<PAGE>
SMITH BARNEY
ALLOCATION
SERIES
SEMI-ANNUAL REPORT | JULY 31, 2000
GLOBAL PORTFOLIO
HIGH GROWTH PORTFOLIO
GROWTH PORTFOLIO
BALANCED PORTFOLIO
CONSERVATIVE PORTFOLIO
INCOME PORTFOLIO
[LOGO OF SMITH BARNEY]
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NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
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<PAGE>
Table of Contents
Letter to Shareholders ....................................................... 1
Smith Barney Allocation Series Portfolios
Global Portfolio ........................................................ 6
High Growth Portfolio ...................................................11
Growth Portfolio ........................................................16
Balanced Portfolio ......................................................21
Conservative Portfolio ..................................................27
Income Portfolio ........................................................33
Schedules of Investments .....................................................38
Statements of Assets and Liabilities .........................................44
Statements of Operations .....................................................45
Statements of Changes in Net Assets ..........................................46
Notes to Financial Statements ................................................48
Financial Highlights .........................................................53
Directors and Officers .......................................................72
<PAGE>
Dear Shareholders:
[PHOTO]
Heath B. McLendon
Chairman
Smith Barney Allocation Series
We are pleased to present the semi-annual report for the Smith Barney Allocation
Series Inc. (formerly known as the Smith Barney Concert Allocation Series) --
Global, High Growth, Growth, Balanced, Conservative and Income Portfolios
("Portfolios") for the period ended July 31, 2000. Please note that this report
has been prepared for the information of shareholders of the Smith Barney
Allocation Series and is not authorized for use unless preceded or accompanied
by a current prospectus. The prospectus includes information regarding the
Portfolios' sales charges, expenses, objectives, policies, management,
performance and other information. Please read it carefully before you invest or
send money.
One theme we have stressed to shareholders since we introduced the Portfolios is
that successful investing requires discipline and patience. Investors should
maintain a long-term perspective and develop a broadly diversified portfolio
made up of different investments. Because no two investors are alike, each has
different short- and long-term investment goals, tolerances for risk and
investment time horizons. In volatile markets, a commitment to a disciplined
plan is, in our view, a prudent course of action.
With economic growth robust, interest rates stable and inflationary pressures
apparently in check, many investors may not feel compelled to alter their
portfolio mixes. Yet, when times are good, it may make sense for investors to
contact their investment professional and re-examine their current asset
allocation to see if it still meets their age, tolerance for risk and investment
time horizon.
Our mission in creating the Smith Barney Allocation Series has remained the
same: to maximize reward potential and minimize risk through diversification by
investing in a wide range of asset classes and investment styles. As you know,
unlike ordinary mutual funds, the 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 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 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.
1
<PAGE>
The chart below shows the performance of the six Portfolios' Class A shares
without and with sales charges for the period under review. The performance and
current holdings of each Portfolio are discussed in greater detail on the
following pages. Additional performance information for the six Portfolios can
be found on pages 8 through 37.
The Performance of Smith Barney Allocation Series Portfolios
Class A Share Total Returns for the Six Months Ended 7/31/00
Class A without Class A with
sales charges* sales charges**
--------------- ----------------
Global Portfolio (4.99)% (9.75)%
High Growth Portfolio 1.52 (3.53)
Growth Portfolio 0.75 (4.31)
Balanced Portfolio 4.56 (0.65)
Conservative Portfolio 4.22 (0.47)
Income Portfolio 3.46 (1.19)
Special Shareholder Notice
On June 13, 2000, the Board of Directors of Smith Barney Allocation Series
approved management's decision to rename the Smith Barney Concert Allocation
Series, the Smith Barney Allocation Series. Please note that this name change,
effective September 11, 2000, represents no change to any Portfolio's investment
objective, policies or management, but rather, reflects a change in brand name
only.
The U.S. Markets
During the period, the U.S. stock market exhibited plenty of volatility, but
little upward progress. After peaking in March, many stocks then gave up their
gains and ended up largely unchanged from the beginning of the period. Large
capitalization stocks, as measured by the Standard & Poor's 500 Composite Stock
Index ("S&P 500 Index"),1 were up 3.2% for the period. The over-the-counter
market, a mix of technology and smaller stocks, declined 4.4% as measured by the
Nasdaq Composite Index2 for the same period. The mediocre performance of the
stock market occurred despite strong corporate earnings, which historically tend
to support higher stock prices. We think that the historic rise in the price of
many shares during the last six months has discounted some of this good news.
---------
* 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. The shorter the time
period of your investment, the greater the possibility of loss. Portfolio
shares are not deposits or obligations of, or insured or guaranteed by, the
U.S. government, any financial institution, the Federal Deposit Insurance
Corporation, or any other agency, entity, or person. These total return
figures assume reinvestment for all dividends, but do not reflect the
deduction of a sales charge for each Portfolio's Class A shares.
** These total return figures assume reinvestment for 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.
1 The S&P 500 Index is a market capitalization-weighted measure of 500 widely
held common stocks. An investor cannot invest directly in an index.
2 The Nasdaq Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market. An investor cannot invest directly in an index.
2
<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 Brothers Government/Corporate Bond Index and Morgan Stanley Capital
International EAFE Index
(July 31, 1990 - July 31, 2000)
(unaudited)
[GRAPH]
Standard & Salomon Smith Lehman Brothers
Poor's 500 Barney World MSCI Government/
Composite Government EAFE Corporate
Stock Index Bond Index Index Bond Index
7/90 10,000 10,000 10,000 10,000
1/91 9,839 10,583 8,866 10,561
1/92 12,068 11,764 9,425 11,948
1/93 13,342 12,931 8,457 13,331
1/94 15,056 14,321 12,160 14,704
1/95 15,135 13,967 11,620 14,247
1/96 20,980 16,420 13,494 16,772
1/97 26,503 17,832 13,753 17,172
1/98 33,634 18,849 15,169 19,091
1/99 44,565 20,870 17,355 20,756
1/00 49,170 20,950 20,695 20,160
7/00 50,743 22,019 20,312 21,231
The Standard & Poor's 500 Composite Stock Index 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 ("MSCI") EAFE Index consists of the equity
total returns for Europe, Australasia and the Far East. These indices are
unmanaged and are not subject to the same management and trading expenses as a
mutual fund. An investor cannot invest directly in an index. Past performance is
not indicative of future results.
Bond investors enjoyed positive returns, as many investors concluded that the
Federal Reserve Board ("Fed") may be done with its recent round of interest rate
hikes. Given the generally flat stock prices during the period, many bonds
outperformed stocks. The performance of bonds is in marked contrast to the last
several reporting periods.
Growth stocks/3/ outperformed value stocks/4/ and large capitalization stocks
outperformed small capitalization stocks during the period. For the most part,
the U.S. stock market has continued to reward large, faster-growing companies,
despite their generally higher valuations.
---------------
3 Growth stocks are shares of companies with the potential for faster-than-
average growth within their industries.
4 Value stocks are the shares of those companies whose shares are considered to
be inexpensive relative to their asset values or earning power.
3
<PAGE>
International Stock Markets
International growth stocks significantly underperformed international value
stocks by almost 10% so far in 2000. Rising U.S. interest rates raised
investors' concerns, especially about telecommunications and technology stocks.
The highly visible retrenchment of the Internet stocks exacerbated technology
stock selling.
Further weakness contributed to the decline of several major currencies versus
the U.S. dollar. Growth stocks, especially in Asia, suffered significant selling
pressure as investors switched to defensive stocks such as health care, consumer
nondurables, financial services and utility stocks.
In our opinion, Europe continues to have strengthening fundamentals despite
lackluster returns for the first half of the year. Many European managers are
restructuring and reengineering their companies, creating economies of scale and
potentially boosting return on capital employed. The fall of the euro5 reduced
returns, but that currency may have reached its bottom and has started to show
signs of recovering versus the U.S. dollar. Merger and acquisition activity
continues to be vibrant throughout Europe.
Our outlook in Asia has become a bit more guarded, as continued Asian recovery
to some extent depends on export volumes to the U.S. Efforts to slow the growth
of the U.S. economy negatively impacted Asia's more interest rate sensitive
stock markets, most notably in Hong Kong and Singapore, which were also affected
by investment portfolio rebalancing due to international benchmark revisions.
Japan continues to be problematic, with efforts to restructure the financial and
corporate sectors resulting in a slowdown in domestic demand.
International Bond Markets
As a result of interest rate increases by many of the world's central banks,
investing in bonds from countries other than the U.S. remained challenging for
many investors. In addition, the historically unique circumstance where the U.S.
government is buying back U.S. Treasury securities in order to reduce federal
debt has created a situation where U.S. Treasury yields are low compared to the
income return available from other types of bonds.
Given the potential for a slowdown in U.S. economic growth -- due in large part
to rising short-term interest rates -- many bond investors have been buying
higher quality instruments such as U.S. Treasury notes. As a result, the
high-yield bond market was under pressure during the period.
Looking Ahead
In our view, the technology sector may continue to be the dominant force
influencing the performance of the world's financial markets for the foreseeable
future. However, we also believe that many compelling investment opportunities
still exist across many companies and industries.
Despite solid economic fundamentals such as low inflation, we think the growth
of the U.S. economy has slowed from its recent overheated pace. We think the
Fed, after implementing a series of interest rate increases, may have succeeded
in guiding the U.S. economy towards a "soft landing."
---------
5 The euro is the single currency of the European Monetary Union that was
adopted by Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the
Netherlands, Austria, Portugal and Finland on January 1, 1999.
4
<PAGE>
Yet, despite a favorable economy, the U.S. stock market remains highly volatile.
We think this market volatility may continue over the near term, as many
investors address a number of issues. One primary concern is the possibility of
further interest rate increases by the Fed. We believe the recent round of Fed
rate increases may be complete, at least for now, but not all investors are
convinced.
Thank you for investing in the Smith Barney Allocation Series Inc. We look
forward to helping you pursue your financial goals in the future.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
August 29, 2000
5
<PAGE>
THE GLOBAL PORTFOLIO
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Target Asset Allocation
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[GRAPH]
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 is the most aggressively managed Portfolio of the Smith
Barney Allocation Series and is designed for investors who are willing to
tolerate higher short-term market fluctuations for potential long-term gains.
Please be aware that, unlike the other five Portfolios in the Smith Barney
Allocation Series, the Global Portfolio is designed to further diversify an
investor's existing investment portfolio and is not intended to be a complete
investment program. (Please note that international investing involves certain
risks, such as currency fluctuation, differing accounting and financial
standards and the potential for adverse political developments, among others.)
--------------------------------------------------------------------------------
Index Comparison*
--------------------------------------------------------------------------------
S&P 500** 3.20%
Russell 2000(R)*** 1.35%
MSCI EAFE+ (1.85)%
MSCI Emerging Markets++ (13.24)%
* The chart above represents total returns for the six months ended July 31,
2000.
** The S&P 500 Index is a market capitalization-weighted measure of 500
widely held common stocks. Please note that an investor cannot invest directly
in an index.
*** The Russell 2000(R) Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, which represents approximately 8% of the
total market capitalization of the Russell 3000 Index. Please note that an
investor cannot invest directly in an index.
+ The MSCI EAFE Index is an unmanaged index of common stocks of companies
located in Europe, Australasia and the Far East. Please note that an investor
cannot invest directly in an index.
++ The MSCI Emerging Markets Index is a broad-based unmanaged index of emerging
market companies with an average size of$800 million and the index performance
of emerging markets in South America, South Africa, Asia and Eastern Europe.
Please note that an investor cannot invest directly in an index.
Portfolio Update
The Smith Barney Allocation Series Global Portfolio's ("Portfolio") Class A
shares, without and with sales charges, generated negative returns of 4.99% and
9.75%, respectively, for the six months ended July 31, 2000. The chart that
appears on page 10 compares the Portfolio's performance to broad-based indices
that track four of the asset classes represented by the Portfolio. Past
performance is not indicative of future results.
The period was characterized by increased levels of stock market volatility
worldwide, seen primarily in the performance of many technology stocks. This
volatility was, in our view, exacerbated by the increasing presence of investors
who largely based their investment decisions on market momentum rather than
fundamentals. Investors' enthusiasm for technology stocks later gave way to a
sharp downward move in many technology stocks, as many investors began to
reassess the high valuations assigned to many high-technology companies in this
sector.
As the period progressed, the prognosis for global economic growth improved.
From many perspectives, the outlook for the global economy is the strongest seen
in more than a decade. The U.S. economy has consistently surpassed forecasts,
and is now witnessing the longest expansion in modern history. The U.S. economy
has dramatically benefited from the rapid expansion of technology, which has
largely contributed to its unprecedented growth rate in a time of low inflation.
Additionally, the European and Asian economic recoveries have, we believe, set
the stage for robust earnings gains in many industries. Yet, concerns over
accelerating price increases have resulted in a number of interest rate
increases around the world.
The new European currency, the euro,1 continued to fall sharply during the
period versus the U.S. dollar and Japanese yen, despite efforts to stabilize the
currency. The euro has confounded most economists with its continued weakness.
The euro's valuation is making many European stocks and bonds relatively more
attractive to investors and its weakness helped accelerate an export-led
recovery throughout Western Europe.
The Asian markets have shown a wide range of performance in the period, with the
traditionally U.S. interest rate sensitive markets (e.g. Hong Kong) suffering
sharp declines recently as the Fed raised rates. The Japanese stock market has
been challenging so far in 2000 after a strong close to 1999. Still, evidence is
growing which indicates to us that a modest Japanese economic rebound may occur
in the months ahead.
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 Smith Barney Allocation Series' Board of Directors.
---------
1 The euro is the single currency of the European Monetary Union that was
adopted by Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the
Netherlands, Austria, Portugal and Finland on January 1, 1999.
6
<PAGE>
The Allocation Series Global Portfolio Breakdown (as of 7/31/00) (unaudited)
[GRAPH]
25.32% Smith Barney World Funds, Inc.- International All Cap Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Serco Group PLC
Nokia Oyj
Capita Group PLC
Hutchinson Whampoa Ltd.
Tomra Systems
24.95% Smith Barney Investment Funds Inc.- Smith Barney Hansberger Global Value
Fund
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Top 5 Holdings:
XL Capital Ltd.
Electronic Data Systems
NCR Corp.
American Home Products
Bank of America Corp.
14.96% Smith Barney Investment Trust- Smith Barney Large Capitalization Growth
Fund
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Top 5 Holdings:
Intel Corp.
Pfizer, Inc.
Texas Instruments Inc.
Merrill Lynch & Co., Inc.
The Coca-Cola Co.
10.03% Smith Barney Investment Funds Inc.- Smith Barney Hansberger Small Cap
Value Fund
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Top 5 Holdings:
Alpharma, Inc.
Voicestream Wireless Co.
Iomega Corp.
NCR Corp.
Partner Communications
4.69% Smith Barney Investment Trust- Smith Barney Mid Cap Core Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Sepracor Inc.
Fiserv, Inc.
Electronic Arts Inc.
AMBAC Financial Group, Inc.
SPX Corp.
4.90% Smith Barney World Funds, Inc.- Emerging Markets Portfolio
--------------------------------------------------------------------------------
Top 5 Holdings:
Telefonos De Mexico S.A.
SK Telecom Co. Ltd.
Hon Hai Precision Industry Co. Ltd.
Grupo Televisa SA GDR
Taiwan Semiconductor Manufacturing
5.17% Smith Barney Funds, Inc.- Large Cap Value Fund
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Top 5 Holdings:
Exxon Mobil Corp.
The Chase Manhattan Corp.
The Williams Cos., Inc.
Marsh & McLennan Cos., Inc.
Mellon Financial Corp.
9.98% Smith Barney Small Cap Core Fund, Inc.
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Top 5 Holdings:
National Computer Systems, Inc.
Plexus Corp.
Affiliated Managers Group, Inc.
Sanmina Corp.
Amerisource Health Corp.
7
<PAGE>
THE GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $13.67 $12.73 $0.00 $0.25 (4.99)%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 11.16 13.67 0.20 0.04 24.57
------------------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/99 11.40 11.16 0.04 0.01 (1.60)+
====================================================================================================================================
Total $0.24 $0.30
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class B Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $13.65 $12.67 $0.00 $0.25 (5.33)%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 11.15 13.65 0.09 0.04 23.59
------------------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/99 11.40 11.15 0.00 0.01 (2.16)+
====================================================================================================================================
Total $0.09 $0.30
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class L Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $13.64 $12.66 $0.00 $0.25 (5.33)%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 11.14 13.64 0.09 0.04 23.61
------------------------------------------------------------------------------------------------------------------------------------
Inception*-1/31/99 11.40 11.14 0.00 0.01 (2.25)+
====================================================================================================================================
Total $0.09 $0.30
====================================================================================================================================
</TABLE>
It is the Portfolio's policy to distribute dividends and capital gains, if any,
annually.
8
<PAGE>
Average Annual Total Returns
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Without Sales Charges(1)
------------------------------------------------------------------------------
Class A Class B Class L
====================================================================================================================================
<S> <C> <C> <C>
Six Months Ended 7/31/00+ (4.99)% (5.33)% (5.33)%
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 8.18 7.38 7.29
------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/00 6.57 5.81 5.78
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
With Sales Charges(2)
------------------------------------------------------------------------------
Class A Class B Class L
====================================================================================================================================
<S> <C> <C> <C>
Six Months Ended 7/31/00+ (9.75)% (9.97)% (7.21)%
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 2.78 2.38 5.24
------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/00 4.31 4.64 5.32
====================================================================================================================================
</TABLE>
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 7/31/00) 16.46%
--------------------------------------------------------------------------------
Class B (Inception* through 7/31/00) 14.48
--------------------------------------------------------------------------------
Class L (Inception* through 7/31/00) 14.40
================================================================================
(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.
* Inception date for Class A, B and L shares is March 9, 1998.
9
<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 -- July 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Global Global Global Standard & MSCI
Portfolio- Portfolio- Portfolio- Poor's 500 Russell MSCI Emerging
Class A Class B Class L Composite 2000 EAFE Markets
Shares Shares Shares Stock Index Index Index 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
7/98 9,300 9,275 9,565 10,709 9,142 10,522 8,154
1/99 9,348 9,295 9,577 12,318 9,362 10,748 7,292
7/99 10,228 10,262 10,551 12,872 9,820 11,541 10,052
1/00 11,646 11,692 11,958 13,591 11,023 12,817 12,713
7/31/2000 11,064 11,148 11,321 14,026 11,172 12,580 11,185
</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
July 31, 2000. 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 ("MSCI")
EAFE Index 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. An investor cannot invest directly in an index.
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.
10
<PAGE>
THE HIGH GROWTH PORTFOLIO
--------------------------------------------------------------------------------
Target Asset Allocation
--------------------------------------------------------------------------------
[GRAPH]
10% Bond Funds
90% Stock Funds
The High Growth Portfolio seeks capital appreciation by investing a high
percentage of its assets in aggressive equity funds.
--------------------------------------------------------------------------------
The High Growth Portfolio seeks capital appreciation. Among the Portfolios of
the Smith Barney Allocation Series, the High Growth Portfolio invests a large
portion of its assets in aggressive stock 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** 3.20%
Russell 2000(R)*** 1.35%
MSCI EAFE+ (1.85)%
Salomon Smith Barney
High Yield Market++ 0.48%
--------------------------------------------------------------------------------
* The chart above represents total returns for the six months ended July 31,
2000.
** The S&P 500 Index is a market capitalization-weighted measure of 500 widely
held common stocks. Please note that an investor cannot invest directly in an
index.
*** The Russell 2000(R) Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, which represents approximately 8% of the
total market capitalization of the Russell 3000 Index. Please note that an
investor cannot invest directly in an index.
+ The MSCI EAFE Index is an unmanaged index of common stocks of companies
located in Europe, Australasia and the Far East. Please note that an investor
cannot invest directly in an index.
++ The Salomon Smith Barney High Yield Market Index is a broad-based unmanaged
index of high yield securities. Please note that an investor cannot invest
directly in an index.
--------------------------------------------------------------------------------
Portfolio Update
--------------------------------------------------------------------------------
The Smith Barney Allocation Series High Growth Portfolio's ("Portfolio") Class A
shares, without and with sales charges, returned 1.52% and a negative 3.53%,
respectively for the six months ended July 31, 2000. The chart that appears on
page 15 compares the Portfolio's performance to broad-based indices that track
four of the asset classes represented in the Portfolio. Past performance is not
indicative of future results.
Several major stock and bond markets hit record highs in 2000, but have since
backed off from their highs. The first half of 2000 was characterized by
increased levels of stock market volatility worldwide, predominantly in the
technology sector. In fact, the tech-laden Nasdaq Composite Index1 experienced
four declines of 10% or more during the period.
In 2000, the Federal Reserve Board ("Fed") raised interest rates three times
(February 2, 2000, March 21, 2000 and May 16, 2000) in an effort to slow the
growth of the robust U.S. economy. While rising interest rates often lead
historically to falling stock prices, the economy (and the bond and stock
markets) appeared to have absorbed the Fed's rate hikes. While consumer
confidence has slipped somewhat so far this year, consumer spending continues to
increase as evidenced by recent economic data. Unemployment remains near its
30-year low. Despite the possibility of future rate hikes this year by the Fed,
we remain optimistic that the growth of the U.S. economy should continue for the
near term. (Of course, no guarantees can be given that our expectations will be
met.)
--------------------------------------------------------------------------------
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 Smith Barney Allocation Series' Board of Directors.
---------
1 The Nasdaq Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market. An investor cannot invest directly in an index.
11
<PAGE>
The Allocation Series High Growth Portfolio Breakdown(as of 7/31/00) (unaudited)
[GRAPH]
19.49% Smith Barney Small Cap Core Fund, Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
National Computer Systems, Inc.
Plexus Corp.
Affiliated Managers Group, Inc.
Sanmina Corp.
Amerisource Health Corp.
11.92% Smith Barney Aggressive Growth Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
Tyco International Ltd.
Intel Corp.
Forest Labs Inc.
IDEC Pharmaceuticals
Lehman Brothers Holdings
10.16% Smith Barney Investment Trust-Smith Barney
Large Capitalization Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Intel Corp.
Pfizer, Inc.
Texas Instruments Inc.
Merrill Lynch & Co., Inc.
The Coca-Cola Co.
9.67% Smith Barney Investment Funds Inc.-Smith Barney
Hansberger Global Value Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
XL Capital Ltd.
Electronic Data Systems NCR Corp.
American Home Products Bank of America Corp.
9.56% Smith Barney World Funds, Inc.-International All Cap Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Serco Group PLC
Nokia Oyj
Capita Group PLC
Hutchinson Whampoa Ltd.
Tomra Systems
9.50% Smith Barney Investment Funds Inc.-Smith Barney Peachtree Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
General Electric Co.
Pharmacia Corp.
Sun Microsystems, Inc.
Microsoft Corp.
Providian Corp.
9.37% Smith Barney Income Funds-Smith Barney High Income Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
United International Holdings
Allied Waste North America, Inc.
United Pan Europe Communications, N.V.
Exodus Communications, Inc.
Nextel Communications, Inc.
4.65% Smith Barney Investment Funds Inc.-Smith Barney Small Cap Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Calpine Corp.
Natural Microsystems Corp.
Transwitch Corp.
Burr-Brown corp.
MRV Communications Inc.
4.78% Smith Barney Equity Funds-Smith Barney Large Cap Blend Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
General Electric Co.
Intel Corp.
Cisco Systems Inc.
Exxon Mobil Corp.
Microsoft Corp.
4.85% Smith Barney Funds, Inc.- Large Cap Value Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Exxon Mobil Corp.
The Chase Manhattan Corp.
The Williams Cos., Inc.
Marsh & McLennan Cos., Inc.
Mellon Financial Corp.
6.05% Smith Barney Investment Trust-Smith Barney Mid Cap Core Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Sepracor Inc.
Fiserv, Inc.
Electronic Arts Inc.
AMBAC Financial Group, Inc.
SPX Corp.
12
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $16.81 $16.67 $0.04 $0.36 1.52%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 14.86 16.81 0.53 0.35 18.97
------------------------------------------------------------------------------------------------------------------------------------
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 $0.98 $1.56
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class B Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $16.74 $16.58 $0.00 $0.36 1.19%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 14.81 16.74 0.39 0.35 18.01
------------------------------------------------------------------------------------------------------------------------------------
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 $0.51 $1.56
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class L Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $16.75 $16.58 $0.00 $0.36 1.13%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 14.81 16.75 0.39 0.35 18.08
------------------------------------------------------------------------------------------------------------------------------------
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 $0.51 $1.56
====================================================================================================================================
</TABLE>
It is the Portfolio's policy to distribute dividends and capital gains, if any,
annually.
13
<PAGE>
Average Annual Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
----------------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 7/31/00+ 1.52% 1.19% 1.13%
--------------------------------------------------------------------------------
Year Ended 7/31/00 13.87 13.00 12.93
--------------------------------------------------------------------------------
Inception* through 7/31/00 12.99 12.08 12.08
================================================================================
With Sales Charges(2)
----------------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 7/31/00+ (3.53)% (3.76)% (0.87)%
--------------------------------------------------------------------------------
Year Ended 7/31/00 8.21 8.00 10.78
--------------------------------------------------------------------------------
Inception* through 7/31/00 11.70 11.93 11.82
================================================================================
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 7/31/00) 72.98%
--------------------------------------------------------------------------------
Class B (Inception* through 7/31/00) 66.84
--------------------------------------------------------------------------------
Class L (Inception* through 7/31/00) 66.82
--------------------------------------------------------------------------------
(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.
* Inception date for Class A, B and L shares is February 5, 1996.
14
<PAGE>
Growth of $10,000 Invested in Class A, B and L Shares of the High Growth
Portfolio vs. the Standard & Poor's 500 Composite Stock Index, Russell 2000
Index, Morgan Stanley Capital International EAFE Index and Salomon Smith Barney
High Yield Market Index
--------------------------------------------------------------------------------
February 5, 1996 - July 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
High Growth High Growth High Growth Standard & Salomon
Portfolio- Portfolio- Portfolio- Poor's 500 Russell MSCI Smith Barney
Class A Class B Class L Composite 2000 EAFE High Yield
Shares Shares Shares Stock Index Index Index Market Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,500 10,000 9,896 10,000 10,000 10,000 10,000
1/97 10,549 10,491 10,786 12,630 11,897 10,220 11,049
1/98 11,419 11,409 11,695 16,026 14,047 11,272 12,693
1/99 13,607 13,671 13,825 21,235 14,099 12,915 13,050
1/00 16,187 16,288 16,324 23,429 16,601 15,400 12,973
7/31/2000 16,434 16,584 16,509 24,179 16,825 15,115 13,035
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 31, 2000. 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 ("MSCI")
EAFE Index 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. An investor cannot invest directly in an index.
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.
15
<PAGE>
THE GROWTH PORTFOLIO
--------------------------------------------------------------------------------
Target Asset Allocation
--------------------------------------------------------------------------------
[GRAPH]
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 seeks long-term growth of capital. Among the Portfolios of
the Smith Barney Allocation Series, the Growth Portfolio invests the highest
percentage of its assets in large-capitalization stock mutual funds to provide
growth. The Portfolio's stock allocation also includes funds that invest in
small- and mid-cap stocks and international securities. In addition, a
significant portion of the Growth Portfolio is allocated to bonds to help reduce
potential volatility.
--------------------------------------------------------------------------------
Index Comparison*
--------------------------------------------------------------------------------
S&P 500** 3.20%
Russell 2000(R)*** 1.35%
MSCI EAFE+ (1.85)%
Lehman Brothers Government/
Corporate Bond++ 5.31%
--------------------------------------------------------------------------------
* The chart above represents total returns for the six months ended July 31,
2000.
** The S&P 500 Index is a market capitalization-weighted measure of 500 widely
held common stocks. Please note that an investor cannot invest directly in an
index.
*** The Russell 2000(R) Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, which represents approximately 8% of the
total market capitalization of the Russell 3000 Index. Please note that an
investor cannot invest directly in an index.
+ The MSCI EAFE Index is an unmanaged index of common stocks of companies
located in Europe, Australasia and the Far East. Please note that an investor
cannot invest directly in an index.
++ The Lehman Brothers Government/Corporate Bond Index tracks the performance of
the overall bond market and is a broad measure of the performance of government
and corporate fixed-rate debt issues. Please note that an investor cannot invest
directly in an index.
--------------------------------------------------------------------------------
Portfolio Update
--------------------------------------------------------------------------------
The Smith Barney Allocation Series Growth Portfolio's ("Portfolio") Class A
shares, without and with sales charges, returned 0.75% and a negative 4.31%,
respectively for the six months ended July 31, 2000. The chart that appears on
page 20 compares the Portfolio's performance to broad-based indices that track
four of the asset classes represented in the Portfolio. Past performance is not
indicative of future results.
Even though the performance of the stock market was negative (as measured by the
S&P 500 Index) for the period, many compelling investment opportunities
continued to exist. Initially, the predominately speculative momentum market of
1999 continued in 2000, peaking during the second week of March.
The Federal Reserve Board's ("Fed") continued increases in interest rates then
started to be felt by most investors, leading to a dramatic sell-off, as
witnessed by the dramatic decrease of the tech-laden Nasdaq Composite Index1
through May. At the same time, many oversold "Old Economy" stocks rallied as
money rotated from the Internet and biotech stocks into areas such as consumer
staples. By the end of the half of the reporting period, most of the markets
recovered so that most broad indices were only down modestly. ("Old Economy"
stocks refer to the shares of more established, "blue-chip" companies.)
One way to describe what happened is that "investment gravity" finally took hold
of many stocks that were trading at what we deemed to be unsustainable levels.
The sell-off in many technology stocks spread to most of the dominant and
overvalued large-cap growth stocks. As a result, it appeared that once again,
corporate earnings were a factor driving most investors' decisions. However, by
the end of the period, investor psychology appeared to somewhat change, with
several investors once again favoring future potential as a premium over proven
ability.
We think that over time the leading established companies that embrace today's
new technologies may emerge as the dominant and most profitable companies in the
future. On the other hand, we also believe that most investors may no longer
favor those "pure-play" Internet companies that cannot demonstrate their ability
to transform themselves into growth companies with sufficient profitability to
support their underlying stock prices.
--------------------------------------------------------------------------------
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 Smith Barney Allocation Series' Board of Directors.
---------
1 The Nasdaq Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market. Please note that an investor cannot invest directly in an index.
16
<PAGE>
The Allocation Series Growth Portfolio Breakdown(as of 7/31/00) (unaudited)
[GRAPH]
10.17% Smith Barney World Funds, Inc.- International All Cap Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Serco Group PLC
Nokia Oyj
Capita Group PLC
Hutchinson Whampoa Ltd.
Tomra Systems
9.89% Smith Barney Investment Funds Inc.- Smith Barney Peachtree Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Electric Co.
Pharmacia Corp.
Sun Microsystems, Inc.
Microsoft Corp.
Providian Corp.
9.78% Smith Barney Investment Funds Inc.- Smith Barney
Investment Grade Bond Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
U.S. Treasury Bonds
U.S. Treasury Notes
FHLMC Gold 8% 30 Year
IBM Corp.
United Technology Corp.
9.77% Smith Barney Investment Funds Inc.- Smith Barney
Government Securities Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
GNMA 8.5% 30 Year
U.S. Treasury Strips
FNMA 8.5% 30 Year
GNMA 7.5% 30 Year
9.38% Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
General Electric Co.
Intel Corp.
Cisco Systems Inc.
Exxon Mobil Corp.
Microsoft Corp.
9.31% Smith Barney Funds, Inc.- Large Cap Value Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Exxon Mobil Corp.
The Chase Manhattan Corp.
The Williams Cos., Inc.
Marsh & McLennan Cos., Inc.
Mellon Financial Corp.
9.03% Smith Barney Income Funds - Smith Barney High Income Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
United International Holdings
Allied Waste North America, Inc.
United Pan Europe Communications, N.V.
Exodus Communications, Inc.
Nextel Communications, Inc.
4.11% Smith Barney Investment Funds Inc. - Smith Barney Small Cap Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Calpine Corp.
Natural Microsystems Corp.
Transwitch Corp.
Burr-Brown Corp.
MRV Communications Inc.
7.07% Smith Barney Investment Trust - Smith Barney Mid Cap Core Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Sepracor Inc.
Fiserv, Inc.
Electronic Arts Inc.
AMBAC Financial Group, Inc.
SPX Corp.
4.91% Smith Barney Small Cap Core Fund, Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
National Computer Systems, Inc.
Plexus Corp.
Affiliated Managers Group, Inc.
Sanmina Corp.
Amerisource Health Corp.
5.21% Smith Barney Investment Trust - Smith Barney
Large Capitalization Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Intel Corp.
Pfizer, Inc.
Texas Instruments Inc.
Merrill Lynch & Co., Inc.
The Coca-Cola Co.
5.40% Smith Barney Investment Funds Inc.- Smith Barney
Hansberger Global Value Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
XL Capital Ltd.
Electronic Data Systems
NCR Corp.
American Home Products
Bank of America Corp.
5.97% Smith Barney Aggressive Growth Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
Tyco International Ltd.
Intel Corp.
Forest Labs Inc.
IDEC Pharmaceuticals
Lehman Brothers Holdings
17
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $15.11 $14.69 $0.03 $0.50 0.75%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 14.43 15.11 0.49 0.35 10.53
------------------------------------------------------------------------------------------------------------------------------------
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 $1.42 $1.70
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class B Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $15.18 $14.74 $0.00 $0.50 $0.39%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 14.48 15.18 0.34 0.35 9.61
------------------------------------------------------------------------------------------------------------------------------------
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 $0.90 $1.70
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class L Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $15.19 $14.74 $0.00 $0.50 0.33%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 14.48 15.19 0.34 0.35 9.68
------------------------------------------------------------------------------------------------------------------------------------
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 $0.90 $1.70
====================================================================================================================================
</TABLE>
It is the Portfolio's policy to distribute dividends and capital gains, if any,
annually.
18
<PAGE>
Average Annual Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
----------------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 7/31/00+ 0.75% 0.39% 0.33%
--------------------------------------------------------------------------------
Year Ended 7/31/00 8.95 8.08 8.08
--------------------------------------------------------------------------------
Inception* through 7/31/00 11.15 10.32 10.32
================================================================================
With Sales Charges(2)
----------------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 7/31/00+ (4.31)% (4.46)% (1.61)%
--------------------------------------------------------------------------------
Year Ended 7/31/00 3.47 3.08 5.98
--------------------------------------------------------------------------------
Inception* through 7/31/00 9.89 10.17 10.06
================================================================================
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 7/31/00) 60.73%
--------------------------------------------------------------------------------
Class B (Inception* through 7/31/00) 55.42
--------------------------------------------------------------------------------
Class L (Inception* through 7/31/00) 55.40
--------------------------------------------------------------------------------
(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.
* Inception date for Class A, B and L shares is February 5, 1996.
19
<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 Brothers
Government/Corporate Bond Index
--------------------------------------------------------------------------------
February 5, 1996 - July 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Growth Growth Growth Standard & Lehman Brothers
Portfolio- Portfolio- Portfolio Poor's 500 Russell MSCI Government/
Class A Class B Class L Composite 2000 EAFE Corporate
Shares Shares Shares Stock Index Index Index Bond Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,500 10,000 9,896 10,000 10,000 10,000 10,000
1/97 10,552 10,532 10,817 12,630 11,897 10,220 9,118
1/98 11,800 11,738 12,109 16,026 14,047 11,272 10,136
1/99 13,712 13,823 13,975 21,235 14,099 12,915 11,020
1/00 15,155 15,281 15,328 23,429 16,601 15,400 10,704
7/31/2000 15,269 15,442 15,378 24,179 16,825 15,115 11,272
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 31, 2000. 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 ("MSCI")
EAFE Index is a composite index that consists of equity total returns for
Europe, Australia and the Far East. The Lehman Brothers 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. An
investor cannot invest directly in an index.
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.
20
<PAGE>
THE BALANCED PORTFOLIO
--------------------------------------------------------------------------------
Target Asset Allocation
--------------------------------------------------------------------------------
[GRAPH]
50% Bond Funds
50% Stock Funds
The Balanced Portfolio seeks a balance of capital growth and income by placing
equal emphasis on funds investing in stocks and bonds.
--------------------------------------------------------------------------------
The Balanced Portfolio 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 stock and bond
mutual funds. The stock funds are primarily large-capitalization,
dividend-paying funds. The bond 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** 3.20%
Lehman Brothers Government/Corporate Bond*** 5.31%
Salomon Smith Barney One-Year Treasury Bill+ 3.32%
Salomon Smith Barney World Government Bond++ 5.10%
--------------------------------------------------------------------------------
* The chart above represents total returns for the six months ended July 31,
2000.
** The S&P 500 Index is a market capitalization-weighted measure of 500 widely
held common stocks. Please note that an investor cannot invest directly in an
index.
*** The Lehman Government/Corporate Bond Index tracks the performance of the
overall bond market and is a broad measure of the performance of government and
corporate fixed-rate debt issues. Please note that an investor cannot invest
directly in an index.
+ The Salomon Smith Barney One-Year Treasury Bill Index consists of one One-Year
United States Treasury Bill whose return is tracked until its maturity. Please
note that an investor cannot invest directly in an index.
++ 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. Please note that an investor cannot invest
directly in an index.
--------------------------------------------------------------------------------
Portfolio Update
--------------------------------------------------------------------------------
The Smith Barney Allocation Series Balanced Portfolio's ("Portfolio") Class A
shares, without and with sales charges, returned 4.56% and a negative 0.65%,
respectively for the six months ended July 31, 2000. The chart that appears on
page 26 compares the Portfolio's performance to broad-based indices that track
four of the asset classes represented in the Portfolio. Past performance is not
indicative of future results.
At the beginning of the period, both stocks and bonds continued to be adversely
impacted by ongoing concerns from investors regarding persistently strong
economic growth, rising inflation fears and a more restrictive Federal Reserve
Board ("Fed") monetary policy. The U.S. economy continued its record growth
rate, with Gross Domestic Product ("GDP")1 continuing to rise. This high level
of economic growth caused concern among many investors regarding inflation. In
an attempt to forestall a potential reacceleration of inflation, the Fed raised
interest rates by 100 basis points2 during the reporting period (on February 2,
2000, March 21, 2000 and on May 16, 2000).
However, despite the actions of the Fed, the bond market outperformed the stock
market during the period. Moreover, just about each sector of the bond market
outperformed the leading stock indices during the period. While the Nasdaq
Composite Index3 and the Dow Jones Industrial Average ("DJIA")4 have lost ground
since the year began, several classes of bonds have significantly performed
better than the stock market, as measured by the S&P 500.
Several factors exist which largely contributed to the bond market's performance
this year. Many investors believe that the growth of the economy is beginning to
slow and no longer view inflation as the threat it was one year earlier.
Additionally, many investors are now convinced that the Fed may be finished with
its latest round of interest rate hikes.
Another factor that may have positively impacted the bond market was the lower
returns offered by the stock market. For the last few years, investors have
grown accustomed to double-digit stellar returns offered by most U.S. stocks. As
the price of many stocks, more specifically, technology stocks, have come down
in recent months, investors have begun to focus more of their attention on
bonds.
---------
1 GDP is the market value of the goods and services produced by labor and
property in the U.S. GDP is comprised of consumer and government purchases,
private domestic investments and net exports of goods and services.
2 A basis point is 0.01% or one one-hundredth of a percent.
3 The Nasdaq Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market. Please note that an investor cannot invest directly in an index.
4 The DJIA is a price-weighted average of 30 actively traded blue-chip
stocks. An investor cannot invest directly in an index.
21
<PAGE>
--------------------------------------------------------------------------------
Portfolio Update (continued)
--------------------------------------------------------------------------------
During the period, the U.S. stock market was characterized by record levels of
volatility. Throughout 1999, especially during November and December, value
stocks (i.e., stocks that are inexpensive compared to other companies with
similar earnings or assets) were virtually ignored by investors. In contrast,
growth stocks (i.e., stocks issued by companies with the potential for
faster-than-average growth within their industries) rose as many investors
appeared willing to pay virtually any price for young and speculative technology
companies. However, investor sentiment shifted dramatically during the first
quarter of 2000. Investors, reacting to the potential threat of inflation, began
to reassess the valuations assigned to many companies.
As such, many large cap stocks fell sharply in January and February before
recovering in early March. Between mid-March and the end of April, however, the
market experienced a substantial correction. The tech-laden Nasdaq Composite
Index fell by more than 35% from its high, including a single-day drop of 10% on
April 14, 2000. Shares of "blue chip" companies declined less severely, with the
S&P 500 Index declining 7.18% during the same time period. Some value-oriented
stocks gained ground amid renewed investor interest.
--------------------------------------------------------------------------------
The Target Asset Allocation set forth on page 21 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 Smith Barney Allocation Series' Board of Directors.
22
<PAGE>
The Allocation Series Balanced Portfolio Breakdown (as of 7/31/00) (unaudited)
[GRAPH]
15.36% Smith Barney Income Funds - Smith Barney Diversified
Strategic Income Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
GNMA 8.5% 30 Year
GNMA 7.5% 30 Year
Swedish Government
Government of Denmark
10.45% Smith Barney Fundamental Value Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
Adobe Systems, Inc.
Texas Instruments Inc.
American Express Co.
Intel Corp.
American International Group Inc.
10.24% Smith Barney Investment Funds Inc. - Smith Barney
Government Securities Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
GNMA 8.5% 30 Year
U.S. Treasury Strips
FNMA 8.5% 30 Year
GNMA 7.5% 30 Year
10.21% Smith Barney Managed Governments Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
FNMA 8.5% 30 Year
GNMA 7.5% 30 Year
GNMA 6.5% 30 Year
GNMA 7.0% 30 Year
9.96% Smith Barney Income Funds-Smith Barney Convertible Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Costco Companies, Inc.
Federated Department Stores, Inc.
Quantum Corp.
Diamond Offshore Drilling Inc.
Wendy's International, Inc.
9.89% Smith Barney Appreciation Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
Berkshire Hathaway
General Electric Co.
Pfizer, Inc.
Exxon Mobil Corp.
Microsoft Corp.
4.52% Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
U.S. Treasury Note 5.5%
U.S. Treasury Note 5.875%
U.S. Treasury Note 6.75%
Black & Decker
The Clorox Co.
9.78% Smith Barney Income Funds - Smith Barney Premium Total Return Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Nabisco Group Holdings
Safeway Inc.
Costco Wholesale Corp.
Federated Department Stores, Inc.
Bristol-Myers Squibb Co.
4.77% Smith Barney World Funds, Inc. - International All Cap Growth Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Serco Group PLC
Nokia Oyj
Capita Group PLC
Hutchinson Whampoa Ltd.
Tomra Systems
4.82% Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
General Electric Co.
Intel Corp.
Cisco Systems Inc.
Exxon Mobil Corp.
Microsoft Corp.
4.96% Smith Barney Funds, Inc. - Large Cap Value Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Exxon Mobil Corp.
The Chase Manhattan Corp.
The Williams Cos., Inc.
Marsh & McLennan Cos., Inc.
Mellon Financial Corp.
5.04% Smith Barney World Funds, Inc. - Global Government Bond Portfolio
--------------------------------------------------------------------------------
Top 5 Holdings:
France OAT 5.25%
Japan Government 1.8%
Bundesrep 4.5%
KFW International Finance
Interamer Development 7.125%
23
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $12.58 $12.38 $0.22 $0.55 4.56%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.95 12.58 0.46 0.46 4.37
------------------------------------------------------------------------------------------------------------------------------------
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 $2.12 $1.74
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class B Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $12.64 $12.44 $0.17 $0.55 4.15%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.95 12.64 0.29 0.46 3.48
------------------------------------------------------------------------------------------------------------------------------------
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 $1.63 $1.74
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class L Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $12.64 $12.44 $0.17 $0.55 4.16%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.94 12.64 0.29 0.46 3.56
------------------------------------------------------------------------------------------------------------------------------------
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 $1.63 $1.74
====================================================================================================================================
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Historical Performance -- Class Z Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $12.55 $12.34 $0.24 $0.55 4.62%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.95 12.55 0.52 0.46 4.58
------------------------------------------------------------------------------------------------------------------------------------
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 $1.81 $1.74
====================================================================================================================================
</TABLE>
It is the Portfolio's policy to distribute dividends quarterly and capital
gains, if any, annually.
<TABLE>
<CAPTION>
Average Annual Total Returns
------------------------------------------------------------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------------------------------------------------------------
Class A Class B Class L Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/00+ 4.56% 4.15% 4.16% 4.62%
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 6.94 6.09 6.10 7.17
------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/00 9.02 8.19 8.19 8.75
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
--------------------------------------------------------------------------------------------------
Class A Class B Class L Class Z
====================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/00+ (0.65)% (0.77)% 2.12% 4.62%
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 1.57 1.18 4.05 7.17
------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/00 7.78 8.02 7.94 8.75
====================================================================================================================================
</TABLE>
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 7/31/00) 47.31%
--------------------------------------------------------------------------------
Class B (Inception* through 7/31/00) 42.39
--------------------------------------------------------------------------------
Class L (Inception* through 7/31/00) 42.39
--------------------------------------------------------------------------------
Class Z (Inception* through 7/31/00) 34.54
================================================================================
(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 deduc- tion of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception date for Class A, B and L shares is February 5, 1996 and for
Class Z shares is January 17, 1997.
25
<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 Brothers
Government/Corporate Bond Index, Salomon Smith Barney One-Year Treasury Bill
Index and Salomon Smith Barney World Government Bond Index
--------------------------------------------------------------------------------
February 5, 1996 - July 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Balanced Balanced Balanced Standard & Lehman Brothers Salomon Smith Salomon Smith
Portfolio- Portfolio- Portfolio- Poor's 500 Government/ Brothers One- Barney World
Class A Class B Class L Composite Corporation Year Treasury Government
Shares Shares Shares Stock Index Bond Index Bill Index Bond Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,500 10,000 9,896 10,000 10,000 10,000 10,000
1/97 10,511 10,490 10,776 12,630 9,118 10,551 10,568
1/98 11,729 11,763 12,036 16,026 10,136 11,214 11,842
1/99 12,824 12,911 13,063 21,235 11,020 11,840 13,708
1/00 13,384 13,471 13,529 23,429 10,704 12,327 12,878
7/31/2000 13,995 14,139 14,091 24,179 11,272 12,736 12,940
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 31, 2000. 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
Brothers 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. An investor cannot invest
directly in an index. 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.
26
<PAGE>
THE CONSERVATIVE PORTFOLIO
--------------------------------------------------------------------------------
Target Asset Allocation
--------------------------------------------------------------------------------
[GRAPH]
30% Stock Funds
70% Bond Funds
The 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 Conservative Portfolio primarily seeks income and, secondarily, long-term
capital growth. Among the Portfolios of the Smith Barney Allocation Series, the
Conservative Portfolio consists primarily of taxable bond funds, with a portion
invested in stock funds that invest primarily in large-capitalization U.S.
stocks.
--------------------------------------------------------------------------------
Index Comparison*
--------------------------------------------------------------------------------
S&P 500** 3.20%
Lehman Brothers Government/
Corporate Bond*** 5.31%
Salomon Smith Barney
High Yield Market+ 0.48%
Salomon Smith Barney
One-Year Treasury Bill++ 3.32%
--------------------------------------------------------------------------------
* The chart above represents total returns for the six months ended July 31,
2000.
** The S&P 500 Index is a market capitalization-weighted measure of 500 widely
held common stocks. Please note that an investor cannot invest directly in an
index.
*** The Lehman Brothers Government/Corporate Bond Index tracks the performance
of the overall bond market and is a broad measure of the performance of
government and corporate fixed-rate debt issues. Please note that an investor
cannot invest directly in an index.
+ The Salomon Smith Barney High Yield Market Index is a broad-based unmanaged
index of high yield securities. Please note that an investor cannot invest
directly in an index.
++ The Salomon Smith Barney One-Year Treasury Bill Index consists of one
One-Year United States Treasury Bill whose return is tracked until its maturity.
Please note that an investor cannot invest directly in an index.
--------------------------------------------------------------------------------
Portfolio Update
--------------------------------------------------------------------------------
The Smith Barney Allocation Series Conservative Portfolio's ("Portfolio") Class
A shares, without and with sales charges, returned 4.22% and a negative 0.47%,
respectively, for the six months ended July 31, 2000. The chart that appears on
page 32 compares the Portfolio's performance to broad-based indices that track
four of the asset classes represented in the Portfolio. Past performance is not
indicative of future results.
In keeping with its investment mandate, the Portfolio is largely comprised of
bond funds with the remainder invested in stock funds. The Portfolio's bond
funds tend to possess high-credit quality and include U.S. government debt as
well as the bonds of other developed nations.
On May 16, 2000, the Fed enacted the sixth in a series of monetary policy
actions that began on June 30, 1999, when the federal funds rate ("fed funds
rate")1 was 4.75%. Since June 30, 1999, the Fed raised rates by 175 basis
points.2 With the fed funds rate presently at 6.5%, the cumulative effect of the
interest rate increases so far, we believe, may begin to have a more pronounced
effect in dampening inflationary pressures in the economy.
Moreover, the plan by the U.S. Treasury to buy back more than$30 billion of its
long-term debt obligations in 2000 and$50 billion in 2001 of its long-term debt
obligations has led to a reduced supply in the marketplace. The U.S. Treasury's
intent to retire debt, particularly at the long end of the yield curve,3 has
been the most recent test for the bond market. However, the constant, yet small
quantities of U.S. Treasuries, relative to outstanding supply, that were retired
cumulatively have begun to have an impact on the market.
In a sharp reversal from our last report, most classes of bonds outperformed the
stock market during the period. Several factors exist which largely contributed
to the bond market's performance this year. Many investors believe that the
growth of the economy is beginning to slow and no longer view inflation as the
major threat it was a year earlier. Additionally, many investors are now
convinced that the Fed may be finished with its latest round of interest rate
hikes.
---------
1 The fed funds rate is the interest rate that banks with excess reserves at
a Federal Reserve district bank charge other banks that need overnight
loans. The fed funds rate often points to the direction of U.S. interest
rates.
2 A basis point is 0.01% or one one-hundredth of a percent.
3 The yield curve is the graphical depiction of the relationship between the
yield on bonds of the same credit quality but different maturities.
27
<PAGE>
--------------------------------------------------------------------------------
Portfolio Update (continued)
--------------------------------------------------------------------------------
Due to the Treasury Department's buyback plan, the price of long-term bonds
increased in relation to their short-term counterparts, as reflected by an
inverted yield curve.4 Instead of a "normal" yield curve, with yields rising
slowly along with the maturity of Treasury bonds, the highest yields were for
shorter-term bonds. The Portfolio's stock holdings largely benefited from the
recovery of many overseas economies and the continued strength of the shares of
what we view as well-managed companies with a global presence.
--------------------------------------------------------------------------------
The Target Asset Allocation set forth on page 27 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 Smith Barney Allocation Series' Board of Directors.
---------
4 An inverted yield curve depicts an unusual situation when short-term
interest rates are higher than long-term rates.
28
<PAGE>
The Allocation Series Conservative Portfolio Breakdown(as of 7/31/00)
(unaudited)
[GRAPH]
20.30% Smith Barney Income Funds - Smith Barney Diversified
Strategic Income Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
GNMA 8.5% 30 Year
GNMA 7.5% 30 Year
Swedish Government
Government of Denmark
15.20% Smith Barney Managed Governments Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
FNMA 8.5% 30 Year
GNMA 7.5% 30 Year
GNMA 6.5% 30 Year
GNMA 7.0% 30 Year
10.26% Smith Barney Investment Funds Inc. - Smith Barney
Government Securities Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
GNMA 8.5% 30 Year
U.S. Treasury Strips
FNMA 8.5% 30 Year
GNMA 7.5% 30 Year
10.13% Smith Barney Income Funds - Smith Barney High Income Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
United International Holdings
Allied Waste North America, Inc.
United Pan Europe Communications, N.V.
Exodus Communications, Inc.
Nextel Communications, Inc.
9.89% Smith Barney Income Funds - Smith Barney Convertible Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Costco Companies, Inc.
Federated Department Stores, Inc.
Quantum Corp.
Diamond Offshore Drilling Inc.
Wendy's International, Inc.
9.66% Smith Barney Appreciation Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
Berkshire Hathaway
General Electric Co.
Pfizer, Inc.
Exxon Mobil Corp.
Microsoft Corp.
5.10% Smith Barney World Funds, Inc. - Global Government Bond Portfolio
--------------------------------------------------------------------------------
Top 5 Holdings:
France OAT 5.25%
Japan Government 1.8%
Bundesrep 4.5%
KFW International Finance
Interamer Development 7.125%
4.74% Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
U.S. Treasury Note 5.5%
U.S. Treasury Note 5.875%
U.S. Treasury Note 6.75%
Black & Decker
The Clorox Co.
4.80% Smith Barney Income Funds - Smith Barney Premium Total Return Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Nabisco Group Holdings
Safeway Inc.
Costco Wholesale Corp.
Federated Department Stores, Inc.
Bristol-Myers Squibb Co.
4.90% Smith Barney Investment Funds Inc. - Smith Barney
Hansberger Global Value Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
XL Capital Ltd.
Electronic Data Systems
NCR Corp.
American Home Products
Bank of America Corp.
5.02% Smith Barney Fundamental Value Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
Adobe Systems, Inc.
Texas Instruments Inc.
American Express Co.
Intel Corp.
American International Group Inc.
29
<PAGE>
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $11.47 $11.50 $0.24 $0.21 4.22%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.04 11.47 0.55 0.25 1.96
------------------------------------------------------------------------------------------------------------------------------------
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 $2.58 $1.10
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class B Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7/31/00 $11.50 $11.53 $0.21 $0.21 3.95%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.02 11.50 0.45 0.25 1.50
------------------------------------------------------------------------------------------------------------------------------------
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 $2.28 $1.10
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class L Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7/31/00 $11.50 $11.53 $0.22 $0.21 3.97%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.02 11.50 0.46 0.25 1.59
------------------------------------------------------------------------------------------------------------------------------------
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 $2.32 $1.10
====================================================================================================================================
</TABLE>
It is the Portfolio's policy to distribute dividends quarterly and capital
gains, if any, annually.
30
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns
------------------------------------------------------------------------------------------------------------------------------------
Without Sales Charges(1)
-------------------------------------------------------------------
Class A Class B Class L
====================================================================================================================================
<S> <C> <C> <C>
Six Months Ended 7/31/00+ 4.22% 3.95% 3.97%
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 5.10 4.61 4.71
------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/00 7.16 6.63 6.69
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
-------------------------------------------------------------------
Class A Class B Class L
====================================================================================================================================
<S> <C> <C> <C>
Six Months Ended 7/31/00+ (0.47)% (0.55)% 1.91%
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 0.40 0.19 2.67
------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/00 6.07 6.45 6.44
====================================================================================================================================
</TABLE>
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 7/31/00) 36.40%
--------------------------------------------------------------------------------
Class B (Inception* through 7/31/00) 33.38
--------------------------------------------------------------------------------
Class L (Inception* through 7/31/00) 33.72
================================================================================
(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.
* Inception date for Class A, B and L shares is February 5, 1996.
31
<PAGE>
Growth of $10,000 Invested in Class A, B and L Shares of the Conservative
Portfolio vs. the Standard & Poor's 500 Composite Stock Index, Lehman Brothers
Government/Corporate Bond Index, Salomon Smith Barney High Yield Market Index
and Salomon Smith Barney One-Year Treasury Bill Index
--------------------------------------------------------------------------------
February 5, 1996 - July 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Lehman Salmon Smith Salmon Smith
Brothers Barney Barney
Conservative Conservative Conservative Poor's 500 Government/ High Yield One-Year
Portfolio- Portfolio- Portfolio- Composite Corporation Market Treasury
Class A Class B Class L Stock Index Bond Index 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
1/97 10,369 10,353 10,596 12,630 9,118 11,049 10,551
1/98 11,581 11,614 11,900 16,026 10,136 12,693 11,214
1/99 12,259 12,342 12,529 21,235 11,020 13,050 11,840
1/00 12,499 12,631 12,728 23,429 10,704 12,973 12,327
7/31/2000 13,027 13,238 13,234 24,179 11,272 13,036 12,736
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 4.50% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 4.50% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 31, 2000. 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
Brothers 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. An
investor cannot invest directly in an index.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
32
<PAGE>
THE INCOME PORTFOLIO
--------------------------------------------------------------------------------
Target Asset Allocation
--------------------------------------------------------------------------------
[GRAPH]
10% Stock Funds
90% Bond Funds
The Income Portfolio seeks high current income by investing primarily in bond
funds.
--------------------------------------------------------------------------------
The Income Portfolio seeks high current income. Among the Portfolios of the
Smith Barney Allocation Series, the Income Portfolio allocates most of its
assets to taxable bond funds designed to generate a high level of income
consistent with relative stability of principal. A small portion of the
Portfolio is invested in stock funds that invest in large-capitalization U.S.
stocks.
--------------------------------------------------------------------------------
Index Comparison*
--------------------------------------------------------------------------------
S&P 500** 3.20%
Lehman Brothers Government/
Corporate Bond*** 5.31%
Salomon Smith Barney
High Yield Market+ 0.48%
Salomon Smith Barney
One-Year Treasury Bill++ 3.32%
--------------------------------------------------------------------------------
* The chart above represents total returns for the six months ended July 31,
2000.
** The S&P 500 Index is a market capitalization-weighted measure of 500 widely
held common stocks. Please note that an investor cannot invest directly in an
index.
*** The Lehman Brothers Government/Corporate Bond Index tracks the performance
of the overall bond market and is a broad measure of the performance of
government and corporate fixed-rate debt issues. Please note that an investor
cannot invest directly in an index.
+ The Salomon Smith Barney High Yield Market Index is a broad-based unmanaged
index of high yield securities. Please note that an investor cannot invest
directly in an index.
++ The Salomon Smith Barney One-Year Treasury Bill Index consists of one
One-Year United States Treasury Bill whose return is tracked until its maturity.
Please note that an investor cannot invest directly in an index.
--------------------------------------------------------------------------------
Portfolio Update
--------------------------------------------------------------------------------
The Smith Barney Allocation Series Income Portfolio's ("Portfolio") Class A
shares, without and with sales charges, returned 3.46% and a negative 1.19% for
the six months ended July 31, 2000. The chart that appears on page 37 compares
the Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio. Past performance is not indicative of
future results.
The majority of the assets in the Portfolio are invested in bond funds that
invest in the debt obligations of the U.S. Government and other developed
nations. During the period, bonds were impacted due in large part to the
interest rate increases by the Federal Reserve Board ("Fed") and the U.S.
Treasury's plan to buy back more than$30 billion of its outstanding long-term
debt.
However, despite the interest rate increases by the Fed, the bond market
outperformed stocks during the period. In our view, several factors exist which
largely contributed to the bond market's performance in 2000. Many investors
believe that the growth of the economy is beginning to slow, and no longer view
inflation as the major threat it was a year ago. Additionally, many investors
are now convinced that the Fed may be finished with its latest round of interest
rate hikes.
--------------------------------------------------------------------------------
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 Smith Barney Allocation Series' Board of Directors.
33
<PAGE>
The Allocation Series Income Portfolio Breakdown(as of 7/31/00) (unaudited)
20.17% Smith Barney Managed Governments Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
FNMA 8.5% 30 Year
GNMA 7.5% 30 Year
GNMA 6.5% 30 Year
GNMA 7.0% 30 Year
20.09% Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
GNMA 8.5% 30 Year
GNMA 7.5% 30 Year
Swedish Government
Government of Denmark
20.02% Smith Barney Income Funds - Smith Barney High Income Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
United International Holdings
Allied Waste North America, Inc.
United Pan Europe Communications, N.V.
Exodus Communications, Inc.
Nextel Communications, Inc.
15.20% Smith Barney Investment Funds Inc. - Smith Barney
Government Securities Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
GNMA 8% 30 Year
GNMA 8.5% 30 Year
U.S. Treasury Strips
FNMA 8.5% 30 Year
GNMA 7.5% 30 Year
[GRAPHIC]
4.77% Smith Barney Income Funds - Smith Barney Premium Total Return Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Nabisco Group Holdings
Safeway Inc.
Costco Wholesale Corp.
Federated Department Stores, Inc.
Bristol-Myers Squibb Co.
4.85% Smith Barney Appreciation Fund Inc.
--------------------------------------------------------------------------------
Top 5 Holdings:
Berkshire Hathaway
General Electric Co.
Pfizer, Inc.
Exxon Mobil Corp.
Microsoft Corp.
4.86% Smith Barney Income Funds - Smith Barney Convertible Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
Costco Companies, Inc.
Federated Department Stores, Inc.
Quantum Corp.
Diamond Offshore Drilling Inc.
Wendy's International, Inc.
10.04% Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund
--------------------------------------------------------------------------------
Top 5 Holdings:
U.S. Treasury Note 5.5%
U.S. Treasury Note 5.875%
U.S. Treasury Note 6.75%
Black & Decker
The Clorox Co.
34
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $10.64 $10.68 $0.31 $0.02 3.46%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 11.50 10.64 0.63 0.11 (1.04)
------------------------------------------------------------------------------------------------------------------------------------
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 $3.03 $0.53
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class B Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $10.65 $10.69 $0.28 $0.02 3.18%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 11.50 10.65 0.58 0.11 (1.47)
------------------------------------------------------------------------------------------------------------------------------------
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 $2.77 $0.53
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class L Shares
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------------- Income Capital Gain Total
Period Ended Beginning of Period End of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/00 $10.65 $10.69 $0.28 $0.02 3.20%+
------------------------------------------------------------------------------------------------------------------------------------
1/31/00 11.50 10.65 0.58 0.11 (1.42)
------------------------------------------------------------------------------------------------------------------------------------
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 $2.80 $0.53
====================================================================================================================================
</TABLE>
It is the Portfolio's policy to distribute dividends monthly and capital gains,
if any, annually.
35
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns
------------------------------------------------------------------------------------------------------------------------------------
Without Sales Charges(1)
-----------------------------------------------------------------------------------
Class A Class B Class L
====================================================================================================================================
<S> <C> <C> <C>
Six Months Ended 7/31/00+ 3.46% 3.18% 3.20%
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 3.89 3.33 3.39
------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/00 5.52 5.00 5.06
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
-----------------------------------------------------------------------------------
Class A Class B Class L
====================================================================================================================================
<S> <C> <C> <C>
Six Months Ended 7/31/00+ (1.19)% (1.32)% 1.16%
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 (0.82) (1.06) 1.40
------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/00 4.45 4.83 4.81
====================================================================================================================================
</TABLE>
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 7/31/00) 27.29%
--------------------------------------------------------------------------------
Class B (Inception* through 7/31/00) 24.49
--------------------------------------------------------------------------------
Class L (Inception* through 7/31/00) 24.78
================================================================================
(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.
* Inception date for Class A, B and L shares is February 5, 1996.
36
<PAGE>
Growth of$10,000 Invested in Class A, B and L Shares of the Income Portfolio vs.
the Standard & Poor's 500 Composite Stock Index, Lehman Brothers
Government/Corporate Bond Index, Salomon Smith Barney High Yield Market Index
and Salomon Smith Barney One-Year Treasury Bill Index
--------------------------------------------------------------------------------
February 5, 1996 - July 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Standard & Lehman Salomon Salomon
Poor's 500 Government/ Brothers Brothers
Income Income Income Composite Corporate High Yield One-Year
Portfolio- Portfolio- Portfolio- Stock Bond Market Treasury
Class A Class B Class L Index Index 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
1/97 10,160 10,139 10,385 12,630 9,118 11,049 10,551
1/98 11,322 11,297 11,636 16,026 10,136 12,693 11,214
1/99 11,875 11,946 12,137 21,235 11,020 13,050 11,840
1/00 11,751 11,880 11,965 23,429 10,704 12,973 12,327
7/31/2000 12,157 12,356 12,348 24,179 11,272 13,035 12,736
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 4.50% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 4.50% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
July 31, 2000. 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
Brothers 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. An
investor cannot invest directly in an index.
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.
37
<PAGE>
THE GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) July 31, 2000
--------------------------------------------------------------------------------------------------------------------
Shares Description Value
====================================================================================================================
<S> <C> <C> <C>
Underlying Funds -- 99.0%
112,607 Smith Barney Funds, Inc. - Large Cap Value Fund $ 1,891,806
715,417 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global 9,128,733
Value Fund
456,571 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Small Cap Value Fund 3,670,835
210,667 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth 5,475,258
Fund
74,791 Smith Barney Investment Trust - Smith Barney Mid Cap Core Fund (a) 1,717,218
265,469 Smith Barney Small Cap Core Fund, Inc. (b) 3,652,861
173,209 Smith Barney World Funds, Inc. - Emerging Markets Portfolio 1,792,716
357,258 Smith Barney World Funds, Inc. - International All Cap Growth Fund (c) 9,263,708
--------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $33,477,828) $ 36,593,135
====================================================================================================================
<CAPTION>
Face
Amount Description Value
<S> <C> <C> <C>
====================================================================================================================
Repurchase Agreement -- 1.0%
$ 367,000 Morgan Stanley Dean Witter & Co., 6.530% due 8/1/00; Proceeds at
maturity -- $367,067; (Fully collateralized by U.S. Treasury Notes,
4.500% to 6.375% due 8/15/00 to 2/15/07; Market value -- $367,765)
(Cost -- $367,000) 367,000
====================================================================================================================
Total Investments -- 100% (Cost -- $33,844,828*) $ 36,960,135
====================================================================================================================
</TABLE>
(a) Formerly known as Smith Barney Investment Trust - Smith Barney Mid Cap
Blend Fund.
(b) Formerly known as Smith Barney Small Cap Blend Fund, Inc.
(c) Formerly known as Smith Barney World Funds, Inc. - International Equity
Portfolio.
* Aggregate cost for Federal income tax purposes is
substantially the same.
See Notes to Financial Statements.
38
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments (unaudited) July 31, 2000
--------------------------------------------------------------------------------------------------------------------
Shares Description Value
====================================================================================================================
<S> <C> <C> <C>
Underlying Funds -- 99.5%
1,035,508 Smith Barney Aggressive Growth Fund Inc. $105,746,042
2,687,019 Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund 42,374,288
2,558,490 Smith Barney Funds, Inc. - Large Cap Value Fund 42,982,639
8,782,199 Smith Barney Income Funds - Smith Barney High Income Fund 83,079,602
4,644,139 Smith Barney Investment Funds Inc. - Smith Barney Peachtree Growth Fund (a) 84,291,127
6,718,409 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 85,726,900
2,677,515 Smith Barney Investment Funds Inc. - Smith Barney Small Cap Growth Fund 41,314,054
3,466,839 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 90,103,161
2,337,013 Smith Barney Investment Trust - Smith Barney Mid Cap Core Fund (b) 53,657,811
12,563,622 Smith Barney Small Cap Core Fund, Inc. (c) 172,875,444
3,271,487 Smith Barney World Funds, Inc. - International All Cap Growth Fund (d) 84,829,649
--------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $715,636,251) 886,980,717
<CAPTION>
Face
Amount Description Value
<S> <C> <C> <C>
====================================================================================================================
Repurchase Agreement -- 0.5%
$4,870,000 Morgan Stanley Dean Witter & Co., 6.530% due 8/1/00; Proceeds at maturity--$4,870,883;
(Fully collateralized by U.S. Treasury Notes, 4.500% to 6.375%
due 8/15/00 to 2/15/07;
Market value -- $4,880,555) (Cost -- $4,870,000) 4,870,000
====================================================================================================================
Total Investments-- 100% (Cost--$720,506,251*) $891,850,717
====================================================================================================================
</TABLE>
(a) Formerly known as Smith Barney Investment Funds Inc. - Concert Peachtree
Growth Fund.
(b) Formerly known as Smith Barney Investment Trust - Smith Barney Mid Cap
Blend Fund.
(c) Formerly known as Smith Barney Small Cap Blend Fund, Inc.
(d) Formerly known as Smith Barney World Funds, Inc. - International Equity
Portfolio.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
39
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments(unaudited) July 31, 2000
------------------------------------------------------------------------------------------------------------------------------
Shares Description Value
==============================================================================================================================
Underlying Funds -- 99.4%
<S> <C> <C>
565,953 Smith Barney Aggressive Growth Fund Inc. $ 57,795,079
5,756,813 Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund 90,784,937
5,363,755 Smith Barney Funds, Inc. - Large Cap Value Fund 90,111,077
9,238,298 Smith Barney Income Funds - Smith Barney High Income Fund 87,394,325
5,272,956 Smith Barney Investment Funds Inc. - Smith Barney Peachtree Growth Fund (a) 95,704,156
10,398,893 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 94,525,934
4,096,295 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 52,268,719
8,323,182 Smith Barney Investment Funds Inc. - Smith Barney Investment Grade Bond Fund 94,634,581
2,578,558 Smith Barney Investment Funds Inc. - Smith Barney Small Cap Growth Fund 39,787,144
1,942,600 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 50,488,181
2,981,908 Smith Barney Investment Trust - Smith Barney Mid Cap Core Fund (b) 68,464,599
3,454,074 Smith Barney Small Cap Core Fund, Inc. (c) 47,528,059
3,797,930 Smith Barney World Funds, Inc. - International All Cap Growth Fund (d) 98,480,311
------------------------------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $854,129,482) 967,967,102
==============================================================================================================================
<CAPTION>
Face
Amount Description Value
==============================================================================================================================
Repurchase Agreement -- 0.6%
<S> <C> <C>
$ 5,405,000 Morgan Stanley Dean Witter & Co., 6.530% due 8/1/00; Proceeds at maturity -- $5,405,980;
(Fully collateralized by U.S. Treasury Notes, 4.500% to 6.375% due 8/15/00 to 2/15/07;
Market value -- $5,416,715) (Cost -- $5,405,000) 5,405,000
==============================================================================================================================
Total Investments -- 100% (Cost -- $859,534,482*) $973,372,102
==============================================================================================================================
</TABLE>
(a) Formerly known as Smith Barney Investment Funds Inc. - Concert Peachtree
Growth Fund.
(b) Formerly known as Smith Barney Investment Trust - Smith Barney Mid Cap
Blend Fund.
(c) Formerly known as Smith Barney Small Cap Blend Fund, Inc.
(d) Formerly known as Smith Barney World Funds, Inc. - International Equity
Portfolio.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
40
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments(unaudited) July 31, 2000
------------------------------------------------------------------------------------------------------------------------------
Shares Description Value
==============================================================================================================================
Underlying Funds -- 100.0%
<S> <C> <C>
3,175,704 Smith Barney Appreciation Fund Inc. $ 47,762,598
1,476,934 Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund 23,291,255
3,255,262 Smith Barney Fundamental Value Fund Inc. 50,489,119
1,424,706 Smith Barney Funds, Inc. - Large Cap Value Fund 23,935,063
5,472,112 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 21,833,730
3,081,499 Smith Barney Income Funds - Smith Barney Convertible Fund 48,102,213
10,299,424 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 74,155,854
2,656,208 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 47,227,384
5,442,480 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 49,472,147
4,098,030 Smith Barney Managed Governments Fund Inc. 49,299,307
2,254,387 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 24,324,833
888,726 Smith Barney World Funds, Inc. - International All Cap Growth Fund (a) 23,044,680
==============================================================================================================================
Total Investments -- 100% (Cost -- $476,714,911*) 482,938,183
==============================================================================================================================
</TABLE>
(a) Formerly known as Smith Barney World Funds, Inc. - International Equity
Portfolio.
* Aggregate cost for Federal income tax purposes is substantially the
same.
See Notes to Financial Statements.
41
<PAGE>
THE CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments(unaudited) July 31, 2000
------------------------------------------------------------------------------------------------------------------------------
Shares Description Value
------------------------------------------------------------------------------------------------------------------------------
Underlying Funds -- 100.0%
<S> <C> <C>
800,663 Smith Barney Appreciation Fund Inc. $ 12,041,981
403,923 Smith Barney Fundamental Value Fund Inc. 6,264,858
1,482,105 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 5,913,599
789,176 Smith Barney Income Funds - Smith Barney Convertible Fund 12,326,937
3,515,575 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 25,312,142
1,335,747 Smith Barney Income Funds - Smith Barney High Income Fund 12,636,168
336,779 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 5,991,304
1,407,795 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 12,796,858
478,854 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 6,110,185
1,575,934 Smith Barney Managed Governments Fund Inc. 18,958,497
589,995 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 6,366,048
==============================================================================================================================
Total Investments -- 100% (Cost -- 129,251,987*) $124,718,577
==============================================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
42
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments(unaudited) July 31, 2000
------------------------------------------------------------------------------------------------------------------------------
Shares Description Value
==============================================================================================================================
Underlying Funds -- 100.0%
<S> <C> <C>
180,601 Smith Barney Appreciation Fund Inc. $ 2,716,246
1,410,167 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 5,626,565
174,463 Smith Barney Income Funds - Smith Barney Convertible Fund 2,723,374
1,563,104 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 11,254,351
1,185,985 Smith Barney Income Funds - Smith Barney High Income Fund 11,219,424
150,398 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 2,674,068
937,141 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 8,518,607
939,607 Smith Barney Managed Governments Fund Inc. 11,303,471
==============================================================================================================================
Total Investments -- 100% (Cost -- $60,586,532*) $56,036,106
==============================================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
43
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (unaudited) July 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Global High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at cost $33,844,828 $720,506,251 $859,534,482 $476,714,911 $129,251,987 $60,586,532
====================================================================================================================================
Investments, at value $36,960,135 $891,850,717 $973,372,102 $482,938,183 $124,718,577 $56,036,106
Cash -- 802 471 -- 377,392 --
Receivable for Fund shares sold 851 132,155 198,299 48,743 23,126 7,417
Receivable from manager 54,088 -- -- -- -- --
Dividends and interest receivable 67 883 980 2,010,977 16,500 14,148
------------------------------------------------------------------------------------------------------------------------------------
Total Assets 37,015,141 891,984,557 973,571,852 484,997,903 125,135,595 56,057,671
------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Distribution fees payable 6,637 166,875 194,234 94,804 18,515 8,430
Payable to bank 598 -- -- 2,003,504 -- 148,123
Accrued expenses -- 1,244,262 1,342,580 1,055,259 246,770 58,753
------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 7,235 1,411,137 1,536,814 3,153,567 265,285 215,306
------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $37,007,906 $890,573,420 $972,035,038 $481,844,336 $124,870,310 $55,842,365
====================================================================================================================================
Net Assets:
Par value of capital shares $ 2,913 $ 53,570 $ 66,042 $ 38,819 $ 10,846 $ 5,225
Capital paid in excess of par value 33,588,632 686,987,884 827,611,485 469,515,863 128,798,104 60,887,989
Undistributed (overdistributed)
net investment income (13,363) 7,380,147 9,613,105 1,638,118 1,337,294 295,915
Accumulated net realized gain (loss)
on investments 314,417 24,807,353 20,906,786 4,428,264 (742,524) (796,338)
Net unrealized appreciation (depreciation)
of investments 3,115,307 171,344,466 113,837,620 6,223,272 (4,533,410) (4,550,426)
------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets 37,007,906 890,573,420 972,035,038 481,844,336 124,870,310 55,842,365
====================================================================================================================================
Shares Outstanding:
Class A 1,600,459 27,414,475 29,876,515 17,643,112 5,545,798 2,611,191
Class B 1,220,574 23,152,472 32,253,241 18,404,403 4,694,034 2,292,445
Class L 92,179 3,003,141 3,912,716 2,724,292 606,449 321,276
Class Z -- -- -- 47,323 -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $12.73 $16.67 $14.69 $12.38 $11.50 $10.68
Class B * $12.67 $16.58 $14.74 $12.44 $11.53 $10.69
Class L ** $12.66 $16.58 $14.74 $12.44 $11.53 $10.69
Class Z (and redemption price) -- -- -- $12.34 -- --
------------------------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of
net asset value per share) $13.40 $17.55 $15.46 $13.03 -- --
Class A (net asset value plus 4.71% of
net asset value per share) -- -- -- -- $12.04 $11.18
Class L (net asset value plus 1.01% of
net asset value per share) $12.79 $16.75 $14.89 $12.57 $11.65 $10.80
====================================================================================================================================
</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.
44
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations (unaudited) For the Six Months Ended July 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Global High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Income distributions from
Underlying Funds $ 14,457 $ 4,410,083 $ 11,021,002 $10,023,932 $ 3,476,286 $ 2,078,934
Short-term capital gain from
Underlying Funds 128,816 7,129,882 3,472,818 477,719 93,598 21,112
Interest 14,534 208,492 163,087 66,079 -- 74
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 157,807 11,748,457 14,656,907 10,567,730 3,569,884 2,100,120
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Distribution fees (Note 2) 107,297 2,773,496 3,295,090 1,631,205 324,223 147,042
Other expenses 63,736 1,594,572 1,748,316 906,021 229,377 103,412
------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 171,033 4,368,068 5,043,406 2,537,226 553,600 250,454
------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (13,226) 7,380,389 9,613,501 8,030,504 3,016,284 1,849,666
------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain(Loss)
on Investments (Note 3):
Realized Gain (Loss) From:
Sale of Underlying Funds 247,342 20,288,026 17,385,576 102,700 (1,420,381) (894,879)
Capital gain distributions from
Underlying Funds 67,192 4,520,718 3,526,097 4,457,411 677,927 221,505
------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 314,534 24,808,744 20,911,673 4,560,111 (742,454) (673,374)
------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation) of Investments:
Beginning of period 5,445,094 191,598,282 138,316,028 (4,005,451) (7,673,748) (5,345,911)
End of period 3,115,307 171,344,466 113,837,620 6,223,272 (4,533,410) (4,550,426)
------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized
Appreciation (Depreciation) (2,329,787) (20,253,816) (24,478,408) 10,228,723 3,140,338 795,485
------------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments (2,015,253) 4,554,928 (3,566,735) 14,788,834 2,397,884 122,111
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations $(2,028,479) $ 11,935,317 $ 6,046,766 $22,819,338 $ 5,414,168 $ 1,971,777
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (unaudited) For the Six Months Ended July 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Global High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (13,226) $ 7,380,389 $ 9,613,501 $ 8,030,504 $ 3,016,284 $ 1,849,666
Net realized gain (loss) 314,534 24,808,744 20,911,673 4,560,111 (742,454) (673,374)
Change in net unrealized
appreciation (depreciation) (2,329,787) (20,253,816) (24,478,408) 10,228,723 3,140,338 795,485
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations (2,028,479) 11,935,317 6,046,766 22,819,338 5,414,168 1,971,777
------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders From:
Net investment income (6,896) (962,350) (962,958) (7,841,293) (2,511,644) (1,597,049)
Net realized gains (718,042) (18,622,713) (31,701,113) (20,614,430) (2,259,793) (90,229)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (724,938) (19,585,063) (32,664,071) (28,455,723) (4,771,437) (1,687,278)
------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 8,811,767 111,702,918 102,091,384 56,944,682 11,551,912 3,239,859
Net asset value of shares issued
for reinvestment of dividends 724,170 19,439,289 32,277,695 27,986,911 4,683,461 1,532,605
Cost of shares reacquired (3,057,638) (105,209,637) (120,137,067) (121,823,891) (34,196,670) (13,325,168)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Fund Share Transactions 6,478,299 25,932,570 14,232,012 (36,892,298) (17,961,297) (8,552,704)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 3,724,882 18,282,824 (12,385,293) (42,528,683) (17,318,566) (8,268,205)
Net Assets:
Beginning of period 33,283,024 872,290,596 984,420,331 524,373,019 142,188,876 64,110,570
------------------------------------------------------------------------------------------------------------------------------------
End of period* $37,007,906 $ 890,573,420 $ 972,035,038 $ 481,844,336 $124,870,310 $55,842,365
====================================================================================================================================
* Includes undistributed (overdistributed)
net investment income of: $(13,363) $7,380,147 $9,613,105 $1,638,118 $1,337,294 $295,915
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets For the Year Ended January 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Global High Growth Growth Balanced Conservative Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 356,795 $ 23,968,190 $ 25,969,227 $ 16,921,137 $ 6,677,677 $ 3,902,046
Net realized gain 768,188 31,085,233 42,160,708 26,492,940 3,260,834 168,875
Change in net unrealized
appreciation (depreciation) 4,771,898 81,015,481 22,714,645 (22,339,498) (7,400,335) (4,971,682)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations 5,896,881 136,068,904 90,844,580 21,074,579 2,538,176 (900,761)
------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders From:
Net investment income (350,036) (23,006,082) (25,775,265) (15,871,205) (6,218,143) (3,825,788)
Net realized gains (93,715) (17,458,064) (21,941,148) (19,103,907) (3,129,896) (678,070)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (443,751) (40,464,146) (47,716,413) (34,975,112) (9,348,039) (4,503,858)
------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 13,607,471 183,979,921 204,689,191 136,513,861 46,615,913 20,001,410
Net asset value of shares issued
for reinvestment of dividends 443,640 40,151,190 47,063,404 34,380,067 9,153,577 4,086,902
Cost of shares reacquired (6,451,424) (175,452,046) (214,147,076) (179,562,239) (50,236,057) (29,405,407)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Fund Share Transactions 7,599,687 48,679,065 37,605,519 (8,668,311) 5,533,433 (5,317,095)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 13,052,817 144,283,823 80,733,686 (22,568,844) (1,276,430) (10,721,714)
Net Assets:
Beginning of year 20,230,207 728,006,773 903,686,645 546,941,863 143,465,306 74,832,284
------------------------------------------------------------------------------------------------------------------------------------
End of year* $33,283,024 $ 872,290,596 $ 984,420,331 $ 524,373,019 $142,188,876 $ 64,110,570
====================================================================================================================================
* Includes undistributed
net investment income of: $6,759 $962,108 $962,562 $1,448,907 $832,654 $43,298
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
Notes to Financial Statements (unaudited)
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Global, High Growth, Growth, Balanced, Conservative and Income Portfolios
("Portfolios") are separate investment portfolios of the Smith Barney Allocation
Series Inc. ("Fund"), formerly known as Smith Barney Concert Allocation Series
Inc. The Fund, a Maryland corporation, is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, open-end management
investment company and consists of these portfolios and five other separate
investment portfolios: Select High Growth, Select Growth, Select Balanced,
Select Conservative and Select Income Portfolios. The Portfolios invest in other
mutual funds ("Underlying Funds") managed by SSB Citi Fund Management LLC
("SSBC"), a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH") which, in
turn, is a subsidiary of Citigroup Inc. ("Citigroup"). The financial statements
and financial highlights for the other portfolios are presented in a separate
shareholder 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; (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% of 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.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney Private
Trust Company, another subsidiary of Citigroup, acts as the Portfolios' transfer
agent and PFPC Global Fund Services ("PFPC") acts as the Portfolios'
sub-transfer agent. CFTC receives account fees and asset-based fees that vary
according to account size and type of account. PFPC is responsible for
shareholder recordkeeping and financial processing for all shareholder accounts.
During the six months ended July 31, 2000, the Portfolios paid transfer agent
fees of$417,208 to CFTC.
Effective June 5, 2000, Salomon Smith Barney Inc. ("SSB"), another subsidiary of
SSBH, became the Portfolios' distributor replacing CFBDS, Inc. ("CFBDS"). In
addition, SSB acts as the primary broker for the Portfolios' portfolio agency
transactions. Certain other broker-dealers, continue to sell Portfolio shares to
the public as members of the selling group.
The Global, High Growth, Growth and Balanced Portfolios have a contingent
deferred sales charge ("CDSC") of 5.00% on Class B shares, which applies if
redemption occurs within 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. Class L shares also have
a 1.00% CDSC which applies if redemption occurs within the first year of
purchase. In certain cases, Class A shares also have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase. This CDSC only applies
to those purchases of Class A shares, which, when combined with current holdings
of Class A shares, equal or exceed $500,000 in the aggregate. These purchases do
not incur an initial sales charge.
For the six months ended July 31, 2000, SSB and CFBDS received sales charges of
approximately $184,000 and $82,000 on sales of the Portfolios' Class A and L
shares, respectively. In addition, CDSCs paid to SSB were approximately:
Portfolio Class A Class B Class L
================================================================================
Global $ -- 4,000 --
High Growth -- 86,000 5,000
Growth -- 187,000 8,000
Balanced -- 121,000 3,000
Conservative -- 15,000 --
Income -- 14,000 1,000
================================================================================
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 pay 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 pay 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.
48
<PAGE>
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
For the six months ended July 31, 2000, total Distribution Plan fees were as
follows:
Portfolio Class A Class B Class L
--------------------------------------------------------------------------------
Global $ 24,936 $ 77,271 $ 5,090
High Growth 577,355 1,949,462 246,679
Growth 554,860 2,444,863 295,367
Balanced 277,878 1,183,431 169,896
Conservative 82,795 217,566 23,862
Income 36,833 97,782 12,427
--------------------------------------------------------------------------------
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the six months ended July 31, 2000, 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 $ 7,692,541 $ 1,613,745
High Growth 100,416,325 80,111,525
Growth 73,310,953 81,373,495
Balanced 6,749,290 61,400,000
Conservative -- 19,699,288
Income -- 8,301,423
--------------------------------------------------------------------------------
At July 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
Net Unrealized
Appreciation
Portfolio Appreciation Depreciation (Depreciation)
--------------------------------------------------------------------------------
Global $ 4,008,948 $ (893,641) $ 3,115,307
High Growth 194,689,373 (23,344,907) 171,344,466
Growth 155,938,599 (42,100,979) 113,837,620
Balanced 26,842,382 (20,619,110) 6,223,272
Conservative 2,549,292 (7,082,702) (4,533,410)
Income 24,290 (4,574,716) (4,550,426)
--------------------------------------------------------------------------------
4. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
5. Capital Shares
At July 31, 2000, 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.
49
<PAGE>
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
At July 31, 2000, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class L Class Z
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global $ 18,548,886 $ 13,874,305 $ 1,168,354 $ --
High Growth 353,657,040 294,224,157 39,160,257 --
Growth 379,470,733 400,052,735 48,154,059 --
Balanced 214,668,454 222,075,601 32,604,804 205,823
Conservative 65,816,230 55,873,271 7,119,449 --
Income 30,431,814 26,746,909 3,714,491 --
Transactions in shares of each class within each Portfolio were as follows:
<CAPTION>
Six Months Ended July 31, 2000 Year Ended January 31, 2000
------------------------------ ---------------------------
Shares Amount Shares Amount
===========================================================================================================
GLOBAL PORTFOLIO:
Class A
Shares sold 362,366 $ 4,994,028 622,065 7,564,934
Shares issued on reinvestment 31,678 401,359 21,526 303,911
Shares reacquired (120,136) (1,653,667) (281,617) (3,453,034)
-----------------------------------------------------------------------------------------------------------
Net Increase 273,908 $ 3,741,720 361,974 $ 4,415,811
===========================================================================================================
Class B
Shares sold 235,191 $ 3,210,912 456,639 $ 5,529,294
Shares issued on reinvestment 23,840 300,624 9,569 133,382
Shares reacquired (92,897) (1,274,345) (238,917) (2,905,174)
-----------------------------------------------------------------------------------------------------------
Net Increase 166,134 $ 2,237,720 227,291 $ 2,757,502
===========================================================================================================
Class L
Shares sold 44,405 $ 606,827 40,493 $ 513,243
Shares issued on reinvestment 1,760 22,187 452 6,347
Shares reacquired (9,516) (129,626) (7,367) (93,216)
-----------------------------------------------------------------------------------------------------------
Net Increase 36,649 $ 499,388 33,578 $ 426,374
===========================================================================================================
HIGH GROWTH PORTFOLIO:
Class A
Shares sold 3,468,123 $ 60,555,501 6,135,918 $ 95,762,765
Shares issued on reinvestment 632,549 10,430,728 1,276,427 21,787,655
Shares reacquired (2,925,944) (51,182,784) (5,752,212) (89,823,483)
-----------------------------------------------------------------------------------------------------------
Net Increase 1,174,728 $ 19,803,445 1,660,133 $ 27,726,937
===========================================================================================================
Class B
Shares sold 2,272,238 $ 39,461,667 4,494,596 $ 69,681,759
Shares issued on reinvestment 486,274 7,974,895 938,822 15,933,726
Shares reacquired (2,015,372) (35,175,983) (4,508,234) (70,071,478)
-----------------------------------------------------------------------------------------------------------
Net Increase 743,140 $ 12,260,579 925,184 $ 15,544,007
===========================================================================================================
Class L
Shares sold 492,168 $ 8,543,760 922,114 $ 14,353,773
Shares issued on reinvestment 62,990 1,033,666 114,059 1,937,349
Shares reacquired (296,573) (5,155,657) (854,726) (13,223,757)
-----------------------------------------------------------------------------------------------------------
Net Increase 258,585 $ 4,421,769 181,447 $ 3,067,365
===========================================================================================================
Class Z+
Shares sold 179,736 $ 3,141,990 264,790 $ 4,181,624
Shares issued on reinvestment -- -- 28,805 492,460
Shares reacquired (776,997) (13,695,213) (148,132) (2,333,328)
-----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (597,261) $(10,553,223) 145,463 $ 2,340,756
===========================================================================================================
+ On July 5, 2000, Class Z shares were fully redeemed.
</TABLE>
50
<PAGE>
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended July 31, 2000 Year Ended January 31, 2000
------------------------------ ---------------------------
Shares Amount Shares Amount
===========================================================================================================
GROWTH PORTFOLIO:
<S> <C> <C> <C> <C>
Class A
Shares sold 3,588,422 $ 55,621,194 6,822,699 $ 99,916,712
Shares issued on reinvestment 1,043,447 15,223,887 1,505,014 22,951,042
Shares reacquired (3,389,400) (52,674,862) (6,799,898) (99,881,076)
-----------------------------------------------------------------------------------------------------------
Net Increase 1,242,469 $ 18,170,219 1,527,815 $ 22,986,678
===========================================================================================================
Class B
Shares sold 2,411,289 $ 37,514,844 5,869,454 $ 86,203,729
Shares issued on reinvestment 1,039,312 15,225,922 1,384,746 21,190,814
Shares reacquired (3,218,944) (50,139,101) (6,519,592) (96,109,685)
-----------------------------------------------------------------------------------------------------------
Net Increase 231,657 $ 2,601,665 734,608 $ 11,284,858
===========================================================================================================
Class L
Shares sold 492,278 $ 7,663,492 1,066,462 $ 15,695,754
Shares issued on reinvestment 124,770 1,827,886 160,938 2,461,856
Shares reacquired (497,068) (7,705,507) (1,116,824) (16,427,203)
-----------------------------------------------------------------------------------------------------------
Net Increase 119,980 $ 1,785,871 110,576 $ 1,730,407
===========================================================================================================
Class Z+
Shares sold 82,765 $ 1,291,854 195,145 $ 2,872,996
Shares issued on reinvestment -- -- 30,311 459,692
Shares reacquired (620,209) (9,617,597) (117,495) (1,729,112)
-----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (537,444) $ (8,325,743) 107,961 $ 1,603,576
===========================================================================================================
BALANCED PORTFOLIO:
Class A
Shares sold 1,917,142 $ 24,767,246 4,909,981 $ 63,180,938
Shares issued on reinvestment 1,041,310 13,063,777 1,262,399 16,057,604
Shares reacquired (2,988,999) (38,678,510) (6,079,104) (78,225,950)
-----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (30,547) $ (847,487) 93,276 $ 1,012,592
===========================================================================================================
Class B
Shares sold 1,539,330 $ 19,975,926 3,993,019 $ 51,415,341
Shares issued on reinvestment 1,001,367 12,602,935 1,096,736 13,958,085
Shares reacquired (2,996,403) (38,958,735) (5,366,542) (68,934,698)
-----------------------------------------------------------------------------------------------------------
Net Decrease (455,706) $ (6,379,874) (276,787) $ (3,561,272)
===========================================================================================================
Class L
Shares sold 341,315 $ 4,431,203 760,050 $ 9,796,888
Shares issued on reinvestment 140,698 1,768,733 152,782 1,944,042
Shares reacquired (446,517) (5,794,305) (913,426) (11,707,779)
-----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 35,496 $ 405,631 (594) $ 33,151
===========================================================================================================
Class Z
Shares sold 602,428 $ 7,770,307 945,905 $12,120,694
Shares issued on reinvestment 42,411 551,466 190,416 2,420,336
Shares reacquired (2,959,798) (38,392,341) (1,609,785) (20,693,812)
-----------------------------------------------------------------------------------------------------------
Net Decrease (2,314,959) $(30,070,568) (473,464) $ (6,152,782)
===========================================================================================================
</TABLE>
+ On July 5, 2000, Class Z shares were fully redeemed.
51
<PAGE>
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended July 31, 2000 Year Ended January 31, 2000
------------------------------ ---------------------------
Shares Amount Shares Amount
===========================================================================================================
CONSERVATIVE PORTFOLIO:
<S> <C> <C> <C> <C>
Class A
Shares sold 572,235 $ 6,681,175 1,961,746 $ 23,263,203
Shares issued on reinvestment 215,027 2,500,211 412,102 4,824,123
Shares reacquired (1,372,945) (16,009,794) (2,188,217) (25,913,762)
-----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (585,683) $ (6,828,408) 185,631 $ 2,173,564
===========================================================================================================
Class B
Shares sold 325,081 $ 3,812,748 1,765,244 $ 21,004,694
Shares issued on reinvestment 167,296 1,949,661 336,293 3,939,093
Shares reacquired (1,442,881) (16,915,024) (1,861,174) (21,953,525)
-----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (950,504) $(11,152,615) 240,363 $ 2,990,262
===========================================================================================================
Class L
Shares sold 90,317 $ 1,057,989 198,951 $ 2,348,016
Shares issued on reinvestment 20,061 233,589 33,335 390,361
Shares reacquired (108,741) (1,271,852) (201,238) (2,368,770)
-----------------------------------------------------------------------------------------------------------
Net Increase 1,637 $ 19,726 31,048 $ 369,607
===========================================================================================================
INCOME PORTFOLIO:
Class A
Shares sold 153,253 $ 1,642,941 1,022,474 $ 11,339,602
Shares issued on reinvestment 78,652 839,270 197,909 2,174,642
Shares reacquired (638,289) (6,838,650) (1,368,490) (15,148,888)
-----------------------------------------------------------------------------------------------------------
Net Decrease (406,384) $ (4,356,439) (148,107) $ (1,634,644)
===========================================================================================================
Class B
Shares sold 111,003 $ 1,189,875 624,103 $ 6,945,122
Shares issued on reinvestment 58,333 623,024 156,566 1,722,038
Shares reacquired (534,203) (5,730,807) (1,122,358) (12,412,069)
-----------------------------------------------------------------------------------------------------------
Net Decrease (364,867) $ (3,917,908) (341,689) $ (3,744,909)
===========================================================================================================
Class L
Shares sold 37,982 $ 407,043 154,679 $ 1,716,686
Shares issued on reinvestment 6,584 70,311 17,299 190,222
Shares reacquired (70,521) (755,711) (167,729) (1,844,450)
-----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (25,955) $ (278,357) 4,249 $ 62,458
===========================================================================================================
</TABLE>
52
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class A
------------------------------------
GLOBAL PORTFOLIO 2000(1)(2) 2000(2) 1999(2)(3)
====================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $13.67 $11.16 $11.40
------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.02 0.21 0.07
Net realized and unrealized gain (loss) (0.71) 2.54 (0.26)
------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.69) 2.75 (0.19)
------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.00)* (0.20) (0.04)
Net realized gains (0.25) (0.04) (0.01)
------------------------------------------------------------------------------------
Total Distributions (0.25) (0.24) (0.05)
------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.73 $13.67 $11.16
------------------------------------------------------------------------------------
Total Return (4.99)%++ 24.57% (1.60)%++
------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $20,377 $18,133 $10,766
------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.59%+
Net investment income 0.27+ 1.73 0.80+
------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 0% 0%
====================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from March 9, 1998 (inception date) to January 31, 1999.
(4) Net investment income 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.
53
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class B
-------------------------------------
GLOBAL PORTFOLIO 2000(1)(2) 2000(2) 1999(2)(3)
=====================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $13.65 $11.15 $11.40
-------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(4) (0.03) 0.10 0.00*
Net realized and unrealized gain (loss) (0.70) 2.53 (0.24)
-------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.73) 2.63 (0.24)
-------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.09) --
Net realized gains (0.25) (0.04) (0.01)
-------------------------------------------------------------------------------------
Total Distributions (0.25) (0.13) (0.01)
------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.67 $13.65 $11.15
-------------------------------------------------------------------------------------
Total Return (5.33)%++ 23.59% (2.16)%++
-------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $15,463 $14,392 $9,220
-------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.32%+
Net investment income (loss) (0.49)+ 0.83 0.06+
-------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 0% 0%
=====================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from March 9, 1998 (inception date) to January 31, 1999.
(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.
54
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class L
-----------------------------------------
GLOBAL PORTFOLIO 2000(1)(2) 2000(2) 1999(2)(3)(4)
========================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $13.64 $11.14 $11.40
----------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(5) (0.03) 0.30 (0.02)
Net realized and unrealized gain (loss) (0.70) 2.33 (0.23)
----------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.73) 2.63 (0.25)
----------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.09) --
Net realized gains (0.25) (0.04) (0.01)
----------------------------------------------------------------------------------------
Total Distributions (0.25) (0.13) (0.01)
----------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.66 $13.64 $11.14
----------------------------------------------------------------------------------------
Total Return (5.33)%++ 23.61% (2.25)%++
----------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $1,168 $ 758 $ 244
----------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.32%+
Net investment income (loss) (0.39)+ 2.36 (0.12)+
----------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 0% 0%
========================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from March 9, 1998 (inception date) to January 31, 1999.
(4) On June 12, 1998, Class C shares were renamed Class L shares.
(5) 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.
55
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------
HIGH GROWTH PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.81 $14.86 $12.97 $12.41 $11.40
---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(4) 0.17 0.54 0.09 0.11 0.20
Net realized and unrealized gain 0.09 2.29 2.36 0.91 1.05
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.26 2.83 2.45 1.02 1.25
Less Distributions From:
Net investment income (0.04) (0.53) (0.08) (0.13) (0.20)
Net realized gains (0.36) (0.35) (0.48) (0.33) (0.04)
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.40) (0.88) (0.56) (0.46) (0.24)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.67 $16.81 $14.86 $12.97 $12.41
---------------------------------------------------------------------------------------------------------------
Total Return 1.52%++ 18.97% 19.15% 8.25% 11.04%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $456,990 $441,050 $365,225 $259,212 $154,069
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60% 0.60% 0.60%+
Net investment income 1.98+ 3.44 0.68 1.00 2.79+
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 9% 2% 21% 39% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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.
56
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
-----------------------------------------------------------------
HIGH GROWTH PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.74 $14.81 $12.95 $12.41 $11.40
--------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(4) 0.11 0.41 (0.01) 0.03 0.08
Net realized and unrealized gain 0.09 2.26 2.35 0.89 1.04
--------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.20 2.67 2.34 0.92 1.12
--------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.39) -- (0.05) (0.07)
Net realized gains (0.36) (0.35) (0.48) (0.33) (0.04)
--------------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.74) (0.48) (0.38) (0.11)
--------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.58 $16.74 $14.81 $12.95 $12.41
--------------------------------------------------------------------------------------------------------------
Total Return 1.19%++ 18.01% 18.30% 7.44% 9.91%++
--------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $383,776 $375,224 $318,101 $230,142 $141,241
--------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35% 1.35% 1.35%+
Net investment income (loss) 1.22+ 2.65 (0.07) 0.25 2.04+
--------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 9% 2% 21% 39% 0%
==============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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 (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.
57
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
------------------------------------------------------------------
HIGH GROWTH PORTFOLIO 2000(1)(2) 2000(2) 1999(2)(3) 1998 1997(4)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.75 $14.81 $12.96 $12.42 $11.40
---------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(5) 0.11 0.43 (0.01) 0.03 0.08
Net realized and unrealized gain 0.08 2.25 2.34 0.89 1.05
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.19 2.68 2.33 0.92 1.13
---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.39) -- (0.05) (0.07)
Net realized gains (0.36) (0.35) (0.48) (0.33) (0.04)
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.74) (0.48) (0.38) (0.11)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.58 $16.75 $14.81 $12.96 $12.42
---------------------------------------------------------------------------------------------------------------
Total Return 1.13%++ 18.08% 18.21% 7.44% 10.00%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $49,807 $45,979 $37,969 $27,845 $19,340
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35% 1.35% 1.35%+
Net investment income (loss) 1.26+ 2.74 (0.07) 0.25 2.04+
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 9% 2% 21% 39% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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) For the period from February 5, 1996 (inception date) to January 31, 1997.
(5) 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.
58
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------
GROWTH PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.11 $14.43 $12.99 $12.32 $11.40
---------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.18 0.47 0.26 0.31 0.33
Net realized and unrealized gain (loss) (0.07) 1.05 1.82 1.14 0.92
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.11 1.52 2.08 1.45 1.25
---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03) (0.49) (0.27) (0.32) (0.31)
Net realized gains (0.50) (0.35) (0.37) (0.46) (0.02)
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.84) (0.64) (0.78) (0.33)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.69 $15.11 $14.43 $12.99 $12.32
---------------------------------------------------------------------------------------------------------------
Total Return 0.75%++ 10.53% 16.20% 11.82% 11.08%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $438,880 $432,580 $391,235 $279,842 $161,026
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60% 0.60% 0.60%+
Net investment income 2.35+ 3.23 1.93 2.77 4.79+
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 2% 10% 41% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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.
59
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------
GROWTH PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.18 $14.48 $13.00 $12.33 $11.40
---------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.12 0.36 0.16 0.22 0.23
Net realized and unrealized gain (loss) (0.06) 1.03 1.82 1.12 0.94
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.06 1.39 1.98 1.34 1.17
---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.34) (0.13) (0.21) (0.22)
Net realized gains (0.50) (0.35) (0.37) (0.46) (0.02)
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.69) (0.50) (0.67) (0.24)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.74 $15.18 $14.48 $13.00 $12.33
---------------------------------------------------------------------------------------------------------------
Total Return 0.39%++ 9.61% 15.40% 10.93% 10.32%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $475,463 $486,164 $452,943 $343,474 $211,434
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35% 1.35% 1.35%+
Net investment income 1.58+ 2.43 1.18 1.96 4.04+
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 2% 10% 41% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
------------------------------------------------------------------
GROWTH PORTFOLIO 2000(1)(2) 2000(2) 1999(2)(3) 1998 1997(4)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.19 $14.48 $13.00 $12.33 $11.40
---------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(5) 0.12 0.35 0.16 0.22 0.24
Net realized and unrealized gain (loss) (0.07) 1.05 1.82 1.12 0.93
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.05 1.40 1.98 1.34 1.17
---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.34) (0.13) (0.21) (0.22)
Net realized gains (0.50) (0.35) (0.37) (0.46) (0.02)
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.69) (0.50) (0.67) (0.24)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.74 $15.19 $14.48 $13.00 $12.33
---------------------------------------------------------------------------------------------------------------
Total Return 0.33%++ 9.68% 15.40% 10.92% 10.32%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $57,692 $57,596 $53,319 $42,983 $31,279
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35% 1.35% 1.35%+
Net investment income 1.59+ 2.39 1.18 1.96 4.04+
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 2% 10% 41% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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) For the period from February 5, 1996 (inception date) to January 31, 1997.
(5) 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.
61
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------
BALANCED PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.58 $12.95 $12.62 $12.14 $11.40
---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(4) 0.22 0.45 0.42 0.58 0.45
Net realized and unrealized gain 0.35 0.10 0.73 0.80 0.74
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.57 0.55 1.15 1.38 1.19
---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.22) (0.46) (0.45) (0.54) (0.45)
Net realized gains (0.55) (0.46) (0.37) (0.36) --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.77) (0.92) (0.82) (0.90) (0.45)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.38 $12.58 $12.95 $12.62 $12.14
---------------------------------------------------------------------------------------------------------------
Total Return 4.56%++ 4.37% 9.33% 11.59% 10.64%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $218,335 $222,275 $227,674 $166,806 $90,938
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60% 0.60% 0.60%+
Net investment income 3.50+ 3.54 3.24 4.79 4.88+
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 1% 4% 10% 23% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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.
62
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
------------------------------------------------------------------
BALANCED PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.64 $12.95 $12.61 $12.14 $11.40
---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(4) 0.18 0.35 0.32 0.48 0.37
Net realized and unrealized gain 0.34 0.09 0.74 0.80 0.74
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.52 0.44 1.06 1.28 1.11
---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.17) (0.29) (0.35) (0.45) (0.37)
Net realized gains (0.55) (0.46) (0.37) (0.36) --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.72) (0.75) (0.72) (0.81) (0.37)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.44 $12.64 $12.95 $12.61 $12.14
---------------------------------------------------------------------------------------------------------------
Total Return 4.15%++ 3.48% 8.62% 10.67% 9.90%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $229,030 $238,456 $247,733 $193,791 $111,918
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35% 1.35% 1.35%+
Net investment income 2.74+ 2.75 2.50 3.96 4.14+
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 1% 4% 10% 23% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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.
63
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
------------------------------------------------------------------
BALANCED PORTFOLIO 2000(1)(2) 2000(2) 1999(2)(3) 1998 1997(4)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.64 $12.94 $12.61 $12.14 $11.40
---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(5) 0.18 0.36 0.32 0.46 0.37
Net realized and unrealized gain 0.34 0.09 0.73 0.82 0.74
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.52 0.45 1.05 1.28 1.11
---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.17) (0.29) (0.35) (0.45) (0.37)
Net realized gains (0.55) (0.46) (0.37) (0.36) --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.72) (0.75) (0.72) (0.81) (0.37)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.44 $12.64 $12.94 $12.61 $12.14
---------------------------------------------------------------------------------------------------------------
Total Return 4.16%++ 3.56% 8.53% 10.67% 9.90%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $33,895 $33,989 $34,809 $27,473 $19,968
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35%+ 1.35% 1.35% 1.35% 1.35%+
Net investment income 2.75+ 2.76 2.50 3.69 4.14+
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 1% 4% 10% 23% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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) For the period from February 5, 1996 (inception date) to January 31, 1997.
(5) 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.
64
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class Z Shares
------------------------------------------------------------------
BALANCED PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998(2) 1997(3)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.55 $12.95 $12.61 $12.13 $12.10
---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(4) 0.23 0.45 0.45 1.11 0.00#
Net realized and unrealized gain 0.35 0.13 0.74 0.30 0.03
---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.58 0.58 1.19 1.41 0.03
---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.24) (0.52) (0.48) (0.57) --
Net realized gains (0.55) (0.46) (0.37) (0.36) --
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.79) (0.98) (0.85) (0.93) --
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.34 $12.55 $12.95 $12.61 $12.13
---------------------------------------------------------------------------------------------------------------
Total Return 4.62%++ 4.58% 9.70% 11.82% 0.25%++
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $584 $29,653 $36,726 $2,919 $2
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.35%+ 0.35% 0.35% 0.35% 0.35%+
Net investment income 3.66+ 3.48 3.50 8.31 5.39*
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 1% 4% 10% 23% 0%
===============================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from January 17, 1996 (inception date) to January 31, 1997.
(4) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
# Amount represents less 0.01.
* Not annualized.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
65
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------------------
CONSERVATIVE PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.47 $12.04 $12.17 $11.90 $11.46
------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.28 0.56 0.58 0.73 0.53
Net realized and unrealized gain (loss) 0.20 (0.33) 0.11 0.63 0.43
------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.48 0.23 0.69 1.36 0.96
------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.24) (0.55) (0.58) (0.69) (0.52)
Net realized gains (0.21) (0.25) (0.24) (0.40) --
------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.80) (0.82) (1.09) (0.52)
------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.50 $11.47 $12.04 $12.17 $11.90
------------------------------------------------------------------------------------------------------------------------
Total Return 4.22%++ 1.96% 5.85% 11.70% 8.57%++
------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $63,763 $70,327 $71,583 $51,233 $30,478
------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60% 0.60% 0.60%+
Net investment income 4.88+ 4.76 4.80 6.17 5.66+
------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 3% 5% 28% 0%
========================================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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.
66
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
--------------------------------------------------------------------------
CONSERVATIVE PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.50 $12.02 $12.16 $11.89 $11.46
------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.25 0.51 0.52 0.66 0.48
Net realized and unrealized gain (loss) 0.20 (0.33) 0.10 0.64 0.42
------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.45 0.18 0.62 1.30 0.90
------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.21) (0.45) (0.52) (0.63) (0.47)
Net realized gains (0.21) (0.25) (0.24) (0.40) --
------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.70) (0.76) (1.03) (0.47)
------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.53 $11.50 $12.02 $12.16 $11.89
------------------------------------------------------------------------------------------------------------------------
Total Return 3.95%++ 1.50% 5.22% 11.21% 8.03%++
------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $54,118 $64,910 $64,983 $48,584 $28,297
------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.10%+ 1.10% 1.09% 1.10% 1.10%+
Net investment income 4.34+ 4.29 4.31 5.67 5.16+
------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 3% 5% 28% 0%
========================================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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.
67
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
--------------------------------------------------------------------------
CONSERVATIVE PORTFOLIO 2000(1)(2) 2000(2) 1999(2)(3) 1998 1997(4)
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.50 $12.02 $12.16 $11.89 $11.46
------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(5) 0.26 0.51 0.53 0.69 0.48
Net realized and unrealized gain (loss) 0.20 (0.32) 0.10 0.62 0.42
------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.46 0.19 0.63 1.31 0.90
------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.22) (0.46) (0.53) (0.64) (0.47)
Net realized gains (0.21) (0.25) (0.24) (0.40) --
------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.71) (0.77) (1.04) (0.47)
------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.53 $11.50 $12.02 $12.16 $11.89
------------------------------------------------------------------------------------------------------------------------
Total Return 3.97%++ 1.59% 5.29% 11.25% 8.08%++
------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $6,989 $6,952 $6,899 $5,386 $4,129
------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05%+ 1.05% 1.05% 1.05% 1.05%+
Net investment income 4.45+ 4.34 4.32 5.72 5.21+
------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 3% 5% 28% 0%
========================================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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) For the period from February 5, 1996 (inception date) to January 31, 1997.
(5) 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.
68
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------------------
INCOME PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.64 $11.50 $11.75 $11.53 $11.46
------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.35 0.64 0.69 0.76 0.63
Net realized and unrealized gain (loss) 0.02 (0.76) (0.14) 0.52 0.07
------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.37 (0.12) 0.55 1.28 0.70
------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.63) (0.69) (0.77) (0.63)
Net realized gains (0.02) (0.11) (0.11) (0.29) --
------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.74) (0.80) (1.06) (0.63)
------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period %10.68 $10.64 $11.50 $11.75 $11.53
------------------------------------------------------------------------------------------------------------------------
Total Return 3.46%++ (1.04)% 4.88% 11.44% 6.39%++
------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $27,892 $32,111 $36,390 $29,574 $17,817
------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60%+ 0.60% 0.60% 0.60% 0.60%+
Net investment income 6.52+ 5.78 5.95 6.62 6.32+
------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 4% 0% 28% 0%
========================================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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.
69
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
--------------------------------------------------------------------------
INCOME PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998 1997(3)
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.65 $11.50 $11.76 $11.53 $11.46
------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.32 0.59 0.63 0.70 0.58
Net realized and unrealized gain (loss) 0.02 (0.75) (0.15) 0.52 0.07
------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.34 (0.16) 0.48 1.22 0.65
------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.58) (0.63) (0.70) (0.58)
Net realized gains (0.02) (0.11) (0.11) (0.29) --
------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.69) (0.74) (0.99) (0.58)
------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.69 $10.65 $11.50 $11.76 $11.53
------------------------------------------------------------------------------------------------------------------------
Total Return 3.18%++ (1.47)% 4.25% 10.93% 5.89%++
------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $24,515 $28,302 $34,497 $26,563 $17,800
------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.10%+ 1.10% 1.10% 1.10% 1.10%+
Net investment income 6.04+ 5.27 5.45 6.12 5.82+
------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 4% 0% 28% 0%
========================================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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.
70
<PAGE>
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares
--------------------------------------------------------------------------
INCOME PORTFOLIO 2000(1)(2) 2000(2) 1999(2)(3) 1998 1997(4)
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.65 $11.50 $11.76 $11.53 $11.46
------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(5) 0.32 0.60 0.64 0.71 0.59
Net realized and unrealized gain (loss) 0.02 (0.76) (0.15) 0.52 0.07
------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.34 (0.16) 0.49 1.23 0.66
------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.58) (0.64) (0.71) (0.59)
Net realized gains (0.02) (0.11) (0.11) (0.29) --
------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.69) (0.75) (1.00) (0.59)
------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.69 $10.65 $11.50 $11.76 $11.53
------------------------------------------------------------------------------------------------------------------------
Total Return 3.20%++ (1.42)% 4.31% 10.98% 5.94%++
------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $3,435 $3,698 $3,945 $3,568 $2,113
------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05%+ 1.05% 1.05% 1.05% 1.05%+
Net investment income 6.07+ 5.36 5.47 6.17 5.87+
------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 4% 0% 28% 0%
========================================================================================================================
</TABLE>
(1) For the six months ended July 31, 2000 (unaudited).
(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) For the period from February 5, 1996 (inception date) to January 31, 1997.
(5) 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.
71
<PAGE>
Directors Investment Manager
Walter E. Auch SSB Citi Fund Management LLC
Martin Brody
H. John Ellis
Armon E. Kamesar Distributor
Stephen E. Kaufman Salomon Smith Barney Inc.
Heath B. McLendon, Chairman PFS Distributors, Inc.
Custodian
Officers PFPC Trust Company
Heath B. McLendon
Chief Executive Officer
Transfer Agent
Lewis E. Daidone Citi Fiduciary Trust Company
Senior Vice President 125 Broad Street, 11th Floor
and Treasurer New York, New York 10004
R. Jay Gerken
Vice President and Sub-Transfer Agent
Investment Officer PFPC Global Fund Services
P.O. Box 9699
Irving P. David Providence, Rhode Island 02940-9699
Controller
Smith Barney
Christina T. Sydor Allocation Series Inc.
Secretary 388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
72
<PAGE>
This report is submitted for the general information of the shareholders of
Smith Barney Allocation Series Inc., but it may also be used as sales literature
when preceded or accompanied by the current Prospectus, which gives details
about charges, expenses, investment objectives and operating policies of the
Fund. If used as sales material after October 31, 2000, this report must be
accompanied by performance information for the most recently completed calendar
quarter.
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Member NASD, SIPC(C)2000
(c)Salomon Smith Barney Inc.
FD01185 9/00
<PAGE>
-------------------------------------------------------------------------------
SMITH BARNEY
CONCERT
ALLOCATION
SERIES
-------------------------------------------------------------------------------
SEMI-ANNUAL REPORT | JULY 31, 2000
SELECT HIGH GROWTH PORTFOLIO
SELECT GROWTH PORTFOLIO
SELECT BALANCED PORTFOLIO
SELECT CONSERVATIVE PORTFOLIO [LOGO] SMITH BARNEY
MUTUAL FUNDS
SELECT INCOME PORTFOLIO YOUR SERIOUS MONEY. PROFESSIONALLY MANAGED.-SM-
-------------------------------------------------------------------------------
NOT FDIC INSURED - NOT BANK GUARANTEED - MAY LOSE VALUE
-------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders...................................... 1
Concert Allocation Series Portfolios
Select High Growth Portfolio............................ 5
Select Growth Portfolio................................. 8
Select Balanced Portfolio............................... 11
Select Conservative Portfolio........................... 14
Select Income Portfolio................................. 17
Schedules of Investments.................................... 20
Statements of Assets and Liabilities........................ 25
Statements of Operations.................................... 26
Statements of Changes in Net Assets......................... 27
Notes to Financial Statements............................... 29
Financial Highlights........................................ 32
Directors and Officers...................................... 37
</TABLE>
<PAGE>
Dear Shareholder:
[PHOTO]
Heath B. McLendon
CHAIRMAN
THE CONCERT ALLOCATION SERIES
We are pleased to present the semi-annual report for the Smith Barney Concert
Allocation Series Inc. Select Portfolios(1) ("Select Portfolios") for the period
ended July 31, 2000.
Our mission in creating the Select Portfolios has remained the same: to maximize
reward potential and minimize risk through diversification by investing in a
wide range of asset classes and investment styles. As you know, unlike ordinary
mutual funds, the 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 Select 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 Select 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.
The chart below shows the performance of the five Select Portfolios for the
period under review. The performance and current holdings of each Select
Portfolio are discussed in greater detail on the following pages.
THE PERFORMANCE OF CONCERT ALLOCATION SERIES SELECT PORTFOLIOS(2)
TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31, 2000
<TABLE>
<CAPTION>
TOTAL
PORTFOLIO RETURN(3)
--------- -------------
<S> <C>
Select High Growth 1.17%
Select Growth 0.68
Select Balanced 4.51
Select Conservative 4.32
Select Income 3.53
</TABLE>
---------
1 THE SMITH BARNEY CONCERT ALLOCATION SERIES INC. SELECT PORTFOLIOS ARE
UNDERLYING INVESTMENT OPTIONS OF VARIOUS VARIABLE ANNUITY PRODUCTS. A VARIABLE
ANNUITY PRODUCT IS A CONTRACT ISSUED BY AN INSURANCE COMPANY WHERE THE ANNUITY
PREMIUM (A SET AMOUNT OF DOLLARS) IS IMMEDIATELY TURNED INTO UNITS OF A
PORTFOLIO OF SECURITIES. UPON RETIREMENT, THE POLICYHOLDER IS PAID ACCORDING
TO ACCUMULATED UNITS WHOSE DOLLARS VALUE VARIES ACCORDING TO THE PERFORMANCE
OF THE SECURITIES PORTFOLIO. ITS OBJECTIVE IS TO PRESERVE, THROUGH INVESTMENT,
THE PURCHASING VALUE OF THE ANNUITY WHICH OTHERWISE IS SUBJECT TO EROSION
THROUGH INFLATION.
2 THE PERFORMANCE FIGURES SHOWN ABOVE REPRESENT PAST PERFORMANCE AND ARE NOT
INDICATIVE OF FUTURE RESULTS.
3 THE PERFORMACE RETURNS SET FORTH ABOVE DO NOT REFLECT THE DEDUCTIONS OF
INITIALS CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE
ANNUITY CONTRACTS SUCH AS ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER
CHARGES, WHICH, IF REFLECTED, WOULD REDUCE THE PERFORMANCE SHOWN.
1
<PAGE>
THE U.S. MARKETS
During the period, the U.S. stock market exhibited plenty of volatility, but
little upward progress. After peaking in March, many stocks then gave up their
gains and ended up largely unchanged from the beginning of the period. Large
capitalization stocks, as measured by the Standard & Poor's 500 Composite Stock
Index ("S&P 500 Index")(4), were up 3.21% for the period. The over-the-counter
market, a mix of technology and smaller stocks, declined 4.4% as measured by the
Nasdaq Composite Index.(5) The mediocre performance of the stock market occurred
despite strong corporate earnings, which historically tend to support higher
stock prices. We think that the historic rise in the price of many shares during
the last six months has discounted some of this good news.
Bond investors enjoyed positive returns, as many investors concluded that the
Federal Reserve Board ("Fed") may be done with its recent round of interest rate
hikes. Given the generally flat stock prices during the period, many bonds
outperformed stocks. The superior performance of bonds is in marked contrast to
the last several reporting periods.
Growth stocks(6) outperformed value stocks(7) and large capitalization stocks
outperformed small capitalization stocks during the period. For the most part,
the U.S. stock market has continued to reward large, faster-growing companies,
despite their generally higher valuations.
INTERNATIONAL STOCK MARKETS
International growth stocks significantly underperformed international value
stocks by almost ten percentage points so far in 2000. Rising U.S. interest
rates raised investors' concerns, especially about telecommunications and
technology stocks. The highly visible retrenchment of the Internet stocks
exacerbated technology stock selling.
Further weakness contributed to the decline of several major currencies versus
the U.S. dollar. Growth stocks, especially in Asia, suffered significant selling
pressure as investors switched to defensive stocks such as health care, consumer
nondurables, financial services and utility stocks.
In our opinion, Europe continues to have strengthening fundamentals despite
lackluster returns for the first half of the year. Many European managers are
restructuring and reengineering their companies, creating economies of scale and
potentially boosting return on capital employed. The fall of the euro(8) reduced
returns, but that currency may have reached its bottom and has started to show
signs of recovering versus the U.S. dollar. Merger and acquisition activity
continues to be vibrant throughout Europe.
Our outlook in Asia has become a bit more guarded, as continued Asian recovery
to some extent depends on export volumes to the U.S. Efforts to slow the growth
of the U.S. economy negatively impacted Asia's more interest rate sensitive
stock markets, most notably in Hong Kong and Singapore, which were also affected
by investment portfolio rebalancing due to international benchmark revisions.
Japan continues to be problematic, with efforts to restructure the financial and
corporate sectors resulting in a slowdown in domestic demand.
---------
4 THE S&P 500 INDEX IS A MARKET CAPITALIZATION-WEIGHTED MEASURE OF 500 WIDELY
HELD COMMON STOCKS. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
5 THE NASDAQ COMPOSITE INDEX IS A MARKET VALUE-WEIGHTED INDEX THAT MEASURES ALL
DOMESTIC AND NON-U.S. BASED SECURITIES LISTED ON THE NASDAQ STOCK MARKET.
PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
6 GROWTH STOCKS ARE SHARES OF COMPANIES WITH THE POTENTIAL FOR
FASTER-THAN-AVERAGE GROWTH WITHIN THEIR INDUSTRIES.
7 VALUE STOCKS ARE THE SHARES OF THOSE COMPANIES WHOSE SHARES ARE CONSIDERED TO
BE INEXPENSIVE RELATIVE TO THEIR ASSET VALUES OR EARNING POWER.
8 THE EURO IS THE SINGLE CURRENCY OF THE EUROPEAN MONETARY UNION THAT WAS
ADOPTED BY BELGIUM, GERMANY, SPAIN, FRANCE, IRELAND, ITALY, LUXEMBOURG, THE
NETHERLANDS, AUSTRIA, PORTUGAL AND FINLAND ON JANUARY 1, 1999.
2
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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 BROTHERS GOVERNMENT/CORPORATE BOND INDEX AND
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
JULY 1990 -- JULY 2000
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD & POOR'S 500 SALOMON SMITH BARNEY WORLD LEHMAN BROTHERS GOVERNMENT/
COMPOSITE STOCK INDEX GOVERNMENT BOND INDEX CORPORATE BOND INDEX MSCI EAFE INDEX
<S> <C> <C> <C>
7/90 $10,000 $10,000 $10,000 $10,000
1/91 $ 9,839 $10,583 $ 8,866 $10,561
1/92 $12,068 $11,764 $ 9,425 $11,948
1/93 $13,342 $12,931 $ 8,457 $13,331
1/94 $15,056 $14,321 $12,160 $14,704
1/95 $15,135 $13,967 $11,620 $14,247
1/96 $20,980 $16,420 $13,494 $16,772
1/97 $26,503 $17,832 $13,753 $17,172
1/98 $33,634 $18,849 $15,169 $19,091
1/99 $44,565 $20,870 $17,355 $20,756
1/00 $49,170 $20,950 $20,695 $20,160
7/00 $50,743 $22,019 $20,312 $21,231
</TABLE>
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX 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
BROTHERS 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 ("MSCI") EAFE INDEX 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. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
GLOBAL BOND MARKETS
As a result of interest rate increases by many of the world's central banks,
investing in bonds from countries other than the U.S. remained challenging for
many investors. In addition, the historically unique circumstance where the U.S.
government is buying back U.S. Treasury securities in order to reduce federal
debt has created a situation where U.S. Treasury yields are low compared to the
income return available from other types of bonds.
Given the potential for a slowdown in U.S. economic growth--due in large part to
rising short term interest rates--many bond investors have been buying higher
quality instruments such as U.S. Treasury notes. As a result, the high-yield
bond market was under pressure during the period.
3
<PAGE>
LOOKING AHEAD
In our view, the technology sector may continue to be the dominant force
influencing the performance of the world's financial markets for the foreseeable
future. However, we also believe that many compelling investment opportunities
still exist across many companies and industries.
Despite solid economic fundamentals such as low inflation, we think the growth
of the U.S. economy has slowed from its recent overheated pace. We think the
Fed, after implementing a series of interest rate increases, may have succeeded
in guiding the U.S. economy towards a "soft landing."
Yet, despite a favorable economy, the U.S. stock market remains highly volatile.
We think this market volatility may continue over the near term, as many
investors address a number of issues. One primary concern is the possibility of
further interest rate increases by the Fed. We believe the recent round of Fed
rate increases may be complete, at least for now, but not all investors are
convinced.
Thank you for investing in the Concert Allocation Series Inc. Select Portfolios.
We look forward to helping you pursue your financial goals in the future.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
CHAIRMAN
AUGUST 29, 2000
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 stock 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** 3.20%
RUSSELL 2000-Registered Trademark- *** 1.35%
MSCI EAFE+ (1.85)%
SALOMON SMITH BARNEY
HIGH YIELD MARKET++ 0.48%
</TABLE>
.................................................................
* THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
2000.
** THE S&P 500 INDEX IS A MARKET CAPITALIZATION-WEIGHTED MEASURE OF 500 WIDELY
HELD COMMON STOCKS. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
***THE RUSSELL 2000-Registered Trademark- INDEX MEASURES THE PERFORMANCE OF THE
2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX, WHICH REPRESENTS
APPROXIMATELY 8% OF THE TOTAL MARKET CAPITALIZATION OF THE RUSSELL 3000
INDEX. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
+ THE MSCI EAFE INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS OF COMPANIES
LOCATED IN EUROPE, AUSTRALASIA AND THE FAR EAST. PLEASE NOTE THAT AN INVESTOR
CANNOT INVEST DIRECTLY IN AN INDEX.
++ THE SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX IS A BROAD-BASED UNMANAGED
INDEX OF HIGH YIELD SECURITIES. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST
DIRECTLY IN AN INDEX.
PORTFOLIO UPDATE
The Select High Growth Portfolio's ("Portfolio") shares returned 1.17% for the
period ended July 31, 2000. The chart that appears on page 6 compares the
Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio.
Several major stock and bond markets hit record highs in 2000, but have since
backed off from their highs. The first half of 2000 was characterized by
increased levels of stock market volatility worldwide, predominantly in the
technology sector. In fact, the tech-laden Nasdaq Composite Index(1) experienced
four declines of 10% or more during the period.
In 2000, the Federal Reserve Board ("Fed") raised interest rates three times
(February 2, 2000, March 21, 2000, and May 16, 2000) in an effort to slow the
growth of the robust U.S. economy. While rising interest rates often lead
historically to falling stock prices, the economy (and the bond and stock
markets) appeared to have absorbed the Fed's rate hikes. While consumer
confidence has slipped somewhat so far this year, consumer spending continues to
increase as evidenced by recent economic data. Unemployment remains near its
30-year low. Despite the possibility of future rate hikes this year by the Fed,
we remain optimistic that the growth of the U.S. economy should continue for the
near term. (Of course, no guarantees can be given that our expectations will be
met.)
------------------------------------------------------------------
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.
----------
1 THE NASDAQ COMPOSITE INDEX IS A MARKET VALUE-WEIGHTED INDEX THAT MEASURES ALL
DOMESTIC AND NON-U.S. BASED SECURITIES LISTED ON THE NASDAQ STOCK MARKET.
PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
5
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT HIGH GROWTH PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, RUSSELL 2000 INDEX,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX AND SALOMON SMITH BARNEY HIGH
YIELD MARKET INDEX
...............................................................................
FEBRUARY 5, 1997 -- JULY 31, 2000 (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>
2/5/1997 $10,000 $10,000 $10,000 $10,000 $10,000
7/97 $11,250 $12,254 $11,307 $11,711 $10,757
1/98 $11,060 $12,689 $11,807 $11,028 $11,487
7/98 $11,998 $14,618 $11,569 $12,349 $11,906
1/99 $13,138 $16,814 $11,851 $12,635 $11,812
7/99 $13,972 $17,571 $12,431 $13,566 $11,870
1/00 $15,563 $18,551 $13,953 $15,067 $11,743
7/31/00 $15,745 $19,145 $14,142 $14,788 $11,800
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JULY 31, 2000.
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 ("MSCI") EAFE INDEX 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. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
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. THE CHART DOES NOT
REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS ADMINISTRATIVE
FEES, ACCOUNT CHARGES AND SURRENDER CHARGES WHICH, IF REFLECTED, WOULD REDUCE
THE PERFORMANCE SHOWN.
6
<PAGE>
HISTORICAL PERFORMANCE -- SELECT HIGH GROWTH PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------------------- INCOME CAPITAL GAIN
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
7/31/00 $15.16 $14.59 $0.39 $0.35 1.17%++
---------------------------------------------------------------------------------------------------------------------------------
1/31/00 13.02 15.16 0.07 0.17 18.46
---------------------------------------------------------------------------------------------------------------------------------
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 $0.53 $0.56
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT HIGH GROWTH PORTFOLIO
...............................................................................
<TABLE>
<S> <C>
Six Months Ended 7/31/00++ 1.17%
----------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 12.69
----------------------------------------------------------------------------------------------------------------------------
2/5/97* through 7/31/00 13.91
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT HIGH GROWTH PORTFOLIO
...............................................................................
2/5/97* through 7/31/00 57.45%
--------------------------------------------------------------------------------
+ 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.
7
<PAGE>
THE SELECT GROWTH PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
BOND FUNDS STOCK FUNDS
30% 70%
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 stock 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 its
potential volatility.
INDEX COMPARISON*
S&P 500** 3.20%
RUSSELL 2000-Registered Trademark- *** 1.35%
MSCI EAFE+ (1.85)%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND++ 5.31%
.................................................................
* THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
2000.
** THE S&P 500 INDEX IS A MARKET CAPITALIZATION-WEIGHTED MEASURE OF 500 WIDELY
HELD COMMON STOCKS. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
***THE RUSSELL 2000-Registered Trademark- INDEX MEASURES THE PERFORMANCE OF THE
2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX, WHICH REPRESENTS
APPROXIMATELY 8% OF THE TOTAL MARKET CAPITALIZATION OF THE RUSSELL 3000
INDEX. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
+ THE MSCI EAFE INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS OF COMPANIES
LOCATED IN EUROPE, AUSTRALASIA AND THE FAR EAST. PLEASE NOTE THAT AN INVESTOR
CANNOT INVEST DIRECTLY IN AN INDEX.
++ THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX TRACKS THE PERFORMANCE OF
THE OVERALL BOND MARKET AND IS A BROAD MEASURE OF THE PERFORMANCE OF
GOVERNMENT AND CORPORATE FIXED-RATE DEBT ISSUES. PLEASE NOTE THAT AN INVESTOR
CANNOT INVEST DIRECTLY IN AN INDEX.
PORTFOLIO UPDATE
The Select Growth Portfolio's ("Portfolio") shares returned 0.68% for the period
ended July 31, 2000. The chart that appears on page 9 compares the Portfolio's
performance to broad-based indices that track four of the asset classes
represented in the Portfolio.
Even though the performance of the stock market was negative (as measured by the
S&P 500 Index) for the period, many compelling investment opportunities
continued to exist. Initially, the predominately speculative momentum market of
1999 continued in 2000, peaking during the second week of March.
The Federal Reserve Board's ("Fed") continued increases in interest rates then
started to be felt by most investors, leading to a dramatic sell-off, as
witnessed by the dramatic decrease of the tech-laden Nasdaq Composite Index(1)
through May. At the same time, many oversold "Old Economy" stocks rallied as
money rotated from the Internet and biotech stocks into areas such as consumer
staples. By the end of the half of the reporting period, most of the markets
recovered so that most broad indices were only down modestly. ("Old Economy"
stocks refer to the shares of more established, "blue-chip" companies.)
One way to describe what happened is that "investment gravity" finally took hold
of many stocks that were trading at what we deemed to be unsustainable levels.
The sell-off in many technology stocks spread to most of the dominant and
overvalued large-cap growth stocks. As a result, it appeared that once again,
corporate earnings were a factor driving most investors' decisions. However, by
the end of the period, investor psychology appeared to somewhat change, with
several investors once again favoring future potential as a premium over proven
ability.
------------------------------------------------------------------
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.
----------
1 THE NASDAQ COMPOSITE INDEX IS A MARKET VALUE-WEIGHTED INDEX THAT MEASURES ALL
DOMESTIC AND NON-U.S. BASED SECURITIES LISTED ON THE NASDAQ STOCK MARKET.
PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
8
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT GROWTH PORTFOLIO VS. THE STANDARD &
POOR'S 500 COMPOSITE STOCK INDEX, RUSSELL 2000 INDEX, MORGAN STANLEY CAPITAL
INTERNATIONAL EAFE INDEX AND LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
...............................................................................
FEBRUARY 5, 1997 -- JULY 31, 2000 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT GROWTH STANDARD & POOR'S 500 LEHMAN BROTHERS 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
7/99 $13,414 $17,571 $12,431 $13,566 $11,694
1/00 $14,395 $18,551 $13,953 $15,067 $11,738
7/31/00 $14,492 $19,145 $14,142 $14,788 $12,362
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JULY 31, 2000.
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 ("MSCI") EAFE INDEX IS A
COMPOSITE INDEX THAT CONSISTS OF EQUITY TOTAL RETURNS FOR EUROPE, AUSTRALIA AND
THE FAR EAST. THE LEHMAN BROTHERS 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. AN INVESTOR CANNOT INVEST
DIRECTLY IN AN INDEX.
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. THE CHART DOES NOT
REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS ADMINISTRATIVE
FEES, ACCOUNT CHARGES AND SURRENDER CHARGES WHICH, IF REFLECTED, WOULD REDUCE
THE PERFORMANCE SHOWN.
9
<PAGE>
HISTORICAL PERFORMANCE -- SELECT GROWTH PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------------------- INCOME CAPITAL GAIN
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
7/31/00 $13.80 $13.09 $0.37 $0.43 0.68%++
---------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.87 13.80 0.13 0.17 9.72
---------------------------------------------------------------------------------------------------------------------------------
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 $0.61 $0.72
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT GROWTH PORTFOLIO
...............................................................................
<TABLE>
<S> <C>
Six Months Ended 7/31/00++ 0.68%
----------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 8.04
----------------------------------------------------------------------------------------------------------------------------
2/5/97* through 7/31/00 11.23
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT GROWTH PORTFOLIO
...............................................................................
2/5/97* through 7/31/00 44.92%
--------------------------------------------------------------------------------
+ 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.
10
<PAGE>
THE SELECT BALANCED PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
BOND FUNDS STOCK FUNDS
50% 50%
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 stock
and bond mutual funds. The stock funds are primarily large-capitalization,
dividend-paying stock funds. The bond 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** 3.20%
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND*** 5.31%
SALOMON SMITH BARNEY ONE-YEAR TREASURY BILL+ 3.32%
SALOMON SMITH BARNEY
WORLD GOVERNMENT BOND++ 5.10%
.................................................................
* THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
2000.
** THE S&P 500 INDEX IS A MARKET CAPITALIZATION-WEIGHTED MEASURE OF 500 WIDELY
HELD COMMON STOCKS. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
***THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX TRACKS THE PERFORMANCE OF
THE OVERALL BOND MARKET AND IS A BROAD MEASURE OF THE PERFORMANCE OF
GOVERNMENT AND CORPORATE FIXED-RATE DEBT ISSUES. PLEASE NOTE THAT AN INVESTOR
CANNOT INVEST DIRECTLY IN AN INDEX.
+ THE SALOMON SMITH BARNEY ONE-YEAR TREASURY BILL INDEX CONSISTS OF ONE
ONE-YEAR UNITED STATES TREASURY BILL WHOSE RETURN IS TRACKED UNTIL ITS
MATURITY. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
++ 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. PLEASE NOTE THAT AN INVESTOR CANNOT
INVEST DIRECTLY IN AN INDEX.
PORTFOLIO UPDATE
The Select Balanced Portfolio's ("Portfolio") shares returned 4.51% for the
period ended July 31, 2000. The chart that appears on page 12 compares the
Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio.
At the beginning of the period, both stocks and bonds continued to be adversely
impacted by ongoing concerns from investors regarding persistently strong
economic growth, rising inflation fears and a more restrictive Federal Reserve
Board ("Fed") monetary policy. The U.S. economy continued its record growth
rate, with Gross Domestic Product ("GDP")(1) continuing to rise. This high level
of economic growth caused concern among many investors regarding inflation. In
an attempt to forestall a potential reacceleration of inflation, the Fed raised
interest rates by 75 basis points(2) during the reporting period (on
February 2, 2000, March 21, 2000 and on May 16, 2000). Despite the actions of
the Fed, the bond market outperformed the stock market during the period.
Moreover, just about each sector of the bond market outperformed the leading
stock indices during the period.
Several factors exist which largely contributed to the bond market's performance
this year. Many investors believe that the growth of the economy is beginning to
slow and no longer view inflation as the threat it was one year earlier.
Additionally, many investors are now convinced that the Fed may be finished with
its latest round of interest rate hikes.
During the period, the U.S. stock market was characterized by record levels of
volatility. Throughout 1999, especially during November and December, value
stocks (i.e., stocks that are inexpensive compared to other companies with
similar earnings or assets) were virtually ignored by investors. In contrast,
growth stocks (i.e., stocks issued by companies with the potential for faster-
than-average growth within their industries) rose as many investors appeared
willing to pay virtually any price for young and speculative technology
companies. However, investor sentiment shifted dramatically during the first
quarter of 2000. Investors, reacting to the potential threat of inflation, began
to reassess the valuations assigned to many companies.
As such, many large cap stocks fell sharply in January and February before
recovering in early March. Between mid-March and the end of April, however, the
market experienced a substantial correction. The tech-laden Nasdaq Composite
Index(3) fell by more than 35% from its high, including a single-day drop of 10%
on April 14, 2000. Shares of "blue chip" companies declined less severely, with
the S&P 500 declining 7.18% during the same time period. Some value-oriented
stocks gained ground amid renewed investor interest.
------------------------------------------------------------------
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.
------------
1 GDP IS THE MARKET VALUE OF THE GOODS AND SERVICES PRODUCED BY LABOR AND
PROPERTY IN THE U.S. GDP IS COMPRISED OF CONSUMER AND GOVERNMENT PURCHASES,
PRIVATE DOMESTIC INVESTMENTS AND NET EXPORTS OF GOODS AND SERVICES.
2 A BASIS POINT IS 0.01% OR ONE-HUNDREDTH OF A PERCENT.
3 THE NASDAQ COMPOSITE INDEX IS A MARKET VALUE-WEIGHTED INDEX THAT MEASURES ALL
DOMESTIC AND NON-U.S. BASED SECURITIES LISTED ON THE NASDAQ STOCK MARKET.
PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
11
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT BALANCED PORTFOLIO VS. THE STANDARD &
POOR'S 500 COMPOSITE STOCK INDEX, LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX, MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX AND SALOMON SMITH BARNEY
WORLD GOVERNMENT BOND INDEX
...............................................................................
FEBRUARY 5, 1997 -- JULY 31, 2000 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT BALANCED STANDARD & POOR'S 500 LEHMAN BROTHERS GOVERNMENT/ MSCI SALOMON SMITH BARNEY
PORTFOLIO COMPOSITE STOCK INDEX CORPORATE BOND INDEX EAFE INDEX WORLD GOVERNMENT BOND INDEX
<S> <C> <C> <C> <C> <C>
2/5/97 $10,000 $10,000 $10,000 $10,000 $10,000
7/97 $11,050 $12,254 $10,575 $11,711 $10,512
1/98 $11,280 $12,689 $11,117 $11,028 $11,111
7/98 $11,846 $14,618 $11,428 $12,349 $11,589
1/99 $12,381 $16,814 $12,086 $12,635 $12,863
7/99 $12,651 $17,571 $11,694 $13,566 $12,347
1/00 $12,961 $18,551 $11,738 $15,067 $12,164
7/31/00 $13,546 $19,145 $12,362 $14,788 $12,784
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JULY 31, 2000.
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 BROTHERS
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 ("MSCI") EAFE INDEX 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. AN
INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
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. THE CHART DOES NOT
REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS ADMINISTRATIVE
FEES, ACCOUNT CHARGES AND SURRENDER CHARGES WHICH, IF REFLECTED, WOULD REDUCE
THE PERFORMANCE SHOWN.
12
<PAGE>
HISTORICAL PERFORMANCE -- SELECT BALANCED PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------------------- INCOME CAPITAL GAIN
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
7/31/00 $12.13 $11.78 $0.40 $0.50 4.51%++
---------------------------------------------------------------------------------------------------------------------------------
1/31/00 12.04 12.13 0.22 0.24 4.69
---------------------------------------------------------------------------------------------------------------------------------
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 $0.78 $0.90
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT BALANCED PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Ended 7/31/00++ 4.51%
----------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 7.07
----------------------------------------------------------------------------------------------------------------------------
2/5/97* through 7/31/00 9.10
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT BALANCED PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
2/5/97* through 7/31/00 35.46%
----------------------------------------------------------------------------------------------------------------------------
</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.
13
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
BOND FUNDS STOCK FUNDS
70% 30%
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 bond funds, with
a portion invested in stock funds that invest primarily in large-capitalization
U.S. stocks.
INDEX COMPARISON*
S&P 500** 3.20%
Lehman Brothers Government/Corporate Bond*** 5.31%
Salomon Smith Barney
High Yield Market+ 0.48%
Salomon Smith Barney
One-Year Treasury Bill++ 3.32%
.................................................................
* THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JULY 31, 2000.
** THE S&P 500 INDEX IS A MARKET CAPITALIZATION-WEIGHTED MEASURE OF 500 WIDELY
HELD COMMON STOCKS. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
***THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX TRACKS THE PERFORMANCE OF
THE OVERALL BOND MARKET AND IS A BROAD MEASURE OF THE PERFORMANCE OF
GOVERNMENT AND CORPORATE FIXED-RATE DEBT ISSUES. PLEASE NOTE THAT AN INVESTOR
CANNOT INVEST DIRECTLY IN AN INDEX.
+ THE SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX IS A BROAD-BASED UNMANAGED
INDEX OF HIGH YIELD SECURITIES. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST
DIRECTLY IN AN INDEX.
++ THE SALOMON SMITH BARNEY ONE-YEAR TREASURY BILL INDEX CONSISTS OF ONE
ONE-YEAR UNITED STATES TREASURY BILL WHOSE RETURN IS TRACKED UNTIL ITS
MATURITY. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
PORTFOLIO UPDATE
The Select Conservative Portfolio's ("Portfolio") shares returned 4.32% for the
period ended July 31, 2000. The chart that appears on page 15 compares the
Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio.
On May 16, 2000, the Fed enacted the sixth in a series of monetary policy
actions that began on June 30, 1999, when the federal funds rate ("fed funds
rate")(1) was 4.75%. Since June 30, 1999, the Fed raised rates by 175 basis
points.(2) With the fed funds rate presently at 6.5%, the cumulative effect of
the interest rate increases so far, we believe, may begin to have a more
pronounced effect in dampening inflationary pressures in the economy.
In a sharp reversal from our last report, most classes of bonds outperformed the
stock market during the period. Several factors exist which largely contributed
to the bond market's performance this year. Many investors believe that the
growth of the economy is beginning to slow and no longer view inflation as the
major threat it was a year earlier. Additionally, many investors are now
convinced that the Fed may be finished with its latest round of interest rate
hikes.
Due to the U.S. Treasury's buyback plan, the price of long-term bonds increased
in relation to their short-term counterparts, as reflected by an inverted yield
curve.(3) Instead of a "normal" yield curve, with yields rising slowly along
with the maturity of Treasury bonds, the highest yields were for shorter-term
bonds. The Portfolio's stock holdings largely benefited from the recovery of
many overseas economies and the continued strength of the shares of what we view
as well-managed companies with a global presence.
------------------------------------------------------------------
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.
__________
1 THE FED FUNDS RATE IS THE INTEREST RATE THAT BANKS WITH EXCESS RESERVES AT A
FEDERAL RESERVE DISTRICT BANK CHARGE OTHER BANKS THAT NEED OVERNIGHT LOANS.
THE FED FUNDS RATE OFTEN POINTS TO THE DIRECTION OF U.S. INTEREST RATES.
2 A BASIS POINT IS 0.01% OR ONE ONE-HUNDREDTH OF A PERCENT.
3 THE YIELD CURVE IS THE GRAPHICAL DEPICTION OF THE RELATIONSHIP BETWEEN THE
YIELD ON BONDS OF THE SAME CREDIT QUALITY BUT DIFFERENT MATURITIES. AN
INVERTED YIELD CURVE DEPICTS AN UNUSUAL SITUATION WHEN SHORT-TERM INTEREST
RATES ARE HIGHER THAN LONG-TERM RATES.
14
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT CONSERVATIVE PORTFOLIO VS. THE STANDARD
& POOR'S 500 COMPOSITE STOCK INDEX, LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX, SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX AND SALOMON SMITH BARNEY
ONE-YEAR TREASURY BILL INDEX
...............................................................................
FEBRUARY 5, 1997 -- JULY 31, 2000 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT STANDARD & POOR'S 500 LEHMAN BROTHERS 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 $12,086 $11,812
7/99 $12,129 $17,571 $11,694 $11,870
1/00 $12,246 $18,551 $11,738 $11,743
7/31/00 $12,774 $19,145 $12,362 $11,800
</TABLE>
SALOMON SMITH BARNEY ONE-YEAR
TREASURY BILL INDEX
2/5/97 $10,000
7/97 $10,322
1/98 $10,627
7/98 $10,910
1/99 $11,222
7/99 $11,481
1/00 $11,683
7/31/00 $12,071
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JULY 31, 2000.
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 BROTHERS
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. AN
INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
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. THE CHART DOES NOT
REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS ADMINISTRATIVE
FEES, ACCOUNT CHARGES AND SURRENDER CHARGES WHICH, IF REFLECTED, WOULD REDUCE
THE PERFORMANCE SHOWN.
15
<PAGE>
HISTORICAL PERFORMANCE -- SELECT CONSERVATIVE PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------------------- INCOME CAPITAL GAIN
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
7/31/00 $11.57 $11.20 $0.62 $0.25 4.32%++
---------------------------------------------------------------------------------------------------------------------------------
1/31/00 11.71 11.57 0.27 0.13 2.19
---------------------------------------------------------------------------------------------------------------------------------
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 $1.06 $0.48
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT CONSERVATIVE PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Ended 7/31/00++ 4.32%
----------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 5.32
----------------------------------------------------------------------------------------------------------------------------
2/5/97* through 7/31/00 7.28
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT CONSERVATIVE PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
2/5/97* through 7/31/00 27.74%
----------------------------------------------------------------------------------------------------------------------------
</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.
16
<PAGE>
THE SELECT INCOME PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
STOCK FUNDS BOND FUNDS
10% 90%
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 to taxable bond funds designed to generate a high level of income
consistent with relative stability of principal. A small portion of the Select
Income Portfolio is invested in stock funds that invest in large-capitalization
U.S. stocks.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500** 3.20%
Lehman Brothers Government/Corporate Bond*** 5.31%
Salomon Smith Barney
High Yield Market+ 0.48%
Salomon Smith Barney
One-Year Treasury Bill++ 3.32%
</TABLE>
.................................................................
* THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE SIX MONTHS ENDED JULY 31,
2000.
** THE S&P 500 INDEX IS A MARKET CAPITALIZATION-WEIGHTED MEASURE OF 500 WIDELY
HELD COMMON STOCKS. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
***THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX TRACKS THE PERFORMANCE OF
THE OVERALL BOND MARKET AND IS A BROAD MEASURE OF THE PERFORMANCE OF
GOVERNMENT AND CORPORATE FIXED-RATE DEBT ISSUES. PLEASE NOTE THAT AN INVESTOR
CANNOT INVEST DIRECTLY IN AN INDEX.
+ THE SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX IS A BROAD-BASED UNMANAGED
INDEX OF HIGH YIELD SECURITIES. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST
DIRECTLY IN AN INDEX.
++ THE SALOMON SMITH BARNEY ONE-YEAR TREASURY BILL INDEX CONSISTS OF ONE
ONE-YEAR UNITED STATES TREASURY BILL WHOSE RETURN IS TRACKED UNTIL ITS
MATURITY. PLEASE NOTE THAT AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
PORTFOLIO UPDATE
The Select Income Portfolio's ("Portfolio") shares returned 3.53% for the period
ended July 31, 2000. The chart that appears on page 18 compares the Portfolio's
performance to broad-based indices that track four of the asset classes
represented in the Portfolio.
The majority of the assets in the Portfolio are invested in bond funds that
invest in the debt obligations of the U.S. Government and other developed
nations. During the period, bonds were impacted due in large part to the
interest rate increases by the Federal Reserve Board ("Fed") and the U.S.
Treasury's plan to buy back more than $30 billion of its outstanding long-term
debt.
However, despite the interest rate increases by the Fed, the bond market
outperformed stocks during the period. In our view, several factors exist which
largely contributed to the bond market's performance in 2000. Many investors
believe that the growth of the economy is beginning to slow, and no longer view
inflation as the major threat it was a year ago. Additionally, many investors
are now convinced that the Fed may be finished with its latest round of interest
rate hikes.
------------------------------------------------------------------
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.
17
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT INCOME PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX,
SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX AND SALOMON SMITH BARNEY ONE-YEAR
TREASURY BILL INDEX
...............................................................................
FEBRUARY 5, 1997 -- JULY 31, 2000 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT STANDARD & POOR'S 500 LEHMAN BROTHERS SALOMON SMITH SALOMON SMITH
INCOME COMPOSITE GOVERNMENT/CORPORATE BARNEY HIGH YIELD BARNEY ONE-YEAR
PORTFOLIO STOCK INDEX BOND INDEX MARKET INDEX TREASURY BILL INDEX
<S> <C> <C> <C> <C> <C>
2/5/97 $10,000 $10,000 $10,000 $10,000 $10,000
7/97 $10,850 $12,254 $10,575 $10,757 $10,322
1/98 $11,290 $12,689 $11,117 $11,487 $10,627
7/98 $11,620 $14,618 $11,428 $11,906 $10,910
1/99 $11,875 $16,814 $12,086 $11,812 $11,222
7/99 $11,722 $17,571 $11,694 $11,870 $11,481
1/00 $11,786 $18,551 $11,738 $11,743 $11,683
7/31/00 $12,201 $19,145 $12,362 $11,800 $12,071
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JULY 31, 2000.
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 BROTHERS
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. AN
INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
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. THE CHART DOES NOT
REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS ADMINISTRATIVE
FEES, ACCOUNT CHARGES AND SURRENDER CHARGES WHICH, IF REFLECTED, WOULD REDUCE
THE PERFORMANCE SHOWN.
18
<PAGE>
HISTORICAL PERFORMANCE -- SELECT INCOME PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------------------- INCOME CAPITAL GAIN
PERIOD ENDED BEGINNING OF PERIOD END OF PERIOD DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
7/31/00 $11.18 $10.68 $0.77 $0.13 3.53%++
---------------------------------------------------------------------------------------------------------------------------------
1/31/00 11.66 11.18 0.33 0.06 (0.75)
---------------------------------------------------------------------------------------------------------------------------------
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 $1.25 $0.25
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT INCOME PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Ended 7/31/00++ 3.53%
----------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/00 4.08
----------------------------------------------------------------------------------------------------------------------------
2/5/97* through 7/31/00 5.87
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT INCOME PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
2/5/97* through 7/31/00 22.01%
----------------------------------------------------------------------------------------------------------------------------
</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.
19
<PAGE>
THE SELECT HIGH GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
-------------------------------------------------------------------------------------------
UNDERLYING FUNDS -- 98.7%
<S> <C> <C>
193,364 Smith Barney Aggressive Growth Fund Inc. $ 19,746,342
562,634 Smith Barney Equity Funds - Smith Barney Large Cap Blend
Fund 8,872,751
546,203 Smith Barney Funds, Inc. - Large Cap Value Fund 9,176,227
1,847,985 Smith Barney Income Funds - Smith Barney High Income Fund 17,481,947
1,405,921 Smith Barney Investment Funds, Inc. - Smith Barney
Hansberger Global Value Fund 17,939,562
962,522 Smith Barney Investment Funds, Inc. - Smith Barney Peachtree
Growth Fund (a) 17,469,792
602,564 Smith Barney Investment Funds, Inc. - Smith Barney Small
Capitalization Growth Fund 9,297,564
691,405 Smith Barney Investment Trust - Smith Barney Large
Capitalization Growth Fund 17,969,627
406,460 Smith Barney Investment Trust - Smith Barney Mid Cap Core
Fund (b) 9,332,331
2,595,112 Smith Barney Small Cap Core Fund, Inc. (c) 35,708,752
687,504 Smith Barney World Funds, Inc. - International All Cap
Growth Fund (d) 17,826,987
-------------------------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $162,649,941) 180,821,882
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE
-------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.3%
<S> <C> <C>
$2,470,000 Morgan Stanley Dean Witter & Co., 6.530% due 8/1/00;
Proceeds at maturity -- $2,470,448;
(Fully collateralized by U.S. Treasury Notes, 4.500% to
6.375% due 8/15/00 to 2/15/07;
Market value -- $2,475,150) (Cost -- $2,470,000) 2,470,000
-------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $165,119,941*) $183,291,882
-------------------------------------------------------------------------------------------
</TABLE>
(a) FORMERLY KNOWN AS SMITH BARNEY INVESTMENT FUNDS, INC. -
CONCERT PEACHTREE GROWTH FUND.
(b) FORMERLY KNOWN AS SMITH BARNEY INVESTMENT TRUST - SMITH
BARNEY MID CAP BLEND FUND.
(c) FORMERLY KNOWN AS SMITH BARNEY SMALL CAP BLEND FUND, INC.
(d) FORMERLY KNOWN AS SMITH BARNEY WORLD FUNDS, INC. -
INTERNATIONAL EQUITY PORTFOLIO.
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS
SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
THE SELECT GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
-------------------------------------------------------------------------------------------
UNDERLYING FUNDS -- 99.0%
<S> <C> <C>
153,113 Smith Barney Aggressive Growth Fund Inc. $ 15,635,914
1,629,673 Smith Barney Equity Funds - Smith Barney Large Cap Blend
Fund 25,699,958
1,591,510 Smith Barney Funds, Inc. - Large Cap Value Fund 26,737,371
2,671,593 Smith Barney Income Funds - Smith Barney High Income Fund 25,273,279
2,982,664 Smith Barney Investment Funds, Inc. - Smith Barney
Government Securities Fund 27,112,419
1,018,438 Smith Barney Investment Funds, Inc. - Smith Barney
Hansberger Global Value Fund 12,995,281
2,403,366 Smith Barney Investment Funds, Inc. - Smith Barney
Investment Grade Bond Fund 27,326,278
1,390,381 Smith Barney Investment Funds, Inc. - Smith Barney Peachtree
Growth Fund (a) 25,235,426
896,210 Smith Barney Investment Funds, Inc. - Smith Barney Small Cap
Growth Fund 13,828,532
505,739 Smith Barney Investment Trust - Smith Barney Large
Capitalization Growth Fund 13,144,176
621,386 Smith Barney Investment Trust - Smith Barney Mid Cap Core
Fund (b) 14,267,034
950,018 Smith Barney Small Cap Core Fund, Inc. (c) 13,072,255
997,124 Smith Barney World Funds, Inc. - International All Cap
Growth Fund (d) 25,855,428
-------------------------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $253,158,805) 266,183,351
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE
-------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.0%
<S> <C> <C>
$2,803,000 Morgan Stanley Dean Witter & Co., 6.530% due 8/1/00;
Proceeds at maturity -- $2,803,508;
(Fully collateralized by U.S. Treasury Notes, 4.500% to
6.375% due 8/15/00 to 2/15/07;
Market value -- $2,808,844) (Cost -- $2,803,000) 2,803,000
-------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $255,961,805*) $268,986,351
-------------------------------------------------------------------------------------------
</TABLE>
(a) FORMERLY KNOWN AS SMITH BARNEY INVESTMENT FUNDS, INC. -
CONCERT PEACHTREE GROWTH FUND.
(b) FORMERLY KNOWN AS SMITH BARNEY INVESTMENT TRUST - SMITH
BARNEY MID CAP BLEND FUND.
(c) FORMERLY KNOWN AS SMITH BARNEY SMALL CAP BLEND FUND, INC.
(d) FORMERLY KNOWN AS SMITH BARNEY WORLD FUNDS, INC. -
INTERNATIONAL EQUITY PORTFOLIO.
* AGGREGATE COST IS SUBSTANTIALLY THE SAME FOR FEDERAL INCOME
TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
THE SELECT BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
-------------------------------------------------------------------------------------------
UNDERLYING FUNDS -- 98.4%
<S> <C> <C>
1,390,370 Smith Barney Appreciation Fund Inc. $ 20,911,171
650,655 Smith Barney Equity Funds - Smith Barney Large Cap Blend
Fund 10,260,833
1,408,766 Smith Barney Fundamental Value Fund Inc. 21,849,971
628,825 Smith Barney Funds, Inc. - Large Cap Value Fund 10,564,270
2,418,324 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 9,649,115
1,347,844 Smith Barney Income Funds - Smith Barney Convertible Fund 21,039,853
4,451,105 Smith Barney Income Funds - Smith Barney Diversified
Strategic Income Fund 32,047,957
1,169,249 Smith Barney Income Funds - Smith Barney Premium Total
Return Fund 20,789,256
2,358,721 Smith Barney Investment Funds, Inc. - Smith Barney
Government Securities Fund 21,440,779
1,777,133 Smith Barney Managed Governments Fund Inc. 21,378,921
994,076 Smith Barney World Funds, Inc. - Global Government Bond
Portfolio 10,726,088
401,692 Smith Barney World Funds, Inc. - International All Cap
Growth Fund (a) 10,415,885
-------------------------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $213,463,442) 211,074,099
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE
-------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.6%
<S> <C> <C>
$3,476,000 Morgan Stanley Dean Witter & Co., 6.530% due 8/1/00;
Proceeds at maturity -- $3,476,630;
(Fully collateralized by U.S. Treasury Notes, 4.500% to
6.375% due 8/15/00 to 2/15/07;
Market value -- $3,483,248) (Cost -- $3,476,000) 3,476,000
-------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $216,939,442*) $214,550,099
-------------------------------------------------------------------------------------------
</TABLE>
(a) FORMERLY KNOWN AS SMITH BARNEY WORLD FUNDS, INC. -
INTERNATIONAL EQUITY PORTFOLIO.
* AGGREGATE COST IS SUBSTANTIALLY THE SAME FOR FEDERAL INCOME
TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------------------------------------------------------------------------------------------
UNDERLYING FUNDS -- 99.2%
<S> <C> <C>
323,042 Smith Barney Appreciation Fund Inc. $ 4,858,563
175,594 Smith Barney Fundamental Value Fund Inc. 2,723,478
586,807 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 2,341,360
334,660 Smith Barney Income Funds - Smith Barney Convertible Fund 5,224,053
1,429,188 Smith Barney Income Funds - Smith Barney Diversified
Strategic Income Fund 10,290,155
532,873 Smith Barney Income Funds - Smith Barney High Income Fund 5,040,983
141,252 Smith Barney Income Funds - Smith Barney Premium Total
Return Fund 2,511,467
568,349 Smith Barney Investment Funds, Inc. - Smith Barney
Government Securities Fund 5,166,297
192,565 Smith Barney Investment Funds, Inc. - Smith Barney
Hansberger Global Value Fund 2,457,139
643,313 Smith Barney Managed Governments Fund Inc. 7,739,063
242,779 Smith Barney World Funds, Inc. - Global Government Bond
Portfolio 2,619,595
------------------------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $52,852,310) 50,972,153
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE
------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
<S> <C> <C>
$401,000 Morgan Stanley Dean Witter & Co., 6.530% due 8/1/00;
Proceeds at maturity -- $401,073;
(Fully collateralized by U.S. Treasury Notes, 4.500% to
6.375% due 8/15/00 to 2/15/07;
Market value -- $411,125) (Cost -- $401,000) 401,000
------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $53,253,310*) $51,373,153
------------------------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS
SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
THE SELECT INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) JULY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
----------------------------------------------------------------------------------------
UNDERLYING FUNDS -- 100.0%
<S> <C> <C>
67,950 Smith Barney Appreciation Fund Inc. $ 1,021,979
512,981 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 2,046,798
67,592 Smith Barney Income Funds - Smith Barney Convertible Fund 1,055,121
587,248 Smith Barney Income Funds - Smith Barney Diversified
Strategic Income Fund 4,228,191
440,718 Smith Barney Income Funds - Smith Barney High Income Fund 4,169,201
57,667 Smith Barney Income Funds - Smith Barney Premium Total
Return Fund 1,025,324
351,833 Smith Barney Investment Funds, Inc. - Smith Barney
Government Securities Fund 3,198,169
354,516 Smith Barney Managed Governments Fund Inc. 4,264,838
----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $22,542,400*) $21,009,621
----------------------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS
SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) JULY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------------------------
ASSETS:
<S> <C> <C> <C> <C> <C>
Investments, at cost $165,119,941 $255,961,805 $216,939,442 $53,253,310 $22,542,400
----------------------------------------------------------------------------------------------------------------------
Investments, at value $183,291,882 $268,986,351 $214,550,099 $51,373,153 $21,009,621
Cash 884 184 656 387 30,720
Dividends and interest receivable 448 508 23,220 5,555 5,059
Receivable from manager -- -- -- -- 7,742
----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 183,293,214 268,987,043 214,573,975 51,379,095 21,053,142
----------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Accrued expenses 195,310 334,409 290,920 99,080 --
----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 195,310 334,409 290,920 99,080 --
----------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $183,097,904 $268,652,634 $214,283,055 $51,280,015 $21,053,142
----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 12,547 $ 20,531 $ 18,194 $ 4,578 $ 1,971
Capital paid in excess of par value 163,451,590 253,605,981 211,041,579 51,923,597 22,275,328
Undistributed net investment income 2,138,234 3,683,473 3,821,482 1,324,449 699,471
Accumulated net realized gain (loss)
from security transactions (676,408) (1,681,897) 1,791,143 (92,452) (390,849)
Net unrealized appreciation
(depreciation)
of investments 18,171,941 13,024,546 (2,389,343) (1,880,157) (1,532,779)
----------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $183,097,904 $268,652,634 $214,283,055 $51,280,015 $21,053,142
----------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING 12,546,752 20,530,658 18,193,511 4,577,940 1,971,323
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE $14.59 $13.09 $11.78 $11.20 $10.68
----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JULY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Income distributions from Underlying Funds $ 927,054 $ 3,143,251 $ 3,932,465 $ 1,371,755 $ 725,669
Short-term capital gains from Underlying
Funds 1,445,601 911,657 197,087 37,764 7,943
Interest 68,423 83,171 51,323 5,853 3,386
-------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,441,078 4,138,079 4,180,875 1,415,372 736,998
-------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Other Expenses 302,679 454,560 358,517 90,878 37,513
-------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 302,679 454,560 358,517 90,878 37,513
-------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,138,399 3,683,519 3,822,358 1,324,494 699,485
-------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3):
Realized Gain (Loss) From:
Security transactions (1,526,909) (2,567,706) (122) (370,224) (289,031)
Capital gain distributions from
Underlying Funds 916,478 941,779 1,807,378 278,473 84,337
-------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) (610,431) (1,625,927) 1,807,256 (91,751) (204,694)
-------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation)of Investments:
Beginning of period 18,858,386 14,000,232 (5,499,454) (2,903,168) (1,798,420)
End of period 18,171,941 13,024,546 (2,389,343) (1,880,157) (1,532,779)
-------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED
APPRECIATION (DEPRECIATION) (686,445) (975,686) 3,110,111 1,023,011 265,641
-------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS (1,296,876) (2,601,613) 4,917,367 931,260 60,947
-------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 841,523 $ 1,081,906 $ 8,739,725 $ 2,255,754 $ 760,432
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED JULY
31, 2000
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income $ 2,138,399 $ 3,683,519 $ 3,822,358 $ 1,324,494 $ 699,485
Net realized gain (loss) (610,431) (1,625,927) 1,807,256 (91,751) (204,694)
Change in net unrealized
appreciation (depreciation) (686,445) (975,686) 3,110,111 1,023,011 265,641
------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 841,523 1,081,906 8,739,725 2,255,754 760,432
------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (4,616,762) (7,137,371) (6,670,680) (2,633,071) (1,407,834)
Net realized gains (4,178,996) (8,295,986) (8,432,875) (1,075,516) (232,835)
------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (8,795,758) (15,433,357) (15,103,555) (3,708,587) (1,640,669)
------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 41,760,201 37,349,709 20,417,122 3,221,481 1,316,508
Net asset value of shares issued for
reinvestment of dividends 4,616,762 15,433,357 15,103,555 3,708,587 1,640,485
Cost of shares reacquired (3,357,975) (5,806,501) (7,795,767) (10,610,945) (4,300,706)
------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 43,018,988 46,976,565 27,724,910 (3,680,877) (1,343,713)
------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 35,064,753 32,625,114 21,361,080 (5,133,710) (2,223,950)
NET ASSETS:
Beginning of period 148,033,151 236,027,520 192,921,975 56,413,725 23,277,092
------------------------------------------------------------------------------------------------------------------------
END OF PERIOD* $183,097,904 $268,652,634 $214,283,055 $ 51,280,015 $21,053,142
------------------------------------------------------------------------------------------------------------------------
*Includes undistributed net
investment income of: $2,138,234 $3,683,473 $3,821,482 $1,324,449 $699,471
------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED JANUARY 31,
2000
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income $ 4,617,216 $ 7,138,581 $ 6,670,409 $ 2,633,689 $ 1,407,932
Net realized gain 4,178,642 8,297,200 8,432,422 1,075,326 119,014
Change in net unrealized
appreciation (depreciation) 10,873,783 3,658,340 (7,271,112) (2,717,439) (1,713,642)
----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS 19,669,641 19,094,121 7,831,719 991,576 (186,696)
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (513,766) (1,845,631) (3,039,821) (1,173,394) (681,850)
Net realized gains (1,277,582) (2,379,175) (3,405,269) (549,268) (132,281)
----------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (1,791,348) (4,224,806) (6,445,090) (1,722,662) (814,131)
----------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 58,280,900 96,213,993 67,914,440 24,895,726 11,268,070
Net asset value of shares issued for
reinvestment of dividends 1,791,348 4,224,806 6,445,090 1,722,662 814,131
Cost of shares reacquired (5,697,525) (9,209,569) (16,619,702) (8,288,832) (8,401,338)
----------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 54,374,723 91,229,230 57,739,828 18,329,556 3,680,863
----------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 72,253,016 106,098,545 59,126,457 17,598,470 2,680,036
NET ASSETS:
Beginning of year 75,780,135 129,928,975 133,795,518 38,815,255 20,597,056
----------------------------------------------------------------------------------------------------------------------
END OF YEAR* $148,033,151 $236,027,520 $192,921,975 $56,413,725 $23,277,092
----------------------------------------------------------------------------------------------------------------------
*Includes undistributed net
investment income of: $4,616,597 $7,137,325 $6,669,804 $2,633,026 $1,407,820
----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
...............................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Select High Growth, Select Growth, Select Balanced, Select Conservative and
Select Income Portfolios ("Portfolios") are separate investment portfolios of
the Smith Barney Concert Allocation Series Inc. ("Fund"). The Fund, a Maryland
corporation, is registered under the Investment Company 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 SSB Citi Fund Management LLC
("SSBC"), formerly known as SSBC Fund Management Inc., a subsidiary of Salomon
Smith Barney Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of
Citigroup Inc. ("Citigroup"). 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 shareholder 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. 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 AND OTHER TRANSACTIONS
Travelers Investment Adviser, Inc. ("TIA"), another subsidiary of SSBH, 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.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney Private
Trust Company, another subsidiary of Citigroup, acts as the Fund's transfer
agent and PFPC Global Fund Services ("PFPC") acts as the Fund's sub-transfer
agent. CFTC receives account fees and asset-based fees that vary according to
the account size and type of account. PFPC is responsible for shareholder
recordkeeping and financial processing for all shareholder accounts and is paid
by CFTC. During the six months ended July 31, 2000, the Portfolios paid transfer
agent fees of $20,833 to CFTC.
All officers and one director of the Fund are employees of Salomon Smith Barney
Inc.
3. INVESTMENTS
During the six months ended July 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
PORTFOLIO PURCHASES SALES
----------------------------------------------------------------------------
Select High Growth $44,402,007 $ 7,597,902
Select Growth 47,880,456 11,708,963
Select Balanced 16,879,733 --
Select Conservative 545,692 6,576,789
Select Income 229,396 2,682,548
----------------------------------------------------------------------------
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
...............................................................................
At July 31, 2000, 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 $23,378,679 $ (5,206,738) $18,171,941
Select Growth 25,960,811 (12,936,265) 13,024,546
Select Balanced 7,838,907 (10,228,250) (2,389,343)
Select Conservative 1,119,212 (2,999,369) (1,880,157)
Select Income 8,786 (1,541,565) (1,532,779)
-----------------------------------------------------------------------------------------
</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 (plus accrued interest) in
amounts at least equal to the repurchase price.
5. CAPITAL SHARES
At July 31, 2000, the Fund had 5.5 billion shares of capital stock authorized
with a par value of $0.001 per share. Transactions in shares for each portfolio
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 31, 2000 JANUARY 31, 2000
--------------------------------------------------------------------------------------------------
SELECT HIGH GROWTH PORTFOLIO
<S> <C> <C>
Shares sold 2,677,198 4,226,369
Shares issued on reinvestment 319,720 131,620
Shares reacquired (213,501) (414,964)
--------------------------------------------------------------------------------------------------
NET INCREASE 2,783,417 3,943,025
--------------------------------------------------------------------------------------------------
SELECT GROWTH PORTFOLIO
Shares sold 2,646,028 7,386,057
Shares issued on reinvestment 1,187,181 328,523
Shares reacquired (410,314) (703,458)
--------------------------------------------------------------------------------------------------
NET INCREASE 3,422,895 7,011,122
--------------------------------------------------------------------------------------------------
SELECT BALANCED PORTFOLIO
Shares sold 1,626,364 5,623,593
Shares issued on reinvestment 1,285,409 544,349
Shares reacquired (623,011) (1,372,026)
--------------------------------------------------------------------------------------------------
NET INCREASE 2,288,762 4,795,916
--------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
...............................................................................
SIX MONTHS ENDED YEAR ENDED
JULY 31, 2000 JANUARY 31, 2000
-------------------------------------------------------------------------------
SELECT CONSERVATIVE PORTFOLIO
Shares sold 270,313 2,128,330
Shares issued on reinvestment 331,420 150,320
Shares reacquired (901,642) (714,607)
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) (299,909) 1,564,043
-------------------------------------------------------------------------------
SELECT INCOME PORTFOLIO
Shares sold 115,998 986,630
Shares issued on reinvestment 153,602 73,213
Shares reacquired (380,706) (744,458)
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) (111,106) 315,385
-------------------------------------------------------------------------------
31
<PAGE>
(This page intentionally left blank.)
<PAGE>
FINANCIAL HIGHLIGHTS
................................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31,
EXCEPT WHERE NOTED:
<TABLE>
<CAPTION>
SELECT HIGH GROWTH PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998(2)(3)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.16 $ 13.02 $ 11.06 $ 10.00
----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(4) 0.19 0.60 0.13 0.26
Net realized and unrealized gain (loss) (0.02) 1.78 1.94 0.80
----------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.17 2.38 2.07 1.06
----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.39) (0.07) (0.07) --
Net realized gains (0.35) (0.17) (0.04) --
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.24) (0.11) --
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.59 $ 15.16 $ 13.02 $ 11.06
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 1.17%++ 18.46% 18.79% 10.60%++
----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S) $183,098 $148,033 $75,780 $27,071
----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35%+ 0.35% 0.35% 0.35%+
Net investment income 2.48+ 4.30 1.08 2.41+
----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 4% 0% 19% 43%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED).
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY
AVERAGE SHARES METHOD.
(3) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF
OPERATIONS) TO JANUARY 31, 1998.
(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.
32
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31,
EXCEPT WHERE NOTED:
<TABLE>
<CAPTION>
SELECT GROWTH PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998(2)(3)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.80 $ 12.87 $ 11.28 $ 10.00
----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(4) 0.20 0.51 0.27 0.44
Net realized and unrealized gain (loss) (0.11) 0.72 1.55 0.84
----------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.09 1.23 1.82 1.28
----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.37) (0.13) (0.11) --
Net realized gains (0.43) (0.17) (0.12) --
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.80) (0.30) (0.23) --
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.09 $ 13.80 $ 12.87 $ 11.28
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 0.68%++ 9.72% 16.31% 12.80%++
----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S) $268,653 $236,028 $129,929 $45,982
----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35%+ 0.35% 0.35% 0.35%+
Net investment income 2.84+ 3.85 2.29 4.11+
----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 5% 0% 10% 43%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED).
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY
AVERAGE SHARES METHOD.
(3) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF
OPERATIONS) TO JANUARY 31, 1998.
(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.
33
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31,
EXCEPT WHERE NOTED:
<TABLE>
<CAPTION>
SELECT BALANCED PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998(2)(3)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.13 $ 12.04 $ 11.28 $ 10.00
-----------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(4) 0.23 0.48 0.42 0.64
Net realized and unrealized gain 0.32 0.07 0.66 0.64
-----------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.55 0.55 1.08 1.28
-----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.40) (0.22) (0.16) --
Net realized gains (0.50) (0.24) (0.16) --
-----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.90) (0.46) (0.32) --
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.78 $ 12.13 $ 12.04 $ 11.28
-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.51%++ 4.69% 9.76% 12.80%++
-----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S) $214,283 $192,922 $133,796 $45,071
-----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35%+ 0.35% 0.35% 0.35%+
Net investment income 3.74+ 3.92 3.64 5.89+
-----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 0% 0% 7% 19%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED).
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY
AVERAGE SHARES METHOD.
(3) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF
OPERATIONS) TO JANUARY 31, 1998.
(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.
34
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31,
EXCEPT WHERE NOTED:
<TABLE>
<CAPTION>
SELECT CONSERVATIVE PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998(2)(3)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.57 $11.71 $11.30 $10.00
----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(4) 0.30 0.61 0.60 0.78
Net realized and unrealized gain (loss) 0.20 (0.35) 0.08 0.52
----------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.50 0.26 0.68 1.30
----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.62) (0.27) (0.17) --
Net realized gains (0.25) (0.13) (0.10) --
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.87) (0.40) (0.27) --
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.20 $11.57 $11.71 $11.30
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.32%++ 2.19% 6.05% 13.00%++
----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S) $51,280 $56,414 $38,815 $10,698
----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35%+ 0.35% 0.35% 0.35%+
Net investment income 5.12+ 5.20 5.27 7.24+
----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 1% 1% 3% 35%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED).
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY
AVERAGE SHARES METHOD.
(3) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF
OPERATIONS) TO JANUARY 31, 1998.
(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.
35
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31,
EXCEPT WHERE NOTED:
<TABLE>
<CAPTION>
SELECT INCOME PORTFOLIO 2000(1)(2) 2000(2) 1999(2) 1998(2)(3)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.18 $11.66 $11.29 $10.00
----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(4) 0.36 0.70 0.74 0.80
Net realized and unrealized gain (loss) 0.04 (0.79) (0.16) 0.49
----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.40 (0.09) 0.58 1.29
----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.77) (0.33) (0.15) --
Net realized gains (0.13) (0.06) (0.06) --
----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.90) (0.39) (0.21) --
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.68 $11.18 $11.66 $11.29
----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.53%++ (0.75)% 5.18% 12.90%++
----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S) $21,053 $23,277 $20,597 $4,440
----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35%+ 0.35% 0.35% 0.35%+
Net investment income 6.55+ 6.08 6.45 7.36+
----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 1% 11% 14% 11%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) FOR THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED).
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY
AVERAGE SHARES METHOD.
(3) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF
OPERATIONS) TO JANUARY 31, 1998.
(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.
36
<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
R. Jay Gerken
VICE PRESIDENT AND
INVESTMENT OFFICER
Irving David
CONTROLLER
Christina T. Sydor
SECRETARY
INVESTMENT MANAGER
Travelers Investment Adviser, Inc.
CUSTODIAN
PFPC Trust Company
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
388 Greenwich Street
New York, New York 10013
37
<PAGE>
<TABLE>
<S> <C>
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE
OWNERS OF THE SMITH BARNEY CONCERT ALLOCATION SERIES INC.: [LOGO]
SELECT HIGH GROWTH, SELECT GROWTH, SELECT BALANCED, SELECT
CONSERVATIVE AND SELECT INCOME PORTFOLIOS. IT IS NOT Member NASD, SIPC
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS -C- 2000 Salomon Smith Barney Inc.
ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR THE FD01325 9/00
FUND, WHICH CONTAINS INFORMATION CONCERNING THE FUND'S
INVESTMENT POLICIES, FEES AND EXPENSES, AS WELL AS OTHER
PERTINENT INFORMATION.
</TABLE>
