence with the custodian. As to securities
purchased but not yet received, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
aforementioned portfolios of the Smith Barney Concert Allocation Series Inc. as
of January 31, 1999, the results of their operations for the year then ended and
the changes in their net assets and the financial highlights for the year ended
January 31, 1999 and for the period from February 5, 1997 to January 31, 1998,
in conformity with generally accepted accounting principles.
[SIGNATURE]
NEW YORK, NEW YORK
MARCH 8, 1999
32
<PAGE>
TAX INFORMATION (UNAUDITED)
...............................................................................
For Federal tax purposes the Portfolios hereby designates for the fiscal year
ended Januay 31, 1999:
<TABLE>
<S> <C>
* Percentages of ordinary dividends paid as qualifying for the corporate dividends received deduction:
Select High Growth Portfolio 41.87%
Select Growth Portfolio 36.68
Select Balanced Portfolio 43.10
Select Conservative Portfolio 28.79
Select Income Portfolio 15.39
* Total long-term capital gain distributions paid:
Select High Growth Portfolio $ 157,661
Select Growth Portfolio 786,615
Select Balanced Portfolio 954,532
Select Conservative Portfolio 115,036
Select Income Portfolio 23,912
</TABLE>
The following percentages of ordinary income dividends paid by the
Portfolios are derived from Federal obligations and may be exempt from taxation
at the state level:
<TABLE>
<S> <C>
Select High Growth Portfolio 0.02%
Select Growth Portfolio 4.42
Select Balanced Portfolio 11.41
Select Conservative Portfolio 8.76
Select Income Portfolio 10.79
</TABLE>
33
<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 which includes all Portfolios; 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>
34
<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
Paul A. Brook
CONTROLLER
Christina T. Sydor
SECRETARY
INVESTMENT MANAGER
Travelers Investment Adviser, Inc.
CUSTODIAN
PNC Bank, N.A.
SMITH BARNEY CONCERT ALLOCATION SERIES INC.
388 Greenwich Street
New York, New York 10013
35
<PAGE>
<TABLE>
<S> <C>
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION
OF THE OWNERS OF THE SMITH BARNEY CONCERT ALLOCATION [LOGO]
SERIES INC.: SELECT HIGH GROWTH, SELECT GROWTH, SELECT
BALANCED, SELECT CONSERVATIVE AND SELECT INCOME Member NASD, SIPC
PORTFOLIOS. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO -C- 1996 Smith Barney Inc.
PROSPECTIVE INVESTORS UNLESS ACCOMPANIED OR PRECEDED BY FD01436 3/99
A CURRENT PROSPECTUS FOR THE FUND, WHICH CONTAINS
INFORMATION CONCERNING THE FUND'S INVESTMENT POLICIES,
FEES AND EXPENSES, AS WELL AS OTHER PERTINENT
INFORMATION.
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Smith Barney Concert
Allocation Series Inc.
[PHOTOS APPEAR HERE]
Global Portfolio
High Growth Portfolio
Growth Portfolio
Balanced Portfolio
Conservative Portfolio
Income Portfolio
------------------------------------
Annual Report
January 31, 1999
------------------------------------
Investment Strategies for Your Life
[LOGO OF SMITH BARNEY MUTUAL FUNDS APPEARS HERE]
<PAGE>
Table of Contents
Letter to Shareholders................................................... 1
The Concert Allocation Series Portfolios
The Global Portfolio................................................... 6
The High Growth Portfolio.............................................. 10
The Growth Portfolio................................................... 15
The Balanced Portfolio................................................. 20
The Conservative Portfolio............................................. 25
The Income Portfolio................................................... 30
Schedules of Investments................................................. 35
Statements of Assets and Liabilities..................................... 41
Statements of Operations................................................. 42
Statements of Changes in Net Assets...................................... 43
Notes to Financial Statements............................................ 45
Financial Highlights..................................................... 50
Independent Auditors' Report............................................. 61
Additional Shareholder Information....................................... 62
Tax Information.......................................................... 63
Directors and Officers................................................... 64
<PAGE>
Dear Shareholder:
[PHOTO OF HEATH B. MCLENDON APPEARS HERE]
Heath B. McLendon
Chairman
The Concert Allocation Series
[PHOTO OF THOMAS B. STILES II APPEARS HERE]
Thomas B. Stiles II
Vice President and
Investment Officer
The Concert Allocation Series
We are pleased to present the annual report for the Smith Barney Concert
Allocation Series Inc. for the year ended January 31, 1999. The Concert
Allocation Series 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 in the
following pages.
As of January 31, 1999, total assets in the Portfolios were approximately $2.4
billion and we are currently helping more than 383,000 shareholders pursue their
financial goals. Additional Portfolio performance information can be found
starting on page 9. We hope you find this report to be useful and informative.
The Performance of Five Concert Allocation Series Portfolios
Class A Share Total Returns for the Year Ended 1/31/99
Class A* Class A**
-------- ---------
High Growth Portfolio 19.15% 13.22%
Growth Portfolio 16.20 10.42
Balanced Portfolio 9.33 3.90
Conservative Portfolio 5.85 1.12
Income Portfolio 4.88 0.19
The Performance of the Global Portfolio
Class A Share Total Return Since March 9, 1998 (Inception) through 1/31/99+
Class A* Class A**
-------- ---------
Global Portfolio (1.60)% (6.52)%
Global Portfolio Update
The Global Portfolio began on March 9, 1998 and is more aggressively managed
than the other five Portfolios. While the other five Concert Allocation Series
Portfolios can generally serve as complete investment programs, the Global
Portfolio 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 9. *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. **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.
+Total return is not annualized, as it may not be representative of the total
return for the year.
1
<PAGE>
The Benefits of Long-Term Investing
Growth of $10,000 Invested in the Standard & Poor's 500 Composite Stock Index,
Salomon Smith Barney World Government Bond Index, Lehman Government/Corporate
Bond Index and Morgan Stanley Capital International EAFE Index
(January 31, 1989 - January 31, 1999)
(unaudited)
[LINE GRAPH APPEARS HERE]
Salomon
Smith Barney World Lehman Gov't./Corp.
Date S&P 500 Index Gov't Bond Index MSCI EAFE Index Bond Index
---- ------------- ---------- --------------- ----------
Jan-89 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Jan-90 $ 11,443 $ 10,603 $ 10,483 $ 11,119
Jan-91 $ 12,401 $ 11,593 $ 8,634 $ 12,344
Jan-92 $ 15,210 $ 12,887 $ 8,690 $ 13,965
Jan-93 $ 16,816 $ 14,167 $ 7,826 $ 15,582
Jan-94 $ 18,977 $ 15,688 $ 11,285 $ 17,187
Jan-95 $ 19,075 $ 15,301 $ 10,812 $ 16,653
Jan-96 $ 26,442 $ 17,988 $ 12,593 $ 19,604
Jan-97 $ 33,404 $ 19,535 $ 12,873 $ 20,072
Jan-98 $ 42,391 $ 21,890 $ 14,218 $ 22,315
Jan-99 $ 56,169 $ 25,341 $ 16,290 $ 24,261
The Standard & Poor's 500 Composite Stock Index ("S&P 500") is a
capitalization-weighted index of 500 widely held common stocks. The Salomon
Smith Barney World Government Bond Index is a market-capitalization-weighted
benchmark that tracks the performance of the government bond markets of 14
countries. The Lehman Government/Corporate Bond Index is a combination of
publicly issued intermediate- and long-term U.S. government bonds and corporate
bonds. The Morgan Stanley Capital International EAFE Index ("MSCI EAFE")
consists of the equity total returns for Europe, Australia and the Far East.
These indices are unmanaged and are not subject to the same management and
trading expenses as a mutual fund.
The U.S. Markets
The year 1998 set records across the financial markets. It was broad-based, for
we enjoyed all-time highs in the popular stock market averages, while the bond
market yields touched levels last seen in the 1960s. Records were set as
large-capitalization stocks, as measured by the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), an index of mostly large-capitalization domestic
stocks, exceeded a 20% return for the fourth year in a row. (Market
capitalization is the value of a company's outstanding shares of common stock,
determined by multiplying the number of shares outstanding by the share price.)
Yet 1998 was also a tumultuous year and we expect 1999 to be no different. In
1998, emerging markets "submerged." Small-capitalization stock indices, such as
the Russell 2000 Index(R), were actually down for the year. Even
large-capitalization stock indices dipped into negative territory twice. At the
end of August 1998 and again in the beginning of October 1998, stocks traded at
levels below that of January 1, 1998. In a turn of events, however, these stocks
recovered and rallied strongly through year-end.
The year 1998 also continued a trend that we have seen over the past few years:
the outperformance of the very largest-capitalization stocks. This trend was
evident whether looking at large-capitalization indices, such as the
2
<PAGE>
S&P 500, or at indices perceived as being small cap, such as NASDAQ. As was the
case over the last several years, the largest stocks, or the "elephants" of the
stock market, garnered the out-sized returns.
As measured by the price change in the S&P 500, large-cap stocks were up an
impressive 26.7% in 1998. However, last year's 26.7% index return is an average,
one that is market-weighted. Put simply, in a market-weighted index those stocks
with higher market capitalization (large caps) have a greater impact on the
index's performance than those with a lower market value (small caps).
An average also implies that returns are randomly distributed. Last year, they
were anything but randomly distributed. For the largest-capitalization stocks
outperformed the average stock, creating a situation where the largest market
cap companies once again had a major impact on the indices. In a sense, they had
a double impact. Their market size ensured they would affect a market-weighted
index. That effect was compounded by their strong price action during the year.
In fact, the top 25 S&P stocks (as measured by market capitalization) returned
33.8% versus the overall index performance of 26.7%. Removing the top 25 stocks
from the index would have resulted in a return of 23.4% for the remaining 475
stocks. (Price change only and not total return.)
---
Another underlying theme in last year's market was a flight to quality. As
previously noted, large stocks outperformed small ones. High-quality bonds
outperformed lower-quality ones. In fact quality, not maturity or duration, was
the main factor distinguishing bond performance last year. Government bonds
outperformed corporate bonds, which in turn outperformed high-yield bonds. This
reluctance on the part of many investors to take on risk was due to problems in
emerging markets, as well as liquidity concerns caused by major, troubled hedge
funds.
The Federal Reserve Board ("Fed"), well aware of growing liquidity problems in
the bond market, engineered three moves starting on September 29, 1998, to
reduce the federal funds rate to 4.75% and the discount rate to 4.50%. After
falling to the historic low of 4.70% on the long U.S. Treasury bond in early
October interest rates have bounced around in a rather narrow trading range. The
Lehman Brothers Government/Corporate Bond index returned 8.72% for the year
ended January 31, 1999. (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.)
International Stock Markets
Powerful forces buffeted global equity markets during 1998. Some of these
factors included:
. The economic convergence of eleven European countries to form "Euroland"
with a common functional currency, the euro
. Significant political change in Asia and Europe and the U.S. Presidential
impeachment process
. Russian debt default, the instability of hedge funds, massive debt trading
losses from major financial institutions and withdrawal of trading
liquidity
. Ongoing global disinflation (in many cases deflation) which applied
downward pressure to both commodity prices and the developing economies
. Massive mergers and acquisitions in several global industries
3
<PAGE>
The first half of the year was characterized by strongly positive returns from
the developed markets while emerging market performance lagged. The financial
crisis of late summer engulfed equity markets, negating virtually all gains from
the early part of the year and driving emerging market returns sharply negative.
Coordinated central bank monetary stimulus allowed a sharp recovery in most
equity markets as the period drew to a close.
Market volatility during the year was higher than in recent years, providing
discomfort to many investors during late summer and the early fall bear market.
Many high-quality stocks fell sharply as investors fled equities for the
perceived safety of U.S. dollar-denominated fixed-income instruments. This
provided great buying opportunities in stocks and again illustrated the benefits
of having a long-term investment perspective.
For other sectors of the market--specifically those companies oriented to
resources and commodities--the global economic deceleration and looming
overcapacity, combined with strong downward price pressures from end users,
increased the prospect of poor earnings in 1998 and 1999. We see very little
attraction in these sectors until a major contraction in capital spending occurs
leading to less capacity. Interestingly, corporate managements also took
advantage of the sharp decline during the period under review to initiate merger
and acquisition activity that reached record levels globally in 1998.
Looking Forward
Over the next twelve months we anticipate more volatility in the U.S. stock
market. Some sectors, such as Internet-related stocks, should swing wildly over
the next year. Further, we expect the underlying fundamentals of the economy and
markets to remain solid. Corporate earnings should accelerate in 1999 versus
1998, while inflation remains low.
We also believe that 1999 should be a positive year for bond investors. Last
year excess cash seems to have poured into stocks and U.S. Treasurys. We expect
that 1999 may see a shift away from U.S. Treasurys and into other kinds of
bonds.
During the variable conditions of the reporting period, the international equity
markets proved resilient to numerous adverse economic and political
developments. We think that Europe should be the regional earnings star
performer, especially in Euroland, which adopted a common currency on January 1,
1999. We think that Europe's investment attractions will continue in 1999 from
the combination of:
. Corporate restructuring
. Increasing consumer confidence, due to declining unemployment
. More attentive management, due to the award of equity incentives
. Deregulation in financial markets, such as share repurchases
. Growing flexibility of labor markets
The trends we have discussed in this letter have contributed to a multi-year
period where the largest stocks dominated the U.S. stock market. This
outperformance by a small group of large stocks raises some basic questions such
as: "Why diversify?" Or, more to the point, "Why invest in a Concert Allocation
Series Portfolio?"
4
<PAGE>
As you know, our original aim in creating 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. 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. As
global market volatility continues, we think that 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
1999.
We encourage you to visit our Web site at www.smithbarney.com to find out more
about the Concert Allocation Series Portfolios. Thank you for your participation
and the confidence you have placed in us.
Sincerely,
/s/ Heath B. McLendon /s/ Thomas B. Stiles II
Heath B. McLendon Thomas B. Stiles II
Chairman Vice President and
Investment Officer
February 25, 1999
5
<PAGE>
The GLOBAL Portfolio
- -------------------------------------------------------------------------------
Target Asset Allocation
- -------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
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. The Global Portfolio is the
most aggressively managed Portfolio of the Concert Allocation Series. It has
been designed for investors who are willing to tolerate higher short-term market
fluctuations for potential long-term gains.
Unlike the other five Portfolios in the Concert Allocation Series, the Global
Portfolio is structured to further diversify an existing investment portfolio
and is not intended to be a complete investment program.
- -------------------------------------------------------------------------------
Index Comparison*
- -------------------------------------------------------------------------------
S&P 500 32.51%
Russell 2000(R) 0.33%
MSCI EAFE 14.41%
MSCI Emerging Markets (19.00)%
................................................................................
*The chart above represents total returns for the year ended January 31, 1999.
- -------------------------------------------------------------------------------
Portfolio Update
- -------------------------------------------------------------------------------
Since its inception on March 9, 1998, the Global Portfolio's ("Portfolio") Class
A shares posted a total return of a negative 1.60%, excluding sales charges. The
chart that appears on page 8 compares the Portfolio's performance to broad-based
indices that track asset classes represented in the Portfolio. 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 past year was a difficult one for global investors. International financial
markets followed patterns similar to domestic markets. Abroad (as well as
domestically), shares of large, well-established companies flourished while the
stocks of smaller companies encountered significant volatility. The funds in the
Global Portfolio that invest in large-company stocks such as the Concert
Peachtree Growth Fund and the Smith Barney Large Capitalization Growth Fund both
turned in impressive performances with total returns of 40.65% and 63.42%,
respectively, for the year ended January 31, 1999. In contrast, although the
Smith Barney Small Cap Blend Fund outperformed its benchmark, it substantially
lagged large-company stock funds.
In addition to the capitalization effect, regional returns also varied
considerably. Stocks of well-established European companies largely outperformed
company shares of other non-U.S. countries. The Smith Barney World Funds-
International Equity Portfolio, which primarily focused on European companies
during the period, returned 12.62% for the year ended January 31, 1999. Ongoing
uncertainties clouding Asia and Latin America led to a disappointing return of
roughly negative 33.73% for the Smith Barney World Funds-Emerging Markets
Portfolio over the same period.
In our view, the wide performance disparity seen during the reporting period
further reinforces the importance of maintaining a diverse portfolio. Because
the favored asset class typically changes over time, we believe that investors
with exposure to a variety of asset classes should experience stronger returns
with less volatility than investors who concentrate heavily on a single asset
class.
................................................................................
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 1/31/99)
(unaudited)
------------------------- ------------------------- ------------------------
10% Smith Barney 25% Smith Barney 10% Smith Barney
Small Cap Blend Fund, Inc. Investment Funds Inc.-- Investment Funds Inc.
------------------------- Smith Barney Hansberger Smith Barney Hansberger
Top 5 Holdings: Global Value Fund Small Cap Value Fund
Lycos Inc. ------------------------- ------------------------
Network Appliance Inc. Top 5 Holdings: Top 5 Holdings:
VISX Inc. Koninklijke KPN NV Roper Industries Inc.
Dycon Industries Inc. Yamanouchi Pharmaceutical Daito Trust Construction
Briggs & Stratton Corp. United Overseas Bank Cafe de Coral Holdings
------------------------- Cable & Wireless PLC Air New Zealand, Class
GTE Corp. B Shares
------------------------- Somerfield PLC
------------------------
[PIE CHART APPEARS HERE]
-------------------------
5% Smith Barney
Investment Funds Inc.--
Concert Peachtree Growth Fund
-------------------------
Top 5 Holdings:
Microsoft Corp.
Sun Microsystems Inc.
Intel Corp.
Apple Computer, Inc.
Tyco International Ltd.
-------------------------
- ------------------------------ -------------------------
25% Smith Barney 5% Smith Barney
World Funds, Inc.-- World Funds, Inc.--
International Equity Portfolio Emerging Markets Portfolio
- ------------------------------ -----------------------------
Top 5 Holdings: Top 5 Holdings:
Nokia Oy AB Samsung Electronics
Compass Group PLC Telephonos de Mexico ADR
Misys PLC Hon Hai Precision Industries
Rentokil Intial PLC Stet Hellas Telecom
Bank of Ireland Videsh Sanchar Nigam Ltd.
- ------------------------- -----------------------------
- ------------------------- -------------------------
15% Smith Barney 5% Smith Barney
Investment Trust-- Funds, Inc.--
Smith Barney Large Large Cap Value Fund
Capitalization Growth Fund -------------------------
- ------------------------- Top 5 Holdings:
Top 5 Holdings: Xerox Corp.
America Online Inc. Bristol-Myers Squibb Co.
The Coca-Cola Co. American Home Products
Texas Instruments Inc. Enron Corp.
Intel Corp. AT&T Corp.
Wells Fargo Co.
- ------------------------- -------------------------
7
<PAGE>
Growth of $10,000 Invested in Class A, B and L Shares of the Global Portfolio
vs. the Standard & Poor's 500 Composite Stock Index, Russell 2000 Index, Morgan
Stanley Capital International EAFE Index and Morgan Stanley Capital
International Emerging Markets Index
................................................................................
March 9, 1998 -- January 31, 1999 (unaudited)
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Global Portfolio Global Portfolio Global Portfolio Standard & Poor's 500 Russell MSCI MSCI Emerging
Date Class A Class B Class L Composite Stock Index 2000 Index EAFE Index Markets Index
---- ------- ------- ------- --------------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/9/98 $ 9,500 $10,000 $ 9,896 $ 10,000 $10,000 $ 10,000 $10,000
Mar-98 $ 9,783 $ 9,798 $10,091 $ 10,477 $10,435 $ 10,308 $10,353
Apr-98 $ 9,908 $ 9,921 $10,213 $ 10,584 $10,492 $ 10,389 $10,171
May-98 $ 9,575 $ 9,561 $ 9,857 $ 10,402 $ 9,927 $ 10,339 $ 8,791
Jun-98 $ 9,408 $ 9,392 $ 9,677 $ 10,824 $ 9,948 $ 10,417 $ 7,901
Jul-98 $ 9,300 $ 9,275 $ 9,565 $ 10,709 $ 9,142 $ 10,522 $ 8,154
Aug-98 $ 7,650 $ 7,625 $ 7,863 $ 9,162 $ 7,367 $ 9,219 $ 5,896
Sep-98 $ 7,725 $ 7,692 $ 7,932 $ 9,749 $ 7,943 $ 8,936 $ 6,280
Oct-98 $ 8,342 $ 8,308 $ 8,568 $ 10,541 $ 8,267 $ 9,867 $ 6,957
Nov-98 $ 8,825 $ 8,783 $ 9,049 $ 11,180 $ 8,701 $ 10,372 $ 7,518
Dec-98 $ 9,181 $ 9,129 $ 9,405 $ 11,824 $ 9,239 $ 10,780 $ 7,414
1/31/99 $ 9,348 $ 9,295 $ 9,577 $ 12,318 $ 9,362 $ 10,748 $ 7,292
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on March 9, 1998 (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
January 31, 1999. 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 MSCI Emerging Markets Index consists of
emerging market companies with an average size of $800 million, the index
performance of emerging markets in South America, South Africa, Asia and Eastern
Europe. 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.
8
<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*-1/31/99 $11.40 $11.16 $0.04 $0.01 (1.60)%+
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class B Shares
...........................................................................................................................
Net Asset Value
------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividend Distribution Return/(1)/
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception*-1/31/99 $11.40 $11.15 $0.00 $0.01 (2.16)%+
- ---------------------------------------------------------------------------------------------------------------------------
<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*-1/31/99 $11.40 $11.14 $0.00 $0.01 (2.25)%+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
Average Annual Total Returns
................................................................................
Without Sales Charges/(1)/
-------------------------------------------
Class A Class B Class L++
- --------------------------------------------------------------------------------
Inception* through 1/31/99+ (1.60)% (2.16)% (2.25)%
- --------------------------------------------------------------------------------
With Sales Charges/(2)/
-------------------------------------------
Class A Class B Class L++
- --------------------------------------------------------------------------------
Inception* through 1/31/99+ (6.52)% (7.05)% (4.23)%
- --------------------------------------------------------------------------------
(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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ On June 12, 1998, Class C shares were renamed Class L shares.
* Inception date for Class A, B and L shares is March 9, 1998.
9
<PAGE>
THE HIGH GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
Bond Funds 10%
Stock Funds 90%
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
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*
- --------------------------------------------------------------------------------
S&P 500 32.51%
Russell 2000(R) 0.33%
MSCI EAFE 14.41%
Salomon Smith Barney
High Yield Market 2.83%
................................................................................
*The chart above represents total returns for the year ended January 31, 1999.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
The Concert Allocation Series High Growth Portfolio's ("Portfolio") Class A
shares generated a total return of 19.15% for the twelve months ended January
31, 1999, excluding any sales charges. The chart that appears on page 14
compares the Portfolio's performance to broad-based indices that track asset
classes represented in the Portfolio. 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.
During the past year, the Portfolio benefited from its exposure to
large-capitalization growth stocks. In particular, the Smith Barney Large
Capitalization Growth Fund and Concert Peachtree Growth Fund both performed very
well during the period (63.42% and 40.65% total returns, respectively). The
Smith Barney Aggressive Growth Fund, which also counts some large-sized
companies among its holdings, turned in an impressive performance as well with a
total return of 45.41% during the year. Although the small-capitalization funds
in the Portfolio outperformed their respective benchmarks, their absolute
returns lagged the outsized gains achieved by large-cap growth stocks.
In addition, investors continued their decided preference for growth stocks over
value stocks. Funds with more of a value bias, such as the Smith Barney Large
Cap Value Fund and the Smith Barney Contrarian Fund tended not to perform as
well as their growth stock counterparts. (Growth stocks are generally considered
to be company shares that have exhibited above-average earnings growth and are
expected to continue to grow faster than other similar-sized companies. Value
investing attempts to identify stocks that are selling at relatively low prices
compared to their earnings or book value with the belief that the market will
eventually recognize their value, therefore, causing their share price to
increase.)
In the international arena, funds that emphasized European companies tended to
perform better than funds that invested more heavily in Asia and other emerging
markets. Moreover, the disparity between growth and value stocks also extended
to international stocks.
In addition, since our last report we added the Smith Barney Mid-Cap Blend Fund
to the Portfolio's mix and removed the Special Equities Fund. The Smith Barney
Mid-Cap Blend Fund seeks companies that are more established than
small-capitalization companies but have not yet acquired the size of
large-capitalization companies. Since its inception on September 1, 1998, the
Smith Barney Mid-Cap Blend Fund has returned 41.75% through January 31, 1999.
As we noted in our main letter, the past twelve months were an unusual
period for financial markets, with large-capitalization growth stocks leading
the way for the third consecutive year. We believe this narrow market leadership
cannot continue indefinitely and further reinforces the importance of
maintaining broad diversification in your investment portfolio over the long
term.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix
of investments for the High Growth Portfolio. The allocation and investment mix
of the Portfolio may vary depending upon market conditions, cash flows in and
out of the Portfolio and other factors. In addition, the allocation and
investment ranges of the Portfolio may be changed from time to time upon the
approval of the Concert Allocation Series' Board of Directors.
10
<PAGE>
The Concert Allocation Series High Growth Portfolio Breakdown (as of 1/31/99)
(unaudited)
[PIE CHART APPEARS HERE]
10% Smith Barney Aggressive Growth Fund Inc.
Top 5 Holdings:
Intel Corp.
Tyco International Ltd.
Amgen, Inc.
Forest Labs Inc., Class A Shares
Genzyme Corp. - General Division
5% Smith Barney Investment Trust-Smith Barney Mid Cap Blend Fund
Top 5 Holdings:
Sepracor Inc.
Croll O'Gara Co.
Lexmark International Group Inc.
Outdoor Systems Inc.
Factset Research Systems
10% Smith Barney World Funds, Inc.-International Equity Portfolio
Top 5 Holdings:
Nokia Oy AB
Compass Group PLC
Misys PLC
Rentokil Initial PLC
Bank of Ireland
5% Smith Barney Funds, Inc.-Large Cap Value Fund
Top 5 Holdings:
Xerox Corp.
Bristol-Myers Squibb Co.
American Home Products
Enron Corp.
AT&T Corp.
10% Smith Barney Investment Funds Inc.-Concert Peachtree Growth Fund
Top 5 Holdings:
Microsoft Corp.
Sun Microsystems Inc.
Intel Corp.
Apple Computer, Inc.
Tyco International Ltd.
12% Smith Barney Investment Trust-Smith Barney Large Capitalization Growth Fund
Top 5 Holdings:
American Online Inc.
The Coca-Cola Co.
Texas Instruments Inc.
Intel Corp.
Wells Fargo Co.
5% Smith Barney Equity Funds-Smith Barney Large Cap Blend Fund
Top 5 Holdings:
Hewlett Packard Co.
Dell Computer Corp.
Eli Lilly & Co.
General Electric Co.
Ameritech Corp.
10% Smith Barney Investment Funds Inc.-Smith Barney Hansberger Global
Value Fund
Top 5 Holdings:
Koninklijke KPN NV
Yamanouchi Pharmaceutical
United Overseas Bank
Cable & Wireless PLC
GTE Corp.
5% Smith Barney Investment Funds Inc.-Smith Barney Contrarian
Fund
Top 5 Holdings:
Aetna, Inc.
Kimberly-Clark Corp.
Washington Mutual, Inc.
Gucci Group NV
ConAgra, Inc.
8% Smith Barney Income Funds-Smith Barney High Income Fund
Top 5 Holdings:
United International Holding
Unisys Corp.
Magellan Health Services
Metronet Communications
Chancellor Media
20% Smith Barney Small Cap Blend Fund, Inc.
Top 5 Holdings:
Lycos Inc.
Network Appliance Inc.
VISX Inc.
Dycon Industries Inc.
Briggs & Stratton Corp.
11
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
...........................................................................................................
Net Asset Value
----------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.97 $14.86 $0.08 $0.48 19.15%
- -----------------------------------------------------------------------------------------------------------
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 $0.41 $0.85
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class B Shares
...........................................................................................................
Net Asset Value
----------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.95 $14.81 $0.00 $0.48 18.30%
- -----------------------------------------------------------------------------------------------------------
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 $0.85
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class L Shares++
...........................................................................................................
Net Asset Value
----------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.96 $14.81 $0.00 $0.48 18.21%
- -----------------------------------------------------------------------------------------------------------
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 $0.85
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class Z Shares
...........................................................................................................
Net Asset Value
----------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.97 $14.86 $0.12 $0.48 19.45%
- -----------------------------------------------------------------------------------------------------------
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 $0.29 $0.81
- -----------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
12
<PAGE>
Average Annual Total Returns
................................................................................
Without Sales Charges(1)
---------------------------------------------------
Class A Class B Class L++ Class Z
- --------------------------------------------------------------------------------
Year Ended 1/31/99 19.15% 18.30% 18.21% 19.45%
- --------------------------------------------------------------------------------
Inception* through 1/31/99 12.77 11.84 11.83 14.38
- --------------------------------------------------------------------------------
With Sales Charges(2)
---------------------------------------------------
Class A Class B Class L++ Class Z
- --------------------------------------------------------------------------------
Year Ended 1/31/99 13.22% 13.30% 16.04% 19.45%
- --------------------------------------------------------------------------------
Inception* through 1/31/99 10.85 11.03 11.44 14.38
- --------------------------------------------------------------------------------
Cumulative Total Returns
................................................................................
Without Sales Charges(1)
- --------------------------------------------------------------------------------
Class A (Inception* through 1/31/99) 43.23%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/99) 39.71
- --------------------------------------------------------------------------------
Class L++ (Inception* through 1/31/99) 39.70
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/99) 31.50
- --------------------------------------------------------------------------------
(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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ On June 12, 1998, Class C shares were renamed Class L shares.
* Inception date for Class A, B and L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
13
<PAGE>
Growth of $10,000 Invested in Class A, B and 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 -- January 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Standard & Poor's
High Growth High Growth High Growth 500 Composite Russell 2000 MSCI EAFE Salomon Smith Barney
Portfolio Class A Portfolio Class B Portfolio - Class L Stock Index Index Index High Yield Market Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,500 10,000 9,896 10,000 10,000 10,000 10,000
Jul-96 9,142 9,083 9,367 10,175 10,084 10,119 10,208
Jan-97 10,549 10,491 10,786 12,630 11,897 10,220 11,049
Jul-97 11,671 11,716 11,999 15,476 13,452 11,968 11,886
Jan-98 11,419 11,409 11,695 16,026 14,047 11,272 12,693
Jul-98 12,426 12,497 12,672 18,462 13,764 12,622 13,152
1/31/99 13,607 13,671 13,825 21,235 14,099 12,915 13,050
</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
January 31, 1999. The Standard & Poor's 500 Composite Stock Index is an
unmanaged index composed of 500 widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and the over-the-counter market. The
Russell 2000 Index is a capitalization weighted total return index which is
comprised of 2,000 of some of the smaller-capitalized U.S.-domiciled companies
whose common stock is traded in the United States on the New York Stock
Exchange, American Stock Exchange and Nasdaq. The Morgan Stanley Capital
International EAFE Index ("MSCI EAFE") consists of the equity total returns for
Europe, Australia and the Far East. The Salomon Smith Barney High Yield Market
Index covers a significant portion of the below-investment-grade U.S. corporate
bond market. These indices are unmanaged and are not subject to the same
management and trading expenses as a mutual fund. The performance of the
Portfolio's other classes may be greater or less than the shares' performance
indicated on this chart, depending on whether greater or lesser sales charges
and fees were incurred by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
14
<PAGE>
THE GROWTH PORTFOLIO
Target Asset Allocation
[PIE CHART APPEARS HERE]
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 the highest
percentage of its assets in large-capitalization stock mutual funds, to provide
growth. The Portfolio's equity allocation also includes funds that invest in
small- and mid-cap stocks and international securities. In addition, a
significant portion of the Portfolio is allocated to bonds, to help reduce
potential volatility.
Index Comparison*
S&P 500 32.51%
Russell 2000(R) 0.33%
MSCI EAFE 14.41%
Lehman Government/
Corporate Bond 8.72%
...............................
*The chart above represents total returns for the year ended January 31, 1999.
Portfolio Update
The Concert Allocation Series Growth Portfolio's ("Portfolio") Class A shares
generated a total return of 16.20% for the twelve months ended January 31, 1999
excluding sales charges. The chart that appears on page 19 compares the
Portfolio's performance to broad-based indices that track asset classes
represented in the Portfolio. 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.
Investors retained their preference for stocks of large, well-established
companies for most of 1998. The Funds in the Growth Portfolio that invest in
these companies, primarily Concert Peachtree Growth Fund and Smith Barney Large
Capitalization Growth Fund, also performed quite well, returning 40.65% and
63.42%, respectively. In addition, the Smith Barney Aggressive Growth Fund,
which also counts some large companies among its holdings, turned in an
impressive performance as well with a total return of 45.41% over the reporting
period.
Moreover, investors continued to favor growth stocks over value stocks in the
last year and the returns of Funds with more of a value bias, such as Smith
Barney Large Cap Value Fund and Smith Barney Contrarian Fund, trailed that of
large company growth stocks. (Growth stocks are generally considered to be
company shares that have exhibited above-average earnings growth and are
expected to continue to grow faster than other similar-sized companies. Value
investing attempts to identify stocks that are selling at relatively low prices
compared to their earnings or book value with the belief that the market will
eventually recognize their value, hence, causing the price to increase.)
Funds in your Portfolio that invest in smaller-capitalized companies
outperformed their respective indices, but nevertheless trailed the unusually
strong performance of large company shares.
International stocks largely followed the same pattern as domestic stocks with
large-capitalization growth stocks leading the way. The Smith Barney World
Funds- International Equity Portfolio performed roughly in line with its
benchmark while the return of the Smith Barney Hansberger Global Value Fund was
negatively impacted by international investor preference for growth stocks.
The bond funds in your Portfolio, with their emphasis on credit quality in their
respective asset classes, also posted returns comparable to their indices.
In addition, since our last report we added the Smith Barney Mid-Cap Blend Fund
to the Growth Portfolio. The Smith Barney Mid-Cap Blend Fund seeks companies
that are more established than small-capitalization companies but have not yet
acquired the size of large-capitalization companies. Since its inception on
September 1, 1998, the Smith Barney Mid-Cap Blend Fund has returned 41.75%
through January 31, 1999.
The past twelve months represented an unusual period for financial markets, with
large-capitalization growth stocks leading the way for the third consecutive
year. We believe this narrow market leadership cannot continue indefinitely and
further reinforces the importance of maintaining broad diversification in your
investment portfolio.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Growth Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series' Board of Directors.
15
<PAGE>
The Concert Allocation Series Growth Portfolio Breakdown (as of 1/31/99)
(unaudited)
[PIE CHART APPEARS HERE]
10% Smith Barney Investment Funds
Inc.-Concert Peachtree Growth Fund
Top 5 Holdings:
Microsoft Corp.
Sun Microsystems Inc.
Intel Corp.
Apple Computer, Inc.
Tyco International Ltd.
10% Smith Barney Funds, Inc.-
Large Cap Value Fund
Top 5 Holdings:
Xerox Corp.
Bristol-Myers Squibb Co.
American Home Products
Enron Corp.
AT&T Corp.
5% Smith Barney Investment Funds Inc.-
Smith Barney Contrarian Fund
Top 5 Holdings:
Aetna, Inc.
Kimberly-Clark Corp.
Washington Mutual, Inc.
Gucci Group NV
ConAgra, Inc.
10% Smith Barney World Funds,
Inc.- International Equity Portfolio
Top 5 Holdings:
Nokia Oy AB
Compass Group PLC
Misys PLC
Rentokil Intial PLC
Bank of Ireland
5% Smith Barney
Aggressive Growth Fund Inc.
Top 5 Holdings:
Intel Corp.
Tyco International Ltd.
Amgen, Inc.
Forest Labs Inc., Class A Shares
Genzyme Corp. -- General Division
5% Smith Barney Investment
Trust-Smith Barney
Mid Cap Blend Fund
Top 5 Holdings:
Sepracor Inc.
Croll O'Gara Co.
Lexmark International Group Inc.
Outdoor Systems Inc.
Factset Research Systems
10% Smith Barney Equity Funds-
Smith Barney Large Cap Blend Fund
Top 5 Holdings:
Hewlett Packard Co.
Dell Computer Corp.
Eli Lilly & Co.
General Electric Co.
Ameritech Corp.
10% Smith Barney Income Funds-
Smith Barney High Income Fund
Top 5 Holdings:
United International Holding
Unisys Corp.
Magellan Health Services
Metronet Communications
Chancellor Media
5% Smith Barney Small Cap
Blend Fund, Inc.
Top 5 Holdings:
Lycos Inc.
Network Appliance Inc.
VISX Inc.
Dycon Industries Inc.
Briggs & Stratton Corp.
10% Smith Barney Investment
Funds Inc.-Smith Barney
Investment Grade Bond Fund
Top 5 Holdings:
U.S. Treasury Note 4.8%
FNMA 6.5% 30yr TBA
Walt Disney Co. 7.6%
FNMA 6.0% 30yr TBA
Boeing Co. 6.9%
5% Smith Barney Investment
Trust-Smith Barney Large
Capitalization Growth Fund
Top 5 Holdings:
America Online Inc.
The Coca-Cola Co.
Texas Instruments Inc.
Intel Corp.
Wells Fargo Co.
10% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
Sector Breakdown:
29.5% U.S. Treasury
70.5% U.S. Government Agencies
Credit Quality:
100% AAA-Rated
Average Maturity:
19.70 Years
5% Smith Barney Investment
Funds Inc.-Smith Barney
Hansberger Global Value Fund
Top 5 Holdings:
Koninklijke KPN NV
Yamanouchi Pharmaceutical
United Overseas Bank
Cable & Wireless PLC
GTE Corp.
16
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
....................................................................................................
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.99 $14.43 $0.27 $0.37 16.20%
- ----------------------------------------------------------------------------------------------------
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 $0.90 $0.85
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class B Shares
....................................................................................................
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $13.00 $14.48 $0.13 $0.37 15.40%
- ----------------------------------------------------------------------------------------------------
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 $0.56 $0.85
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class L Shares++
....................................................................................................
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $13.00 $14.48 $0.13 $0.37 15.40%
- ----------------------------------------------------------------------------------------------------
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 $0.56 $0.85
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class Z Shares
....................................................................................................
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.99 $14.41 $0.32 $0.37 16.47%
- ----------------------------------------------------------------------------------------------------
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 $0.67 $0.83
- ----------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
17
<PAGE>
Average Annual Total Returns
................................................................................
Without Sales Charges(1)
---------------------------------------------------
Class A Class B Class L++ Class Z
- --------------------------------------------------------------------------------
Year Ended 1/31/99 16.20% 15.40% 15.40% 16.47%
- --------------------------------------------------------------------------------
Inception* through 1/31/99 13.06 12.24 12.24 14.61
- --------------------------------------------------------------------------------
With Sales Charges(2)
---------------------------------------------------
Class A Class B Class L++ Class Z
- --------------------------------------------------------------------------------
Year Ended 1/31/99 10.42% 10.40% 13.26% 16.47%
- --------------------------------------------------------------------------------
Inception* through 1/31/99 11.14 11.44 11.85 14.61
- --------------------------------------------------------------------------------
Cumulative Total Returns
................................................................................
Without Sales Charges(1)
- --------------------------------------------------------------------------------
Class A (Inception* through 1/31/99) 44.33%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/99) 41.23
- --------------------------------------------------------------------------------
Class L++ (Inception* through 1/31/99) 41.22
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/99) 32.04
- --------------------------------------------------------------------------------
(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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ On June 12, 1998, Class C shares were renamed Class L shares.
* Inception date for Class A, B and L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
18
<PAGE>
Growth of $10,000 Invested in Class A, B and 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 -- January 31, 1999 (unaudited)
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Standard & Poor's Lehman
Growth Portfolio- Growth Portfolio- Growth Portfolio- 500 Composite Russell 2000 MSCI EAFE Government/Corporate
Class A Class B Class L Stock Index Index INDEX Bond Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,500 10,000 9,896 10,000 10,000 10,000 10,000
Jul-96 9,258 9,225 9,513 10,175 10,084 10,119 9,473
Jan-97 10,552 10,532 10,817 12,630 11,897 10,220 9,118
Jul-97 11,700 11,787 12,060 15,476 13,452 11,968 9,643
Jan-98 11,800 11,738 12,109 16,026 14,047 11,272 10,136
Jul-98 12,683 12,807 12,969 18,462 13,764 12,622 10,421
1/31/99 13,712 13,823 13,975 21,235 14,099 12,915 11,020
</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
January 31, 1999. The Standard & Poor's 500 Composite Stock Index is an
unmanaged index composed of 500 widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and the over-the-counter market. The
Russell 2000 Index is a capitalization-weighted total return index which is
comprised of 2,000 of some of the smaller-capitalized U.S.-domiciled companies
whose common stock is traded in the United States on the New York Stock
Exchange, American Stock Exchange and Nasdaq. The Morgan Stanley Capital
International EAFE Index ("MSCI EAFE") is a composite index that consists of
equity total returns for Europe, Australia and the Far East. The Lehman
Government/Corporate Bond Index is a combination of publicly issued
intermediate- and long-term U.S. government bonds and corporate bonds. These
indices are unmanaged and are not subject to the same management and trading
expenses as a mutual fund. The performance of the Portfolio's other classes may
be greater or less than the performance indicated on this chart, depending on
whether greater or lesser sales charges and fees were incurred by shareholders
investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
19
<PAGE>
The Balanced Portfolio
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
Stock Funds 50%
Bond Funds 50%
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.
- --------------------------------------------------------------------------------
Index Comparison*
- --------------------------------------------------------------------------------
S&P 500 32.51%
Lehman Government/
Corporate Bond 8.72%
Salomon Smith Barney
One-Year Treasury Bill 5.60%
Salomon Smith Barney
World Government Bond 13.13%
- --------------------------------------------------------------------------------
*The chart above represents total returns for the year ended January 31, 1999.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
The Concert Allocation Series Balanced Portfolio's ("Portfolio") Class A shares
generated a total return of 9.33% for the twelve months ended January 31, 1999,
excluding sales charges. The chart that appears on page 24 compares the
Portfolio's performance to broad-based indices that track asset classes
represented in the Portfolio. 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 stock Funds in your Portfolio that focus primarily on large companies (Smith
Barney Large Cap Value Fund, Smith Barney Appreciation Fund, Smith Barney
Fundamental Value Fund and Smith Barney Large Cap Blend Fund) posted solid gains
during the period. However, in a year in which investors showed a decided
preference for growth stocks, their value bias caused their returns to lag the
outsized gains of the very narrow group of large-capitalization growth stocks
that drove the performance of the major indices. (Growth stocks are generally
considered to be company shares that have exhibited above-average earnings
growth and are expected to continue to grow faster than other similar-sized
companies. Value investing attempts to identify stocks that are selling at
relatively low prices compared to their earnings or book value with the belief
that the market will eventually recognize their value, therefore, causing the
price to increase.)
Your Portfolio also benefited from the funds with high-quality bonds in their
holdings. Like stock markets, bond markets worldwide experienced significant
volatility during much of 1998. The bond funds in your Portfolio emphasize very
strong credit quality and focus largely on U.S. government debt and the debt of
other developed nations. During the Portfolio's fiscal year, the returns of
these bonds consisted mostly of coupon interest with very little price
appreciation or depreciation.
- --------------------------------------------------------------------------------
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Balanced Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series' Board of Directors.
20
<PAGE>
The Concert Allocation Series Balanced Portfolio Breakdown (as of 1/31/99)
(unaudited)
[PIE CHART APPEARS HERE]
5% Smith Barney Equity Funds-
Smith Barney Large Cap
Blend Fund
Top 5 Holdings:
Hewlett Packard Co.
Dell Computer Corp.
Eli Lilly & Co.
General Electric Co.
Ameritech Corp.
5% Smith Barney Funds, Inc.-
Large Cap Value Fund
Top 5 Holdings:
Xerox Corp.
Bristol-Myers Squibb Co.
American Home Products
Enron Corp.
AT&T Corp.
10% Smith Barney Income
Funds-Smith Barney Premium
Total Return Fund
Top 5 Holdings:
MCI WorldCom Inc.
Loews Corp.
Bristol-Myers Squibb Co.
SLM Holding Corp.
Aetna Inc.
10% Smith Barney
Appreciation Fund Inc.
Top 5 Holdings:
Berkshire Hathaway Inc.
General Electric Co.
Intel Corp.
Microsoft Corp.
Allstate Corp.
10% Smith Barney Fundamental
Value Fund Inc.
Top 5 Holdings:
Tele Communications Inc.
Adobe Systems, Inc.
American International Group Inc.
American Express Co.
Time Warner, Inc.
10% Smith Barney Income
Funds-Smith Barney
Convertible Fund
Top 5 Holdings:
Waste Management Inc.
Alpharma Inc.
Bell Atlantic Finc'l. Srvcs. Corp.
Athena Neuroscience Inc.
Rite Aid Corp.
5% Smith Barney World Funds,
Inc.-Global Government
Bond Portfolio
Top 5 Holdings:
U.S. Treasury Bonds
Bundesobligation
France Oat
KFW International Finance
Denmark Government Bond
Top 5 Country Holdings:
Germany
United States
United Kingdom
France
Denmark
15% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
Sector Breakdown:
42.0% U.S. Government Agencies
29.5% High Yield Corporate Bonds
26.3% Foreign Government Bonds
0.7% U.S. Treasury
1.5% Other
Top 5 Holdings:
GNMA
FNMA
FHLMC
European Investment Bank
Swedish Government
Top 5 Country Holdings:
United States
Germany
United Kingdom
Sweden
Denmark
Average Maturity:
5.50 Years
5% Smith Barney Funds, Inc.-
Short-Term High Grade Bond Fund
Sector Breakdown:
19.0% U.S. Government & Agency Obligations
12.6% Mortgage-Backed Securities
62.8% Corporate Bonds & Notes
5.6% Repurchase Agreements & Short-term
Credit Quality:
29% AAA-Rated
Average Maturity:
4.14 Years
5% Smith Barney World Funds, Inc.-
International Equity Portfolio
Top 5 Holdings:
Nokia Oy AB
Compass Group PLC
Misys PLC
Rentokil Intial PLC
Bank of Ireland
10% Smith Barney Investment
Funds Inc.- Smith Barney
Government Securities Fund
Sector Breakdown:
29.5% U.S. Treasury
70.5% U.S. Government Agencies
Credit Quality:
100% AAA-Rated
Average Maturity:
19.70 Years
10% Smith Barney Managed
Governments Fund Inc.
Sector Breakdown:
2.4% Repurchase Agreements
39.9% GNMA
4.8% FHLMC
50.0% FNMA
2.9% Treasury Notes
Credit Quality:
100% AAA-Rated
Average Maturity:
7.35 Years
21
<PAGE>
The Balanced Portfolio
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns/(1)/
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.62 $12.95 $0.45 $0.37 9.33%
- --------------------------------------------------------------------------------------------------
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 $1.44 $0.73
- --------------------------------------------------------------------------------------------------
</TABLE>
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns/(1)/
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.61 $12.95 $0.35 $0.37 8.62%
- --------------------------------------------------------------------------------------------------
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 $1.17 $0.73
- --------------------------------------------------------------------------------------------------
</TABLE>
Historical Performance -- Class L Shares++
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns/(1)/
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.61 $12.94 $0.35 $0.37 8.53%
- --------------------------------------------------------------------------------------------------
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 $1.17 $0.73
- --------------------------------------------------------------------------------------------------
</TABLE>
Historical Performance -- Class Z Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns/(1)/
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.61 $12.95 $0.48 $0.37 9.70%
- --------------------------------------------------------------------------------------------------
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 $1.05 $0.73
- --------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
22
<PAGE>
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
----------------------------------------------------
Class A Class B Class L++ Class Z
- --------------------------------------------------------------------------------
Year Ended 1/31/99 9.33% 8.62% 8.53% 9.70%
- --------------------------------------------------------------------------------
Inception* through 1/31/99 10.56 9.76 9.74 10.67
- --------------------------------------------------------------------------------
With Sales Charges(2)
----------------------------------------------------
Class A Class B Class L++ Class Z
- --------------------------------------------------------------------------------
Year Ended 1/31/99 3.90% 3.62% 6.43% 9.70%
- --------------------------------------------------------------------------------
Inception* through 1/31/99 8.68 8.92 9.35 10.67
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
- --------------------------------------------------------------------------------
Class A (Inception* through 1/31/99) 34.99%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/99) 32.11
- --------------------------------------------------------------------------------
Class L++ (Inception* through 1/31/99) 32.01
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/99) 22.96
- --------------------------------------------------------------------------------
(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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ On June 12, 1998, Class C shares were renamed Class L shares.
* Inception date for Class A, B and L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
23
<PAGE>
Growth of $10,000 Invested in Class A, B and 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 -- January 31, 1999 (unaudited)
[LINE GRAPH APPEARS HERE]
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
January 31, 1999. The Standard & Poor's 500 Composite Stock Index is an
unmanaged index composed of 500 widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and the over-the-counter market. The
Lehman Government/Corporate Bond Index is a combination of publicly issued
intermediate- and long-term U.S. government bonds and corporate bonds. The
Salomon Smith Barney One-Year Treasury Bill Index consists of one 1-Year United
States Treasury bill whose return is tracked until its maturity. The Salomon
Smith Barney World Government Bond Index is a market-capitalization-weighted
benchmark that tracks the performance of the government bond markets of 14
countries. These indices are unmanaged and are not subject to the same
management and trading expenses as a mutual fund. The performance of the
Portfolio's other classes may be greater or less than the performance indicated
on this chart, depending on whether greater or lesser sales charges and fees
were incurred by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
24
<PAGE>
THE CONSERVATIVE PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
Stock Funds 30%
Bond Funds 70%
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
portion invested in stock funds that invest primarily in large-capitalization
U.S. stocks.
- --------------------------------------------------------------------------------
Index Comparison*
- --------------------------------------------------------------------------------
S&P 500 32.51%
Lehman Government/
Corporate Bond 8.72%
Salomon Smith Barney
High Yield Market 2.83%
Salomon Smith Barney
One-Year Treasury Bill 5.60%
- --------------------------------------------------------------------------------
*The chart above represents total returns for the year ended January 31, 1999.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
The Concert Allocation Series Conservative Portfolio's ("Portfolio") Class A
shares generated a total return of 5.85% for the twelve months ended January 31,
1999, excluding sales charges. The chart that appears on page 29 compares the
Portfolio's performance to broad-based indices that track asset classes
represented in the Portfolio. 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.
In keeping with its investment objective, the Conservative Portfolio consists
largely of bond funds with the remainder invested in stock funds. Investor doubt
and uncertainty clouded almost every financial market during the latter half of
1998, leading many investors to seek some safe haven from the turmoil. For bond
investors, this meant U.S. Treasury bonds. Your Portfolio generally emphasizes
very high-credit quality and focuses on U.S. Government debt as well as the
bonds of other developed nations. During the Portfolio's fiscal year, the
returns of these funds consisted mostly of coupon interest with very little
price appreciation or depreciation. Your Portfolio's exposure to high-quality
foreign national debt also contributed to its returns achieved during the
period.
The portion of your Portfolio devoted to stocks was invested primarily in large
company stocks. While their absolute returns were quite strong for the most
part, the value bias of these funds caused them to lag the major indices. For
the third consecutive year, returns of most major stock indices were driven by a
handful of very large-capitalization growth stocks. (Growth stocks are generally
considered to be company shares that have exhibited above-average earnings
growth and are expected to continue to grow faster than other similar-sized
companies. Value investing attempts to identify stocks that are selling at
relatively low prices compared to their earnings or book value with the belief
that the market will eventually recognize their value, therefore, causing their
share price to increase.)
- --------------------------------------------------------------------------------
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Conservative Portfolio. The allocation and investment mix of
the Portfolio may vary depending upon market conditions, cash flows in and out
of the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series Inc.'s Board of Directors.
25
<PAGE>
The Concert Allocation Series Conservative Portfolio Breakdown (as of 1/31/99)
(unaudited)
[PIE CHART APPEARS HERE]
15% Smith Barney
Managed Governments Fund Inc.
Sector Breakdown:
2.4% Repurchase Agreements
39.9% GNMA
4.8% FHLMC
50.0% FNMA
2.9% Treasury Notes
Credit Quality:
100% AAA-Rated
Average Maturity:
7.35 Years
10% Smith Barney Income Funds-
Smith Barney Convertible Fund
Top 5 Holdings:
Waste Management Inc.
Alpharma Inc.
Bell Atlantic Finc'l. Srvcs. Corp.
Athena Neuroscience Inc.
Rite Aid Corp.
5% Smith Barney Income Funds-
Smith Barney Premium Total
Return Fund
Top 5 Holdings:
S&P 500 Index Options
MCI WorldCom Inc.
Loews Corp.
Bristol-Myers Squibb Co.
SLM Holding Corp.
20% Smith Barney Income Funds-
Smith Barney Diversified
Strategic Income Fund
Sector Breakdown:
42.0% U.S. Government Agencies
29.5% High Yield Corporate Bonds
26.3% Foreign Government Bonds
0.7% U.S. Treasury
1.5% Other
Top 5 Holdings:
GNMA
FNMA
FHLMC
European Investment Bank
Swedish Government
Top 5 Country Holdings:
United States
Germany
United Kingdom
Sweden
Denmark
Average Maturity:
5.50 Years
10% Smith Barney
Appreciation Fund Inc.
Top 5 Holdings:
Berkshire Hathaway Inc., Class A Shares
General Electric Co.
Intel Corp.
Microsoft Corp.
Allstate Corp.
10% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
Sector Breakdown:
29.5% U.S. Treasury
70.5% U.S. Government Agencies
Credit Quality:
100% AAA-Rated
Average Maturity:
19.70 Years
5% Smith Barney Funds,
Inc.-Short-Term High Grade
Bond Fund
Sector Breakdown:
19.0% U.S. Government & Agency Obligations
12.6% Mortgage-Backed Securities
62.8% Corporate Bonds & Notes
5.6% Repurchase Agreements & Short-Term
Credit Quality:
29.0% AAA-Rated
Average Maturity:
4.14 Years
5% Smith Barney World Funds,
Inc.-Global Government
Bond Portfolio
Top 5 Holdings:
U.S. Treasury Bonds
Bundesobligation
France OAT
KFW International Finance
Denmark Government Bond
Top 5 Country Holdings:
Germany
United States
United Kingdom
France
Denmark
10% Smith Barney Income
Funds-Smith Barney
High Income Fund
Top 5 Holdings:
United International Holding
Unisys Corp.
Magellan Health Services
Metronet Communications
Chancellor Media
5% Smith Barney Fundamental
Value Fund Inc.
Top 5 Holdings:
Tele Communications Inc.
Adobe Systems, Inc.
American International Group Inc.
American Express Co.
Time Warner, Inc.
5% Smith Barney Investment
Fund Inc.-Smith Barney
Hansberger Global Value Fund
Top 5 Holdings:
Koninklijke KPN NV
Yamanouchi Pharmaceutical
United Overseas Bank
Cable and Wireless PLC
GTE Corp.
26
<PAGE>
THE CONSERVATIVE PORTFOLIO
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.17 $12.04 $0.58 $0.24 5.85%
- -------------------------------------------------------------------------------------------------
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 $1.79 $0.64
- -------------------------------------------------------------------------------------------------
</TABLE>
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.16 $12.02 $0.52 $0.24 5.22%
- -------------------------------------------------------------------------------------------------
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 $1.62 $0.64
- -------------------------------------------------------------------------------------------------
</TABLE>
Historical Performance -- Class L Shares++
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $12.16 $12.02 $0.53 $0.24 5.29%
- -------------------------------------------------------------------------------------------------
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 $1.64 $0.64
- -------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
27
<PAGE>
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
---------------------------------------------------
Class A Class B Class L++
- --------------------------------------------------------------------------------
Year Ended 1/31/99 5.85% 5.22% 5.29%
- --------------------------------------------------------------------------------
Inception* through 1/31/99 8.71 8.16 8.21
- --------------------------------------------------------------------------------
With Sales Charges(2)
---------------------------------------------------
Class A Class B Class L++
- --------------------------------------------------------------------------------
Year Ended 1/31/99 1.12% 0.77% 3.28%
- --------------------------------------------------------------------------------
Inception* through 1/31/99 7.05 7.29 7.83
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
- --------------------------------------------------------------------------------
Class A (Inception* through 1/31/99) 28.37%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/99) 26.42
- --------------------------------------------------------------------------------
Class L++ (Inception* through 1/31/99) 26.60
- --------------------------------------------------------------------------------
(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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ On June 12, 1998, Class C shares were renamed Class L shares.
* Inception date for Class A, B and L shares is February 5, 1996.
28
<PAGE>
<TABLE>
<CAPTION>
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 -- January 31, 1999 (unaudited)
Smith Barney Smith Barney
Conservative Conservative Conservative Standard & Poor's Lehman Government/ Salomon Brothers Salomon Brothers
Portfolio- Portfolio- Portfolio- 500 Composite Corporate High Yield One-Year Treasury
Class A Shares Class B Shares Class L Shares Stock Index Bond Index Market Index Bill Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,550 10,000 9,896 10,000 10,000 10,000 10,000
Jul-96 9,560 9,542 9,786 10,175 9,473 10,208 10,214
Jan-97 10,369 10,353 10,596 12,630 9,118 11,049 10,551
Jul-97 11,277 11,323 11,609 15,476 9,643 11,886 10,892
Jan-98 11,581 11,614 11,900 16,026 10,136 12,693 11,214
Jul-98 11,925 12,029 12,215 18,462 10,421 13,152 11,511
1/31/99 12,259 12,342 12,529 21,235 11,020 13,050 11,840
</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
January 31, 1999. The Standard & Poor's 500 Composite Stock Index is an
unmanaged index composed of 500 widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and the over-the-counter market. The
Lehman Government/Corporate Bond Index is a combination of publicly issued
intermediate- and long-term U.S. government bonds and corporate bonds. The
Salomon Smith Barney High Yield Market Index covers a significant portion of the
below-investment-grade U.S. corporate bond market. The Salomon Smith Barney
One-Year Treasury Bill Index consists of one 1-Year United States Treasury bill
whose return is tracked until its maturity. These indices are unmanaged and are
not subject to the same management and trading expenses as a mutual fund. The
performance of the Portfolio's other classes may be greater or less than the
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
29
<PAGE>
THE INCOME PORTFOLIO
- -----------------------
Target Asset Allocation
- -----------------------
[PIE CHART APPEARS HERE]
Bond Funds 90%
Stock Funds 10%
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.
-----------------
Index Comparison*
-----------------
S&P 500 32.51%
Lehman Government/
Corporate Bond 8.72%
Salomon Smith Barney
High Yield Market 2.83%
Salomon Smith Barney
One-Year Treasury Bill 5.60%
................................................................................
*The chart above represents total returns for the year ended January 31, 1999.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
The Concert Allocation Series Income Portfolio's ("Portfolio") Class A shares
generated a total return of 4.88% for the twelve months ended January 31, 1999,
excluding sales charges. The chart that appears on page 34 compares the
Portfolio's performance to broad-based indices that track asset classes
represented in the Portfolio. 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 Income Portfolio devotes a large portion of its assets to bond funds that
invest in the debt obligations of the U. S. Government and other developed
nations. The year 1998 was a volatile one for financial markets. The market
turmoil led many investors to shun most corporate bonds in favor of U.S.
Treasury bonds, considered to be the global benchmark for credit quality. Your
Portfolio benefited from its emphasis on high-credit quality during this period
of investor doubt and uncertainty. In contrast to a gyrating corporate bond
market, these funds in your Portfolio remained relatively stable, with returns
coming mostly from coupon interest, with very little price appreciation or
depreciation.
Your Portfolio also allocates a portion of its assets to the Smith Barney High
Income Fund that invests in high-yield corporate bonds. After the collapse of
Russia's economy and the near failure of a prominent leveraged hedge fund last
summer, many investors suddenly became risk averse and retreated to safer havens
such as U.S. Treasury bonds.
High-yield bonds, in particular, came under pressure during this time and these
market conditions negatively impacted the Smith Barney High Income Fund's
performance. However, the Smith Barney High Income Fund held up better than many
other funds in its category because of its emphasis on credit quality relative
to its peers. Despite the disappointing results of high yield bonds as an asset
class, the Smith Barney High Income Fund substantially outperformed the average
total return of its peer group during the reporting period according to Lipper,
Inc., a major fund-tracking organization. The Smith Barney High Income Fund
returned 0.57% for the year ended January 31, 1999 versus the negative 0.93%
average total return for funds in its Lipper category.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Income Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series Inc.'s Board of Directors.
30
<PAGE>
The Concert Allocation Series Income Portfolio Breakdown (as of 1/31/99)
(unaudited)
10% Smith Barney Funds, Inc.
Short-Term High
Grade Bond Fund
Sector Breakdown:
19.0% U.S. Government & Agency Obligations
12.6% Mortgage-Backed Securities
62.8% Corporate Bonds & Notes
5.6% Repurchase Agreements & Short-Term
Credit Quality:
29% AAA-Rated
Average Maturity:
4.14 Years
15% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
Sector Breakdown:
29.5% U.S. Treasury
70.5% U.S. Government Agencies
Credit Quality:
100% AAA-Rated
Average Maturity:
19.70 Years
20% Smith Barney Managed
Governments Fund Inc.
Sector Breakdown:
2.4% U.S. Treasurys
39.9% Mortgage-Backed Securities
4.8% FHLMC
50.0% FNMA
2.9% Treasury Notes
Credit Quality:
100% AAA-Rated
Average Maturity:
7.35 Years
20% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
Sector Breakdown:
42.0% U.S. Government Agencies
29.5% High Yield Corporate Bonds
26.3% Foreign Government Bonds
0.7% U.S. Treasury
1.5% Other
Top 5 Holdings:
GNMA
FNMA
FHLMC
European Investment Bank
Swedish Government
Top 5 Country Holdings:
United States
Germany
United Kingdom
Sweden
Denmark
Average Maturity:
5.50 Years
[PIE CHART APPEARS HERE]
5% Smith Barney
Appreciation Fund Inc.
Top 5 Holdings:
Berkshire Hathaway Inc., Class A Shares
General Electric Co.
Intel Corp.
Microsoft Corp.
Allstate Corp.
5% Smith Barney Income Funds-
Smith Barney Convertible Fund
Top 5 Holdings:
Waste Management Inc.
Alpharma Inc.
Bell Atlantic Finc'l. Srvcs. Corp.
Athena Neuroscience Inc.
Rite Aid Corp.
20% Smith Barney Income Funds
Smith Barney High Income Fund
Top 5 Holdings:
United International Holdings
Unisys Corp.
Magellan Health Services
Metronet Communications
Chancellor Media
5% Smith Barney Income Funds-
Smith Barney Premium Total
Return Fund
Top 5 Holdings:
S&P 500 Index Options
MCI WorldCom Inc.
Loews Corp.
Bristol-Myers Squibb Co.
SLM Holding Corp.
31
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
.......................................................................................................
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -------------------------------------------------------------------------------------------------------
1/31/99 $11.75 $11.50 $0.69 $0.11 4.88%
- -------------------------------------------------------------------------------------------------------
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 $2.09 $0.40
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class B Shares
.......................................................................................................
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/99 $11.76 $11.50 $0.63 $0.11 4.25%
- -------------------------------------------------------------------------------------------------------
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 $1.91 $0.40
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class L Shares++
.......................................................................................................
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- -------------------------------------------------------------------------------------------------------
1/31/99 $11.76 $11.50 $0.64 $0.11 4.31%
- -------------------------------------------------------------------------------------------------------
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 $1.94 $0.40
- -------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
32
<PAGE>
Average Annual Total Returns
........................................................................
Without Sales Charges(1)
------------------------------------
Class A Class B Class L++
- ------------------------------------------------------------------------
Year Ended 1/31/99 4.88% 4.25% 4.31%
- ------------------------------------------------------------------------
Inception* through 1/31/99 7.56 7.01 7.07
- ------------------------------------------------------------------------
With Sales Charges(2)
------------------------------------
Class A Class B Class L++
- ------------------------------------------------------------------------
Year Ended 1/31/99 0.19% (0.15)% 2.29%
- ------------------------------------------------------------------------
Inception* through 1/31/99 5.92 6.13 6.69
- ------------------------------------------------------------------------
Cumulative Total Returns
........................................................................
Without Sales Charges(1)
- ------------------------------------------------------------------------
Class A (Inception* through 1/31/99) 24.34%
- ------------------------------------------------------------------------
Class B (Inception* through 1/31/99) 22.46
- ------------------------------------------------------------------------
Class L++ (Inception* through 1/31/99) 22.64
- ------------------------------------------------------------------------
(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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ On June 12, 1998, Class C shares were renamed Class L shares.
* Inception date for Class A, B and L shares is February 5, 1996.
33
<PAGE>
<TABLE>
<CAPTION>
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 -- January 31, 1999 (unaudited)
Income Income Income Standard & Poor's Lehman Government Salomon Brothers Salomon Brothers
Portfolio- Portfolio- Portfolio- 500 Composite /Corporate High Yield One-Year Treasury
Class A Class B Class L Stock Index Bond Index Market Index Bill Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,550 10,000 9,896 10,000 10,000 10,000 10,000
Jul-96 9,482 9,472 9,711 10,175 9,473 10,208 10,214
Jan-97 10,160 10,139 10,385 12,630 9,118 11,049 10,551
Jul-97 10,939 10,973 11,263 15,476 9,643 11,886 10,892
Jan-98 11,322 11,297 11,636 16,026 10,136 12,693 11,214
Jul-98 11,644 11,750 11,929 18,462 10,421 13,152 11,511
1/31/99 11,875 11,946 12,137 21,235 11,020 13,050 11,840
</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
January 31, 1999. The Standard & Poor's 500 Composite Stock Index is an
unmanaged index composed of 500 widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and the over-the-counter market. The
Lehman Government/Corporate Bond Index is a combination of publicly issued
intermediate- and long-term U.S. government bonds and corporate bonds. The
Salomon Smith Barney High Yield Market Index covers a significant portion of the
below-investment-grade U.S. corporate bond market. The Salomon Smith Barney
One-Year Treasury Bill Index consists of one 1-Year United States Treasury bill
whose return is tracked until its maturity. These indices are unmanaged and are
not subject to the same management and trading expenses as a mutual fund. The
performance of the Portfolio's other classes may be greater or less than the
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
34
<PAGE>
THE GLOBAL PORTFOLIO
Schedule of Investments January 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds -- 98.4%
54,424 Smith Barney Funds, Inc. - Large Cap Value Fund $ 1,001,954
49,795 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 936,655
464,523 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 4,882,139
208,219 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Small Cap Value Fund 1,959,344
149,208 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 3,125,908
147,046 Smith Barney Small Cap Blend Fund, Inc. 1,976,308
134,266 Smith Barney World Funds, Inc. - Emerging Markets Portfolio 1,001,625
218,812 Smith Barney World Funds, Inc. - International Equity Portfolio 4,964,861
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $19,175,598) 19,848,794
- ------------------------------------------------------------------------------------------------------------------------------------
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement -- 1.6%
$314,000 Morgan Stanley Dean Witter & Co., 4.700% due 2/1/99; Proceeds
at maturity -- $314,123; (Fully collateralized by U.S. Treasury
Notes and Bonds, 5.375% to 7.875% due 4/15/99 to 2/15/26; Market
value -- $321,850) (Cost -- $314,000) 314,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments -- 100% (Cost -- $19,489,598*) $20,162,794
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
35
<PAGE>
THE HIGH GROWTH PORTFOLIO
Schedule of Investments January 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds -- 99.5%
1,488,619 Smith Barney Aggressive Growth Fund Inc. $ 84,836,414
1,953,866 Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund 35,032,811
1,771,682 Smith Barney Funds, Inc. - Large Cap Value Fund 32,616,663
5,592,266 Smith Barney Income Funds - Smith Barney High Income Fund 60,899,773
4,150,362 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 78,068,317
2,417,207 Smith Barney Investment Funds Inc. - Smith Barney Contrarian Fund 33,744,213
6,215,413 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 65,323,992
4,161,337 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 87,180,017
2,326,088 Smith Barney Investment Trust - Smith Barney Mid Cap Blend Fund 37,682,630
10,575,415 Smith Barney Small Cap Blend Fund, Inc. 142,133,578
3,014,447 Smith Barney World Funds, Inc. - International Equity Portfolio 68,397,795
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $615,333,402) 725,916,203
- ------------------------------------------------------------------------------------------------------------------------------------
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement -- 0.5%
$3,382,000 Morgan Stanley Dean Witter & Co., 4.700% due 2/1/99; Proceeds at maturity -- $3,383,325;
(Fully collateralized by U.S. Treasury Notes and Bonds, 5.375%
to 7.875% due 4/15/99 to 11/15/26; Market value -- $3,466,555)
(Cost -- $3,382,000) 3,382,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments -- 100% (Cost -- $618,715,402*) $729,298,203
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
36
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 1999
- --------------------------------------------------------------------------------
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds -- 99.4%
953,287 Smith Barney Aggressive Growth Fund Inc. $ 54,327,806
5,043,833 Smith Barney Equity Funds, Inc. - Smith Barney Large Cap Blend Fund 90,435,929
4,529,132 Smith Barney Funds, Inc. - Large Cap Value Fund 83,381,322
7,348,931 Smith Barney Income Funds - Smith Barney High Income Fund 80,029,887
5,272,297 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 99,171,916
3,121,617 Smith Barney Investment Funds Inc. - Smith Barney Contrarian Fund 43,577,770
8,529,612 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 85,125,525
4,039,904 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 42,459,387
6,470,103 Smith Barney Investment Funds Inc. - Smith Barney Investment Grade Bond Fund 85,470,065
2,672,069 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 55,979,841
2,981,908 Smith Barney Investment Trust - Smith Barney Mid Cap Blend Fund 48,306,903
3,327,549 Smith Barney Small Cap Blend Fund, Inc. 44,722,258
3,882,446 Smith Barney World Funds, Inc. - International Equity Portfolio 88,092,704
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $785,479,930) 901,081,313
- ------------------------------------------------------------------------------------------------------------------------------------
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement -- 0.6%
$5,518,000 Morgan Stanley Dean Witter & Co., 4.700% due 2/1/99; Proceeds
at maturity -- $5,520,161; (Fully collateralized by U.S.
Treasury Notes, 5.375% to 7.875% due 4/15/99 to 11/15/26; Market
value -- $5,655,959) (Cost -- $5,518,000) 5,518,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments -- 100% (Cost -- $790,997,930*) $906,599,313
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
37
<PAGE>
THE BALANCED PORTFOLIO
Schedule of Investments January 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds -- 99.3%
3,542,776 Smith Barney Appreciation Fund Inc. $ 55,019,306
1,576,510 Smith Barney Equity Funds, Inc. - Smith Barney Large Cap Blend Fund 28,266,834
4,829,546 Smith Barney Fundamental Value Fund Inc. 55,926,147
1,496,288 Smith Barney Funds, Inc. - Large Cap Value Fund 27,546,668
5,932,804 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 24,502,482
3,467,139 Smith Barney Income Funds - Smith Barney Convertible Fund 54,434,085
10,376,716 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 81,872,293
2,584,521 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 53,861,424
5,459,449 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 54,485,296
4,265,813 Smith Barney Managed Governments Fund Inc. 54,389,116
2,309,198 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 27,133,079
1,217,089 Smith Barney World Funds, Inc. - International Equity Portfolio 27,615,756
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $526,718,439) 545,052,486
- ------------------------------------------------------------------------------------------------------------------------------------
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement -- 0.7%
$3,892,000 Morgan Stanley Dean Witter & Co., 4.700% due 2/1/99; Proceeds at maturity -- $3,893,524;
(Fully collateralized by U.S. Treasury Notes, 5.375% to 7.875% due 4/15/99 to 11/15/26;
Market value -- $3,989,306) (Cost -- $3,892,000) 3,892,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments -- 100% (Cost -- $530,610,439*) $548,944,486
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
38
<PAGE>
THE CONSERVATIVE PORTFOLIO
Schedule of Investments January 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds -- 98.4%
940,999 Smith Barney Appreciation Fund Inc. $ 14,613,715
649,079 Smith Barney Fundamental Value Fund Inc. 7,516,333
1,552,722 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 6,412,742
911,825 Smith Barney Income Funds - Smith Barney Convertible Fund 14,315,646
3,618,596 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 28,550,723
1,312,268 Smith Barney Income Funds - Smith Barney High Income Fund 14,290,600
341,552 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 7,117,940
1,429,933 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 14,270,730
706,973 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 7,430,285
1,676,523 Smith Barney Managed Governments Fund Inc. 21,375,671
604,992 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 7,108,653
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $143,276,451) 143,003,038
- ------------------------------------------------------------------------------------------------------------------------------------
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement -- 1.6%
$2,313,000 Morgan Stanley Dean Witter & Co., 4.700% due 2/1/99; Proceeds at maturity -- $2,313,906;
(Fully collateralized by U.S. Treasury Notes and Bonds, 5.375% to 7.875%
due 4/15/99 to 11/15/26; Market value -- $2,385,223) (Cost -- $2,313,000) 2,313,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments -- 100% (Cost -- $145,589,451*) $145,316,038
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
39
<PAGE>
THE INCOME PORTFOLIO
Schedule of Investments January 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Underlying Funds -- 100.0%
252,679 Smith Barney Appreciation Fund Inc. $ 3,924,107
1,710,365 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 7,063,810
239,952 Smith Barney Income Funds - Smith Barney Convertible Fund 3,767,262
1,896,892 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 14,966,478
1,380,993 Smith Barney Income Funds - Smith Barney High Income Fund 15,039,016
175,568 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 3,658,838
1,123,906 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 11,216,587
1,167,153 Smith Barney Managed Governments Fund Inc. 14,881,204
- ------------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $74,891,531) 74,517,302
- ------------------------------------------------------------------------------------------------------------------------------------
Face
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement -- 0.0%
$23,000 Goldman, Sachs & Co., 4.710% due 2/1/99; Proceeds at maturity -- $23,009;
(Fully collateralized by U.S. Treasury Notes, 5.625% to 11.125%
due 11/30/99 to 8/15/25; Market value -- $23,460) (Cost -- $23,000) 23,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments -- 100% (Cost -- $74,914,531*) $74,540,302
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
40
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities January 31, 1999
...................................................................................................................................
Global High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at cost $19,489,598 $618,715,402 $790,997,930 $530,610,439 $ 145,589,451 $ 74,914,531
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $20,162,794 $729,298,203 $906,599,313 $548,944,486 $ 145,316,038 $ 74,540,302
Cash 4,016 804 828 763 923 340,393
Receivable for Fund shares sold 36,785 354,447 713,734 705,713 53,152 57,196
Receivable from manager 56,309 -- -- -- -- 14,940
Dividends and interest receivable 41 442 720 71,385 18,513 20,495
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets 20,259,945 729,653,896 907,314,595 549,722,347 145,388,626 74,973,326
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased -- -- 1,292,504 1,446,266 1,601,366 --
Payable for Fund shares purchased 17,152 891,160 769,669 203,048 102,276 103,167
Dividends payable -- -- -- -- -- 32,960
Distribution fees payable 12,586 -- 56,038 47,095 11,561 4,915
Accrued expenses -- 755,963 1,509,739 1,084,075 208,117 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 29,738 1,647,123 3,627,950 2,780,484 1,923,320 141,042
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $20,230,207 $728,006,773 $903,686,645 $546,941,863 $143,465,306 $74,832,284
===================================================================================================================================
Net Assets:
Par value of capital shares $ 1,814 $ 49,079 $ 62,505 $ 42,242 $ 11,924 $ 6,508
Capital paid in excess of par value 19,511,745 612,380,740 775,777,491 515,073,049 141,224,890 74,756,505
Undistributed (overdistributed)
net investment income -- -- 768,600 398,975 373,120 (32,960)
Accumulated net realized gain
on investments 43,452 4,994,153 11,476,666 13,093,550 2,128,785 476,460
Net unrealized appreciation
(depreciation) of investments 673,196 110,582,801 115,601,383 18,334,047 (273,413) (374,229)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $20,230,207 $728,006,773 $903,686,645 $546,941,863 $143,465,306 $74,832,284
===================================================================================================================================
Shares Outstanding:
Class A 964,577 24,579,614 27,106,231 17,580,383 5,945,850 3,165,682
Class B 827,149 21,484,148 31,286,976 19,136,896 5,404,175 2,999,001
Class L 21,952 2,563,109 3,682,160 2,689,390 573,764 342,982
Class Z -- 451,798 429,483 2,835,746 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $11.16 $14.86 $14.43 $12.95 $12.04 $11.50
Class B * $11.15 $14.81 $14.48 $12.95 $12.02 $11.50
Class L ** $11.14 $14.81 $14.48 $12.94 $12.02 $11.50
Class Z (and redemption price) -- $14.86 $14.41 $12.95 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of
net asset value per share) $11.75 $15.64 $15.19 $13.63 -- --
Class A (net asset value plus 4.71% of
net asset value per share) -- -- -- -- $12.61 $12.04
Class L (net asset value plus 1.01% of
net asset value per share) $11.25 $14.96 $14.63 $13.07 $12.14 $11.62
===================================================================================================================================
</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
41
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations For the Year Ended January 31, 1999
...................................................................................................................................
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 $107,394 $ 7,502,061 $ 19,241,916 $16,749,096 $ 6,503,279 $ 4,418,781
Short-term capital gain distributions
from Underlying Funds 6,319 100,417 147,653 760,947 157,399 24,839
Interest 4,267 255,703 298,131 196,142 53,836 22,562
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 117,980 7,858,181 19,687,700 17,706,185 6,714,514 4,466,182
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Distribution fees (Note 2) 50,777 3,793,526 5,236,803 3,029,348 613,263 335,636
Other expenses 29,278 2,147,850 2,712,756 1,605,830 433,128 237,885
- ----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 80,055 5,941,376 7,949,559 4,635,178 1,046,391 573,521
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 37,925 1,916,805 11,738,141 13,071,007 5,668,123 3,892,661
- ----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments (Note 3):
Realized Gain From:
Sale of Underlying Funds -- 13,639,486 8,218,602 1,803,124 293,539 --
Capital gain distributions from
Underlying Funds 59,221 7,083,926 13,874,444 14,532,717 2,366,553 684,340
- ----------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain 59,221 20,723,412 22,093,046 16,335,841 2,660,092 684,340
- ----------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation) of Investments:
Beginning of year -- 25,534,430 33,636,442 8,293,764 1,114,017 1,113,579
End of year 673,196 110,582,801 115,601,383 18,334,047 (273,413) (374,229)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net
Unrealized Appreciation 673,196 85,048,371 81,964,941 10,040,283 (1,387,430) (1,487,808)
==================================================================================================================================
Net Gain (Loss) on Investments 732,417 105,771,783 104,057,987 26,376,124 1,272,662 (803,468)
==================================================================================================================================
Increase in Net Assets From Operations $770,342 $107,688,588 $115,796,128 $39,447,131 $ 6,940,785 $ 3,089,193
==================================================================================================================================
</TABLE>
(1) For the period March 9, 1998 (commencement of operations) to January 31,
1999.
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets For the Year Ended January 31, 1999
....................................................................................................................................
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 $ 37,925 $ 1,916,805 $ 11,738,141 $ 13,071,007 $ 5,668,123 $ 3,892,661
Net realized gain 59,221 20,723,412 22,093,046 16,335,841 2,660,092 684,340
Increase (decrease) in net
unrealized appreciation 673,196 85,048,371 81,964,941 10,040,283 (1,387,430) (1,487,808)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Operations 770,342 107,688,588 115,796,128 39,447,131 6,940,785 3,089,193
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders From:
Net investment income (37,925) (1,916,805) (11,668,230) (13,888,946) (5,720,587) (3,925,621)
Net realized gains (15,769) (22,738,630) (21,474,608) (13,499,883) (2,438,232) (653,034)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (53,694) (24,655,435) (33,142,838) (27,388,829) (8,158,819) (4,578,655)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 21,514,725 250,815,393 279,779,380 221,653,754 63,759,336 32,573,378
Net asset value of shares issued
for reinvestment of dividends 53,691 24,488,226 32,700,434 26,738,856 7,940,449 4,093,470
Cost of shares reacquired (2,054,857) (150,565,920) (160,653,723) (104,498,115) (32,857,120) (20,741,399)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 19,513,559 124,737,699 151,826,091 143,894,495 38,842,665 15,925,449
====================================================================================================================================
Increase in Net Assets 20,230,207 207,770,852 234,479,381 155,952,797 37,624,631 14,435,987
Net Assets:
Beginning of year -- 520,235,921 669,207,264 390,989,066 105,840,675 60,396,297
- ------------------------------------------------------------------------------------------------------------------------------------
End of year* $ 20,230,207 $ 728,006,773 $ 903,686,645 $ 546,941,863 $ 143,465,306 $ 74,832,284
====================================================================================================================================
* Includes undistributed
(overdistributed) net
investment income of: -- -- $ 768,600 $ 398,975 $ 373,120 $ (32,960)
====================================================================================================================================
</TABLE>
(1) For the period March 9, 1998 (commencement of operations) to
January 31, 1999.
See Notes to Financial Statements.
43
<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.
44
<PAGE>
Notes to Financial Statements
................................................................................
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"). 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 SSBC Fund
Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"). The financial
statements and financial highlights for the other portfolios are presented in a
separate annual report.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) investments in the
Underlying Funds are valued at the closing net asset value per share of each
Underlying Fund on the day of valuation; (c) 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;
(d) long-term capital gains from Underlying Funds are recorded on the
ex-dividend date as realized gains; (e) gains or losses on the sale of
Underlying Funds are calculated by using the specific identification method; (f)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (g) 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; (h) 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. Net
investment income, net realized gains and net assets were not affected by these
adjustments; (i) 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 (j) 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
SSBC is the investment manager for the Fund. Each Portfolio pays SSBC 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,
the excess amount is paid on behalf of the Fund by SSBC.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, was the
Fund's distributor. SSB, as well as certain other broker-dealers, continues to
sell Fund shares to the public as members of the selling group.
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 year ended January 31, 1999, SSB received sales charges of approximately
$798,000 and $113,000 on sales of the Portfolios' Class A and L shares,
respectively. In addition, CDSCs paid to SSB were approximately:
Portfolio Class B Class L
- --------------------------------------------------------------------------------
Global $ 2,000 $ --
High Growth 280,000 8,000
Growth 490,000 4,000
Balanced 232,000 3,000
Conservative 35,000 --
Income 34,000 --
- --------------------------------------------------------------------------------
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.
45
<PAGE>
Notes to Financial Statements (continued)
................................................................................
For the year ended January 31, 1999, total Distribution Plan fees were as
follows:
Portfolio Class A Class B Class L
- --------------------------------------------------------------------------------
Global $ 10,958 $ 38,673 $ 1,146
High Growth 765,218 2,700,351 327,957
Growth 823,014 3,941,671 472,118
Balanced 497,891 2,220,756 310,701
Conservative 152,606 419,651 41,006
Income 82,447 227,917 25,272
- --------------------------------------------------------------------------------
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the year ended January 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Portfolio Purchases Sales
- --------------------------------------------------------------------------------
Global $ 19,175,598 $ --
High Growth 238,598,218 128,878,059
Growth 221,527,973 76,604,977
Balanced 188,061,812 43,408,741
Conservative 45,028,326 5,872,884
Income 15,985,448 --
- --------------------------------------------------------------------------------
At January 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Net Unrealized
Portfolio Appreciation
Appreciation Depreciation (Depreciation)
- --------------------------------------------------------------------------------
Global $ 1,212,354 $ (539,158) $ 673,196
High Growth 123,598,840 (13,016,039) 110,582,801
Growth 126,068,066 (10,466,683) 115,601,383
Balanced 25,035,339 (6,701,292) 18,334,047
Conservative 2,686,680 (2,960,093) (273,413)
Income 1,089,796 (1,464,025) (374,229)
- --------------------------------------------------------------------------------
4. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
5. Capital Shares
At January 31, 1999, 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.
46
<PAGE>
Notes to Financial Statements (continued)
................................................................................
At January 31, 1999, total paid-in capital amounted to the following for each
class:
Portfolio Class A Class B Class L Class Z
- --------------------------------------------------------------------------------
Global $ 10,391,354 $ 8,879,613 $ 242,592 $ --
High Growth 307,189,542 267,315,727 31,796,169 6,128,381
Growth 338,731,002 386,620,460 44,693,404 5,795,130
Balanced 214,503,349 232,016,747 32,166,022 36,429,173
Conservative 70,471,074 64,035,624 6,730,116 --
Income 36,422,897 34,409,726 3,930,390 --
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended January 31, 1999* Year Ended January 31, 1998
---------------------------- -----------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GLOBAL Portfolio:
Class A
Shares sold 1,073,327 $ 11,530,351 -- --
Shares issued on reinvestment 4,610 50,532 -- --
Shares reacquired (113,360) (1,189,529) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase 964,577 $ 10,391,354 -- --
================================================================================================================================
Class B
Shares sold 907,165 $ 9,739,828 -- --
Shares issued on reinvestment 281 3,083 -- --
Shares reacquired (80,297) (863,298) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase 827,149 $ 8,879,613 -- --
================================================================================================================================
Class L**
Shares sold 22,142 $ 244,546 -- --
Shares issued on reinvestment 7 76 -- --
Shares reacquired (197) (2,030) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase 21,952 $ 242,592 -- --
================================================================================================================================
High Growth Portfolio:
Class A
Shares sold 9,638,759 $133,112,615 10,010,305 $128,519,682
Shares issued on reinvestment 924,090 13,150,399 674,466 8,707,357
Shares reacquired (5,966,783) (82,338,491) (3,113,531) (40,195,802)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase 4,596,066 $ 63,924,523 7,571,240 $ 97,031,237
================================================================================================================================
Class B
Shares sold 7,337,722 $100,937,836 8,083,651 $103,764,047
Shares issued on reinvestment 700,013 9,910,412 496,177 6,400,681
Shares reacquired (4,321,062) (58,961,282) (2,190,222) (28,152,547)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase 3,716,673 $ 51,886,966 6,389,606 $ 82,012,181
================================================================================================================================
Class L**
Shares sold 978,422 $ 13,492,978 967,197 $ 12,449,955
Shares issued on reinvestment 83,746 1,186,252 60,158 776,640
Shares reacquired (647,771) (8,784,316) (435,887) (5,582,392)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase 414,397 $ 5,894,914 591,468 $ 7,644,203
================================================================================================================================
Class Z
Shares sold 237,560 $ 3,271,964 230,648 $ 3,053,994
Shares issued on reinvestment 16,927 241,163 7,908 102,090
Shares reacquired (36,884) (481,831) (4,701) (63,044)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase 217,603 $ 3,031,296 233,855 $ 3,093,040
================================================================================================================================
</TABLE>
* For the Global Portfolio, transactions are for the period from March 9,
1998 (inception date) to January 31, 1999.
** On June 12, 1998, Class C shares were renamed Class L shares.
47
<PAGE>
<TABLE>
<CAPTION>
Notes to Financial Statements (continued)
...................................................................................................................................
Year Ended January 31, 1999 Year Ended January 31, 1998
--------------------------- ---------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Portfolio:
Class A
Shares sold 9,890,705 $ 135,398,427 10,133,515 $ 130,849,284
Shares issued on reinvestment 1,153,168 16,051,546 1,205,901 15,556,116
Shares reacquired (5,482,711) (74,886,382) (2,864,046) (37,262,268)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 5,561,163 $ 76,563,591 8,475,370 $ 109,143,132
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 9,212,957 $ 125,960,941 10,828,351 $ 139,348,855
Shares issued on reinvestment 1,053,702 14,682,979 1,263,705 16,327,065
Shares reacquired (5,399,175) (73,438,124) (2,826,910) (36,586,917)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 4,867,484 $ 67,205,796 9,265,146 $ 119,089,003
- -----------------------------------------------------------------------------------------------------------------------------------
Class L*
Shares sold 1,118,532 $ 15,322,127 1,167,870 $ 15,084,743
Shares issued on reinvestment 122,113 1,702,086 155,822 2,013,222
Shares reacquired (863,978) (11,810,541) (555,673) (7,192,671)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 376,667 $ 5,213,672 768,019 $ 9,905,294
- -----------------------------------------------------------------------------------------------------------------------------------
Class Z
Shares sold 225,050 $ 3,097,885 218,816 $ 2,890,642
Shares issued on reinvestment 18,966 263,823 12,339 159,049
Shares reacquired (38,475) (518,676) (7,700) (103,417)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 205,540 $ 2,843,032 223,455 $ 2,946,274
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Class A
Shares sold 7,295,468 $ 93,331,666 7,062,248 $ 89,012,976
Shares issued on reinvestment 992,232 12,647,946 812,798 10,223,473
Shares reacquired (3,928,077) (50,334,232) (2,144,347) (27,210,876)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 4,359,623 $ 55,645,380 5,730,699 $ 72,025,573
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 6,310,903 $ 80,756,363 7,134,949 $ 89,763,171
Shares issued on reinvestment 955,452 12,174,485 834,347 10,489,664
Shares reacquired (3,493,405) (44,662,329) (1,826,017) (23,166,035)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 3,772,950 $ 48,268,519 6,143,279 $ 77,086,800
- -----------------------------------------------------------------------------------------------------------------------------------
Class L*
Shares sold 1,018,653 $ 13,032,302 776,967 $ 9,788,923
Shares issued on reinvestment 126,636 1,613,187 114,791 1,442,518
Shares reacquired (634,335) (8,131,326) (358,733) (4,560,118)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 510,954 $ 6,514,163 533,025 $ 6,671,323
- -----------------------------------------------------------------------------------------------------------------------------------
Class Z
Shares sold 2,689,368 $ 34,533,423 230,880 $ 2,958,677
Shares issued on reinvestment 23,813 303,238 10,474 132,091
Shares reacquired (108,811) (1,370,228) (10,188) (130,447)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,604,369 $ 33,466,433 231,166 $ 2,960,321
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
48
<PAGE>
<TABLE>
<CAPTION>
Notes to Financial Statements (continued)
...................................................................................................................................
Year Ended January 31, 1999 Year Ended January 31, 1998
--------------------------- ---------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSERVATIVE PORTFOLIO:
Class A
Shares sold 2,757,450 $ 33,247,320 2,101,072 $ 25,731,997
Shares issued on reinvestment 343,683 4,130,057 317,020 3,840,702
Shares reacquired (1,363,889) (16,448,987) (771,353) (9,452,258)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,737,244 $ 20,928,390 1,646,739 $ 20,120,441
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 2,192,411 $ 26,465,020 1,817,304 $ 22,221,744
Shares issued on reinvestment 283,399 3,402,812 279,308 3,380,940
Shares reacquired (1,068,131) (12,898,059) (480,509) (5,906,489)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,407,679 $ 16,969,773 1,616,103 $ 19,696,195
- -----------------------------------------------------------------------------------------------------------------------------------
Class L*
Shares sold 273,480 $ 3,295,754 171,125 $ 2,100,179
Shares issued on reinvestment 28,107 337,543 31,837 385,261
Shares reacquired (170,834) (2,071,580) (107,293) (1,313,296)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 130,753 $ 1,561,717 95,669 $ 1,172,144
- -----------------------------------------------------------------------------------------------------------------------------------
Class Z+
Shares sold 61,958 $ 751,242 70,965 $ 874,228
Shares issued on reinvestment 5,835 70,037 3,420 41,577
Shares reacquired (120,224) (1,438,494) (22,043) (277,453)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (52,431) $ (617,215) 52,342 $ 638,352
- -----------------------------------------------------------------------------------------------------------------------------------
Income Portfolio:
Class A
Shares sold 1,432,010 $ 16,620,992 1,518,353 $ 17,876,653
Shares issued on reinvestment 186,978 2,165,859 179,710 2,105,847
Shares reacquired (969,412) (11,236,624) (727,648) (8,590,070)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 649,576 $ 7,550,227 970,415 $ 11,392,430
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 1,150,258 $ 13,342,895 1,016,644 $ 11,985,471
Shares issued on reinvestment 144,806 1,678,632 138,552 1,623,669
Shares reacquired (554,946) (6,443,862) (440,392) (5,187,806)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 740,118 $ 8,577,665 714,804 $ 8,421,334
- -----------------------------------------------------------------------------------------------------------------------------------
Class L*
Shares sold 142,970 $ 1,657,080 161,208 $ 1,904,319
Shares issued on reinvestment 14,963 173,507 15,043 176,293
Shares reacquired (118,393) (1,382,791) (56,114) (660,859)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 39,540 $ 447,796 120,137 $ 1,419,753
- -----------------------------------------------------------------------------------------------------------------------------------
Class Z+
Shares sold 81,175 $ 952,411 68,905 $ 816,265
Shares issued on reinvestment 6,518 75,472 3,572 42,003
Shares reacquired (146,474) (1,678,122) (13,734) (165,113)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (58,781) $ (650,239) 58,743 $ 693,155
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
+ On January 4, 1999, Class Z shares were fully redeemed.
49
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
GLOBAL PORTFOLIO/(1)/ Class A Shares/(2)/ Class B Shares/(2)/ Class L Shares/(2)(3)/
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $11.40 $11.40 $11.40
- -----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)/(4)/ 0.07 0.00* (0.02)
Net realized and unrealized loss (0.26) (0.24) (0.23)
- -----------------------------------------------------------------------------------------------------------------
Total Loss From Operations (0.19) (0.24) (0.25)
- -----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.04) -- --
Net realized gains (0.01) (0.01) (0.01)
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.05) (0.01) (0.01)
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.16 $11.15 $11.14
- -----------------------------------------------------------------------------------------------------------------
Total Return++ (1.60)% (2.16)% (2.25)%
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $10,766 $9,220 $244
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.59% 1.32% 1.32%
Net investment income (loss) 0.80 0.06 (0.12)
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period from March 9, 1998 (inception date) to January 31, 1999.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) Net investment income (loss) per share includes short-term capital gain
distributions from Underlying Funds.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
50
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
----------------------------------------- -----------------------------------------
HIGH GROWTH PORTFOLIO 1999/(1)/ 1998 1997/(2)/ 1999/(1)/ 1998 1997/(2)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.97 $12.41 $11.40 $12.95 $12.41 $11.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)/(3)/ 0.09 0.11 0.20 (0.01) 0.03 0.08
Net realized and unrealized gain 2.36 0.91 1.05 2.35 0.89 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 2.45 1.02 1.25 2.34 0.92 1.12
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.08) (0.13) (0.20) -- (0.05) (0.07)
Net realized gains (0.48) (0.33) (0.04) (0.48) (0.33) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.46) (0.24) (0.48) (0.38) (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.86 $12.97 $12.41 $14.81 $12.95 $12.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 19.15% 8.25% 11.04%++ 18.30% 7.44% 9.91%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $365,225 $259,212 $154,069 $318,101 $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 (loss) 0.68 1.00 2.79+ (0.07) 0.25 2.04+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 21% 39% 0% 21% 39% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(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.
51
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class L Shares/(1)/ Class Z Shares
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HIGH GROWTH PORTFOLIO 1999/(2)/ 1998 1997/(3)/ 1999/(2)/ 1998/(2)/ 1997/(4)/
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $12.96 $12.42 $11.40 $12.97 $12.41 $12.24
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)/(5)/ (0.01) 0.03 0.08 0.13 0.17 0.01
Net realized and unrealized gain 2.34 0.89 1.05 2.36 0.89 0.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 2.33 0.92 1.13 2.49 1.06 0.17
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.05) (0.07) (0.12) (0.17) --
Net realized gains (0.48) (0.33) (0.04) (0.48) (0.33) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.38) (0.11) (0.60) (0.50) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.81 $12.96 $12.42 $14.86 $12.97 $12.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 18.21% 7.44% 10.00%++ 19.45% 8.58% 1.39%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $37,969 $27,845 $19,340 $6,712 $3,037 $4
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35%+ 0.35% 0.35% 0.35%+
Net investment income (loss) (0.07) 0.25 2.04+ 0.95 1.25 3.33*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 21% 39% 0% 21% 39% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) For the period from January 17, 1997 (inception date) to January 31, 1997.
(5) Net investment income (loss) per share includes short-term capital gain
distributions from Underlying Funds.
* Not annualized.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
52
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------ ------------------------------------------
Growth Portfolio 1999/(1)/ 1998 1997/(2)/ 1999/(1)/ 1998 1997/(2)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.99 $12.32 $11.40 $13.00 $12.33 $11.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income/(3)/ 0.26 0.31 0.33 0.16 0.22 0.23
Net realized and unrealized gain 1.82 1.14 0.92 1.82 1.12 0.94
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 2.08 1.45 1.25 1.98 1.34 1.17
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.27) (0.32) (0.31) (0.13) (0.21) (0.22)
Net realized gains (0.37) (0.46) (0.02) (0.37) (0.46) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.78) (0.33) (0.50) (0.67) (0.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.43 $12.99 $12.32 $14.48 $13.00 $12.33
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 16.20% 11.82% 11.08%++ 15.40% 10.93% 10.32%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $391,235 $279,842 $161,026 $452,943 $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 1.93 2.77 4.79+ 1.18 1.96 4.04+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 41% 0% 10% 41% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(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.
53
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
..................................................................................................................................
For a share of each class of capital stock outstanding throughout each year ended January 31:
Class L Shares(1) Class Z Shares
------------------------------------- ----------------------------------
Growth Portfolio 1999(2) 1998 1997(3) 1999(2) 1998(2) 1997(4)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.00 $ 12.33 $ 11.40 $ 12.99 $ 12.32 $ 12.18
- ----------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(5) 0.16 0.22 0.24 0.30 0.73 0.02
Net realized and unrealized gain 1.82 1.12 0.93 1.81 0.75 0.12
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.98 1.34 1.17 2.11 1.48 0.14
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.13) (0.21) (0.22) (0.32) (0.35) --
Net realized gains (0.37) (0.46) (0.02) (0.37) (0.46) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.67) (0.24) (0.69) (0.81) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 14.48 $ 13.00 $ 12.33 $ 14.41 $ 12.99 $ 12.32
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 15.40% 10.92% 10.32%++ 16.47% 12.08% 1.15%++
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 53,319 $ 42,983 $ 31,279 $ 6,190 $ 2,908 $ 6
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35%+ 0.35% 0.35% 0.35%+
Net investment income 1.18 1.81 4.04+ 2.18 5.24 5.30*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 41% 0% 10% 41% 0%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) For the period from January 17, 1997 (inception date) to January 31, 1997.
(5) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
* Not annualized.
++ 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 year ended January 31:
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Balanced Portfolio 1999(1) 1998 1997(2) 1999(1) 1998 1997(2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.62 $ 12.14 $ 11.40 $ 12.61 $ 12.14 $ 11.40
- ----------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.42 0.58 0.45 0.32 0.48 0.37
Net realized and unrealized gain 0.73 0.80 0.74 0.74 0.80 0.74
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.15 1.38 1.19 1.06 1.28 1.11
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.45) (0.54) (0.45) (0.35) (0.45) (0.37)
Net realized gains (0.37) (0.36) -- (0.37) (0.36) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.82) (0.90) (0.45) (0.72) (0.81) (0.37)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.95 $ 12.62 $ 12.14 $ 12.95 $ 12.61 $ 12.14
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 9.33% 11.59% 10.64%++ 8.62% 10.67% 9.90%++
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 227,674 $ 166,806 $ 90,938 $ 247,733 $ 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 3.24 4.79 4.88+ 2.50 3.96 4.14+
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 23% 0% 10% 23% 0%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(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.
55
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
..................................................................................................................................
For a share of each class of capital stock outstanding throughout each year ended January 31:
Class L Shares(1) Class Z Shares
--------------------------------------- ----------------------------------------
BALANCED PORTFOLIO 1999/(2)/ 1998 1997/(3)/ 1999/(2)/ 1998/(2)/ 1997/(4)/
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.61 $ 12.14 $ 11.40 $ 12.61 $ 12.13 $ 12.10
- ----------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income/(5)/ 0.32 0.46 0.37 0.45 1.11 0.00#
Net realized and unrealized gain 0.73 0.82 0.74 0.74 0.30 0.03
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.05 1.28 1.11 1.19 1.41 0.03
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.35) (0.45) (0.37) (0.48) (0.57) --
Net realized gains (0.37) (0.36) -- (0.37) (0.36) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.72) (0.81) (0.37) (0.85) (0.93) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.94 $ 12.61 $ 12.14 $ 12.95 $ 12.61 $ 12.13
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 8.53% 10.67% 9.90%++ 9.70 11.82% 0.25%++
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 34,809 $ 27,473 $ 19,968 $ 36,726 $ 2,919 $ 2
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35%+ 0.35% 0.35% 0.35%+
Net investment income 2.50 3.69 4.14+ 3.50 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) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) For the period from January 17, 1997 (inception date) to January 31, 1997.
(5) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
# Amount represents less than $0.01.
* Not annualized.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
56
<PAGE>
Financial Highlights (continued)
................................................................................
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------ -------------------------------------
CONSERVATIVE PORTFOLIO 1999/(1)/ 1998 1997/(2)/ 1999/(/1) 1998 1997/(2)/
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.17 $ 11.90 $ 11.46 $ 12.16 $ 11.89 $ 11.46
- ----------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income/(3)/ 0.58 0.73 0.53 0.52 0.66 0.48
Net realized and unrealized gain 0.11 0.63 0.43 0.10 0.64 0.42
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.69 1.36 0.96 0.62 1.30 0.90
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.58) (0.69) (0.52) (0.52) (0.63) (0.47)
Net realized gains (0.24) (0.40) -- (0.24) (0.40) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.82) (1.09) (0.52) (0.76) (1.03) (0.47)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.04 $ 12.17 $ 11.90 $ 12.02 $ 12.16 $ 11.89
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 5.85% 11.70% 8.57%++ 5.22% 11.21% 8.03%++
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 71,583 $ 51,233 $ 30,478 $ 64,983 $ 48,584 $ 28,297
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60% 0.60%+ 1.09% 1.10% 1.10%+
Net investment income 4.80 6.17 5.66+ 4.31 5.67 5.16+
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 28% 0% 5% 28% 0%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(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.
57
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
Class L Shares/(1)/
------------------------------------
CONSERVATIVE PORTFOLIO 1999/(2)/ 1998 1997/(3)/
- -----------------------------------------------------------------------------
Net Asset Value, Beginning of Year $12.16 $11.89 $11.46
- -----------------------------------------------------------------------------
Income From Operations:
Net investment income/(4)/ 0.53 0.69 0.48
Net realized and unrealized gain 0.10 0.62 0.42
- -----------------------------------------------------------------------------
Total Income From Operations 0.63 1.31 0.90
- -----------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.53) (0.64) (0.47)
Net realized gains (0.24) (0.40) --
- -----------------------------------------------------------------------------
Total Distributions (0.77) (1.04) (0.47)
- -----------------------------------------------------------------------------
Net Asset Value, End of Year $12.02 $12.16 $11.89
- -----------------------------------------------------------------------------
Total Return 5.29% 11.25% 8.08%++
- -----------------------------------------------------------------------------
Net Assets, End of Year (000's) $6,899 $5,386 $4,129
- -----------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05% 1.05% 1.05%+
Net investment income 4.32 5.72 5.21+
- -----------------------------------------------------------------------------
Portfolio Turnover Rate 5% 28% 0%
- -----------------------------------------------------------------------------
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(4) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
* Not annualized.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
58
<PAGE>
Financial Highlights (continued)
................................................................................
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------- -----------------------------------
Income Portfolio 1999/(1)/ 1998 1997/(2)/ 1999/(1)/ 1998 1997/(2)/
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.75 $11.53 $11.46 $11.76 $11.53 $11.46
- --------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(3)/ 0.69 0.76 0.63 0.63 0.70 0.58
Net realized and unrealized gain (loss) (0.14) 0.52 0.07 (0.15) 0.52 0.07
- --------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.55 1.28 0.70 0.48 1.22 0.65
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.69) (0.77) (0.63) (0.63) (0.70) (0.58)
Net realized gains (0.11) (0.29) -- (0.11) (0.29) --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.80) (1.06) (0.63) (0.74) (0.99) (0.58)
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.50 $11.75 $11.53 $11.50 $11.76 $11.53
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 4.88% 11.44% 6.39%++ 4.25% 10.93% 5.89%++
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $36,390 $29,574 $17,817 $34,497 $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 5.95 6.62 6.32+ 5.45 6.12 5.82+
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 28% 0% 0% 28% 0%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(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.
59
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
.................................................................................................................................
For a share of each class of capital stock outstanding throughout each year ended January 31:
Class L Shares
-------------------------------------------------
Income Portfolio 1999(2) 1998 1997(3)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 11.76 $ 11.53 $ 11.46
- --------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.64 0.71 0.59
Net realized and unrealized gain (loss) (0.15) 0.52 0.07
- --------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.49 1.23 0.66
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.64) (0.71) (0.59)
Net realized gains (0.11) (0.29) --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.75) (1.00) (0.59)
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 11.50 $ 11.76 $ 11.53
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 4.31% 10.98% 5.94%++
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 3,945 $ 3,568 $ 2,113
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05% 1.05% 1.05%+
Net investment income 5.47 6.17 5.87+
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 28% 0%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from February 5, 1996 (inception date) to January 31, 1997.
(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.
60
<PAGE>
Independent Auditors' Report
................................................................................
The Shareholders and Board of Directors of
Smith Barney Concert Allocation Series Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Global, High Growth, Growth, Balanced,
Conservative, and Income Portfolios ("Portfolios") of Smith Barney Concert
Allocation Series Inc. ("Fund") as of January 31, 1999, the related statements
of operations for the year then ended, and statements of changes in net assets
for each of the years in the two-year period then ended and financial highlights
for each of the years in the two-year period then ended and for the period from
February 5, 1996 (commencement of operations) to January 31, 1997, with respect
to the High Growth, Growth, Balanced, Conservative, and Income Portfolios, and
from March 9, 1998 (commencement of operations) to January 31, 1999, with
respect to the Global Portfolio. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1999, by correspondence with the custodian. As to securities
purchased but not yet received, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
aforementioned portfolios of Smith Barney Concert Allocation Series Inc. as of
January 31, 1999, and the results of their operations for the year then ended,
the changes in their net assets and financial highlights for the periods
referred to above, in conformity with generally accepted accounting principles.
KMPG LLP
New York, New York
March 8, 1999
61
<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 which includes all Portfolios; 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:
Percentage Percentage
Shares Voted of Shares Shares Voted of Shares
Name of Directors For Voted Against Voted
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.*
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
- --------------------------------------------------------------------------------
2,789,103.084 86.804% 71,944.707 2.239% 362,102.180 11.270%
- --------------------------------------------------------------------------------
* Broker non-votes constituted less than one percent of the shares voted.
62
<PAGE>
Tax Information (unaudited)
................................................................................
For Federal tax purposes the Portfolios hereby designates for the fiscal year
ended January 31, 1999:
. Percentages of ordinary dividends paid as qualifying for the corporate
dividends received deduction:
Global Portfolio 46.81%
High Growth Portfolio 45.26
Growth Portfolio 18.94
Balanced Portfolio 19.01
Conservative Portfolio 8.86
Income Portfolio 4.08
. Total long-term capital gain distributions paid:
Global Portfolio $ 15,769
High Growth Portfolio 21,767,356
Growth Portfolio 20,599,163
Balanced Portfolio 12,899,989
Conservative Portfolio 2,308,904
Income Portfolio 653,034
The following percentages of ordinary income dividends paid by the Portfolios
are derived from Federal obligations and may be exempt from taxation at the
state level:
Global Portfolio 0.01%
High Growth Portfolio 0.01
Growth Portfolio 4.60
Balanced Portfolio 12.43
Conservative Portfolio 10.46
Income Portfolio 13.43
63
<PAGE>
Directors
Walter E. Auch
Martin Brody
H. John Ellis
Armon E. Kamesar
Stephen E. Kaufman
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Thomas B. Stiles II
Vice President and
Investment Officer
R. Jay Gerken
Vice President and
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Manager
SSBC Fund Management Inc.
Distributors
CFBDS, 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, MF-2
New York, New York 10013
www.smithbarney.com
64
<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.
[LOGO OF SALOMON SMITH BARNEY APPEARS HERE]
Member NASD, SIPC
(C) 1998 Smith Barney Inc.
FD01278 3/99
