<PAGE>
SMITH BARNEY
CONCERT ALLOCATION SERIES INC.
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Investment Strategies
For Your Life
ANNUAL REPORT
January 31, 2000
Global Portfolio
High Growth Portfolio
Growth Portfolio
Balanced Portfolio
Conservative Portfolio
Income Portfolio [LOGO OF SMITH BARNEY]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Table of Contents
Letter to Shareholders ....................................................... 1
Concert Allocation Series Portfolios
Global Portfolio .......................................................... 6
High Growth Portfolio .....................................................11
Growth Portfolio ..........................................................16
Balanced Portfolio ........................................................21
Conservative Portfolio ....................................................26
Income Portfolio ..........................................................31
Schedules of Investments .....................................................36
Statements of Assets and Liabilities .........................................42
Statements of Operations .....................................................43
Statements of Changes in Net Assets ..........................................44
Notes to Financial Statements ................................................46
Financial Highlights .........................................................51
Independent Auditors' Report .................................................70
Tax Information ..............................................................71
Directors and Officers .......................................................72
<PAGE>
Dear Shareholder:
[PHOTO]
Heath B. McLendon
Chairman
The Concert Allocation Series
We are pleased to present the annual report for the Smith Barney Concert
Allocation Series Inc. -- Global, High Growth, Growth, Balanced, Conservative
and Income Portfolios ("Portfolios") for the year ended January 31, 2000. Please
note that this report has been prepared for the information of shareholders of
the Portfolios 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.
As we stated in our inaugural report to shareholders in 1996, successful
investing requires discipline and patience. Investors should maintain a long-
term perspective and develop a broadly diversified portfolio made up of
different investments. Moreover, the present market euphoria has been marked by
the performance dominance of technology stocks.
Our original mission in creating the Portfolios was to maximize potential reward
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 a group of carefully selected 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. We are pleased to report that the Portfolios covered in this
report generally delivered competitive returns during the reporting period.
Additional Portfolio performance information can be found starting on page
eight. The chart on the following page shows the performance of the six
Portfolios' Class A shares, with and without sales charges for the period under
review. The performance and current holdings of each Portfolio are discussed in
greater detail on the following pages.
1
<PAGE>
The Performance of The Concert Allocation Series Portfolios
Class A Share Total Returns for the Year Ended 1/31/001
Class A without Class A with
sales charges2 sales charges3
--------------- --------------
Global Portfolio 24.57% 18.32%
High Growth Portfolio 18.97 13.03
Growth Portfolio 10.53 5.00
Balanced Portfolio 4.37 (0.84)
Conservative Portfolio 1.96 (2.65)
Income Portfolio (1.04) (5.48)
Performance numbers for the other classes of shares can be found beginning on
page 8.
The U.S. Markets
The stock market continued its record performance for most of the reporting
period, supported by strong corporate earnings reports and apparent economic
recovery overseas. For the year ended January 31, 2000, the Standard & Poor's
500 Composite Stock Index ("S&P 500"), a market capitalization-weighted measure
of 500 widely held common stocks, returned 10.34%. The Russell 2000 Index(R), a
broad-based index comprised of 2,000 of the smallest stocks in the Russell 3000
Index and a measure of smaller-capitalization stocks, returned 17.74% for the
period.
However, this continued growth led to concerns that inflationary pressures would
surface. As an inflationary precaution, the Federal Reserve Board ("Fed") raised
interest rates three times in 1999 for a total of 75 basis points, effectively
"taking back" the interest rate cuts it implemented in the fall of 1998. (A
basis point is 0.01% or one one-hundredth of a percent.) This change in the
Fed's monetary policy negatively impacted the bond market but did little to
derail the strong performance of many stocks. (A bond's value fluctuates, often
due to changing interest rates. When rates rise, the price of a bond typically
decreases, and vice versa.) On February 2, 2000, the Fed raised interest rates
0.25% again to 5.75%, which had a negative impact on the stock market.
- -------------------
1 Total return is not annualized, as it may not be representative of the
total return for the year.
2 These total return figures do not reflect the deduction of a sales charge
for each Portfolio's Class A shares. In addition, all total return
information represents past performance, which is not indicative of future
results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. 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.
3 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.
2
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The Benefits of Long-Term Investing
Growth of $10,000 Invested in the Standard & Poor's 500 Composite Stock Index,
Salomon Smith Barney World Government Bond Index, Lehman Government/Corporate
Bond Index and Morgan Stanley Capital International EAFE Index
(January 31, 1990 - January 31, 2000)
(unaudited)
[GRAPH]
Salomon Lehman
Smith Barney Government/
World Government MSCI EAFE Corporate Bond
S&P 500 Index Bond Index Index Index
1-90 10,000 10,000 10,000 10,000
1-91 10,837 10,934 8,236 11,102
1-92 13,292 12,154 8,290 12,580
1-93 14,695 13,361 7,466 14,014
1-94 16,584 14,796 10,785 15,458
1-95 16,670 14,431 10,314 14,977
1-96 23,108 16,965 12,013 17,631
1-97 29,192 18,424 12,280 18,052
1-98 37,045 20,646 13,563 20,069
1-99 49,086 23,900 15,540 21,820
1-00 54,157 22,453 18,530 21,193
The Standard & Poor's 500 Composite Stock Index ("S&P 500") is a
capitalization-weighted index of 500 widely held common stocks. The Salomon
Smith Barney World Government Bond Index is a market-capitalization-weighted
benchmark that tracks the performance of the government bond markets of 14
countries. The Lehman Government/Corporate Bond Index is a combination of
publicly issued intermediate- and long-term U.S. government bonds and corporate
bonds. The Morgan Stanley Capital International EAFE Index ("MSCI EAFE")
consists of the equity total returns for Europe, Australia and the Far East.
These indices are unmanaged and are not subject to the same management and
trading expenses as a mutual fund. An investor cannot invest directly in an
index.
1999 was a difficult year for bonds because of a strong U.S. economy, tight
labor markets, the persistent fear of accelerating inflation and a more
restrictive Fed monetary policy. For the year ended January 31, 2000, the Lehman
Government Corporate Bond Index, a combination of publicly issued intermediate-
and long-term U.S. government bonds and corporate bonds, generated a
disappointing return of a negative 2.87%.
The performance of the stock markets during the period was largely propelled by
the performance of growth stocks. Value stocks have continued to underperform
the growth sector of the market. (Growth investors look for companies that they
believe are going to grow earnings quickly; value investors look for stocks that
are priced at less than their intrinsic value.) Despite this factor, the
performance of the value sector has continued to improve as investors have begun
to seek high-quality companies with favorable valuations.
3
<PAGE>
During the same period, telecommunications and technology stocks posted
exceptional returns. The 57.24% return for the tech-laden NASDAQ Composite Index
for the 12-month period ended January 31, 2000, in our view, is a clear
illustration of investors' enthusiasm for these market sectors. (The NASDAQ
Composite Index measures all domestic and non-U.S. based securities, more than
4,700 companies, listed on the NASDAQ Stock Market.) In our opinion, the
dominance of these two sectors is largely attributable to the ever-increasing
use and influence of the Internet both in business and in the home.
At the end of the period, the U.S. stock market, as measured by the Dow Jones
Industrial Average, began to decline primarily in response to the Fed's
tightening monetary policy. (The Dow Jones Industrial Average is a
price-weighted average of 30 actively traded stocks.)
International Stock Markets
For the year ended January 31, 2000, the Morgan Stanley Capital International
EAFE Index ("MSCI EAFE"), an index consisting of the equity total returns for
Europe, Australia and the Far East, posted a return of 19.25%.
International stock markets ended strong in 1999 with solid market performance.
Y2K concerns in global markets continued to ease and no significant Y2K-related
problems were reported globally. This led to strong performance in emerging
market stocks and technology-related companies in mature markets that had
previously suffered from Y2K fears. In the United States, despite the negative
influences of a tight labor market and rising commodity prices, inflation has
remained under control due in large part to Fed vigilance.
As in the U.S., upward movement in many global markets was narrowly based in
technology and Internet-related companies. The strong price appreciation of many
of these companies raised valuations significantly, so there was little room for
earnings disappointments. After a very strong fourth quarter in 1999,
international stock markets succumbed to profit-taking in January.
International Bond Markets
For the year ended January 31, 2000, the Salomon Smith Barney World Government
Bond Index, a market capitalization-weighted benchmark that tracks the
performance of government bond markets in 14 countries, generated a return of a
negative 5.44%.
Bond yields have moved higher worldwide in recent months, making 1999 the worst
year for bond returns since 1994. In local currency terms returns are
significantly worse than they were in 1994. In our opinion, a growing global
economy and concerns over inflationary pressures have been responsible for the
overall rise in bond yields.
Looking Forward
In 1999, U.S. stock prices increased while bond prices declined. We think that
the short-term performance of the U.S. financial markets will be in large part
determined by the Fed's actions. Yet we are confident that the Fed will limit
future rate increases because we believe inflation will probably remain low.4 We
expect U.S. stocks to continue to perform well, powered by strong corporate
earnings increases.
- -------------------
4 Please note that on March 21, 2000 the Fed raised interest rates 0.25% to
6.00% after this letter was written.
4
<PAGE>
Our outlook for international stock investing is brighter than it has been in
many years. In our opinion, three factors exist that could cause non-U.S.
markets to perform better than the U.S. stock market in the coming months:
. International stocks are inexpensive compared with their U.S. counterparts;
. Resurgent economic growth in many economies could lead to strong corporate
earnings gains at a time when U.S. corporate earnings may be pressured; and
. Greater scope for corporate restructuring (either voluntarily or through
hostile acquisition) is now being realized overseas.
With respect to international bonds, we expect better performance from Europe
than from the U.S. over the near term because interest rates in Europe are
discounting greater central bank rate hikes than in the U.S., yet both inflation
and economic growth are lower in the region. One risk to our expectations is the
Japanese economy rebounding too strongly, which could lead to a drain of capital
from the U.S. and Europe back to Japan, resulting in a stronger yen and greater
upward pressure on commodity prices. Should this occur, the global economy would
become unbalanced and worldwide inflation might once again resurface.
If you would like to receive either a prospectus or additional information on
the Portfolios or the Underlying Funds in the Portfolios please call
1-800-221-3627. Thank you for investing in the Smith Barney Concert Allocation
Series Inc. We look forward to helping you pursue your financial goals in the
new century.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
February 25, 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.
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The Global Portfolio
The Global Portfolio is the most aggressively managed Portfolio of the Concert
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 Concert 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 to name a few.)
Index Comparsion*
S&P 500 10.34%
Russell 2000(R) 17.74%
MSCI EAFE 19.25%
MSCI Emerging Markets 76.21%
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* The chart above represents total returns for the year ended January 31,
2000.
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Portfolio Update
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For the year ended January 31, 2000, the Concert Allocation Series Global
Portfolio's ("Portfolio") Class A shares, without sales charges, returned
24.57%. 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.
With respect to the global economy, what a difference a year makes. When 1999
began, Asia was in the midst of a severe currency and credit crisis that caused
its stock markets to fall. Moreover, Europe was preparing for the introduction
of a unified currency, the Euro. (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, 2000.) In November 1998, many of the world's central banks completed
a series of interest-rate cuts that were intended to add liquidity to troubled
financial systems and stimulate global economic growth. In retrospect, these
monetary actions proved to be effective as many international economies began to
rebound in 1999.
In addition to the revitalization of the global economy, the U.S. stock market
continued its unprecedented rise despite actions by the Federal Reserve Board
("Fed") to raise interest rates three times during the reporting period.
Subsequently, on February 2, 2000, the Fed raised interest rates 0.25% to 5.75%.
In past years, large-cap growth stocks largely outperformed other asset classes.
(Growth investing focuses on stocks of corporations that are exhibiting or are
expected to exhibit faster- than-average growth within their industry.) During
the period, however, small cap stocks outperformed large cap growth stocks. The
better relative performance of the small cap sector was largely due to
technology stocks that continued to dominate market performance.
The Portfolio benefited from this global economic recovery and we believe these
favorable conditions should continue in 2000. Moreover, we think that the U.S.
economy will perform well, supported by significant gains in labor productivity
through technology. (Of course, past performance is not indicative of future
results.)
- --------------------------------------------------------------------------------
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Global Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series' Board of Directors.
6
<PAGE>
The Concert Allocation Series Global Portfolio Breakdown (as of 1/31/00)
(unaudited)
10% Smith Barney Small Cap Blend Fund, Inc.
Top 5 Holdings:
IDEC Pharmaceuticals Corp.
Mercury International
MicroStrategy, Inc.
Lam Research Corp.
Amkor Technology, Inc.
24% Smith Barney Investment Funds Inc.-Smith Barney Hansberger Global Value Fund
Top 5 Holdings:
Daiwa Securities Trust Co.
Kon Pitt
Cable & Wireless PLC
Marubeni Corp.
Malayan Bkg Bhd
10% Smith Barney Investment Funds Inc.-Smith Barney Hansberger Small Cap Value
Fund
Top 5 Holdings:
Clipsal Industries Ltd.
South China Morning Post
Fin Marc De Lacharriere
Bail Investissement
BT Industries AB
[GRAPH]
4% Smith Barney Investment Funds Inc.-Concert Peachtree Growth Fund
Top 5 Holdings:
General Electric Co.
Microsoft Corp.
Nextel Communications, Inc.
America Online, Inc.
Sun Microsystems, Inc.
26% Smith Barney World Funds, Inc.-International Equity Portfolio
Top 5 Holdings:
Nokia AB Oy K Shares
COLT Telecom Group PLC
Murata Manufacturing Co. Ltd.
Misys PLC
Sony Corp.
6% Smith Barney World Funds, Inc.-Emerging Markets Portfolio
Top 5 Holdings:
Telefonos De Mexico
SK Telecom Co. Ltd.
Malayan Bkg Bhd
Trigem Computer, Inc.
Yapi ve Kredi Bankasi A.S.
15% Smith Barney Investment Trust-Smith Barney Large Capitalization Growth Fund
Top 5 Holdings:
Intel Corp.
Texas Instruments Inc.
America Online, Inc.
The Coca-Cola Co.
Merrill Lynch & Co., Inc.
5% Smith Barney Funds, Inc.- Large Cap Value Fund
Top 5 Holdings:
Enron Corp.
Exxon Mobil Corp.
Chase Manhattan Corp.
General Electric Co.
Marsh & McLennan Cos., Inc.
7
<PAGE>
THE GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $0.05
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $0.05
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $0.05
- --------------------------------------------------------------------------------------------------------------------
It is the Fund's policy to distribute dividends and capital gains, if any, annually.
</TABLE>
8
<PAGE>
Average Annual Total Returns
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Without Sales Charges (1)
--------------------------------
Class A Class B Class L
- -----------------------------------------------------------------------
Year Ended 1/31/00 24.57% 23.59% 23.61%
- -----------------------------------------------------------------------
Inception* through 1/31/00 11.34 10.54 10.50
- -----------------------------------------------------------------------
With Sales Charges (2)
- -----------------------------------------------------------------------
Class A Class B Class L
- -----------------------------------------------------------------------
Year Ended 1/31/00 18.32% 18.59% 21.40&
- -----------------------------------------------------------------------
Inception* through 1/31/00 8.37 8.60 9.89
- -----------------------------------------------------------------------
Cumulative Total Returns
- -----------------------------------------------------------------------
Without Sales Charges (1)
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Class A (Inception* through 1/31/00) 22.59%
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Class B (Inception* through 1/31/00) 20.92
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Class L (Inception* through 1/31/00) 20.84
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(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 -- January 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
SB Global Global Portfolio - Global Portfolio - Global Portfolio - Standard & Poor's 500 Russell 2000 MSCI EAFE MSCI Emerging
Class A Class B Class L Composite Stock Index Index Index Markets Index
<S> <C> <C> <C> <C> <C> <C> <C>
3/9/98 9,500 10,000 9,896 10,000 10,000 10,000 10,000
Apr-98 9,908 9,921 10,213 10,584 10,492 10,389 10,171
Jul-98 9,300 9,275 9,565 10,709 9,142 10,522 8,154
Jan-99 9,348 9,295 9,577 12,318 9,362 10,748 7,292
Apr-99 10,060 10,104 10,386 12,893 9,521 11,373 9,394
Jul-99 10,228 10,262 10,551 12,872 9,820 11,541 10,052
1/31/00 11,646 11,692 11,958 13,591 11,023 12,817 12,713
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on March 9, 1998 (inception date), assuming deduction of
the maximum 5.00% and 1.00% sales charge at the time of investment for Class A
and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class B
shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
January 31, 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 EAFE Index ("MSCI EAFE") consists of the equity total returns for
Europe, Australia and the Far East. The MSCI Emerging Markets Index consists of
emerging market companies with an average size of $800 million, the index
performance of emerging markets in South America, South Africa, Asia and Eastern
Europe. These indices are unmanaged and are not subject to the same management
and trading expenses as a mutual fund. An investor cannot invest directly in an
index. The performance of the Portfolio's other classes may be greater or less
than the shares' performance indicated on this chart, depending on whether
greater or lesser sales charges and fees were incurred by shareholders investing
in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
10
<PAGE>
THE HIGH GROWTH PORTFOLIO
Target Asset Allocation
[GRAPH]
The High Growth Portfolio seeks capital appreciation by investing a high
percentage of its assets in aggressive equity funds.
The High Growth Portfolio
The High Growth Portfolio seeks capital appreciation. Among the Portfolios of
the Concert Allocation Series, the High Growth Portfolio invests 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 rapid growth
potential. 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 10.34%
Russell 2000((r)) 17.74%
MSCI EAFE 19.25%
Salomon Smith Barney
High Yield Market (0.60)%
.............................
*The chart above represents total returns for the year ended January 31, 2000.
Porfolio Update
The Concert Allocation Series High Growth Portfolio's ("Portfolio") Class A
shares, without sales charges, returned 18.97% for the year ended January 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.
During the reporting period, the U.S. economy continued its unprecedented growth
despite concerns regarding inflation, higher stock and bond market volatility
and a tightening monetary policy by the Federal Reserve Board ("Fed"). Although
the Fed raised interest rates three times in 1999, the stock market continued to
perform well, led primarily by technology stocks and select small cap stocks.
In our opinion, the stellar performance of the stock market during the period
was largely driven by technology stocks as evidenced by the remarkable 57.24%
rise of the tech-laden NASDAQ Composite Index for the year ended January 31,
2000. (The NASDAQ Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities, more than 4,700 companies listed on
the NASDAQ stock market.)
In addition, the performance of the growth sector continued to drive the
performance of the U.S. stock market. The value sector of the market has
continued to underperform the growth sector of the market. (Growth investors
look for companies that they believe are going to grow earnings quickly; value
investors look for stocks that are priced at less than their intrinsic value.)
Despite this style performance disparity, the performance of the value sector
has started to improve as many investors have begun to seek out high-quality
companies with favorable valuations.
The bond market did not perform well in 1999, due largely to rising interest
rates. However, the high yield bond market continued to outperform the other
segments of the U.S. bond market which helped the performance of the Portfolio.
- --------------------------------------------------------------------------------
The Target Asset Allocation set forth above represents an approximate mix of
investments for the High Growth Portfolio. The allocation and investment mix of
the Portfolio may vary depending upon market conditions, cash flows in and out
of the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series' Board of Directors.
<PAGE>
The Concert Allocation Series High Growth Portfolio Breakdown (as of 1/31/00)
(unaudited)
14% Smith Barney
Aggressive Growth Fund Inc.
Top 5 Holdings:
IDEC Pharmaceuticals Corp.
Adaptive Broadband Corp.
Intel Corp.
Tyco International Ltd.
Amgen Inc.
5% Smith Barney
Investment Trust-
Smith Barney Mid Cap Blend Fund
Top 5 Holdings:
VERITAS Software Corp.
Sepracor Inc.
The AES Corp.
XL Capital Ltd.
FactSet Research Systems
11% Smith Barney
World Funds, Inc.-
International Equity Portfolio
Top 5 Holdings:
Nokia AB Oy K Shares
COLT Telecom Group PLC
Murata Manufacturing Co. Ltd.
Misys PLC
Sony Corp.
4% Smith Barney Funds, Inc.-
Large Cap Value Fund
Top 5 Holdings:
Enron Corp.
Exxon Mobil Corp.
Chase Manhattan Corp.
General Electric Co.
Marsh & McLennan Cos., Inc.
9% Smith Barney
Investment Funds Inc.-
Concert Peachtree Growth Fund
Top 5 Holdings:
General Electric Co.
Microsoft Corp.
Nextel Communications, Inc.
America Online, Inc.
Sun Microsystems, Inc.
11% Smith Barney Investment
Trust-Smith Barney Large
Capitalization Growth Fund
Top 5 Holdings:
Intel Corp.
Texas Instruments Inc.
America Online, Inc.
The Coca-Cola Co.
Merrill Lynch & Co., Inc.
5% Smith Barney Equity Funds-
Smith Barney Large Cap Blend Fund
Top 5 Holdings:
General Electric Co.
Intel Corp.
Microsoft Corp.
Cisco Systems, Inc.
Exxon Mobil Corp.
10% Smith Barney Investment
Funds Inc.- Smith Barney
Hansberger Global Value Fund
Top 5 Holdings:
Daiwa Securities Trust Co.
Kon Pitt
Cable & Wireless PLC
Marubeni Corp.
Malayan Bkg Bhd
4% Smith Barney
Investment Funds Inc.-
Smith Barney Contrarian Fund
Top 5 Holdings:
SunGard Data Systems
The Allstate Corp.
Archer-Daniels-Midland Corp.
Tyco International Ltd.
Scholastic Corp.
9% Smith Barney Income Funds-
Smith Barney High Income Fund
Top 5 Holdings:
United International Holdings, Inc.
Allied Waste North America Inc.
United Pan-Europe Communications, N.V.
Nextel Communications, Inc.
NEXTLINK Communications, Inc.
18% Smith Barney
Small Cap Blend Fund, Inc.
Top 5 Holdings:
IDEC Pharmaceuticals Corp.
Mercury International
MicroStrategy, Inc.
Lam Research Corp.
Amkor Technology, Inc.
12
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance -- Class A Shares
- ----------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $0.94 $1.20
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class B Shares
- ------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $1.20
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Historical Performance -- Class L Shares
- ------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $1.20
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class Z Shares
- ------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $14.86 $16.81 $0.57 $0.35 19.26%
- ----------------------------------------------------------------------------------------------------------
1/31/99 12.97 14.86 0.12 0.48 19.45
- ----------------------------------------------------------------------------------------------------------
1/31/98 12.41 12.97 0.17 0.33 8.58
- ----------------------------------------------------------------------------------------------------------
Inception*-1/31/97 12.24 12.41 0.00 0.00 1.39+
- ----------------------------------------------------------------------------------------------------------
Total $0.86 $1.16
- ----------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
13
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------------------------------------------
Without Sales Charges(1)
------------------------------------------------------------
Class A Class B Class L Class Z
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended 1/31/00 18.97% 18.01% 18.08% 19.26%
- ------------------------------------------------------------------------------------------------
Inception* through 1/31/00 14.29 13.35 13.37 15.96
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
------------------------------------------------------------
Class A Class B Class L Class Z
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended 1/31/00 13.03% 13.01% 15.90% 19.26%
- ------------------------------------------------------------------------------------------------
Inception* through 1/31/00 12.83 13.01 13.07 15.96
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Returns
- ------------------------------------------------------------------------------------------------
Without Sales Charges(1)
- ------------------------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 1/31/00) 70.39%
- ------------------------------------------------------------------------------------------------
Class B (Inception* through 1/31/00) 64.87
- ------------------------------------------------------------------------------------------------
Class L (Inception* through 1/31/00) 64.96
- ------------------------------------------------------------------------------------------------
Class Z (Inception* through 1/31/00) 56.82
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
+ 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.
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 - January 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Salomon
High Growth High Growth Standard & Poor's Smith Barney High Growth
Portfolio MSCI EAFE Portfolio 500 Composite High Yield Portfolio
Class L Index Class A Stock Index Russell 2000 Market Index Class B
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,500 10,000 9,896 10,000 10,000 10,000 10,000
Jul-96 9,142 9,083 9,367 10,175 10,084 10,119 10,208
Jan-97 10,549 10,491 10,786 12,630 11,897 10,220 11,049
Jul-97 11,671 11,716 11,999 15,476 13,452 11,968 11,886
Jan-98 11,419 11,409 11,695 16,026 14,047 11,272 12,693
Jul-98 12,426 12,497 12,672 18,462 13,764 12,622 13,152
Jan-99 13,607 13,671 13,825 21,235 14,099 12,915 13,050
Jul-99 14,432 14,564 14,619 22,191 14,789 13,867 13,114
1/31/00 16,187 16,288 16,324 23,429 16,601 15,400 12,973
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
January 31, 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 EAFE Index ("MSCI EAFE") consists of the equity total returns for
Europe, Australia and the Far East. The Salomon Smith Barney High Yield Market
Index covers a significant portion of the below-investment-grade U.S. corporate
bond market. These indices are unmanaged and are not subject to the same
management and trading expenses as a mutual fund. An investor cannot invest
directly in an index. The performance of the Portfolio's other classes may be
greater or less than the shares' performance indicated on this chart, depending
on whether greater or lesser sales charges and fees were incurred by
shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
15
<PAGE>
THE GROWTH PORTFOLIO
Target Asset Allocation
[GRAPH]
The Growth Portfolio seeks long-term growth of capital by investing primarily in
funds containing the issues of more established companies.
The Growth Portfolio
The Growth Portfolio seeks long-term growth of capital. Among the Portfolios of
the Concert Allocation Series, the Growth Portfolio invests the highest
percentage of its assets in large-capitalization stock mutual funds to provide
growth. The Portfolio's 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 10.34%
Russell 2000(R) 17.74%
MSCI EAFE 19.25%
Lehman Government/
Corporate Bond (2.87)%
*The chart above represents total returns for the year ended January 31, 2000.
Portfolio Update
The Concert Allocation Series Growth Portfolio's ("Portfolio") Class A shares,
without sales charges, returned 10.53% for the year ended January 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.
While the positive economic and market conditions that fueled the U.S. stock
market's historic rise remained intact - strong economic growth, low inflation,
robust consumer spending and rising demand for U.S. exports - inflation became a
concern to many investors. These fears regarding inflation caused higher levels
of volatility in both the stock and bond markets. In a preemptive strike against
inflation, the Federal Reserve Board ("Fed") raised interest rates three times
in 1999, effectively "taking back" the rate cuts it implemented in 1998 in
response to a global economic crisis.
The Portfolio benefited from its holdings in international stocks, large cap
growth stocks and small cap growth stocks that generally did better than the
overall market. (Growth investing focuses on the stocks of corporations that are
exhibiting or are expected to exhibit faster-than-average growth within their
industry.) In addition, the Portfolio benefited from its underlying holdings in
the technology sector.
Although the value sector of the market did not perform as well as the growth
segment of the market, it has recently started to improve as investors began to
search for high-quality companies with favorable valuations. (Value investing
consists of identifying securities of companies that are believed to be
undervalued in the market.) In our view, many of these companies in the value
sector may be in a good position to capitalize on economic growth worldwide.
The monetary policy decisions of the Fed during the period negatively impacted
the performance of the bond market. Despite this factor, the bond funds in the
Portfolio, with their emphasis on credit quality in their respective asset
classes, should do well if rates stabilize or go down in the coming months. (Of
course, no guarantees can be made that our credit emphasis will be successful.)
- --------------------------------------------------------------------------------
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Growth Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series' Board of Directors.
16
<PAGE>
The Concert Allocation Series Growth Portfolio Breakdown (as of 1/31/00)
(unaudited)
10% Smith Barney Investment Funds
Inc.-Concert Peachtree Growth Fund
Top 5 Holdings:
General Electric Co.
Microsoft Corp.
Nextel Communications, Inc.
America Online, Inc.
Sun Microsystems, Inc.
9% Smith Barney Funds, Inc.-
Large Cap Value Fund
Top 5 Holdings:
Enron Corp.
Exxon Mobil Corp.
Chase Manhattan Corp.
General Electric Co.
Marsh & McLennan Cos., Inc.
4% Smith Barney Investment Funds Inc.-
Smith Barney Contrarian Fund
Top 5 Holdings:
SunGard Data Systems
The Allstate Corp.
Archer-Daniels-Midland Corp.
Tyco International Ltd.
Scholastic Corp.
12% Smith Barney World Funds,
Inc.- International Equity Portfolio
Top 5 Holdings:
Nokia AB Oy K Shares
COLT Telecom Group PLC
Murata Manufacturing Co. Ltd.
Misys PLC
Sony Corp.
7% Smith Barney
Aggressive Growth Fund Inc.
Top 5 Holdings:
IDEC Pharmaceuticals Corp.
Adaptive Broadband Corp.
Intel Corp.
Tyco International Ltd.
Amgen Inc.
6% Smith Barney Investment
Trust-Smith Barney
Mid Cap Blend Fund
Top 5 Holdings:
VERITAS Software Corp.
Sepracor Inc.
The AES Corp.
XL Capital Ltd.
FactSet Research Systems
9% Smith Barney Equity Funds-
Smith Barney Large Cap Blend Fund
Top 5 Holdings:
General Electric Co.
Intel Corp.
Microsoft Corp.
Cisco Systems, Inc.
Exxon Mobil Corp.
9% Smith Barney Income Funds-
Smith Barney High Income Fund
Top 5 Holdings:
United International Holdings, Inc.
Allied Waste North America
United Pan-Europe Communications, N.V.
Nextel Communications, Inc.
NEXTLINK Communications, Inc.
5% Smith Barney Small Cap
Blend Fund, Inc.
Top 5 Holdings:
IDEC Pharmaceuticals Corp.
Mercury International
MicroStrategy, Inc.
Lam Research Corp.
Amkor Technology, Inc.
9% Smith Barney Investment
Funds Inc.-Smith Barney
Investment Grade Bond Fund
Sector Breakdown:
65.2% Corporate Bonds
20.0% U.S. Treasuries
10.9% Government Agencies
Credit Quality:
34.8% AAA-Rated
Average Maturity:
22.12 Years
6% Smith Barney Investment
Trust-Smith Barney Large
Capitalization Growth Fund
Top 5 Holdings:
Intel Corp.
Texas Instruments Inc.
America Online, Inc.
The Coca-Cola Co.
Merrill Lynch & Co., Inc.
9% Smith Barney Investment
Funds Inc.-Smith Barney Government
Securities Fund
Sector Breakdown:
83.0% U.S. Government Agencies
11.8% U.S. Treasuries
5.2% Other
Credit Quality:
100% AAA-Rated
Average Maturity:
22.92 Years
5% Smith Barney Investment
Funds Inc.-Smith Barney
Hansberger Global Value Fund
Top 5 Holdings:
Daiwa Securities Trust Co.
Kon Pitt
Cable & Wireless PLC
Marubeni Corp.
Malayan Bkg Bhd
17
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance - Class A Shares
- ----------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $1.39 $1.20
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class B Shares
- ----------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $1.20
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class L Shares
- ----------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $1.20
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class Z Shares
- ----------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/31/00 $14.41 $15.03 $0.58 $0.35 10.76%
- ----------------------------------------------------------------------------------------------------------
1/31/99 12.99 14.41 0.32 0.37 16.47
- ----------------------------------------------------------------------------------------------------------
1/31/98 12.32 12.99 0.35 0.46 12.08
- ----------------------------------------------------------------------------------------------------------
Inception*-1/31/97 12.18 12.32 0.00 0.00 1.15+
- ----------------------------------------------------------------------------------------------------------
Total $1.25 $1.18
- ----------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
18
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns
Without Sales Charges(1)
------------------------------------------------------------
Class A Class B Class L Class Z
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended 1/31/00 10.53% 9.61% 9.68% 10.76%
- ------------------------------------------------------------------------------------------------
Inception* through 1/31/00 12.42 11.58 11.59 13.33
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
------------------------------------------------------------
Class A Class B Class L Class Z
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended 1/31/00 5.00% 4.61% 7.56% 10.76%
- ------------------------------------------------------------------------------------------------
Inception* through 1/31/00 10.98 11.21 11.30 13.33
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Returns
- ------------------------------------------------------------------------------------------------
Without Sales Charges(1)
- ------------------------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 1/31/00) 59.53%
- ------------------------------------------------------------------------------------------------
Class B (Inception* through 1/31/00) 54.81
- ------------------------------------------------------------------------------------------------
Class L (Inception* through 1/31/00) 54.89
- ------------------------------------------------------------------------------------------------
Class Z (Inception* through 1/31/00) 46.25
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
+ 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.
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 Government/Corporate
Bond Index
- --------------------------------------------------------------------------------
February 5, 1996 - January 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Growth Portfolio- Growth Portfolio- Growth Portfolio- Standard & Poor's 500 Russell 2000 MSCI EAFE Lehman Government/
Class A Class B Class L Composite Stock Index Index INDEX Corporate Bond Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,500 10,000 9,896 10,000 10,000 10,000 10,000
Jul-96 9,258 9,225 9,513 10,175 10,084 10,119 9,473
Jan-97 10,552 10,532 10,817 12,630 11,897 10,220 9,118
Jul-97 11,700 11,787 12,060 15,476 13,452 11,968 9,643
Jan-98 11,800 11,738 12,109 16,026 14,047 11,272 10,136
Jul-98 12,683 12,807 12,969 18,462 13,764 12,622 10,421
Jan-99 13,712 13,823 13,975 21,235 14,099 12,915 11,020
Jul-99 14,015 14,179 14,228 22,191 14,789 13,867 10,663
1/30/00 15,155 15,281 15,328 23,429 16,601 15,400 10,704
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
January 31, 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 EAFE Index ("MSCI EAFE") is a composite index that consists of
equity total returns for Europe, Australia and the Far East. The Lehman
Government/Corporate Bond Index is a combination of publicly issued
intermediate- and long-term U.S. government bonds and corporate bonds. These
indices are unmanaged and are not subject to the same management and trading
expenses as a mutual fund. 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.
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
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 10.34%
Lehman Government/
Corporate Bond (2.87)%
Salomon Smith Barney
One-Year Treasury Bill 4.11%
Salomon Smith Barney
World Government Bond (5.44)%
- --------------------------------------------------------------------------------
*The chart above represents total returns for the year ended January 31, 2000.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
The Concert Allocation Series Balanced Portfolio's ("Portfolio") Class A shares,
without sales charges, returned 4.37% for the year ended January 31, 2000. The
chart that appears on page 25 compares the Portfolio's performance to
broad-based indices that track four of the asset classes represented in the
Portfolio.
Economic conditions during the reporting period were characterized by strong
growth both in the United States and overseas and growing investor concerns
regarding inflation. In our opinion, these concerns contributed to higher
volatility in both the stock and bond markets. Although both growth and value
stocks yielded positive returns in the U.S. stock market, the growth sector
outperformed the value sector. (Value investing consists of identifying
securities of companies that are believed to be undervalued in the market.
Growth investing focuses on the stocks of corporations that are exhibiting or
arc expected to exhibit faster-than-average growth within their industry.)
The Portfolio generated positive results from its underlying funds' exposure to
several industry sectors that benefited from the strength of the global economy.
In addition, Portfolio holdings in the technology sector should, in our view
continue to benefit from positive trends such as globalization, demographic
changes and the explosive growth of the Internet.
The bond market did not perform well during the period due to the interest rate
increases implemented by the Federal Reserve Board ("Fed") in 1999 and
consequently, the Portfolio's bond funds hurt its performance. Most recently, on
February 2, 2000, the Fed raised interest rates 0.25% to 5.75%. Despite the
decline in the bond market, the Balanced Portfolio's manager continued to
maintain its emphasis on strong credit quality. Although the Fed has pursued a
tightening stance so far in 2000, indicating that subsequent rate increases are
likely to follow, we think current inflation fears may be overblown.
- --------------------------------------------------------------------------------
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Balanced Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series' Board of Directors.
21
<PAGE>
The Concert Allocation Series Balanced Portfolio Breakdown (as of 1/31/00)
(unaudited)
[GRAPH]
- -------------------------------------------
5% Smith Barney Funds, Inc.-
Large Cap Value Fund
- -------------------------------------------
Top 5 Holdings:
Enron Corp.
Exxon Mobil Corp.
Chase Manhattan Corp.
General Electric Co.
Marsh & McLennan Cos., Inc.
- -------------------------------------------
- -------------------------------------------
10% Smith Barney Income
Funds-Smith Barney Premium
Total Return Fund
- -------------------------------------------
Top 5 Holdings:
Bristol-Myers Squibb Co.
MCI WorldCom
GTE Corp.
Safeway Inc.
Costco Wholesale Corp.
- -------------------------------------------
- -------------------------------------------
10% Smith Barney
Appreciation Fund Inc.
- -------------------------------------------
Top 5 Holdings:
Berkshire Hathaway Inc.
Exxon Mobil Corp.
Microsoft Corp.
General Electric Co.
Cisco Systems, Inc.
- -------------------------------------------
- -------------------------------------------
10% Smith Barney Fundamental
Value Fund Inc.
- -------------------------------------------
Top 5 Holdings:
Texas Instruments Inc.
AT&T Corp.
Alcoa, Inc.
American Express Co.
Adobe Systems, Inc.
- -------------------------------------------
- -------------------------------------------
10% Smith Barney Income
Funds-Smith Barney
Convertible Fund
- -------------------------------------------
Top 5 Holdings:
Quantum Corp.
NTL Inc.
Rodgers Communications Inc.
Bell Atlantic Financial Services Corp.
Kerr-McGee Corp.
- -------------------------------------------
- -------------------------------------------
5% Smith Barney World Funds,
Inc.-Global Government
Bond Portfolio
- -------------------------------------------
Top 5 Country Holdings:
U.S.A.
Germany
United Kingdom
Denmark
France
- -------------------------------------------
- -------------------------------------------
15% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
- -------------------------------------------
Sector Breakdown:
49.6% U.S. Government Agencies
27.6% High Yield Corporate Bonds
17.1% Foreign Government Bonds
5.3% U.S. Treasuries
Top 5 Holdings:
GNMA 8.0% 30 Year
FNMA 7.0% 30 Year
U.S. Treasury Strips
Buoni Poliennali Del Tes
Bundesobligation
Top 5 Country Holdings:
United States
Denmark
United Kingdom
Italy
Germany
Average Maturity:
5 Years
- -------------------------------------------
- -------------------------------------------
5% Smith Barney Funds, Inc.-
Short-Term High Grade Bond Fund
- -------------------------------------------
Sector Breakdown:
48.1% Corporate Bonds & Notes
47.3% U.S. Government & Agency Obligations
4.6% Repurchase Agreements
Credit Quality:
29% AAA-rated
Average Maturity:
2.31 Years
- -------------------------------------------
- -------------------------------------------
5% Smith Barney World Funds, Inc.-
International Equity Portfolio
- -------------------------------------------
Top 5 Holdings:
Nokia AB Oy K Shares
COLT Telecom Group PLC
Murata Manufacturing Co. Ltd.
Misys PLC
Sony Corp.
- -------------------------------------------
- -------------------------------------------
10% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
- -------------------------------------------
Sector Breakdown:
83.0% U.S. Government Agencies
11.8% U.S. Treasuries
5.2% Other
Credit Quality:
100% AAA-rated
Average Maturity:
22.92 Years
- -------------------------------------------
- -------------------------------------------
10% Smith Barney Managed
Governments Fund Inc.
- -------------------------------------------
Sector Breakdown:
95.0% U.S. Agency Obligations
5.0% U.S. Treasuries
Credit Quality:
100% AAA-rated
Average Maturity:
10 Years
- -------------------------------------------
- -------------------------------------------
5% Smith Barney Equity Funds-
Smith Barney Large Cap
Blend Fund
- -------------------------------------------
Top 5 Holdings:
General Electric Co.
Intel Corp.
Microsoft Corp.
Cisco Systems, Inc.
Exxon Mobil Corp.
- -------------------------------------------
22
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance - Class A Shares
- --------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
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 $1.90 $1.19
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class B Shares
- --------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $1.46 $1.19
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class L Shares
- --------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $1.46 $1.19
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class Z Shares
- ------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $1.57 $1.19
========================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
23
<PAGE>
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
-----------------------------------------------
Class A Class B Class L Class Z
================================================================================
Year Ended 1/31/00 4.37% 3.48% 3.56% 4.58%
- --------------------------------------------------------------------------------
Inception* through 1/31/00 8.97 8.15 8.15 8.63
================================================================================
With Sales Charges(2)
-----------------------------------------------
Class A Class B Class L Class Z
================================================================================
Year Ended 1/31/00 (0.84)% (1.40)% 1.57% 4.58%
- --------------------------------------------------------------------------------
Inception* through 1/31/00 7.58 7.76 7.87 8.63
================================================================================
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 1/31/00) 40.88%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/00) 36.71
- --------------------------------------------------------------------------------
Class L (Inception* through 1/31/00) 36.71
- --------------------------------------------------------------------------------
Class Z (Inception* through 1/31/00) 28.60
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales 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 and for
Class Z shares is January 17, 1997.
24
<PAGE>
Growth of $10,000 Invested in Class A, B and L Shares of the Balanced Portfolio
vs. the Standard & Poor's 500 Composite Stock Index, Lehman Government/Corporate
Bond Index, Salomon Smith Barney One-Year Treasury Bill Index and Salomon Smith
Barney World Government Bond Index
- --------------------------------------------------------------------------------
February 5, 1996 - January 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Balanced Balanced Balanced Lehman Salomon Salomon
Portfolio- Portfolio- Portfolio- Standard & Poor's Government/ Smith Barney Smith Barney
Class A Class B Class L 500 Composite Corporate One-Year Treasury World 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
Jul-96 9,513 9,486 9,778 10,175 9,473 10,214 10,167
Jan-97 10,511 10,490 10,776 12,630 9,118 10,551 10,568
Jul-97 11,587 11,664 11,939 15,476 9,643 10,892 11,204
Jan-98 11,729 11,763 12,036 16,026 10,136 11,214 11,842
Jul-98 12,298 12,408 12,575 18,462 10,421 11,511 12,351
Jan-99 12,824 12,911 13,063 21,235 11,020 11,840 13,708
Jul-99 13,087 13,221 13,281 22,191 10,663 12,114 13,159
1/31/00 13,384 13,471 13,529 23,429 10,704 12,327 12,878
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 5.00% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 5.00% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
January 31, 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 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.
25
<PAGE>
THE CONSERVATIVE PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[GRAPH]
70% Bond Funds
30% Stock Funds
The Conservative Portfolio seeks income and, secondarily, long-term growth of
capital by investing the majority of its assets in funds that invest in bonds.
- --------------------------------------------------------------------------------
The Conservative Portfolio
The Conservative Portfolio seeks income and, secondarily, long-term capital
growth. Among the Portfolios of the Concert Allocation Series, 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 10.34%
Lehman Government/
Corporate Bond (2.87)%
Salomon Smith Barney
High Yield Market (0.60)%
Salomon Smith Barney
One-Year Treasury Bill 4.11%
- --------------------------------------------------------------------------------
*The chart above represents total returns for the year ended January 31, 2000.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
The Concert Allocation Series Conservative Portfolio's ("Portfolio") Class A
shares, without sales charges, returned 1.96% for the year ended January 31,
2000. The chart that appears on page 30 compares the Portfolio's performance to
broad-based indices that track four of the asset classes represented in the
Portfolio.
In keeping with its investment mandate, the Conservative 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.
During the period, the bond market suffered one of its worst years on record and
consequently, the Portfolio's bond funds hurt its performance. The robust growth
of the U.S. economy led to rising concerns about inflation. To counter any
possible effects of inflation, the Federal Reserve Board ("Fed") raised interest
rates three times in 1999, adopting a more restrictive monetary policy. The
Fed's actions in turn led to increased volatility in both the stock and bond
markets. However, the stock market continued to perform well, led by strong
corporate earnings growth, increases in labor productivity and seemingly
limitless investor enthusiasm for select technology stocks.
The disparity between U.S. Treasury securities and other types of bonds widened
sharply during the period. The high yield bond market continued to outperform
other segments of the U.S. bond market, with positive performance concentrated
among the better quality issues in the middle to upper quality segments (i.e.,
B/B and BB/Ba rated issues).
We remain positive on the total return prospects of the bond market at current
valuation levels, especially given the continued health of the economy. Looking
ahead, we anticipate a continuation of solid economic growth with only a modest
upward bias to inflation.
The Portfolio's stock holdings largely benefited from the recovery of overseas
economies and the continued strength of U.S. stocks.
- --------------------------------------------------------------------------------
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Conservative Portfolio. The allocation and investment mix of
the Portfolio may vary depending upon market conditions, cash flows in and out
of the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series' Board of Directors.
26
<PAGE>
The Concert Allocation Series Conservative Portfolio Breakdown (as of 1/31/00)
(unaudited)
[GRAPH]
- -------------------------------------------
15% Smith Barney
Managed Governments Fund Inc.
- -------------------------------------------
Sector Breakdown:
95.0% U.S. Agency Obligations
5.0% U.S. Treasuries
Credit Quality:
100% AAA-rated
Average Maturity:
10 Years
- -------------------------------------------
- -------------------------------------------
10% Smith Barney Income Funds-
Smith Barney Convertible Fund
- -------------------------------------------
Top 5 Holdings:
Quantum Corp.
NTL Inc.
Rodgers Communications Inc.
Bell Atlantic Financial Services Corp.
Kerr-McGee Corp.
- -------------------------------------------
- -------------------------------------------
5% Smith Barney Income Funds-
Smith Barney Premium Total
Return Fund
- -------------------------------------------
Top 5 Holdings:
Bristol-Myers Squibb Co.
MCI WorldCom
GTE Corp.
Safeway Inc.
Costco Wholesale Corp.
- -------------------------------------------
- -------------------------------------------
20% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
- -------------------------------------------
Sector Breakdown:
49.6% U.S. Government Agencies
27.6% High Yield Corporate Bonds
17.1% Foreign Government Bonds
5.3% U.S. Treasuries
Top 5 Holdings:
GNMA 8.0% 30 Year
FNMA 7.0% 30 Year
U.S. Treasury Strips
Buoni Poliennali Del Tes
Bundesobligation
Top 5 Country Holdings:
United States
Denmark
United Kingdom
Italy
Germany
Average Maturity:
5 Years
- -------------------------------------------
- -------------------------------------------
10% Smith Barney
Appreciation Fund Inc.
- -------------------------------------------
Top 5 Holdings:
Berkshire Hathaway Inc.
Exxon Mobil Corp.
Microsoft Corp.
General Electric Co.
Cisco Systems, Inc.
- -------------------------------------------
- -------------------------------------------
10% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
- -------------------------------------------
Sector Breakdown:
83.0% U.S. Government Agencies
11.8% U.S. Treasuries
5.2% Other
Credit Quality:
100% AAA-rated
Average Maturity:
22.92 Years
- -------------------------------------------
- -------------------------------------------
5% Smith Barney Funds,
Inc.-Short-Term High Grade
Bond Fund
- -------------------------------------------
Sector Breakdown:
48.1% Corporate Bonds & Notes
47.3% U.S. Government & Agency Obligations
4.6% Repurchase Agreements
Credit Quality:
29% AAA-rated
Average Maturity:
2.3 Years
- -------------------------------------------
- -------------------------------------------
5% Smith Barney World Funds,
Inc.-Global Government
Bond Portfolio
- -------------------------------------------
Top 5 Holdings:
U.S.A.
Germany
United Kingdom
Denmark
France
- -------------------------------------------
- -------------------------------------------
10% Smith Barney Income
Funds-Smith Barney
High Income Fund
- -------------------------------------------
Top 5 Holdings:
United International Holdings, Inc.
Allied Waste North America
United Pan-Europe Communications, N.V.
Nextel Communications, Inc.
NEXTLINK Communications, Inc.
- -------------------------------------------
- -------------------------------------------
5% Smith Barney Fundamental
Value Fund Inc.
- -------------------------------------------
Top 5 Holdings:
Texas Instruments Inc.
AT&T Corp.
Alcoa, Inc.
American Express Co.
Adobe Systems, Inc.
- -------------------------------------------
- -------------------------------------------
5% Smith Barney Investment
Funds Inc.-Smith Barney
Hansberger Global Value Fund
- -------------------------------------------
Top 5 Holdings:
Daiwa Securities Trust Co.
Kon Pitt
Cable & Wireless PLC
Marubeni Corp.
Malayan Bkg Bhd
- -------------------------------------------
27
<PAGE>
THE CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance - Class A Shares
- --------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
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 $2.34 $0.89
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class B Shares
- --------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $2.07 $0.89
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Historical Performance - Class L Shares
- --------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------------- Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $2.10 $0.89
========================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
28
<PAGE>
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------------
Class A Class B Class L
================================================================================
Year Ended 1/31/00 1.96% 1.50% 1.59%
- --------------------------------------------------------------------------------
Inception* through 1/31/00 6.98 6.45 6.51
================================================================================
With Sales Charges(2)
--------------------------------------------------
Class A Class B Class L
================================================================================
Year Ended 1/31/00 (2.65)% (2.81)% (0.36)%
- --------------------------------------------------------------------------------
Inception* through 1/31/00 5.75 6.03 6.23
================================================================================
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 1/31/00) 30.88%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/00) 28.31
- --------------------------------------------------------------------------------
Class L (Inception* through 1/31/00) 28.61
================================================================================
(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.
29
<PAGE>
Growth of $10,000 Invested in Class A, B and L Shares of the Conservative
Portfolio vs. the Standard & Poor's 500 Composite Stock Index, Lehman
Government/Corporate Bond Index, Salomon Smith Barney High Yield Market Index
and Salomon Smith Barney One-Year Treasury Bill Index
- --------------------------------------------------------------------------------
February 5, 1996 - January 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Conservative Conservative Conservative Standard & Lehman Salomon Salomon
Portfolio- Portfolio- Portfolio- Poor's 500 Government/ Smith Barney Smith Barney
Class A Class B Class L Composite Corporate High Yield One-Year Treasury
Shares Shares Shares Stock Index Bond Index Market Index Bill Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,550 10,000 9,896 10,000 10,000 10,000 10,000
Jul-96 9,560 9,542 9,786 10,175 9,473 10,208 10,214
Jan-97 10,369 10,353 10,596 12,630 9,118 11,049 10,551
Jul-97 11,277 11,323 11,609 15,476 9,643 11,886 10,892
Jan-98 11,581 11,614 11,900 16,026 10,136 12,693 11,214
Jul-98 11,925 12,029 12,215 18,462 10,421 13,152 11,511
Jan-99 12,259 12,342 12,529 21,235 11,020 13,050 11,840
Jul-99 12,395 12,550 12,639 22,191 10,663 13,114 12,114
1/30/00 12,499 12,631 12,728 23,429 10,704 12,973 12,327
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 4.50% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 4.50% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
January 31, 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 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. 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.
30
<PAGE>
THE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Target Asset Allocation
- --------------------------------------------------------------------------------
[GRAPH]
Bond Funds 90%
Stock Funds 10%
The Income Portfolio seeks high current income by investing primarily in bond
funds.
................................................................................
The Income Portfolio
The Income Portfolio seeks high current income. Among the Portfolios of the
Concert Allocation Series, 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
equity funds that invest in large-capitalization U.S. stocks.
- --------------------------------------------------------------------------------
Index Comparison*
- --------------------------------------------------------------------------------
S&P 500 10.34%
Lehman Government/
Corporate Bond (2.87)%
Salomon Smith Barney
High Yield Market (0.60)%
Salomon Smith Barney
One-Year Treasury Bill 4.11%
................................................................................
* The chart above represents total returns for the year ended January 31, 2000.
- --------------------------------------------------------------------------------
Portfolio Update
- --------------------------------------------------------------------------------
The Concert Allocation Series Income Portfolio's ("Portfolio") Class A shares,
without sales charges, returned a negative 1.04% for the year ended January 31,
2000. The chart that appears on page 35 compares the Portfolio's performance to
broad-based indices that track four of the asset classes represented in the
Portfolio.
The majority of 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, the bond markets suffered a decline due to concerns regarding
inflation which led the Federal Reserve Board to raise interest rates three
times in 1999, effectively reversing the cuts it implemented in 1998 following
the global economic crisis. The Portfolio's bond funds had a negative impact on
its performance during the period. On the other hand, the stock portion of the
Portfolio continued to benefit from strong corporate earnings growth and the
recovery of the overseas markets.
................................................................................
The Target Asset Allocation set forth above represents an approximate mix of
investments for the Income Portfolio. The allocation and investment mix of the
Portfolio may vary depending upon market conditions, cash flows in and out of
the Portfolio and other factors. In addition, the allocation and investment
ranges of the Portfolio may be changed from time to time upon the approval of
the Concert Allocation Series' Board of Directors.
31
<PAGE>
The Concert Allocation Series Income Portfolio Breakdown (as of 1/31/00)
(unaudited)
[GRAPH]
- -------------------------------------------
10% Smith Barney Funds, Inc.-
Short-Term High
Grade Bond Fund
- -------------------------------------------
Sector Breakdown:
48.1% Corporate Bonds & Notes
47.3% U.S. Government & Agency Obligations
4.6% Repurchase Agreements
Credit Quality:
29% AAA-rated
Average Maturity:
2.3 Years
- -------------------------------------------
- -------------------------------------------
15% Smith Barney Investment
Funds Inc.-Smith Barney
Government Securities Fund
- -------------------------------------------
Sector Breakdown:
83.0% U.S. Government Agencies
11.8% U.S. Treasuries
5.2% Other
Credit Quality:
100% AAA-rated
Average Maturity:
22.92 Years
- -------------------------------------------
- -------------------------------------------
20% Smith Barney
Managed Governments Fund Inc.
- -------------------------------------------
Sector Breakdown:
95.0% U.S. Agency Obligations
5.0% U.S. Treasuries
Credit Quality:
100% AAA-rated
Average Maturity:
10 Years
- -------------------------------------------
- -------------------------------------------
20% Smith Barney Income
Funds-Smith Barney Diversified
Strategic Income Fund
- -------------------------------------------
Sector Breakdown:
49.6% U.S. Government Agencies
27.6% High Yield Corporate Bonds
17.1% Foreign Government Bonds
5.3% U.S. Treasuries
Top 5 Holdings:
GNMA 8.0% 30 Year
FNMA 7.0% 30 Year
U.S. Treasury Strips
Buoni Poliennali Del Tes
Bundesobligation
Top 5 Country Holdings:
United States
Denmark
United Kingdom
Italy
Germany
Average Maturity:
5 Years
- -------------------------------------------
- -------------------------------------------
5% Smith Barney Income Funds-
Smith Barney Premium Total
Return Fund
- -------------------------------------------
Top 5 Holdings:
Bristol-Myers Squibb Co.
MCI WorldCom
GTE Corp.
Safeway Inc.
Costco Wholesale Corp.
- -------------------------------------------
- -------------------------------------------
20% Smith Barney Income Funds-
Smith Barney High Income Fund
- -------------------------------------------
Top 5 Holdings:
United International Holdings, Inc.
Allied Waste North America
United Pan-Europe Communications, N.V.
Nextel Communications, Inc.
NEXTLINK Communications, Inc.
- -------------------------------------------
- -------------------------------------------
5% Smith Barney Income Funds-
Smith Barney Convertible Fund
- -------------------------------------------
Top 5 Holdings:
Quantum Corp.
NTL Inc.
Rodgers Communications Inc.
Bell Atlantic Financial Services Corp.
Kerr-McGee Corp.
- -------------------------------------------
- -------------------------------------------
5% Smith Barney
Appreciation Fund Inc.
- -------------------------------------------
Top 5 Holdings:
Berkshire Hathaway Inc.
Exxon Mobil Corp.
Microsoft Corp.
General Electric Co.
Cisco Systems, Inc.
- -------------------------------------------
32
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Historical Performance - Class A Shares
- --------------------------------------------------------------------------------------------------------
Net Asset Value
------------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
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 $2.72 $0.51
- --------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance - Class B Shares
- --------------------------------------------------------------------------------------------------------
Net Asset Value
------------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
========================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $2.49 $0.51
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Historical Performance - Class L Shares
- ------------------------------------------------------------------------------------------------------
Net Asset Value
------------------------------------ Income Capital Gain Total
Year Ended Beginning of Year End of Year Dividends Distributions Returns(1)
======================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/00 $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 $2.52 $0.51
- ------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
33
<PAGE>
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
-------------------------------------
Class A Class B Class L
- --------------------------------------------------------------------------------
Year Ended 1/31/00 (1.04)% (1.47)% (1.42)%
- --------------------------------------------------------------------------------
Inception* through 1/31/00 5.34 4.82 4.87
- --------------------------------------------------------------------------------
With Sales Charges(2)
-------------------------------------
Class A Class B Class L
- --------------------------------------------------------------------------------
Year Ended 1/31/00 (5.48)% (5.64)% (3.35)%
- --------------------------------------------------------------------------------
Inception* through 1/31/00 4.13 4.41 4.60
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
- --------------------------------------------------------------------------------
Class A (Inception* through 1/31/00) 23.04%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/00) 20.66
- --------------------------------------------------------------------------------
Class L (Inception* through 1/31/00) 20.90
- --------------------------------------------------------------------------------
(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.
34
<PAGE>
Growth of $10,000 Invested in Class A, B and L Shares of the Income Portfolio
vs. Standard & Poor's 500 Composite Stock Index, Lehman Government/Corporate
Bond Index, Salomon Smith Barney High Yield Market Index and Salomon Smith
Barney One-Year Treasury Bill Index
- --------------------------------------------------------------------------------
February 5, 1996 - January 31, 2000 (unaudited)
[GRAPH]
<TABLE>
<CAPTION>
Salomon
Income Income Income Lehman Salomon Smith Barney
Portfolio- Portfolio- Portfolio- Standard & Poor's Government/ Smith Barney One-Year
Class A Class B Class L 500 Composite Corporate High Yield Treasury
Shares Shares Shares Stock Index Bond Index Market Index Bill Index
<S> <C> <C> <C> <C> <C> <C> <C>
2/5/96 9,550 10,000 9,896 10,000 10,000 10,000 10,000
Jul-96 9,482 9,472 9,711 10,175 9,473 10,208 10,214
Jan-97 10,160 10,139 10,385 12,630 9,118 11,049 10,551
Jul-97 10,939 10,973 11,263 15,476 9,643 11,886 10,892
Jan-98 11,322 11,297 11,636 16,026 10,136 12,693 11,214
Jul-98 11,644 11,750 11,929 18,462 10,421 13,152 11,511
Jan-99 11,875 11,946 12,137 21,235 11,020 13,050 11,840
Jul-99 11,702 11,856 11,943 22,191 10,663 13,114 12,114
1/30/00 11,751 11,880 11,966 23,429 10,704 12,973 12,327
</TABLE>
The chart above represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares on February 5, 1996 (inception date), assuming deduction
of the maximum 4.50% and 1.00% sales charge at the time of investment for Class
A and L shares, respectively, the deduction of the maximum 4.50% CDSC for Class
B shares and the deduction of the 1.00% CDSC for Class L shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value through
January 31, 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 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. 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.
35
<PAGE>
THE GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 2000
- -------------------------------------------------------------------------------------------------------
Shares Description Value
=======================================================================================================
<S> <C> <C>
Underlying Funds -- 98.5%
95,662 Smith Barney Funds, Inc. - Large Cap Value Fund $ 1,609,039
76,817 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 1,391,173
599,407 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 8,020,069
343,045 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Small Cap Value Fund 3,183,460
196,494 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 4,853,406
232,758 Smith Barney Small Cap Blend Fund, Inc. 3,167,837
155,017 Smith Barney World Funds, Inc. - Emerging Markets Portfolio 1,849,362
279,699 Smith Barney World Funds, Inc. - International Equity Portfolio 8,522,438
- -------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost-- $27,151,690) 32,596,784
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Description Value
=======================================================================================================
<S> <C> <C>
Repurchase Agreement -- 1.5%
$ 495,000 Morgan Stanley Dean Witter &Co., 5.680% due 2/1/00; Proceeds at
maturity -- $495,078; (Fully collateralized by U.S. Treasury Notes,
5.500% to 7.000% due 7/15/08 to 5/15/09; Market value -- $507,848)
(Cost -- $495,000) 495,000
=======================================================================================================
Total Investments -- 100% (Cost -- $27,646,690*) $33,091,784
=======================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
36
<PAGE>
THE HIGH GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 2000
- -----------------------------------------------------------------------------------------------------------
Shares Description Value
===========================================================================================================
<S> <C> <C>
Underlying Funds -- 99.3%
1,351,842 Smith Barney Aggressive Growth Fund Inc. $118,421,338
2,377,590 Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund 38,184,096
2,197,862 Smith Barney Funds, Inc. - Large Cap Value Fund 36,968,043
7,551,893 Smith Barney Income Funds - Smith Barney High Income Fund 75,745,487
4,380,637 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 79,333,344
3,335,166 Smith Barney Investment Funds Inc. - Smith Barney Contrarian Fund 36,186,548
6,334,915 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 84,761,166
3,978,233 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 98,262,348
2,337,013 Smith Barney Investment Trust - Smith Barney Mid Cap Blend Fund 45,641,857
11,627,450 Smith Barney Small Cap Blend Fund, Inc. 158,249,600
3,114,141 Smith Barney World Funds, Inc. - International Equity Portfolio 94,887,880
- -----------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $675,043,425) 866,641,707
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Description Value
===========================================================================================================
<S> <C> <C>
Repurchase Agreement -- 0.7%
$ 6,100,000 Morgan Stanley Dean Witter & Co., 5.680% due 2/1/00; Proceeds at
maturity -- $6,100,962; (Fully collateralized by U.S. Treasury Notes,
5.500% to 7.000% due 7/15/08 to 5/15/09; Market value -- $6,222,000)
(Cost -- $6,100,000) 6,100,000
===========================================================================================================
Total Investments -- 100% (Cost -- $681,143,425*) $872,741,707
===========================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
37
<PAGE>
THE GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 2000
- ----------------------------------------------------------------------------------------------------------
Shares Description Value
==========================================================================================================
<S> <C> <C>
Underlying Funds -- 99.8%
832,540 Smith Barney Aggressive Growth Fund Inc. $ 72,930,507
5,537,104 Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund 88,925,892
5,083,714 Smith Barney Funds, Inc. - Large Cap Value Fund 85,508,070
8,570,484 Smith Barney Income Funds - Smith Barney High Income Fund 85,961,983
5,272,956 Smith Barney Investment Funds Inc. - Concert Peachtree Growth Fund 95,493,238
3,710,836 Smith Barney Investment Funds Inc. - Smith Barney Contrarian Fund 40,262,575
9,924,936 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 88,431,187
4,096,294 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 54,808,422
7,853,814 Smith Barney Investment Funds Inc. - Smith Barney Investment Grade Bond Fund 87,727,107
2,535,359 Smith Barney Investment Trust - Smith Barney Large Capitalization Growth Fund 62,623,378
2,981,907 Smith Barney Investment Trust - Smith Barney Mid Cap Blend Fund 58,236,656
3,415,911 Smith Barney Small Cap Blend Fund, Inc. 46,490,551
3,797,929 Smith Barney World Funds, Inc. - International Equity Portfolio 115,722,911
- ----------------------------------------------------------------------------------------------------------
Total Underlying Funds (Cost -- $844,806,449) 983,122,477
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Face
Amount Description Value
==========================================================================================================
<S> <C> <C>
Repurchase Agreement-- 0.2%
$ 2,456,000 Morgan Stanley Dean Witter & Co., 5.680% due 2/1/00; Proceeds
at maturity -- $2,456,388; (Fully collateralized by U.S. Treasury
Notes, 5.500% to 7.000% due 7/15/08 to 5/15/09; Market value --
$2,519,747) (Cost -- $2,456,000) 2,456,000
==========================================================================================================
Total Investments -- 100% (Cost -- $847,262,449*) $985,578,477
==========================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
38
<PAGE>
THE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 2000
- ----------------------------------------------------------------------------------------------------------
Shares Description Value
==========================================================================================================
<S> <C> <C>
Underlying Funds-- 100.0%
3,458,420 Smith Barney Appreciation Fund Inc.$ 52,395,067
1,650,950 Smith Barney Equity Funds - Smith Barney Large Cap Blend Fund 26,514,257
4,024,262 Smith Barney Fundamental Value Fund Inc. 54,770,217
1,500,816 Smith Barney Funds, Inc. - Large Cap Value Fund 25,243,729
6,049,289 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 23,894,694
3,648,618 Smith Barney Income Funds - Smith Barney Convertible Fund 52,941,448
10,827,047 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 78,387,826
2,892,325 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 51,223,078
5,807,928 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 51,748,647
4,406,413 Smith Barney Managed Governments Fund Inc. 52,083,806
2,426,883 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 25,506,549
1,068,203 Smith Barney World Funds, Inc. - International Equity Portfolio 32,548,152
- ----------------------------------------------------------------------------------------------------------
Total Investments -- 100% (Cost -- $531,262,921*) $527,257,470
==========================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
39
<PAGE>
THE CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 2000
- ----------------------------------------------------------------------------------------------------------
Shares Description Value
==========================================================================================================
<S> <C> <C>
Underlying Funds -- 100.0%
955,217 Smith Barney Appreciation Fund Inc. $ 14,471,539
523,703 Smith Barney Fundamental Value Fund Inc. 7,127,604
1,666,134 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 6,581,231
976,356 Smith Barney Income Funds - Smith Barney Convertible Fund 14,166,927
3,981,044 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 28,822,762
1,451,396 Smith Barney Income Funds - Smith Barney High Income Fund 14,557,505
387,942 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 6,870,468
1,604,290 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 14,294,232
541,917 Smith Barney Investment Funds Inc. - Smith Barney Hansberger Global Value Fund 7,250,853
1,825,325 Smith Barney Managed Governments Fund Inc. 21,575,343
664,076 Smith Barney World Funds, Inc. - Global Government Bond Portfolio 6,979,444
- ----------------------------------------------------------------------------------------------------------
Total Investments-- 100% (Cost-- $150,371,656*) $142,697,908
==========================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
40
<PAGE>
THE INCOME PORTFOLIO
<TABLE>
<CAPTION>
Schedule of Investments January 31, 2000
- ----------------------------------------------------------------------------------------------------------
Shares Description Value
==========================================================================================================
<S> <C> <C>
Underlying Funds -- 100.0%
211,866 Smith Barney Appreciation Fund Inc. $ 3,209,769
1,555,311 Smith Barney Funds, Inc. - Short-Term High Grade Bond Fund 6,143,478
219,431 Smith Barney Income Funds - Smith Barney Convertible Fund 3,183,938
1,790,977 Smith Barney Income Funds - Smith Barney Diversified Strategic Income Fund 12,966,672
1,294,148 Smith Barney Income Funds - Smith Barney High Income Fund 12,980,305
182,334 Smith Barney Income Funds - Smith Barney Premium Total Return Fund 3,229,145
1,088,850 Smith Barney Investment Funds Inc. - Smith Barney Government Securities Fund 9,701,658
1,094,319 Smith Barney Managed Governments Fund Inc. 12,934,851
- ----------------------------------------------------------------------------------------------------------
Total Investments -- 100% (Cost -- $69,695,727*) $64,349,816
==========================================================================================================
</TABLE>
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
41
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities January 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 $27,646,690 $681,143,425 $847,262,449 $531,262,921 $150,371,656 $69,695,727
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value $33,091,784 $872,741,707 $985,578,477 $527,257,470 $142,697,908 $64,349,816
Cash 375 266,942 480 -- 65,281 86,797
Receivable for Fund shares sold 136,854 931,081 935,149 383,315 438,384 114,819
Receivable from manager 65,699 -- -- -- -- --
Dividends and interest receivable 78 963 388 49,637 15,329 13,886
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets 33,294,790 873,940,693 986,514,494 527,690,422 143,216,902 64,565,318
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for Fund shares purchased 6,300 956,945 1,184,124 2,381,841 821,450 --
Distribution fees payable 5,466 148,639 198,909 58,455 19,721 8,843
Payable to bank -- -- -- 139,825 -- --
Payable for securities purchased -- -- -- -- -- 411,230
Accrued expenses -- 544,513 711,130 737,282 186,855 34,675
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 11,766 1,650,097 2,094,163 3,317,403 1,028,026 454,748
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $33,283,024 $872,290,596 $984,420,331 $524,373,019 $142,188,876 $64,110,570
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Par value of capital shares $ 2,437 $ 51,991 $ 64,986 $ 41,585 $ 12,381 $ 6,022
Capital paid in excess of par value 27,110,809 661,056,893 813,380,529 506,405,395 146,757,866 69,439,896
Undistributed net investment income 6,759 962,108 962,562 1,448,907 832,654 43,298
Accumulated net realized gain (loss)
on investments 717,925 18,621,322 31,696,226 20,482,583 2,259,723 (32,735)
Net unrealized appreciation (depreciation)
of investments 5,445,094 191,598,282 138,316,028 (4,005,451) (7,673,748) (5,345,911)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $33,283,024 $872,290,596 $984,420,331 $524,373,019 $142,188,876 $64,110,570
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding:
Class A 1,326,551 26,239,747 28,634,046 17,673,659 6,131,481 3,017,575
Class B 1,054,440 22,409,332 32,021,584 18,860,109 5,644,538 2,657,312
Class L 55,530 2,744,556 3,792,736 2,688,796 604,812 347,231
Class Z -- 597,261 537,444 2,362,282 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.67 $16.81 $15.11 $12.58 $11.47 $10.64
Class B * $13.65 $16.74 $15.18 $12.64 $11.50 $10.65
Class L ** $13.64 $16.75 $15.19 $12.64 $11.50 $10.65
Class Z (and redemption price) -- $16.81 $15.03 $12.55 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of
net asset value per share) $14.39 $17.69 $15.90 $13.24 -- --
Class A (net asset value plus 4.71% of
net asset value per share) -- -- -- -- $12.01 $11.14
Class L (net asset value plus 1.01% of
net asset value per share) $13.78 $16.92 $15.34 $12.77 $11.62 $10.76
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC (4.50%
for the Conservative Portfolio and the Income Portfolio) if shares are
redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations 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>
Investment Income:
Income distributions from
Underlying Funds $ 232,528 $ 9,834,631 $ 22,142,429 $ 20,518,324 $ 7,530,953 $ 4,407,029
Short-term capital gain
from Underlying Funds 358,134 21,460,630 13,123,108 1,635,150 381,530 91,603
Interest 17,575 224,033 228,812 74,880 31,896 8,807
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 608,237 31,519,294 35,494,349 22,228,354 7,944,379 4,507,439
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Distribution fees (Note 2) 158,132 4,803,927 6,242,889 3,407,583 746,755 356,733
Other expenses 93,310 2,747,177 3,282,233 1,899,634 519,947 248,660
- -----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 251,442 7,551,104 9,525,122 5,307,217 1,266,702 605,393
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 356,795 23,968,190 25,969,227 16,921,137 6,677,677 3,902,046
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments (Note 3):
Realized Gain (Loss) From:
Sale of Underlying Funds -- 4,679,143 5,189,537 1,634,128 186,596 (716,142)
Capital gain distributions from
Underlying Funds 768,188 26,406,090 36,971,171 24,858,812 3,074,238 885,017
- -----------------------------------------------------------------------------------------------------------------------------------
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) of Investments:
Beginning of year 673,196 110,582,801 115,601,383 18,334,047 (273,413) (374,229)
End of year 5,445,094 191,598,282 138,316,028 (4,005,451) (7,673,748) (5,345,911)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized
Appreciation (Depreciation) 4,771,898 81,015,481 22,714,645 (22,339,498) (7,400,335) (4,971,682)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments 5,540,086 112,100,714 64,875,353 4,153,442 (4,139,501) (4,802,807)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations $5,896,881 $136,068,904 $ 90,844,580 $ 21,074,579 $ 2,538,176 $ (900,761)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
43
<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.
44
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued) For the Year Ended January 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Global High Growth Growth Balanced Conservative Income
Portfolio(1) Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 37,925 $ 1,916,805 $ 11,738,141 $ 13,071,007 $ 5,668,123 $ 3,892,661
Net realized gain 59,221 20,723,412 22,093,046 16,335,841 2,660,092 684,340
Change in net unrealized
appreciation (depreciation) 673,196 85,048,371 81,964,941 10,040,283 (1,387,430) (1,487,808)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 770,342 107,688,588 115,796,128 39,447,131 6,940,785 3,089,193
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders From:
Net investment income (37,925) (1,916,805) (11,668,230) (13,888,946) (5,720,587) (3,925,621)
Net realized gains (15,769) (22,738,630) (21,474,608) (13,499,883) (2,438,232) (653,034)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (53,694) (24,655,435) (33,142,838) (27,388,829) (8,158,819) (4,578,655)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (Note 5):
Net proceeds from sale of shares 21,514,725 250,815,393 279,779,380 221,653,754 63,759,336 32,573,378
Net asset value of shares issued
for reinvestment of dividends 53,691 24,488,226 32,700,434 26,738,856 7,940,449 4,093,470
Cost of shares reacquired (2,054,857) (150,565,920) (160,653,723) (104,498,115) (32,857,120) (20,741,399)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 19,513,559 124,737,699 151,826,091 143,894,495 38,842,665 15,925,449
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 20,230,207 207,770,852 234,479,381 155,952,797 37,624,631 14,435,987
Net Assets:
Beginning of year -- 520,235,921 669,207,264 390,989,066 105,840,675 60,396,297
- -----------------------------------------------------------------------------------------------------------------------------------
End of year* $ 20,230,207 $ 728,006,773 $ 903,686,645 $546,941,863 $ 143,465,306 $ 74,832,284
- -----------------------------------------------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed)
net investment income of: -- -- $ 768,600 $ 398,975 $ 373,120 $ (32,960)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period March 9, 1998 (commencement of operations) to
January 31, 1999.
See Notes to Financial Statements.
45
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Global, High Growth, Growth, Balanced, Conservative and Income Portfolios
("Portfolios") are separate investment portfolios of the Smith Barney Concert
Allocation Series Inc. ("Fund"). The Fund, a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended, as a non-diversified,
open-end management investment company and consists of these portfolios and five
other separate investment portfolios: Select High Growth, Select Growth, Select
Balanced, Select Conservative and Select Income Portfolios. The Portfolios
invest in other mutual funds ("Underlying Funds") managed by 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"). 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.
Effective October 1999, Smith Barney Private Trust Company ("Private Trust"),
another subsidiary of Citigroup, became the Fund's transfer agent and PFPC
Global Fund Services ("PFPC") became the sub-transfer agent. Private Trust
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 Private Trust.
During the period October 1, 1999 through January 31, 2000, the Portfolios paid
transfer agent fees of $241,632 to Private Trust.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member 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 year ended January 31, 2000, CFBDS and SSB received sales charges of
approximately $323,000 and $164,000 on sales of the Portfolios' Class A and L
shares, respectively. In addition, CDSCs paid to CFBDS were approximately:
Portfolio Class A Class B Class L
- --------------------------------------------------------------------------------
Global $ -- $ -- $ --
High Growth 3,000 257,000 4,000
Growth 2,000 432,000 11,000
Balanced -- 280,000 6,000
Conservative 1,000 48,000 2,000
Income -- 32,000 --
- --------------------------------------------------------------------------------
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to their Class A, B and L shares calculated at an annual rate of 0.25% of the
average daily net assets of each respective class. In addition, the Global, High
Growth, Growth and Balanced Portfolios each pays a distribution fee with respect
to their Class B and L shares calculated at an annual rate of 0.75% of the
average daily net assets of each class. The Conservative and Income Portfolios
each pays a distribution fee with respect to their Class B and L shares
calculated at the annual rates of 0.50% and 0.45%, respectively, of the average
daily net assets of each class.
46
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the year ended January 31, 2000, total Distribution Plan fees were as
follows:
Portfolio Class A Class B Class L
- --------------------------------------------------------------------------------
Global $ 36,155 $ 117,753 $ 4,224
High Growth 988,428 3,407,050 408,449
Growth 1,021,504 4,667,876 553,509
Balanced 570,225 2,480,309 357,049
Conservative 181,917 514,670 50,168
Income 87,026 240,920 28,787
- --------------------------------------------------------------------------------
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the year ended January 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 $ 7,981,101 $ --
High Growth 68,223,211 13,000,000
Growth 69,588,159 14,000,000
Balanced 25,538,237 20,719,000
Conservative 11,526,460 4,466,000
Income 3,143,173 7,535,727
- --------------------------------------------------------------------------------
At January 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 $ 5,860,709 $ (415,615) $ 5,445,094
High Growth 208,508,005 (16,909,723) 191,598,282
Growth 176,997,671 (38,681,643) 138,316,028
Balanced 28,374,026 (32,379,477) (4,005,451)
Conservative 2,361,490 (10,035,238) (7,673,748)
Income 15,666 (5,361,577) (5,345,911)
- --------------------------------------------------------------------------------
4. Repurchase Agreements
The Portfolios purchase (and their custodian takes possession of) U.S.
government securities from banks and securities dealers subject to agreements to
resell the securities to the sellers at a future date (generally, the next
business day) at an agreed-upon higher repurchase price. The Portfolios require
continual maintenance of the market value of the collateral in amounts at least
equal to the repurchase price.
5. Capital Shares
At January 31, 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.
47
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At January 31, 2000, total paid-in capital amounted to the following for each
class:
Portfolio Class A Class B Class L Class Z
- --------------------------------------------------------------------------------
Global $ 14,807,165 $ 11,637,115 $ 668,966 $--
High Growth 334,916,479 282,859,734 34,863,534 8,469,137
Growth 361,717,680 397,905,318 46,423,811 7,398,706
Balanced 215,515,941 228,455,475 32,199,173 30,276,391
Conservative 72,644,638 67,025,886 7,099,723 --
Income 34,788,253 30,664,817 3,992,848 --
- --------------------------------------------------------------------------------
Transactions in shares of each class within each Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended January 31, 2000 Year Ended January 31, 1999*
--------------------------- ----------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
GLOBAL PORTFOLIO:
Class A
Shares sold 622,065 $ 7,564,934 1,073,327 $ 11,530,351
Shares issued on reinvestment 21,526 303,911 4,610 50,532
Shares reacquired (281,617) (3,453,034) (113,360) (1,189,529)
- ------------------------------------------------------------------------------------------------------
Net Increase 361,974 $ 4,415,811 964,577 $10,391,354
- ------------------------------------------------------------------------------------------------------
Class B
Shares sold 456,639 $ 5,529,294 907,165 $ 9,739,828
Shares issued on reinvestment 9,569 133,382 281 3,083
Shares reacquired (238,917) (2,905,174) (80,297) (863,298)
- ------------------------------------------------------------------------------------------------------
Net Increase 227,291 $ 2,757,502 827,149 $ 8,879,613
- ------------------------------------------------------------------------------------------------------
Class L**
Shares sold 40,493 $ 513,243 22,142 $ 244,546
Shares issued on reinvestment 452 6,347 7 76
Shares reacquired (7,367) (93,216) (197) (2,030)
- ------------------------------------------------------------------------------------------------------
Net Increase 33,578 $ 426,374 21,952 $ 242,592
- ------------------------------------------------------------------------------------------------------
HIGH GROWTH PORTFOLIO:
Class A
Shares sold 6,135,918 $ 95,762,765 9,638,759 $ 133,112,615
Shares issued on reinvestment 1,276,427 21,787,655 924,090 13,150,399
Shares reacquired (5,752,212) (89,823,483) (5,966,783) (82,338,491)
- ------------------------------------------------------------------------------------------------------
Net Increase 1,660,133 $ 27,726,937 4,596,066 $ 63,924,523
- ------------------------------------------------------------------------------------------------------
Class B
Shares sold 4,494,596 $ 69,681,759 7,337,722 $ 100,937,836
Shares issued on reinvestment 938,822 15,933,726 700,013 9,910,412
Shares reacquired (4,508,234) (70,071,478) (4,321,062) (58,961,282)
- ------------------------------------------------------------------------------------------------------
Net Increase 925,184 $ 15,544,007 3,716,673 $ 51,886,966
- ------------------------------------------------------------------------------------------------------
Class L**
Shares sold 922,114 $ 14,353,773 978,422 $ 13,492,978
Shares issued on reinvestment 114,059 1,937,349 83,746 1,186,252
Shares reacquired (854,726) (13,223,757) (647,771) (8,784,316)
- ------------------------------------------------------------------------------------------------------
Net Increase 181,447 $ 3,067,365 414,397 $ 5,894,914
- ------------------------------------------------------------------------------------------------------
Class Z
Shares sold 264,790 $ 4,181,624 237,560 $ 3,271,964
Shares issued on reinvestment 28,805 492,460 16,927 241,163
Shares reacquired (148,132) (2,333,328) (36,884) (481,831)
- ------------------------------------------------------------------------------------------------------
Net Increase 145,463 $ 2,340,756 217,603 $ 3,031,296
- ------------------------------------------------------------------------------------------------------
</TABLE>
* For the Global Portfolio, transactions are for the period from March 9,
1998 (inception date) to January 31, 1999.
** On June 12, 1998, Class C shares were renamed Class L shares.
48
<PAGE>
<TABLE>
<CAPTION>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------------------------
Year Ended January 31, 2000 Year Ended January 31, 1999
--------------------------- ----------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GROWTH PORTFOLIO:
Class A
Shares sold 6,822,699 $ 99,916,712 9,890,706 $ 135,398,427
Shares issued on reinvestment 1,505,014 22,951,042 1,153,168 16,051,546
Shares reacquired (6,799,898) (99,881,076) (5,482,711) (74,886,382)
- --------------------------------------------------------------------------------------------------
Net Increase 1,527,815 $ 22,986,678 5,561,163 $ 76,563,591
- --------------------------------------------------------------------------------------------------
Class B
Shares sold 5,869,454 $ 86,203,729 9,212,957 $ 125,960,941
Shares issued on reinvestment 1,384,746 21,190,814 1,053,702 14,682,979
Shares reacquired (6,519,592) (96,109,685) (5,399,175) (73,438,124)
- --------------------------------------------------------------------------------------------------
Net Increase 734,608 $ 11,284,858 4,867,484 $ 67,205,796
- --------------------------------------------------------------------------------------------------
Class L*
Shares sold 1,066,462 $ 15,695,754 1,118,532 $ 15,322,127
Shares issued on reinvestment 160,938 2,461,856 122,113 1,702,086
Shares reacquired (1,116,824) (16,427,203) (863,978) (11,810,541)
- --------------------------------------------------------------------------------------------------
Net Increase 110,576 $ 1,730,407 376,667 $ 5,213,672
- --------------------------------------------------------------------------------------------------
Class Z
Shares sold 195,145 $ 2,872,996 225,050 $ 3,097,885
Shares issued on reinvestment 30,311 459,692 18,965 263,823
Shares reacquired (117,495) (1,729,112) (38,475) (518,676)
- --------------------------------------------------------------------------------------------------
Net Increase 107,961 $ 1,603,576 205,540 $ 2,843,032
- --------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO:
Class A
Shares sold 4,909,981 $ 63,180,938 7,295,468 $ 93,331,666
Shares issued on reinvestment 1,262,399 16,057,604 992,232 12,647,946
Shares reacquired (6,079,104) (78,225,950) (3,928,077) (50,334,232)
- --------------------------------------------------------------------------------------------------
Net Increase 93,276 $ 1,012,592 4,359,623 $ 55,645,380
- --------------------------------------------------------------------------------------------------
Class B
Shares sold 3,993,019 $ 51,415,341 6,310,903 $ 80,756,363
Shares issued on reinvestment 1,096,736 13,958,085 955,452 12,174,485
Shares reacquired (5,366,542) (68,934,698) (3,493,405) (44,662,329)
- --------------------------------------------------------------------------------------------------
Net Increase (Decrease) (276,787) $ (3,561,272) 3,772,950 $ 48,268,519
- --------------------------------------------------------------------------------------------------
Class L*
Shares sold 760,050 $ 9,796,888 1,018,653 $ 13,032,302
Shares issued on reinvestment 152,782 1,944,042 126,636 1,613,187
Shares reacquired (913,426) (11,707,779) (634,335) (8,131,326)
- --------------------------------------------------------------------------------------------------
Net Increase (Decrease) (594) $ 33,151 510,954 $ 6,514,163
- --------------------------------------------------------------------------------------------------
Class Z
Shares sold 945,905 $ 12,120,694 2,689,367 $ 34,533,423
Shares issued on reinvestment 190,416 2,420,336 23,813 303,238
Shares reacquired (1,609,785) (20,693,812) (108,811) (1,370,228)
- --------------------------------------------------------------------------------------------------
Net Increase (Decrease) (473,464) $ (6,152,782) 2,604,369 $ 33,466,433
- --------------------------------------------------------------------------------------------------
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
49
<PAGE>
Notes to Financial Statements (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended January 31, 2000 Year Ended January 31, 1999
----------------------------- ------------------------------
Shares Amount Shares Amount
=====================================================================================================
<S> <C> <C> <C> <C>
CONSERVATIVE PORTFOLIO:
Class A
Shares sold 1,961,746 $ 23,263,203 2,757,450 $ 33,247,320
Shares issued on reinvestment 412,102 4,824,123 343,683 4,130,057
Shares reacquired (2,188,217) (25,913,762) (1,363,889) (16,448,987)
- -----------------------------------------------------------------------------------------------------
Net Increase 185,631 $ 2,173,564 1,737,244 $ 20,928,390
=====================================================================================================
Class B
Shares sold 1,765,244 $ 21,004,694 2,192,411 $ 26,465,020
Shares issued on reinvestment 336,293 3,939,093 283,399 3,402,812
Shares reacquired (1,861,174) (21,953,525) (1,068,131) (12,898,059)
- -----------------------------------------------------------------------------------------------------
Net Increase 240,363 $ 2,990,262 1,407,679 $ 16,969,773
=====================================================================================================
Class L*
Shares sold 198,951 $ 2,348,016 273,480 $ 3,295,754
Shares issued on reinvestment 33,335 390,361 28,107 337,543
Shares reacquired (201,238) (2,368,770) (170,834) (2,071,580)
- -----------------------------------------------------------------------------------------------------
Net Increase 31,048 $ 369,607 130,753 $ 1,561,717
=====================================================================================================
Class Z+
Shares sold -- -- 61,958 $ 751,242
Shares issued on reinvestment -- -- 5,835 70,037
Shares reacquired -- -- (120,224) (1,438,494)
- -----------------------------------------------------------------------------------------------------
Net Decrease -- -- (52,431) $ (617,215)
=====================================================================================================
INCOME PORTFOLIO:
Class A
Shares sold 1,022,474 $ 11,339,602 1,432,010 $ 16,620,992
Shares issued on reinvestment 197,909 2,174,642 186,978 2,165,859
Shares reacquired (1,368,490) (15,148,888) (969,412) (11,236,624)
- -----------------------------------------------------------------------------------------------------
Net Increase (Decrease) (148,107) $ (1,634,644) 649,576 $ 7,550,227
=====================================================================================================
Class B
Shares sold 624,103 $ 6,945,122 1,150,258 $ 13,342,895
Shares issued on reinvestment 156,566 1,722,038 144,806 1,678,632
Shares reacquired (1,122,358) (12,412,069) (554,946) (6,443,862)
- -----------------------------------------------------------------------------------------------------
Net Increase (Decrease) (341,689) $ (3,744,909) 740,118 $ 8,577,665
=====================================================================================================
Class L*
Shares sold 154,679 $ 1,716,686 142,970 $ 1,657,080
Shares issued on reinvestment 17,299 190,222 14,963 173,507
Shares reacquired (167,729) (1,844,450) (118,393) (1,382,791)
- -----------------------------------------------------------------------------------------------------
Net Increase 4,249 $ 62,458 39,540 $ 447,796
=====================================================================================================
Class Z+
Shares sold -- -- 81,175 $ 952,411
Shares issued on reinvestment -- -- 6,518 75,472
Shares reacquired -- -- (146,474) (1,678,122)
- -----------------------------------------------------------------------------------------------------
Net Decrease -- -- (58,781) $ (650,239)
=====================================================================================================
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
+ On January 4, 1999, Class Z shares were fully redeemed.
50
<PAGE>
Financial Highlights
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class A Class B Class L
------------------------ ------------------------ ---------------------------
GLOBAL PORTFOLIO 2000(1) 1999(1)(2) 2000(1) 1999(1)(2) 2000(1) 1999(1)(2)(3)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.16 $11.40 $11.15 $11.40 $11.14 $11.40
- -----------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(4) 0.21 0.07 0.10 0.00* 0.30 (0.02)
Net realized and unrealized gain (loss) 2.54 (0.26) 2.53 (0.24) 2.33 (0.23)
- -----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.75 (0.19) 2.63 (0.24) 2.63 (0.25)
- -----------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.20) (0.04) (0.09) -- (0.09) --
Net realized gains (0.04) (0.01) (0.04) (0.01) (0.04) (0.01)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.24) (0.05) (0.13) (0.01) (0.13) (0.01)
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.67 $11.16 $13.65 $11.15 $13.64 $11.14
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 24.57% (1.60)%++ 23.59% (2.16)%++ 23.61% (2.25)%++
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $18,133 $10,766 $14,392 $9,220 $758 $244
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.59%+ 1.35% 1.32%+ 1.35% 1.32%+
Net investment income (loss) 1.73 0.80+ 0.83 0.06+ 2.36 (0.12)+
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0% 0% 0%
=============================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from March 9, 1998 (inception date) to January 31, 1999.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) Net investment income (loss) per share includes short-term capital gain
distributions from Underlying Funds.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
51
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------
HIGH GROWTH PORTFOLIO 2000(1) 1999(1) 1998 1997(2)
=======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.86 $12.97 $12.41 $11.40
- -------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.54 0.09 0.11 0.20
Net realized and unrealized gain 2.29 2.36 0.91 1.05
- -------------------------------------------------------------------------------------------------------
Total Income From Operations 2.83 2.45 1.02 1.25
- -------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.53) (0.08) (0.13) (0.20)
Net realized gains (0.35) (0.48) (0.33) (0.04)
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.88) (0.56) (0.46) (0.24)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.81 $14.86 $12.97 $12.41
- -------------------------------------------------------------------------------------------------------
Total Return 18.97% 19.15% 8.25% 11.04%++
- -------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $441,050 $365,225 $259,212 $154,069
- -------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60% 0.60% 0.60%+
Net investment income 3.44 0.68 1.00 2.79+
- -------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 2% 21% 39% 0%
=======================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
52
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class B Shares
----------------------------------------------------------
HIGH GROWTH PORTFOLIO 2000(1) 1999(1) 1998 1997(2)
=======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.81 $12.95 $12.41 $11.40
- -------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(3) 0.41 (0.01) 0.03 0.08
Net realized and unrealized gain 2.26 2.35 0.89 1.04
- -------------------------------------------------------------------------------------------------------
Total Income From Operations 2.67 2.34 0.92 1.12
- -------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.39) -- (0.05) (0.07)
Net realized gains (0.35) (0.48) (0.33) (0.04)
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.48) (0.38) (0.11)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.74 $14.81 $12.95 $12.41
- -------------------------------------------------------------------------------------------------------
Total Return 18.01% 18.30% 7.44% 9.91%++
- -------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $375,224 $318,101 $230,142 $141,241
- -------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35% 1.35%+
Net investment income (loss) 2.65 (0.07) 0.25 2.04+
- -------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 2% 21% 39% 0%
=======================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income (loss) per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
53
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class L Shares
----------------------------------------------------------
HIGH GROWTH PORTFOLIO 2000(1) 1999(1)(2) 1998 1997(3)
=======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.81 $12.96 $12.42 $11.40
- -------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)(4) 0.43 (0.01) 0.03 0.08
Net realized and unrealized gain 2.25 2.34 0.89 1.05
- -------------------------------------------------------------------------------------------------------
Total Income From Operations 2.68 2.33 0.92 1.13
- -------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.39) -- (0.05) (0.07)
Net realized gains (0.35) (0.48) (0.33) (0.04)
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.48) (0.38) (0.11)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.75 $14.81 $12.96 $12.42
- -------------------------------------------------------------------------------------------------------
Total Return 18.08% 18.21% 7.44% 10.00%++
- -------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $45,979 $37,969 $27,845 $19,340
- -------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35% 1.35%+
Net investment income (loss) 2.74 (0.07) 0.25 2.04+
- -------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 2% 21% 39% 0%
=======================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(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.
54
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class Z Shares
---------------------------------------------
HIGH GROWTH PORTFOLIO 2000(1) 1999(1) 1998(1) 1997(2)
==========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.86 $12.97 $12.41 $12.24
- ------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.63 0.13 0.17 0.01
Net realized and unrealized gain 2.24 2.36 0.89 0.16
- ------------------------------------------------------------------------------------------
Total Income From Operations 2.87 2.49 1.06 0.17
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.57) (0.12) (0.17) -
Net realized gains (0.35) (0.48) (0.33) -
- ------------------------------------------------------------------------------------------
Total Distributions (0.92) (0.60) (0.50) -
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.81 $14.86 $12.97 $12.41
- ------------------------------------------------------------------------------------------
Total Return 19.26% 19.45% 8.58% 1.39%++
- ------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $10,038 $6,712 $3,037 $4
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.35% 0.35% 0.35% 0.35%+
Net investment income 4.00 0.95 1.25 3.33*
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 2% 21% 39% 0%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from January 17, 1997 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributionsfrom Underlying Funds.
* Not annualized.
++ 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:
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------
GROWTH PORTFOLIO 2000(1) 1999(1) 1998(1) 1997(2)
==========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.43 $12.99 $12.32 $11.40
- ------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.47 0.26 0.31 0.33
Net realized and unrealized gain 1.05 1.82 1.14 0.92
- ------------------------------------------------------------------------------------------
Total Income From Operations 1.52 2.08 1.45 1.25
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.49) (0.27) (0.32) (0.31)
Net realized gains (0.35) (0.37) (0.46) (0.02)
- ------------------------------------------------------------------------------------------
Total Distributions (0.84) (0.64) (0.78) (0.33)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Year $15.11 $14.43 $12.99 $12.32
- ------------------------------------------------------------------------------------------
Total Return 10.53% 16.20% 11.82% 11.08++
- ------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $432,580 $391,235 $279,842 $161,026
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60% 0.60% 0.60%+
Net investment income 3.23 1.93 2.77 4.79+
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 2% 10% 41% 0%
==========================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
56
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------
GROWTH PORTFOLIO 2000(1) 1999(1) 1998(1) 1997(2)
==========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.48 $13.00 $12.33 $11.40
- ------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.36 0.16 0.22 0.23
Net realized and unrealized gain 1.03 1.82 1.12 0.94
- ------------------------------------------------------------------------------------------
Total Income From Operations 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 (0.35) (0.37) (0.46) (0.02)
- ------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.50) (0.67) (0.24)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Year $15.18 $14.48 $13.00 $12.33
- ------------------------------------------------------------------------------------------
Total Return 9.61% 15.40% 10.93% 10.32%++
- ------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $486,164 $452,943 $343,474 $211,434
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35% 1.35%+
Net investment income 2.43 1.18 1.96 4.04+
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 2% 10% 41% 0%
==========================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributionsfrom 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:
<TABLE>
<CAPTION>
Class L Shares
---------------------------------------------
GROWTH PORTFOLIO 2000(1) 1999(1)(2) 1998 1997(3)
=============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.48 $13.00 $12.33 $11.40
- ---------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(4) 0.35 0.16 0.22 0.24
Net realized and unrealized gain 1.05 1.82 1.12 0.93
- ---------------------------------------------------------------------------------------------
Total Income From Operations 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 (0.35) (0.37) (0.46) (0.02)
- ---------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.50) (0.67) (0.24)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Year $15.19 $14.48 $13.00 $12.33
- ---------------------------------------------------------------------------------------------
Total Return 9.68% 15.40% 10.92% 10.32%++
- ---------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $57,596 $53,319 $42,983 $31,279
- ---------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35% 1.35%+
Net investment income 2.39 1.18 1.96 4.04+
- ---------------------------------------------------------------------------------------------
Portfolio Turnover Rate 2% 10% 41% 0%
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(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.
58
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class Z Shares
---------------------------------------------
GROWTH PORTFOLIO 2000(1) 1999(1) 1998(1) 1997(2)
==========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.41 $12.99 $12.32 $12.18
- ------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.55 0.30 0.73 0.02
Net realized and unrealized gain 1.00 1.81 0.75 0.12
- ------------------------------------------------------------------------------------------
Total Income From Operations 1.55 2.11 1.48 0.14
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.58) (0.32) (0.35) --
Net realized gains (0.35) (0.37) (0.46) --
- ------------------------------------------------------------------------------------------
Total Distributions (0.93) (0.69) (0.81) --
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Year $15.03 $14.41 $12.99 $12.32
- ------------------------------------------------------------------------------------------
Total Return 10.76% 16.47% 12.08% 1.15%++
- ------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $8,080 $6,190 $2,908 $6
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.35% 0.35% 0.35% 0.35%+
Net investment income 3.72 2.18 5.24 5.30*
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 2% 10% 41% 0%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from January 17, 1997 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributionsfrom Underlying Funds.
* Not annualized.
++ 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:
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------
BALANCED PORTFOLIO 2000(1) 1999(1) 1998 1997(2)
============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.95 $12.62 $12.14 $11.40
- --------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.45 0.42 0.58 0.45
Net realized and unrealized gain 0.10 0.73 0.80 0.74
- --------------------------------------------------------------------------------------------
Total Income From Operations 0.55 1.15 1.38 1.19
- --------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.46) (0.45) (0.54) (0.45)
Net realized gains (0.46) (0.37) (0.36) --
- --------------------------------------------------------------------------------------------
Total Distributions (0.92) (0.82) (0.90) (0.45)
- --------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.58 $12.95 $12.62 $12.14
- --------------------------------------------------------------------------------------------
Total Return 4.37% 9.33% 11.59% 10.64%++
- --------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $222,275 $227,674 $166,806 $90,938
- --------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60% 0.60% 0.60%+
Net investment income 3.54 3.24 4.79 4.88+
- --------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 10% 23% 0%
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
60
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------------------
BALANCED PORTFOLIO 2000(1) 1999(1) 1998 1997(2)
======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.95 $12.61 $12.14 $11.40
- ------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.35 0.32 0.48 0.37
Net realized and unrealized gain 0.09 0.74 0.80 0.74
- ------------------------------------------------------------------------------------------------------
Total Income From Operations 0.44 1.06 1.28 1.11
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.29) (0.35) (0.45) (0.37)
Net realized gains (0.46) (0.37) (0.36) --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.75) (0.72) (0.81) (0.37)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.64 $12.95 $12.61 $12.14
- ------------------------------------------------------------------------------------------------------
Total Return 3.48% 8.62% 10.67% 9.90%++
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $238,456 $247,733 $193,791 $111,918
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35% 1.35%+
Net investment income 2.75 2.50 3.96 4.14+
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 10% 23% 0%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
61
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class L Shares
---------------------------------------------------------
BALANCED PORTFOLIO 2000(1) 1999(1)(2) 1998 1997(3)
======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.94 $12.61 $12.14 $11.40
- ------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(4) 0.36 0.32 0.46 0.37
Net realized and unrealized gain 0.09 0.73 0.82 0.74
- ------------------------------------------------------------------------------------------------------
Total Income From Operations 0.45 1.05 1.28 1.11
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.29) (0.35) (0.45) (0.37)
Net realized gains (0.46) (0.37) (0.36) --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.75) (0.72) (0.81) (0.37)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.64 $12.94 $12.61 $12.14
- ------------------------------------------------------------------------------------------------------
Total Return 3.56% 8.53% 10.67% 9.90%++
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $33,989 $34,809 $27,473 $19,968
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.35% 1.35% 1.35%+
Net investment income 2.76 2.50 3.69 4.14+
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 10% 23% 0%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(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:
<TABLE>
<CAPTION>
Class Z Shares
---------------------------------------------------------
BALANCED PORTFOLIO 2000(1) 1999(1) 1998(1) 1997(2)
======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.95 $12.61 $12.13 $12.10
- ------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.45 0.45 1.11 0.00#
Net realized and unrealized gain 0.13 0.74 0.30 0.03
- ------------------------------------------------------------------------------------------------------
Total Income From Operations 0.58 1.19 1.41 0.03
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.52) (0.48) (0.57) --
Net realized gains (0.46) (0.37) (0.36) --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.98) (0.85) (0.93) --
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.55 $12.95 $12.61 $12.13
- ------------------------------------------------------------------------------------------------------
Total Return 4.58% 9.70% 11.82% 0.25%++
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $29,653 $36,726 $2,919 $2
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.35% 0.35% 0.35% 0.35%+
Net investment income 3.48 3.50 8.31 5.39*
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 10% 23% 0%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from January 17, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds. # Amount represents less than $0.01.
* Not annualized.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
63
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------
CONSERVATIVE PORTFOLIO 2000(1) 1999(1) 1998 1997(2)
===========================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.04 $12.17 $11.90 $11.46
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.56 0.58 0.73 0.53
Net realized and unrealized gain (loss) (0.33) 0.11 0.63 0.43
- -----------------------------------------------------------------------------------------------------------
Total Income From Operations 0.23 0.69 1.36 0.96
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.55) (0.58) (0.69) (0.52)
Net realized gains (0.25) (0.24) (0.40) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.80) (0.82) (1.09) (0.52)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.47 $12.04 $12.17 $11.90
- -----------------------------------------------------------------------------------------------------------
Total Return 1.96% 5.85% 11.70% 8.57%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $70,327 $71,583 $51,233 $30,478
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60% 0.60% 0.60%+
Net investment income 4.76 4.80 6.17 5.66+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 3% 5% 28% 0%
===========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
64
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------------------
CONSERVATIVE PORTFOLIO 2000(1) 1999(1) 1998 1997(2)
===========================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.02 $12.16 $11.89 $11.46
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.51 0.52 0.66 0.48
Net realized and unrealized gain (loss) (0.33) 0.10 0.64 0.42
- -----------------------------------------------------------------------------------------------------------
Total Income From Operations 0.18 0.62 1.30 0.90
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.45) (0.52) (0.63) (0.47)
Net realized gains (0.25) (0.24) (0.40) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.70) (0.76) (1.03) (0.47)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.50 $12.02 $12.16 $11.89
- -----------------------------------------------------------------------------------------------------------
Total Return 1.50% 5.22% 11.21% 8.03%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $64,910 $64,983 $48,584 $28,297
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.10% 1.09% 1.10% 1.10%+
Net investment income 4.29 4.31 5.67 5.16+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 3% 5% 28% 0%
===========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
65
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class L Shares
---------------------------------------------------------
CONSERVATIVE PORTFOLIO 2000(1) 1999(1)(2) 1998 1997(3)
===========================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.02 $12.16 $11.89 $11.46
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.51 0.53 0.69 0.48
Net realized and unrealized gain (loss) (0.32) 0.10 0.62 0.42
- -----------------------------------------------------------------------------------------------------------
Total Income From Operations 0.19 0.63 1.31 0.90
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.46) (0.53) (0.64) (0.47)
Net realized gains (0.25) (0.24) (0.40) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.71) (0.77) (1.04) (0.47)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.50 $12.02 $12.16 $11.89
- -----------------------------------------------------------------------------------------------------------
Total Return 1.59% 5.29% 11.25% 8.08%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $6,952 $6,899 $5,386 $4,129
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05% 1.05% 1.05% 1.05%+
Net investment income 4.34 4.32 5.72 5.21+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 3% 5% 28% 0%
===========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(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:
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------
INCOME PORTFOLIO 2000(1) 1999(1) 1998 1997(2)
===========================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.50 $11.75 $11.53 $11.46
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.64 0.69 0.76 0.63
Net realized and unrealized gain (loss) (0.76) (0.14) 0.52 0.07
- -----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.12) 0.55 1.28 0.70
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.63) (0.69) (0.77) (0.63)
Net realized gains (0.11) (0.11) (0.29) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.80) (1.06) (0.63)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.64 $11.50 $11.75 $11.53
- -----------------------------------------------------------------------------------------------------------
Total Return (1.04)% 4.88% 11.44% 6.39%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $32,111 $36,390 $29,574 $17,817
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.60% 0.60% 0.60% 0.60%+
Net investment income 5.78 5.95 6.62 6.32+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 0% 28% 0%
===========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
67
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------------------
INCOME PORTFOLIO 2000(1) 1999(1) 1998 1997(2)
===========================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.50 $11.76 $11.53 $11.46
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.59 0.63 0.70 0.58
Net realized and unrealized gain (loss) (0.75) (0.15) 0.52 0.07
- -----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.16) 0.48 1.22 0.65
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.58) (0.63) (0.70) (0.58)
Net realized gains (0.11) (0.11) (0.29) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.74) (0.99) (0.58)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.65 $11.50 $11.76 $11.53
- -----------------------------------------------------------------------------------------------------------
Total Return (1.47)% 4.25% 10.93% 5.89%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $28,302 $34,497 $26,563 $17,800
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.10% 1.10% 1.10% 1.10%+
Net investment income 5.27 5.45 6.12 5.82+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 0% 28% 0%
===========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from February 5, 1996 (inception date) to January 31, 1997.
(3) Net investment income per share includes short-term capital gain
distributions from Underlying Funds.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
68
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended January 31:
<TABLE>
<CAPTION>
Class L Shares
---------------------------------------------------------
INCOME PORTFOLIO 2000(1) 1999(1)(2) 1998 1997(3)
===========================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.50 $11.76 $11.53 $11.46
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.60 0.64 0.71 0.59
Net realized and unrealized gain (loss) (0.76) (0.15) 0.52 0.07
- -----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.16) 0.49 1.23 0.66
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.58) (0.64) (0.71) (0.59)
Net realized gains (0.11) (0.11) (0.29) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.75) (1.00) (0.59)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.65 $11.50 $11.76 $11.53
- -----------------------------------------------------------------------------------------------------------
Total Return (1.42)% 4.31% 10.98% 5.94%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $3,698 $3,945 $3,568 $2,113
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.05% 1.05% 1.05% 1.05%+
Net investment income 5.36 5.47 6.17 5.87+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 0% 28% 0%
===========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(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>
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Smith Barney Concert Allocation Series Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Global, High Growth, Growth, Balanced,
Conservative, and Income Portfolios ("Portfolios") of Smith Barney Concert
Allocation Series Inc. ("Fund") as of January 31, 2000, the related statements
of operations for the year then ended, and statements of changes in net assets
for each of the years in the two-year period then ended and financial highlights
for each of the years in the three-year period then ended and for the period
from February 5, 1996 (commencement of operations) to January 31, 1997, with
respect to the High Growth, Growth, Balanced, Conservative, and Income
Portfolios, and for the year then ended and for the period from March 9, 1998
(commencement of operations) to January 31, 1999, with respect to the Global
Portfolio. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 2000, by correspondence with the custodian. As to securities
purchased but not yet received, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
aforementioned portfolios of Smith Barney Concert Allocation Series Inc. as of
January 31, 2000, and the results of their operations for the year then ended,
the changes in their net assets and financial highlights for the periods
referred to above, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 8, 2000
70
<PAGE>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Portfolios hereby designate for the fiscal year
ended January 31, 2000:
. Percentages of ordinary dividends paid as qualifying for the corporate
dividends received deduction:
Global Portfolio 16.66%
High Growth Portfolio 12.23
Growth Portfolio 14.47
Balanced Portfolio 22.10
Conservative Portfolio 10.82
Income Portfolio 5.76
. Total long-term capital gain distributions paid:
Global Portfolio $ 93,715
High Growth Portfolio 16,369,918
Growth Portfolio 20,738,136
Balanced Portfolio 19,103,907
Conservative Portfolio 3,129,896
Income Portfolio 678,070
The following percentages of ordinary income dividends paid by the Portfolios
are derived from Federal obligations and may be exempt from taxation at the
state level:
Growth Portfolio 4.57%
Balanced Portfolio 7.45
Conservative Portfolio 6.03
Income Portfolio 6.35
71
<PAGE>
Directors Investment Manager
Walter E. Auch SSB CitiFund Management LLC
Martin Brody
H. John Ellis
Armon E. Kamesar Distributor
Stephen E. Kaufman CFBDS, Inc.
Heath B. McLendon, Chairman
Custodian PNC Bank, N.A.
Officers
Heath B. McLendon
Chief Executive Officer Transfer Agent
Smith Barney Private Trust Company
Lewis E. Daidone 388 Greenwich Street, 22(nd)Floor
Senior Vice President New York, New York 10013
and Treasurer
R. Jay Gerken Sub-Transfer Agent
Vice President and PFPC Global Fund Services
Investment Officer P.O. Box 9699
Providence, Rhode Island 02940-9699
Irving P. David
Controller
Smith Barney Concert
Christina T. Sydor Allocation Series Inc.
Secretary 388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
72
<PAGE>
This report is submitted for the general information of the shareholders of
Smith Barney Concert Allocation Series Inc. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
[LOGO OF SALOMON SMITH BARNEY]
Solomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Member NASD, SIPC
(C) 1999 Salomon Smith Barney Inc.
FD01278 3/00
<PAGE>
SMITH BARNEY
CONCERT ALLOCATION
SERIES INC.
- ------------------------------------------------------------------------
Investment Strategies
For Your Life
ANNUAL REPORT
January 31, 2000
Select High Growth Portfolio
Select Growth Portfolio
Select Balanced Portfolio
Select Conservative Portfolio
Select Income Portfolio
[LOGO]Smith Barney
Mutual Funds
- ----------------------------------------------------------------
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
Independent Auditors' Report.............................................. 37
Tax Information........................................................... 38
Directors and Officers.................................................... 39
</TABLE>
<PAGE>
Dear Shareholder:
[PHOTO]
Heath B. McLendon
CHAIRMAN
THE CONCERT ALLOCATION SERIES
We are pleased to present the annual report for the Smith Barney Concert
Allocation Series Inc. Select Portfolios ("Select Portfolios") for the year
ended January 31, 2000. The Select Portfolios seek to deliver strong returns
over the long-term while minimizing market volatility.
We believe 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. Moreover, the present market
euphoria has been marked by the performance dominance of technology stocks.
Our original mission in creating the Select Portfolios was to maximize potential
reward 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 Select Portfolios do not invest directly in stocks, bonds or other
securities. Instead, they invest in a group of carefully selected 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. We are pleased to report that the Select Portfolios covered
in this report generally delivered competitive returns during the reporting
period.
The chart at the top of page two shows the performance of the five Select
Portfolios for the period under review. The performance and current holdings of
each Portfolio are discussed in greater detail on the following pages.
1
<PAGE>
THE PERFORMANCE OF CONCERT ALLOCATION
SERIES SELECT PORTFOLIOS*
TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 2000
<TABLE>
<CAPTION>
PORTFOLIO TOTAL RETURN
- --------- ------------
<S> <C>
Select High Growth 18.46%
Select Growth 9.72
Select Balanced 4.69
Select Conservative 2.19
Select Income (0.75)
</TABLE>
* THE PERFORMANCE FIGURES SHOWN ABOVE REPRESENT PAST PERFORMANCE WHICH IS NOT
INDICATIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
THE U.S. MARKETS
The stock market continued its record performance for most of the reporting
period, supported by strong corporate earnings reports and an apparent economic
recovery overseas. For the year ended January 31, 2000, the Standard & Poor's
500 Composite Stock Index ("S&P 500"), a market capitalization-weighted measure
of 500 widely held common stocks, returned 10.34%. The Russell 2000
Index-Registered Trademark-, a broad-based index comprised of 2,000 of the
smallest stocks in the Russell 3000 Index-Registered Trademark- and a measure of
smaller-capitalization stocks, returned 17.74% for the period.
However, this continued growth led to concerns that inflationary pressures would
resurface. As an inflationary precaution, the Federal Reserve Board ("Fed")
raised interest rates three times in 1999 for a total of 75 basis points,
effectively "taking back" the interest rate cuts it implemented in the fall of
1998. (A basis point is .01% or one one-hundredth of a percent.) This change in
the Fed's monetary policy negatively impacted the bond market but did little to
derail the strong performance of many stocks. (A bond's value fluctuates, often
due to changing interest rates. When rates rise, the price of a bond typically
decreases and vice versa.) On February 2, 2000, the Fed raised interest rates
0.25% again to 5.75%, which had a negative impact on the stock market.
1999 was a difficult year for bonds because of a strong U.S. economy, tight
labor markets, the persistent fear of accelerating inflation and a more
restrictive Fed monetary policy. For the year ended January 31, 2000, the Lehman
Government/Corporate Bond Index, a combination of publicly issued intermediate-
and long-term U.S. government bonds and corporate bonds, generated a
disappointing return of negative 2.87%.
The performance of the stock markets during the period was largely propelled by
the performance of growth stocks. Value stocks have continued to underperform
the growth sector of the market. (Growth investors look for companies that they
believe are going to grow earnings quickly; value investors look for stocks that
are priced at less than their intrinsic value.) Despite this factor, the
performance of the value sector has continued to improve as investors have begun
to seek out high-quality companies with favorable valuations.
During the period, telecommunications and technology stocks posted exceptional
returns. The 57.24% return for the tech-laden NASDAQ Composite Index for the
year ended January 31, 2000, in our view, is a clear illustration of investors'
enthusiasm for these market sectors. (The NASDAQ Composite Index measures all
domestic and non-U.S. based securities, more than 4,700 companies, listed on the
NASDAQ Stock Market.) In our opinion, the dominance of these two sectors is
largely attributable to the ever-increasing use and influence of the Internet
both in business and in the home.
At the end of the period, the U.S. stock market, as measured by the Dow Jones
Industrial Average, began to decline primarily in response to the Fed's
tightening monetary policy. (The Dow Jones Industrial Average is a
price-weighted average of 30 actively traded stocks.)
2
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE BENEFITS OF LONG-TERM INVESTING S&P 500 SALOMON SMITH BARNEY WORLD MSCI EAFE INDEX
GROWTH OF $10,000 INVESTED IN THE COMPOSITE STOCK INDEX GOVERNMENT BOND INDEX
STANDARD & POOR'S 500 COMPOSITE STOCK INDEX,
SALOMON SMITH BARNEY WORLD GOVERNMENT BOND INDEX,
LEHMAN GOVERNMENT/CORPORATE BOND INDEX AND
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
JANUARY 1990 -- JANUARY 2000
(UNAUDITED)
<S> <C> <C> <C>
1/90 $10,000 $10,000 $10,000
1/91 $10,837 $10,934 $8,236
1/92 $13,292 $12,154 $8,290
1/93 $14,695 $13,361 $7,466
1/94 $16,584 $14,796 $10,765
1/95 $16,670 $14,431 $10,314
1/96 $23,108 $16,965 $12,013
1/97 $29,192 $18,424 $12,280
1/98 $37,045 $20,646 $13,563
1/99 $49,086 $23,900 $15,540
1/00 $54,157 $22,602 $18,530
<CAPTION>
THE BENEFITS OF LONG-TERM INVESTING LEHMAN GOVERNMENT/
GROWTH OF $10,000 INVESTED IN THE CORPORATE BOND INDEX
STANDARD & POOR'S 500 COMPOSITE STOCK INDEX,
SALOMON SMITH BARNEY WORLD GOVERNMENT BOND INDEX,
LEHMAN GOVERNMENT/CORPORATE BOND INDEX AND
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
JANUARY 1990 -- JANUARY 2000
(UNAUDITED)
<S> <C>
1/90 $10,000
1/91 $11,102
1/92 $12,560
1/93 $14,014
1/94 $15,458
1/95 $14,977
1/96 $17,631
1/97 $18,052
1/98 $20,069
1/99 $21,820
1/00 $21,193
</TABLE>
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX ("S&P 500") IS A
CAPITALIZATION-WEIGHTED INDEX OF 500 WIDELY HELD COMMON STOCKS. THE SALOMON
SMITH BARNEY WORLD GOVERNMENT BOND INDEX IS A MARKET-CAPITALIZATION-WEIGHTED
BENCHMARK THAT TRACKS THE PERFORMANCE OF THE GOVERNMENT BOND MARKETS OF 14
COUNTRIES. THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX IS A COMBINATION OF
PUBLICLY ISSUED INTERMEDIATE- AND LONG-TERM U.S. GOVERNMENT BONDS AND CORPORATE
BONDS. THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("MSCI EAFE")
CONSISTS OF THE EQUITY TOTAL RETURNS FOR EUROPE, AUSTRALIA AND THE FAR EAST.
THESE INDICES ARE UNMANAGED AND ARE NOT SUBJECT TO THE SAME MANAGEMENT AND
TRADING EXPENSES AS A MUTUAL FUND. AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
INTERNATIONAL STOCK MARKETS
For the year ended January 31, 2000, the Morgan Stanley Capital International
EAFE Index ("MSCI EAFE"), an index consisting of the equity total returns for
Europe, Australia and the Far East, posted a return of 19.25%.
International stock markets finished strong in 1999 with solid market
performance. Y2K concerns in global markets continued to ease and in fact no
significant Y2K-related problems were reported globally. This led to strong
performance in emerging market stocks and technology-related companies in mature
markets that had previously suffered from Y2K fears. In the United States,
despite the negative influences of a tight labor market and rising commodity
prices, inflation has remained under control due in large part to Fed vigilance.
As in the U.S, upward movement in many global markets was narrowly based in
technology and Internet-related companies. The strong price appreciation of many
of these companies raised valuations significantly, so there was little room for
earnings disappointments. After a very strong fourth quarter in 1999,
international stock markets succumbed to profit-taking in January.
3
<PAGE>
INTERNATIONAL BOND MARKETS
For the year ended January 31, 2000, the Salomon Smith Barney World Government
Bond Index, a market capitalization-weighted benchmark that tracks the
performance of the government bond markets of 14 countries, generated a return
of negative 5.44%.
Bond yields have moved higher worldwide in recent months, making 1999 the worst
year for bond returns since 1994. In local currency terms, returns are
significantly worse than they were in 1994. In our opinion, a growing global
economy and concerns over inflationary pressures have been responsible for the
overall rise in bond yields.
LOOKING FORWARD
In 1999, U.S. stock prices increased while bond prices declined. We think that
the short-term performance of the U.S. financial markets will be in large part
determined by the Fed's actions. Yet we are confident that the Fed will limit
future rate increases, because we believe inflation will probably remain low.(1)
We expect U.S. stocks should continue to perform well, powered by strong
corporate earnings increases.
Our outlook for international stock investing is brighter than it has been in
many years. In our opinion, three factors could cause non-U.S. markets to
perform better than the U.S. stock market in the coming months:
- International stocks are inexpensive compared with their U.S.
counterparts;
- Resurgent economic growth in many economies could lead to strong corporate
earnings gains at a time when U.S. corporate earnings may be pressured;
and
- Greater scope for corporate restructuring (either voluntarily or through
hostile acquisition) is now being realized overseas.
With respect to international bonds, we expect better performance from Europe
than from the U.S. over the near term because interest rates in the region are
discounting greater central bank rate hikes than in the U.S., yet both inflation
and economic growth are lower in Europe. One risk to our expectations is the
Japanese economy rebounding too strongly, which could lead to a drain of capital
from the U.S. and Europe back to Japan, resulting in a stronger yen and greater
upward pressure on commodity prices. Should this occur, the global economy would
become unbalanced and worldwide inflation might once again resurface.
Thank you for investing in the Smith Barney Concert Allocation Series Inc.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
CHAIRMAN
FEBRUARY 25, 2000
- ---------
(1) PLEASE NOTE THAT ON MARCH 21, 2000, THE FED RAISED INTEREST RATES 0.25% TO
6.00% AFTER THIS LETTER WAS WRITTEN.
4
<PAGE>
THE SELECT HIGH GROWTH PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
10% 90%
</TABLE>
THE SELECT HIGH GROWTH PORTFOLIO SEEKS CAPITAL APPRECIATION BY INVESTING A HIGH
PERCENTAGE OF ITS ASSETS IN AGGRESSIVE EQUITY FUNDS.
.................................................................
THE SELECT HIGH GROWTH PORTFOLIO
The Select High Growth Portfolio seeks capital appreciation. Among the
Portfolios of the Concert Allocation Series, the Select High Growth Portfolio
invests a large portion of its assets in aggressive equity mutual funds that
focus on smaller, more speculative companies as well as mid-sized (or larger)
companies with the potential for rapid growth. Moreover, a significant portion
of the Portfolio is invested in international or emerging markets funds in order
to achieve a greater level of diversification.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 10.34%
RUSSELL 2000 17.74%
MSCI EAFE 19.25%
SALOMON SMITH BARNEY
HIGH YIELD MARKET (0.60)%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 2000.
PORTFOLIO UPDATE
The Select High Growth Portfolio's ("Portfolio") shares returned 18.46% for the
year ended January 31, 2000. The chart that appears on page six compares the
Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio.
During the period, the U.S. economy continued its unprecedented growth despite
concerns regarding inflation, higher stock and bond market volatility and a
tightening monetary policy by the Federal Reserve Board ("Fed"). Although the
Fed raised interest rates three times in 1999, the stock market continued to
perform well, led primarily by technology stocks and select small-cap stocks.
In our opinion, the solid performance of the stock market during the period was
largely driven by technology stocks as evidenced by the remarkable 57.24% rise
in the tech-laden NASDAQ Composite Index for the year ended January 31, 2000.
(The NASDAQ Composite Index is a market value-weighted index that measures all
domestic and non-U.S. based securities, more than 4,700 companies listed on the
NASDAQ stock market.)
In addition, the performance of the growth sector continued to drive the
performance of the U.S. stock market. The value sector of the market has
continued to underperform the growth sector of the market. (Growth investors
look for companies that they believe are going to grow earnings quickly; value
investors look for stocks that are priced at less than their intrinsic value.)
Despite this style performance disparity, the performance of the value sector
has started to improve as many investors have begun to seek out high-quality
companies with favorable valuations.
The bond market did not perform well in 1999, largely due to rising interest
rates. However, the high yield bond market continued to outperform the other
segments of the U.S. bond market which helped the performance of the Portfolio.
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT HIGH GROWTH PORTFOLIO. THE ALLOCATION AND INVESTMENT
MIX OF THE PORTFOLIO MAY VARY DEPENDING UPON MARKET CONDITIONS, CASH FLOWS IN
AND OUT OF THE PORTFOLIO AND OTHER FACTORS. IN ADDITION, THE ALLOCATION AND
INVESTMENT RANGES OF THE PORTFOLIO MAY BE CHANGED FROM TIME TO TIME UPON THE
APPROVAL OF THE CONCERT ALLOCATION SERIES' BOARD OF DIRECTORS.
5
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT HIGH GROWTH PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, RUSSELL 2000 INDEX,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX AND SALOMON SMITH BARNEY HIGH
YIELD MARKET INDEX
...............................................................................
FEBRUARY 5, 1997 -- JANUARY 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>
2/5/97 $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
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
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 EAFE INDEX ("MSCI
EAFE") CONSISTS OF THE EQUITY TOTAL RETURNS FOR EUROPE, AUSTRALIA AND THE FAR
EAST. THE SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX COVERS A SIGNIFICANT
PORTION OF THE BELOW-INVESTMENT-GRADE U.S. CORPORATE BOND MARKET. THESE INDICES
ARE UNMANAGED AND ARE NOT SUBJECT TO THE SAME MANAGEMENT AND TRADING EXPENSES AS
A MUTUAL FUND. 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.
6
<PAGE>
HISTORICAL PERFORMANCE -- SELECT HIGH GROWTH PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------ INCOME CAPITAL GAIN
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
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 $0.14 $0.21
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT HIGH GROWTH PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended 1/31/00 18.46%
- -----------------------------------------------------------------------------------------------------------------------
2/5/97* through 1/31/00 15.96
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT HIGH GROWTH PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
2/5/97* through 1/31/00 55.63%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT HIGH GROWTH PORTFOLIO'S POLICY TO DISTRIBUTE DIVIDENDS AND
CAPITAL GAINS, IF ANY, ANNUALLY.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS.
7
<PAGE>
THE SELECT GROWTH PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
30% 70%
</TABLE>
THE SELECT GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING
PRIMARILY IN FUNDS CONTAINING THE ISSUES OF MORE ESTABLISHED COMPANIES.
.................................................................
THE SELECT GROWTH PORTFOLIO
The Select Growth Portfolio seeks long-term growth of capital. Among the
Portfolios of the Concert Allocation Series, the Select Growth Portfolio invests
the highest percentage of its assets in large-capitalization stock mutual funds
to provide growth. The Portfolio's equity allocation also includes funds that
invest in small- and mid-cap stocks and international securities. In addition, a
significant portion of the Select Growth Portfolio is also allocated to bonds,
to help reduce volatility.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 10.34%
RUSSELL 2000 17.74%
MSCI EAFE 19.25%
LEHMAN GOVERNMENT/
CORPORATE BOND (2.87)%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 2000.
PORTFOLIO UPDATE
The Select Growth Portfolio's ("Portfolio") shares returned 9.72% for the year
ended January 31, 2000. The chart that appears on page nine compares the
Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio.
While the positive economic and market conditions that fueled the U.S. stock
market's historic rise remained intact -- strong economic growth, low inflation,
robust consumer spending and rising demand for U.S. exports -- inflation became
a concern to many investors. These fears regarding inflation caused higher
levels of volatility in both the stock and bond markets. In a preemptive strike
against inflation, the Federal Reserve Board ("Fed") raised interest rates three
times in 1999, effectively "taking back" the rate cuts it implemented in 1998 in
response to a global economic crisis.
The Portfolio benefited from its holdings in international stocks, large cap
growth stocks and small cap growth stocks that generally did better than the
overall market. (Growth investing focuses on the stocks of corporations that are
exhibiting or are expected to exhibit faster-than-average growth within their
industry.) In addition, the Portfolio benefited from its underlying holdings in
the technology sector.
Although the value sector of the market did not perform as well as the growth
segment of the market, it has recently started to improve as investors began to
search for high-quality companies with favorable valuations. (Value investing
consists of identifying securities of companies that are believed to be
undervalued in the market.) In our view, many of these companies in the value
sector may be in a good position to capitalize on economic growth worldwide.
The monetary policy decisions of the Fed during the period negatively impacted
the performance of the bond market. Despite this factor, the bond funds in the
Portfolio, with their emphasis on credit quality in their respective asset
classes, should do well if rates stabilize or go down in the coming months. (Of
course, no guarantees can be made that our credit emphasis will be successful.)
- ------------------------------------------------------------------
THE TARGET ASSET ALLOCATION SET FORTH ABOVE REPRESENTS AN APPROXIMATE MIX OF
INVESTMENTS FOR THE SELECT GROWTH PORTFOLIO. THE ALLOCATION AND INVESTMENT MIX
OF THE PORTFOLIO MAY VARY DEPENDING UPON MARKET CONDITIONS, CASH FLOWS IN AND
OUT OF THE PORTFOLIO AND OTHER FACTORS. IN ADDITION, THE ALLOCATION AND
INVESTMENT RANGES OF THE PORTFOLIO MAY BE CHANGED FROM TIME TO TIME UPON THE
APPROVAL OF THE CONCERT ALLOCATION SERIES' BOARD OF DIRECTORS.
8
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT GROWTH PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, RUSSELL 2000 INDEX,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX AND LEHMAN GOVERNMENT/CORPORATE
BOND INDEX
...............................................................................
FEBRUARY 5, 1997 -- JANUARY 31, 2000 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT GROWTH STANDARD & POOR'S 500 RUSSELL 2000 INDEX MSCI EAFE INDEX LEHMAN GOVERNMENT/
PORTFOLIO COMPOSITE STOCK 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
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
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 EAFE INDEX ("MSCI
EAFE") IS A COMPOSITE INDEX THAT CONSISTS OF EQUITY TOTAL RETURNS FOR EUROPE,
AUSTRALIA AND THE FAR EAST. THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX IS A
COMBINATION OF PUBLICLY ISSUED INTERMEDIATE- AND LONG-TERM U.S. GOVERNMENT BONDS
AND CORPORATE BONDS. THESE INDICES ARE UNMANAGED AND ARE NOT SUBJECT TO THE SAME
MANAGEMENT AND TRADING EXPENSES AS A MUTUAL FUND. 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.
9
<PAGE>
HISTORICAL PERFORMANCE -- SELECT GROWTH PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------------- INCOME CAPITAL GAIN
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
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 $0.24 $0.29
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT GROWTH PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended 1/31/00 9.72%
- --------------------------------------------------------------------------------------------------------------------------
2/5/97* through 1/31/00 12.97
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT GROWTH PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
2/5/97* through 1/31/00 43.95%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ IT IS THE SELECT GROWTH PORTFOLIO'S POLICY TO DISTRIBUTE DIVIDENDS AND
CAPITAL GAINS, IF ANY, ANNUALLY.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
* COMMENCEMENT OF OPERATIONS.
10
<PAGE>
THE SELECT BALANCED PORTFOLIO
TARGET ASSET ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
50% 50%
</TABLE>
THE SELECT BALANCED PORTFOLIO SEEKS A BALANCE OF CAPITAL GROWTH AND INCOME BY
PLACING EQUAL EMPHASIS ON FUNDS INVESTING IN STOCKS AND BONDS.
.................................................................
THE SELECT BALANCED PORTFOLIO
The Select Balanced Portfolio seeks long-term growth of capital and income,
placing equal emphasis on current income and capital appreciation. The Select
Balanced Portfolio, as its name states, divides its assets roughly between
equity and fixed-income mutual funds. The equity funds are primarily
large-capitalization, dividend-paying stock funds. The fixed-income portion of
the Portfolio is mainly invested in funds that invest in U.S. government and
agency securities, as well as mortgage-backed securities.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 10.34%
LEHMAN GOVERNMENT/CORPORATE BOND (2.87)%
SALOMON SMITH BARNEY ONE-YEAR TREASURY BILL 4.11%
SALOMON SMITH BARNEY
WORLD GOVERNMENT BOND (5.44)%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 2000.
PORTFOLIO UPDATE
The Select Balanced Portfolio's ("Portfolio") shares returned 4.69% for the year
ended January 31, 2000. The chart that appears on page twelve compares the
Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio.
Economic conditions during the reporting period were characterized by strong
growth both in the United States and overseas and growing investor concerns
regarding inflation. In our opinion, these concerns contributed to higher
volatility in both the stock and bond markets. Although both growth and value
stocks yielded positive returns in the U.S. stock market, the growth sector
outperformed the value sector. (Value investing consists of identifying
securities of companies that are believed to be undervalued in the market.
Growth investing focuses on the stocks of corporations that are exhibiting, or
are expected to exhibit, faster-than-average growth within their industry.)
The Portfolio generated positive results from its underlying funds' exposure to
several industry sectors that benefited from the strength of the global economy.
In addition, Portfolio holdings in the technology sector should, in our view
continue to benefit from positive trends such as globalization, demographic
changes and the explosive growth of the Internet.
The bond market did not perform well during the period due to the interest rate
increases implemented by the Federal Reserve Board ("Fed") in 1999 and
consequently, the Portfolio's bond funds hurt its performance. Most recently, on
February 2, 2000, the Fed raised interest rates 0.25% to 5.75%. Despite the
decline in the bond market, the Portfolio's manager continued to maintain the
Portfolio's emphasis on strong credit quality. Although the Fed has pursued a
tightening stance so far in 2000, indicating that subsequent rate increases are
likely to follow, we think current inflation fears may be overblown.
- ------------------------------------------------------------------
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.
11
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT BALANCED PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, LEHMAN GOVERNMENT/CORPORATE
BOND INDEX,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX AND SALOMON SMITH BARNEY WORLD
GOVERNMENT BOND INDEX
...............................................................................
FEBRUARY 5, 1997 -- JANUARY 31, 2000 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT BALANCED STANDARD & POOR'S 500 LEHMAN GOVERNMENT/CORPORATE MSCI SALOMON SMITH BARNEY
PORTFOLIO COMPOSITE STOCK INDEX 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
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
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
GOVERNMENT/CORPORATE BOND INDEX IS A COMBINATION OF PUBLICLY ISSUED
INTERMEDIATE- AND LONG-TERM U.S. GOVERNMENT BONDS AND CORPORATE BONDS. THE
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("MSCI EAFE") IS A COMPOSITE
INDEX THAT CONSISTS OF EQUITY TOTAL RETURNS FOR EUROPE, AUSTRALIA AND THE FAR
EAST. THE SALOMON SMITH BARNEY WORLD GOVERNMENT BOND INDEX IS A
MARKET-CAPITALIZATION-WEIGHTED BENCHMARK THAT TRACKS THE PERFORMANCE OF THE
GOVERNMENT BOND MARKETS OF 14 COUNTRIES. THESE INDICES ARE UNMANAGED AND ARE NOT
SUBJECT TO THE SAME MANAGEMENT AND TRADING EXPENSES AS A MUTUAL FUND. 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.
12
<PAGE>
HISTORICAL PERFORMANCE -- SELECT BALANCED PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------ INCOME CAPITAL GAIN
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
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 $0.38 $0.40
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT BALANCED PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended 1/31/00 4.69%
- ------------------------------------------------------------------------------------------------------------------------
2/5/97* through 1/31/00 9.07
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT BALANCED PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
2/5/97* through 1/31/00 29.61%
- ------------------------------------------------------------------------------------------------------------------------
</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
<TABLE>
<CAPTION>
BOND FUNDS STOCK FUNDS
<S> <C>
70% 30%
</TABLE>
THE SELECT CONSERVATIVE PORTFOLIO PRIMARILY SEEKS INCOME AND, SECONDARILY,
LONG-TERM GROWTH OF CAPITAL BY INVESTING THE MAJORITY OF ITS ASSETS IN FUNDS
THAT INVEST IN BONDS.
.................................................................
THE SELECT CONSERVATIVE PORTFOLIO
The Select Conservative Portfolio primarily seeks income and, secondarily,
long-term capital growth. Among the Portfolios of the Concert Allocation Series,
the Select Conservative Portfolio consists primarily of taxable fixed-income
funds, with a portion invested in stock funds that invest primarily in
large-capitalization U.S. stocks.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 10.34%
Lehman Government/Corporate Bond (2.87)%
Salomon Smith Barney
High Yield Market (0.60)%
Salomon Smith Barney
One-Year Treasury Bill 4.11%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 2000.
PORTFOLIO UPDATE
The Select Conservative Portfolio's ("Portfolio") shares returned 2.19% for the
year ended January 31, 2000. The chart that appears on page fifteen compares the
Portfolio's performance to broad-based indices that track four of the asset
classes represented in the Portfolio.
In keeping with its investment mandate, the Select Conservative 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.
During the period, the bond market suffered one of its worst years on record and
consequently, the Portfolio's bond funds hurt its performance. The robust growth
of the U.S. economy led to rising concerns about inflation. To counter any
possible effects of inflation, the Federal Reserve Board ("Fed") raised interest
rates three times in 1999, adopting a more restrictive monetary policy. The
Fed's actions in turn led to increased volatility in both the stock and bond
markets. However, the stock market continued to perform well, led by strong
corporate earnings growth, increases in labor productivity and seemingly
limitless investor enthusiasm for select technology stocks.
The disparity between U.S. Treasury securities and other types of bonds widened
sharply during the period. The high yield bond market continued to outperform
other segments of the U.S. bond market, with positive performance concentrated
among the better quality issues in the middle to upper quality segments (i.e.,
B/B and BB/Ba rated issues).
We remain positive on the total return prospects of the bond market at current
valuation levels, especially given the continued health of the economy. Looking
ahead, we anticipate a continuation of solid economic growth with only a modest
upward bias to inflation.
The Portfolio's stock holdings largely benefited from the recovery of the
economies overseas and the continued strength of U.S. stocks.
- ------------------------------------------------------------------
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.
14
<PAGE>
GROWTH OF $10,000 INVESTED IN THE SELECT CONSERVATIVE PORTFOLIO VS.
THE STANDARD & POOR'S 500 COMPOSITE STOCK INDEX, LEHMAN GOVERNMENT/CORPORATE
BOND INDEX, SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX AND SALOMON SMITH
BARNEY ONE-YEAR TREASURY BILL INDEX
...............................................................................
FEBRUARY 5, 1997 -- JANUARY 31, 2000 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT STANDARD & POOR'S 500 LEHMAN GOVERNMENT/ SALOMON SMITH BARNEY HIGH
CONSERVATIVE PORTFOLIO COMPOSITE STOCK INDEX CORPORATE BOND INDEX YIELD MARKET INDEX
<S> <C> <C> <C> <C>
2/5/97 $10,000 $10,000 $10,000 $10,000
7/97 $10,930 $12,254 $10,575 $10,757
1/98 $11,300 $12,689 $11,117 $11,487
7/98 $11,646 $14,618 $11,428 $11,906
1/99 $11,984 $16,814 $12,086 $11,812
7/99 $12,129 $17,571 $11,694 $11,870
1/00 $12,246 $18,551 $11,738 $11,743
<CAPTION>
SALOMON SMITH BARNEY ONE-YEAR
TREASURY BILL INDEX
<S> <C>
2/5/97 $10,000
7/97 $10,322
1/98 $10,627
7/98 $10,910
1/99 $11,222
7/99 $11,481
1/00 $11,683
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
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
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.
15
<PAGE>
HISTORICAL PERFORMANCE -- SELECT CONSERVATIVE PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------ INCOME CAPITAL GAIN
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
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 $0.44 $0.23
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT CONSERVATIVE PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended 1/31/00 2.19%
- ------------------------------------------------------------------------------------------------------------------------
2/5/97* through 1/31/00 7.02
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT CONSERVATIVE PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
2/5/97* through 1/31/00 22.46%
- ------------------------------------------------------------------------------------------------------------------------
</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
<TABLE>
<CAPTION>
STOCK FUNDS BOND FUNDS
<S> <C>
10% 90%
</TABLE>
THE SELECT INCOME PORTFOLIO SEEKS HIGH CURRENT INCOME BY INVESTING PRIMARILY IN
BOND FUNDS.
.................................................................
THE SELECT INCOME PORTFOLIO
The Select Income Portfolio seeks high current income. Among the Portfolios of
the Concert Allocation Series, the Select Income Portfolio allocates most of its
assets to taxable fixed-income funds designed to generate a high level of income
consistent with relative stability of principal. A small portion of the
Portfolio is invested in equity funds that invest in large-capitalization U.S.
stocks.
INDEX COMPARISON*
<TABLE>
<S> <C>
S&P 500 10.34%
Lehman Government/
Corporate Bond (2.87)%
Salomon Smith Barney
High Yield Market (0.60)%
Salomon Smith Barney
One-Year Treasury Bill 4.11%
</TABLE>
.................................................................
*THE CHART ABOVE REPRESENTS TOTAL RETURNS FOR THE YEAR ENDED JANUARY 31, 2000.
PORTFOLIO UPDATE
The Select Income Portfolio's ("Portfolio") shares returned a negative 0.75% for
the year ended January 31, 2000. The chart that appears on page eighteen
compares the Portfolio's performance to broad-based indices that track four of
the asset classes represented in the Portfolio.
The majority of 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, the bond markets suffered a decline due to concerns regarding
inflation which led the Federal Reserve Board to raise interest rates three
times in 1999, effectively reversing the cuts it implemented in 1998 following
the global economic crisis. The Portfolio's bond funds had a negative impact on
its performance during the period. On the other hand, the stock portion of the
Portfolio continued to benefit from strong corporate earnings growth and the
recovery of the overseas markets.
- ------------------------------------------------------------------
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 GOVERNMENT/CORPORATE
BOND INDEX,
SALOMON SMITH BARNEY HIGH YIELD MARKET INDEX AND SALOMON SMITH BARNEY ONE-YEAR
TREASURY BILL INDEX
...............................................................................
FEBRUARY 5, 1997 -- JANUARY 31, 2000 (UNAUDITED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SELECT STANDARD & POOR'S 500 LEHMAN GOVERNMENT/CORPORATE SALOMON SMITH BARNEY SALOMON SMITH BARNEY ONE-YEAR
INCOME PORTFOLIO COMPOSITE STOCK INDEX BOND INDEX HIGH YIELD 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
</TABLE>
THE CHART ABOVE REPRESENTS A HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED ON
FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS), ASSUMING REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY, AT NET ASSET VALUE THROUGH JANUARY 31,
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
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.
18
<PAGE>
HISTORICAL PERFORMANCE -- SELECT INCOME PORTFOLIO+
...............................................................................
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------------ INCOME CAPITAL GAIN
YEAR ENDED BEGINNING OF YEAR END OF YEAR DIVIDENDS DISTRIBUTIONS TOTAL RETURNS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
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 $0.48 $0.12
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- SELECT INCOME PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended 1/31/00 (0.75)%
- ------------------------------------------------------------------------------------------------------------------------------
2/5/97* through 1/31/00 5.66
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN -- SELECT INCOME PORTFOLIO
...............................................................................
<TABLE>
<S> <C> <C> <C> <C> <C>
2/5/97* through 1/31/00 17.86%
- ------------------------------------------------------------------------------------------------------------------------------
</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 JANUARY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
----------------------------------------------------------------------------
UNDERLYING FUNDS -- 98.9%
182,942 Smith Barney Aggressive Growth Fund $ 16,025,748
455,081 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 7,308,614
442,598 Smith Barney Funds, Inc. - Large Cap Value Fund 7,444,511
1,404,709 Smith Barney Income Funds - Smith Barney High
Income Fund 14,089,237
803,244 Smith Barney Investment Funds, Inc. - Concert
Peachtree Growth Fund 14,546,759
675,415 Smith Barney Investment Funds, Inc. - Smith
Barney Contrarian Fund 7,328,255
1,080,326 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value Fund 14,454,772
594,415 Smith Barney Investment Trust - Smith Barney
Large Capitalization Growth Fund 14,682,058
372,959 Smith Barney Investment Trust - Smith Barney Mid
Cap Blend Fund 7,283,903
2,080,337 Smith Barney Small Cap Blend Fund, Inc. 28,313,392
484,210 Smith Barney World Funds, Inc. - International
Equity Portfolio 14,753,881
----------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $127,372,744) 146,231,130
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.1%
$1,605,000 Morgan Stanley Dean Witter & Co., 5.680% due
2/1/00; Proceeds at maturity -- $1,605,253;
(Fully collateralized by U.S. Treasury Notes,
5.500% to 7.000% due 7/15/00 to 5/15/09;
Market value -- $1,646,659) (Cost -- $1,605,000) 1,605,000
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $128,977,744*) $147,836,130
----------------------------------------------------------------------------
</TABLE>
* 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 JANUARY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
----------------------------------------------------------------------------
UNDERLYING FUNDS -- 99.0%
153,113 Smith Barney Aggressive Growth Fund $ 13,412,711
1,424,636 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 22,879,668
1,375,178 Smith Barney Funds, Inc. - Large Cap Value Fund 23,130,507
2,204,338 Smith Barney Income Funds - Smith Barney High
Income Fund 22,109,514
1,252,031 Smith Barney Investment Funds, Inc. - Concert
Peachtree Growth Fund 22,674,296
1,053,142 Smith Barney Investment Funds, Inc. - Smith
Barney Contrarian Fund 11,426,600
2,618,516 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 23,330,982
853,834 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value Fund 11,424,302
2,098,264 Smith Barney Investment Funds, Inc. - Smith
Barney Investment Grade Bond Fund 23,437,620
472,697 Smith Barney Investment Trust - Smith Barney
Large Capitalization Growth Fund 11,675,622
618,902 Smith Barney Investment Trust - Smith Barney Mid
Cap Blend Fund 12,087,172
828,193 Smith Barney Small Cap Blend Fund, Inc. 11,271,710
810,454 Smith Barney World Funds, Inc. - International
Equity Portfolio 24,694,545
----------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $219,555,017) 233,555,249
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.0%
$2,472,000 Morgan Stanley Dean Witter & Co., 5.680% due
2/1/00; Proceeds at maturity -- $2,472,390;
(Fully collaterlized by U.S. Treasury Notes,
5.500% to 7.000% due 5/15/09 to 7/15/08;
Market value -- $2,536,163) (Cost -- $2,472,000) 2,472,000
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $222,027,017*) $236,027,249
----------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
THE SELECT BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS JANUARY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
----------------------------------------------------------------------------
UNDERLYING FUNDS -- 99.0%
1,238,496 Smith Barney Appreciation Fund Inc. $ 18,763,222
586,518 Smith Barney Equity Funds - Smith Barney Large
Cap Blend Fund 9,419,485
1,408,766 Smith Barney Fundamental Value Fund Inc. 19,173,314
557,864 Smith Barney Funds, Inc. - Large Cap Value Fund 9,383,273
2,191,907 Smith Barney Funds, Inc. - Short-Term High Grade
Bond Fund 8,658,035
1,319,324 Smith Barney Income Funds - Smith Barney
Convertible Fund 19,143,392
3,957,468 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 28,652,069
1,062,269 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 18,812,789
2,143,879 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 19,101,968
1,611,127 Smith Barney Managed Governments Funds Inc. 19,043,533
903,856 Smith Barney World Funds, Inc. - Global
Government Bond Portfolio 9,499,528
375,246 Smith Barney World Funds, Inc. - International
Equity Portfolio 11,433,768
----------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $196,583,830) 191,084,376
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.0%
$1,936,000 Morgan Stanley Dean Witter & Co., 5.680% due
2/1/00; Proceeds at maturity -- $1,936,305;
(Fully collaterlized by U.S. Treasury Notes,
5.500% to 7.000% due 5/15/09 to 7/15/08;
Market value -- $1,986,250) (Cost -- $1,936,000) 1,936,000
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $198,519,830*) $193,020,376
----------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
THE SELECT CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS JANUARY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
---------------------------------------------------------------------------
UNDERLYING FUNDS -- 99.6%
368,881 Smith Barney Appreciation Fund Inc. $ 5,588,553
212,107 Smith Barney Fundamental Value Fund Inc. 2,886,771
649,697 Smith Barney Funds, Inc. - Short-Term High Grade
Bond Fund 2,566,302
385,875 Smith Barney Income Funds - Smith Barney
Convertible Fund 5,599,040
1,563,643 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 11,320,782
571,335 Smith Barney Income Funds - Smith Barney High
Income Fund 5,730,491
166,208 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 2,943,544
632,766 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 5,637,941
211,674 Smith Barney Investment Funds, Inc. - Smith
Barney Hansberger Global Value Fund 2,832,200
714,730 Smith Barney Managed Governments Fund Inc. 8,448,113
266,101 Smith Barney World Funds, Inc. - Global
Government Bond Portfolio 2,796,726
---------------------------------------------------------------------------
TOTAL UNDERLYING FUNDS (Cost -- $59,253,631) 56,350,463
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
---------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.4%
$238,000 Morgan Stanley Dean Witter & Co., 5.680% due
2/1/00; Proceeds at maturity -- $238,038;
(Fully collateralized by U.S. Treasury Notes,
5.500% to 7.000% due 5/15/09 to 7/15/09;
Market value -- $244,177) (Cost -- $238,000) 238,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $59,491,631*) $56,588,463
---------------------------------------------------------------------------
</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 JANUARY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
-------------------------------------------------------------------------
UNDERLYING FUNDS -- 100%
77,813 Smith Barney Appreciation Fund Inc. $ 1,178,859
569,432 Smith Barney Funds, Inc. - Short-Term High Grade
Bond Fund 2,249,256
80,363 Smith Barney Income Funds - Smith Barney
Convertible Fund 1,166,069
653,122 Smith Barney Income Funds - Smith Barney
Diversified Strategic Income Fund 4,728,606
472,111 Smith Barney Income Funds - Smith Barney High
Income Fund 4,735,275
66,714 Smith Barney Income Funds - Smith Barney Premium
Total Return Fund 1,181,513
396,800 Smith Barney Investment Funds, Inc. - Smith
Barney Government Securities Fund 3,535,492
398,570 Smith Barney Managed Governments Fund Inc. 4,711,092
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $25,284,582*) $23,486,162
-------------------------------------------------------------------------
</TABLE>
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES JANUARY 31, 2000
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at cost $128,977,744 $222,027,017 $198,519,830 $59,491,631 $25,284,582
- ------------------------------------------------------------------------------------------------------------
Investments, at value $147,836,130 $236,027,249 $193,020,376 $56,588,463 $23,486,162
Cash 2,499 94 840 -- --
Receivable from manager -- -- -- -- 4,693
Receivable from Fund shares sold 337,722 314,665 154,480 10,743 73,065
Dividends and interest receivable 253 390 18,284 5,368 5,068
- ------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 148,176,604 236,342,398 193,193,980 56,604,574 23,568,988
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares purchased 238 62,571 36,367 108,856 5,976
Payable to bank -- -- -- 44 285,920
Accrued expenses 143,215 252,307 235,638 81,949 --
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 143,453 314,878 272,005 190,849 291,896
- ------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $148,033,151 $236,027,520 $192,921,975 $56,413,725 $23,277,092
- ------------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 9,763 $ 17,108 $ 15,905 $ 4,878 $ 2,082
Capital paid in excess of par value 120,435,386 206,632,839 183,318,958 55,604,174 23,618,930
Undistributed net investment income 4,616,597 7,137,325 6,669,804 2,633,026 1,407,820
Accumulated net realized gain from
security transactions 4,113,019 8,240,016 8,416,762 1,074,815 46,680
Net unrealized appreciation
(depreciation)
of investments 18,858,386 14,000,232 (5,499,454) (2,903,168) (1,798,420)
- ------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $148,033,151 $236,027,520 $192,921,975 $56,413,725 $23,277,092
- ------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING 9,763,335 17,107,763 15,904,749 4,877,849 2,082,429
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE $15.16 $13.80 $12.13 $11.57 $11.18
- ------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
STATEMENTS OF OPERATIONS 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
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income distributions from Underlying Funds $ 1,529,692 $ 4,883,193 $ 6,649,172 $ 2,651,486 $ 1,447,264
Short-term capital gains from Underlying Funds 3,388,220 2,786,395 533,145 133,474 31,483
Interest 75,943 119,117 84,959 26,541 10,540
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 4,993,855 7,788,705 7,267,276 2,811,501 1,489,287
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Other expenses 376,639 650,124 596,867 177,812 81,355
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 376,639 650,124 596,867 177,812 81,355
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 4,617,216 7,138,581 6,670,409 2,633,689 1,407,932
- ---------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain (Loss) From:
Security transactions - - - (16,594) (189,708)
Capital gain distributions from Underlying Funds 4,178,642 8,297,200 8,432,422 1,091,920 308,722
- ---------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN 4,178,642 8,297,200 8,432,422 1,075,326 119,014
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of year 7,984,603 10,341,892 1,771,658 (185,729) (84,778)
End of year 18,858,386 14,000,232 (5,499,454) (2,903,168) (1,798,420)
- ---------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 10,873,783 3,658,340 (7,271,112) (2,717,439) (1,713,642)
- ---------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 15,052,425 11,955,540 1,161,310 (1,642,113) (1,594,628)
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $19,669,641 $19,094,121 $ 7,831,719 $ 991,576 $ (186,696)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS 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
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
OPERATIONS:
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.
27
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED JANUARY 31,
1999
...............................................................................
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
HIGH GROWTH GROWTH BALANCED CONSERVATIVE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 513,295 $ 1,844,604 $ 3,039,216 $ 1,172,731 $ 681,738
Net realized gain 1,306,932 2,407,077 3,404,973 549,268 59,947
Increase in net unrealized
appreciation (depreciation) 7,876,219 10,166,260 2,042,065 (159,130) (116,288)
- ----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS 9,696,446 14,417,941 8,486,254 1,562,869 625,397
- ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (259,791) (689,890) (1,058,984) (290,574) (124,156)
Net realized gains (157,661) (786,615) (1,074,913) (169,756) (48,840)
- ----------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (417,452) (1,476,505) (2,133,897) (460,330) (172,996)
- ----------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 40,984,630 71,729,729 82,964,105 28,219,439 19,481,318
Net asset value of shares issued for
reinvestment of dividends 417,452 1,476,505 2,133,897 460,330 172,996
Cost of shares reacquired (1,971,681) (2,200,244) (2,725,679) (1,664,789) (3,949,914)
- ----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 39,430,401 71,005,990 82,372,323 27,014,980 15,704,400
- ----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 48,709,395 83,947,426 88,724,680 28,117,519 16,156,801
NET ASSETS:
Beginning of year 27,070,740 45,981,549 45,070,838 10,697,736 4,440,255
- ----------------------------------------------------------------------------------------------------------------
END OF YEAR* $75,780,135 $129,928,975 $133,795,518 $38,815,255 $20,597,056
- ----------------------------------------------------------------------------------------------------------------
*Includes undistributed net
investment income of: $513,147 $1,844,375 $3,039,216 $1,172,731 $681,738
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
...............................................................................
1. SIGNIFICANT ACCOUNTING POLICIES
The Select High Growth, Select Growth, Select Balanced, Select Conservative and
Select Income Portfolios ("Portfolios") are separate investment portfolios of
the Smith Barney Concert Allocation Series Inc. ("Fund"). The Fund, a Maryland
corporation, is registered under the Investment 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 TRANACTIONS
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.
Effective October 1999, Smith Barney Private Trust Company ("Private Trust"),
another subsidiary of Citigroup, became the Fund's transfer agent. Private Trust
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. During the period October 1,
1999 through January 31, 2000, each Portfolio, paid transfer agent fees of
$1,667 to Private Trust.
All officers and one director of the Fund are employees of Salomon Smith Barney
Inc.
3. INVESTMENTS
During the year ended January 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
<S> <C> <C> <C>
- --------------------------------------------------------------------
Select High Growth $ 59,878,503 $ --
Select Growth 100,491,840 --
Select Balanced 66,523,621 --
Select Conservative 20,940,131 300,000
Select Income 7,482,909 2,436,756
- --------------------------------------------------------------------
</TABLE>
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
...............................................................................
At January 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 $22,260,017 $(3,401,631) $18,858,386
Select Growth 25,671,611 (11,671,379) 14,000,232
Select Balanced 6,930,751 (12,430,205) (5,499,454)
Select Conservative 1,026,045 (3,929,213) (2,903,168)
Select Income 19,185 (1,817,605) (1,798,420)
- -----------------------------------------------------------------------------------
</TABLE>
4. REPURCHASE AGREEMENTS
The Portfolios purchase (and their custodian takes possession of ) U.S.
government securities from banks and security dealers subject to agreements to
resell the securities to sellers at a future date (generally, the next business
day) at an agreed-upon higher repurchase price. The Portfolios require continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
5. CAPITAL SHARES
At January 31, 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>
YEAR ENDED YEAR ENDED
JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
- ---------------------------------------------------------------------------
SELECT HIGH GROWTH PORTFOLIO
Shares sold 4,226,369 3,511,232
Shares issued on reinvestment 131,620 35,109
Shares reacquired (414,964) (173,302)
- ---------------------------------------------------------------------------
NET INCREASE 3,943,025 3,373,039
- ---------------------------------------------------------------------------
SELECT GROWTH PORTFOLIO
Shares sold 7,386,057 6,086,424
Shares issued on reinvestment 328,523 124,285
Shares reacquired (703,458) (191,489)
- ---------------------------------------------------------------------------
NET INCREASE 7,011,122 6,019,220
- ---------------------------------------------------------------------------
SELECT BALANCED PORTFOLIO
Shares sold 5,623,593 7,161,383
Shares issued on reinvestment 544,349 185,234
Shares reacquired (1,372,026) (234,832)
- ---------------------------------------------------------------------------
NET INCREASE 4,795,916 7,111,785
- ---------------------------------------------------------------------------
</TABLE>
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
...............................................................................
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
- ---------------------------------------------------------------------------
SELECT CONSERVATIVE PORTFOLIO
Shares sold 2,128,330 2,472,258
Shares issued on reinvestment 150,320 40,441
Shares reacquired (714,607) (145,515)
- ---------------------------------------------------------------------------
NET INCREASE 1,564,043 2,367,184
- ---------------------------------------------------------------------------
SELECT INCOME PORTFOLIO
Shares sold 986,630 1,703,327
Shares issued on reinvestment 73,213 15,162
Shares reacquired (744,458) (344,589)
- ---------------------------------------------------------------------------
NET INCREASE 315,385 1,373,900
- ---------------------------------------------------------------------------
</TABLE>
31
<PAGE>
FINANCIAL HIGHLIGHTS
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
SELECT HIGH GROWTH PORTFOLIO 2000(1) 1999(1) 1998(1)(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $13.02 $11.06 $10.00
- ------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.60 0.13 0.26
Net realized and unrealized
gain 1.78 1.94 0.80
- ------------------------------------------------------------------------
Total Income From Operations 2.38 2.07 1.06
- ------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.07) (0.07) --
Net realized gains (0.17) (0.04) --
- ------------------------------------------------------------------------
Total Distributions (0.24) (0.11) --
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $15.16 $13.02 $11.06
- ------------------------------------------------------------------------
TOTAL RETURN 18.46% 18.79% 10.60%++
- ------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $148,033 $75,780 $27,071
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35% 0.35%+
Net investment income 4.30 1.08 2.41+
- ------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 0% 19% 43%
- ------------------------------------------------------------------------
</TABLE>
(1) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(3) NET INVESTMENT INCOME PER SHARE INCLUDES SHORT-TERM CAPITAL GAIN
DISTRIBUTIONS FROM UNDERLYING FUNDS.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
32
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
SELECT GROWTH PORTFOLIO 2000(1) 1999(1) 1998(1)(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $12.87 $11.28 $10.00
- ------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.51 0.27 0.44
Net realized and unrealized
gain 0.72 1.55 0.84
- ------------------------------------------------------------------------
Total Income From Operations 1.23 1.82 1.28
- ------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.13) (0.11) --
Net realized gains (0.17) (0.12) --
- ------------------------------------------------------------------------
Total Distributions (0.30) (0.23) --
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.80 $12.87 $11.28
- ------------------------------------------------------------------------
TOTAL RETURN 9.72% 16.31% 12.80%++
- ------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $236,028 $129,929 $45,982
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35% 0.35%+
Net investment income 3.85 2.29 4.11+
- ------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 0% 10% 43%
- ------------------------------------------------------------------------
</TABLE>
(1) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(3) NET INVESTMENT INCOME PER SHARE INCLUDES SHORT-TERM CAPITAL GAIN
DISTRIBUTIONS FROM UNDERLYING FUNDS.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
33
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
SELECT BALANCED PORTFOLIO 2000(1) 1999(1) 1998(1)(2)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $12.04 $11.28 $10.00
- ---------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.48 0.42 0.64
Net realized and unrealized
gain 0.07 0.66 0.64
- ---------------------------------------------------------------------------
Total Income From Operations 0.55 1.08 1.28
- ---------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.22) (0.16) --
Net realized gains (0.24) (0.16) --
- ---------------------------------------------------------------------------
Total Distributions (0.46) (0.32) --
- ---------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.13 $12.04 $11.28
- ---------------------------------------------------------------------------
TOTAL RETURN 4.69% 9.76% 12.80%++
- ---------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $192,922 $133,796 $45,071
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35% 0.35%+
Net investment income 3.92 3.64 5.89+
- ---------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 0% 7% 19%
- ---------------------------------------------------------------------------
</TABLE>
(1) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(3) NET INVESTMENT INCOME PER SHARE INCLUDES SHORT-TERM CAPITAL GAIN
DISTRIBUTIONS FROM UNDERLYING FUNDS.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
34
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
SELECT CONSERVATIVE PORTFOLIO 2000(1) 1999(1) 1998(1)(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $11.71 $11.30 $10.00
- ------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income(3) 0.61 0.60 0.78
Net realized and unrealized
gain (loss) (0.35) 0.08 0.52
- ------------------------------------------------------------------------
Total Income From Operations 0.26 0.68 1.30
- ------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.27) (0.17) --
Net realized gains (0.13) (0.10) --
- ------------------------------------------------------------------------
Total Distributions (0.40) (0.27) --
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.57 $11.71 $11.30
- ------------------------------------------------------------------------
TOTAL RETURN 2.19% 6.05% 13.00%++
- ------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $56,414 $38,815 $10,698
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35% 0.35%+
Net investment income 5.20 5.27 7.24+
- ------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 1% 3% 35%
- ------------------------------------------------------------------------
</TABLE>
(1) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(3) NET INVESTMENT INCOME PER SHARE INCLUDES SHORT-TERM CAPITAL GAIN
DISTRIBUTIONS FROM UNDERLYING FUNDS.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
35
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
...............................................................................
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED JANUARY 31:
<TABLE>
<CAPTION>
SELECT INCOME PORTFOLIO 2000(1) 1999(1) 1998(1)(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
YEAR $11.66 $11.29 $10.00
- ------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3) 0.70 0.74 0.80
Net realized and unrealized
gain (loss) (0.79) (0.16) 0.49
- ------------------------------------------------------------------------
Total Income (Loss) From
Operations (0.09) 0.58 1.29
- ------------------------------------------------------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.33) (0.15) --
Net realized gains (0.06) (0.06) --
- ------------------------------------------------------------------------
Total Distributions (0.39) (0.21) --
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.18 $11.66 $11.29
- ------------------------------------------------------------------------
TOTAL RETURN (0.75)% 5.18% 12.90%++
- ------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S) $23,277 $20,597 $4,440
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 0.35% 0.35%+
Net investment income 6.08 6.45 7.36+
- ------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 11% 14% 11%
- ------------------------------------------------------------------------
</TABLE>
(1) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD.
(2) FOR THE PERIOD FROM FEBRUARY 5, 1997 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1998.
(3) NET INVESTMENT INCOME PER SHARE INCLUDES SHORT-TERM CAPITAL GAIN
DISTRIBUTIONS FROM UNDERLYING FUNDS.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
36
<PAGE>
INDEPENDENT AUDITORS' REPORT
...............................................................................
THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
SMITH BARNEY CONCERT ALLOCATION SERIES INC.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Select High Growth, Select Growth, Select
Balanced, Select Conservative and Select Income Portfolios ("Portfolios") of the
Smith Barney Concert Allocation Series Inc. ("Fund") as of January 31, 2000, the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the two-year period then
ended and for the period from February 5, 1997 (commencement of operations) to
January 31, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 2000, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
aforementioned portfolios of the Smith Barney Concert Allocation Series Inc. as
of January 31, 2000, the results of their operations for the year then ended,
the changes in their net assets for each of the years in the two-year period
then ended and the financial highlights for each of the years in the two-year
period then ended and for the period from February 5, 1997 (commencement of
operations) to January 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
NEW YORK, NEW YORK
MARCH 8, 2000
37
<PAGE>
TAX INFORMATION (UNAUDITED)
...............................................................................
For Federal tax purposes the Portfolios hereby designate for the fiscal year
ended January 31, 2000:
- Percentages of ordinary dividends paid as
qualifying for the corporate dividends received
deduction:
Select High Growth Portfolio 43.41%
Select Growth Portfolio 36.44
Select Balanced Portfolio 34.37
Select Conservative Portfolio 19.85
Select Income Portfolio 10.57
- Total long-term capital gain distributions
paid:
Select High Growth Portfolio $ 722,439
Select Growth Portfolio 1,899,043
Select Balanced Portfolio 3,187,071
Select Conservative Portfolio 521,208
Select Income Portfolio 132,281
The following percentages of ordinary income dividends paid by the
Portfolios are derived from Federal obligations and may be exempt from
taxation at the state level:
<TABLE>
<S> <C>
Select Growth Portfolio 3.72%
Select Balanced Portfolio 6.91
Select Conservative Portfolio 5.82
Select Income Portfolio 6.56
</TABLE>
38
<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
Paul A. Brook
CONTROLLER
Christina T. Sydor
SECRETARY
INVESTMENT MANAGER
Travelers Investment Adviser, Inc.
CUSTODIAN
PNC Bank, N.A.
SMITH BARNEY CONCERT
ALLOCATION SERIES INC.
388 Greenwich Street
New York, New York 10013
39
<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- 1999 Salomon Smith Barney Inc.
ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR THE FD01436 3/00
FUND, WHICH CONTAINS INFORMATION CONCERNING THE FUND'S
INVESTMENT POLICIES, FEES AND EXPENSES, AS WELL AS OTHER
PERTINENT INFORMATION.
</TABLE>
