<PAGE>
 


                                 SMITH BARNEY

                        CONCERT ALLOCATION SERIES INC.





                                   [PICTURE]


                              P R O S P E C T U S


                                 MAY 29, 1998

                         Prospectus begins on page one






                                    [LOGO]

                                 SMITH BARNEY
                                 MUTUAL FUNDS
                          Investing for your future.
                                Every day.(TM)
<PAGE>
 
PROSPECTUS                                                    
                                                              May 29, 1998 
 
Smith Barney Concert Allocation Series Inc.
388 Greenwich Street
New York, New York 10013
(800) 451-2010

 Smith Barney Concert Allocation Series Inc. (the "Concert Series" or "Series")
currently offers eleven professionally managed investment portfolios, six of
which are offered by this Prospectus (each, a "Portfolio"). Each Portfolio
seeks to achieve its objective by investing in a number of other Smith Barney
Mutual Funds ("Underlying Smith Barney Funds"). 
 
 The High Growth Portfolio seeks capital appreciation.
 
 The Global Portfolio seeks capital appreciation. 
 
 The Growth Portfolio seeks long-term growth of capital.
 
 The Balanced Portfolio seeks a balance of growth of capital and income.
 
 The Conservative Portfolio seeks income and, secondarily, long-term growth of
capital.
 
 The Income Portfolio seeks high current income.
 
 This Prospectus sets forth concisely certain information about the Concert
Series and each of the Portfolios that prospective investors will find helpful
in making an investment decision. Investors are encouraged to read this Pro-
spectus carefully and retain it for future reference.

 Additional information about each of the Portfolios is contained in a State-
ment of Additional Information dated May 29, 1998, as amended or supplemented
from time to time, that is available upon request and without charge by calling
or writing the Concert Series at the telephone number or address set forth
above or by contacting a Smith Barney Financial Consultant. The Statement of
Additional Information has been filed with the Securities and Exchange Commis-
sion (the "SEC") and is incorporated by reference into this Prospectus in its
entirety. 
 
SMITH BARNEY INC.
Distributor

MUTUAL MANAGEMENT CORP. 
Investment Manager
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
 
                                                                               1
<PAGE>
 
TABLE OF CONTENTS
 
<TABLE>
<S>                                            <C>
PROSPECTUS SUMMARY                               3
--------------------------------------------------
FINANCIAL HIGHLIGHTS                             9
--------------------------------------------------
WHY INVEST IN THE CONCERT SERIES                12
--------------------------------------------------
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES   12
--------------------------------------------------
RISK FACTORS AND SPECIAL CONSIDERATIONS         14
--------------------------------------------------
PORTFOLIO TURNOVER                              15
--------------------------------------------------
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS    15
--------------------------------------------------
VALUATION OF SHARES                             24
--------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES              25
--------------------------------------------------
PURCHASE OF SHARES                              25
--------------------------------------------------
EXCHANGE PRIVILEGE                              31
--------------------------------------------------
REDEMPTION OF SHARES                            33
--------------------------------------------------
MINIMUM ACCOUNT SIZE                            34
--------------------------------------------------
PERFORMANCE                                     34
--------------------------------------------------
MANAGEMENT OF THE CONCERT SERIES                35
--------------------------------------------------
DISTRIBUTOR                                     37
--------------------------------------------------
ADDITIONAL INFORMATION                          37
--------------------------------------------------
APPENDIX                                       A-1
--------------------------------------------------
</TABLE>
 
--------------------------------------------------------------------------------
 No person has been authorized to give any information or to make any represen-
tations in connection with this offering other than those contained in this
Prospectus and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Concert Series or the
Distributor. This Prospectus does not constitute an offer by the Concert Series
or the Distributor to sell or a solicitation of an offer to buy any of the
securities offered hereby or securities of any Underlying Smith Barney Fund in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.
--------------------------------------------------------------------------------
 
2
<PAGE>
 
PROSPECTUS SUMMARY
 
 The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the Prospec-
tus. See "Table of Contents."

INVESTMENT OBJECTIVES The Concert Series is an open-end, non-diversified man-
agement investment company that currently offers eleven professionally managed
investment portfolios. This Prospectus offers six Portfolios. The High Growth
Portfolio seeks to provide capital appreciation. The Growth Portfolio seeks to
provide long-term growth of capital. The Global Portfolio seeks to provide cap-
ital appreciation. The Balanced Portfolio seeks to provide a balance of growth
of capital and income. The Conservative Portfolio seeks to provide income and,
secondarily, long-term growth of capital. The Income Portfolio seeks to provide
high current income. Each Portfolio seeks to achieve its investment objective
by investing in a diverse mix of "Underlying Smith Barney Funds," which consist
of open-end management investment companies or series thereof for which Smith
Barney Inc. ("Smith Barney") now or in the future acts as principal underwriter
or for which Smith Barney, Mutual Management Corp. ("MMC") (formerly Smith Bar-
ney Mutual Funds Management Inc.) or Smith Barney Strategy Advisers Inc.
("SBSA") or Travelers Investment Management Company ("TIMCO") now or in the
future acts as investment adviser. Investors may choose to invest in one or
more of the Portfolios based on their personal investment goals, risk tolerance
and financial circumstances. See "Investment Objectives and Management Poli-
cies." 

ALTERNATIVE PURCHASE ARRANGEMENTS Each Portfolio offers several classes of
shares ("Classes") to investors designed to provide them with the flexibility
of selecting an investment best suited to their needs. The general public is
offered three Classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of sales charges and rate of expenses
to which they are subject. A fourth Class of shares, Class Y shares, is offered
only to investors meeting an initial investment minimum of $15,000,000. See
"Purchase of Shares" and "Redemption of Shares." 

 Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.00% with respect to the High Growth Portfolio, the
Growth Portfolio, the Global Portfolio and the Balanced Portfolio and up to
4.50% with respect to the Conservative Portfolio and the Income Portfolio. The
initial sales charge may be reduced or waived for certain purchases. Purchases
of Class A shares of $500,000 or more will be made at net asset value with no
initial sales charge, but will be subject to a contingent deferred sales charge
("CDSC") of 1.00% on redemptions made within 12 months of purchase. See "Pro-
spectus Summary--Reduced or No Initial Sales Charge." Class A shares of each
Portfolio are subject to an annual service fee of 0.25% of the average daily
net assets of the Class. 

 Class B Shares. Class B shares of the High Growth Portfolio, the Growth Port-
folio, the Global Portfolio and the Balanced Portfolio are offered at net asset
value subject to a maximum CDSC of 5.00% of redemption proceeds, declining by
1.00% each year after the date of purchase to zero. Class B shares of the Con-
servative Portfolio and the Income Portfolio are offered at net asset value
subject to a maximum CDSC of 4.50% of redemption proceeds, declining by 0.50%
the first year after purchase and 1.00% each year thereafter to zero. The CDSC
may be waived for certain redemptions. Class B shares of the High Growth Port-
folio, the Growth Portfolio, the Global Portfolio and the Balanced Portfolio
are subject to an annual service fee of 0.25% and an annual distribution fee of
0.75% of the average daily net assets of the Class. Class B shares of the Con-
servative Portfolio and the Income Portfolio are subject to an annual service
fee of 0.25% and an annual distribution fee of 0.50% of the average daily net
assets of the Class. The Class B shares' distribution fee may cause that Class
to have higher expenses and pay lower dividends than Class A shares. 
 
 Class B Shares Conversion Feature. Class B shares will convert automatically
to Class A shares, based on relative net asset value, eight years after the
date of the original purchase. Upon conversion, these shares will no longer be
subject to an annual distribution fee. In addition, a certain portion of Class
B shares that have been acquired through the reinvestment of dividends and dis-
tributions ("Class B Dividend Shares") will be converted at that time. See
"Purchase of Shares--Deferred Sales Charge Alternatives."

 Class C Shares. Class C shares are sold at net asset value with no initial
sales charge; however, investors pay a CDSC of 1.00% if they redeem Class C
shares within 12 months of purchase. The CDSC may be waived for certain redemp-
tions. Class C shares of the High Growth Portfolio, the Growth Portfolio, the
Global Portfolio and the Balanced Portfolio are subject to an annual service
fee of 0.25% and an annual distribution fee of 0.75% of the average daily net
assets of the Class. Class C shares of the Conservative Portfolio and the
Income Portfolio are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.45% of the average daily net assets of the Class. The
Class C shares' distribution fee may cause that Class to have higher expenses
and pay lower dividends than Class A shares. Purchases of Portfolio shares,
which when combined with current holdings of Class C shares of a Portfolio
equal or exceed $500,000 in the aggregate, should be made in Class A shares at
net asset value with no sales charge, and will be subject to a CDSC of 1.00% on
redemptions made within 12 months of purchase. 

 Class Y Shares. Class Y shares are available only to investors meeting an ini-
tial investment minimum of $15,000,000. Class Y shares are sold at net asset
value with no initial sales charge or CDSC. They are not subject to any service
or distribution fees. 
 
                                                                               3
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
 In deciding which Class of Portfolio shares to purchase, investors should con-
sider the following factors, as well as any other relevant facts and circum-
stances:
 
 Intended Holding Period. The decision as to which Class of shares is more ben-
eficial to an investor depends on the amount and intended duration of his or
her investment. Shareholders who are planning to establish a program of regular
investment may wish to consider Class A shares; as the investment accumulates
shareholders may qualify for reduced sales charges and the shares are subject
to lower ongoing expenses over the term of the investment. As an alternative,
Class B and Class C shares are sold without any initial sales charge so the
entire purchase price is immediately invested in a Portfolio. Any investment
return on these additional invested amounts may partially or wholly offset the
higher annual expenses of these Classes. Because a Portfolio's future return
cannot be predicted, however, there can be no assurance that this would be the
case.
 
 Finally, investors should consider the effect of the CDSC period and any con-
version rights of the Classes in the context of their own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class
B shares, they do not have a conversion feature, and therefore, are subject to
an ongoing distribution fee. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks.
 
 Reduced or No Initial Sales Charge. The initial sales charge on Class A shares
may be waived for certain eligible purchasers, and the entire purchase price
will be immediately invested in a Portfolio. In addition, Class A share pur-
chases of $500,000 or more, will be made at net asset value with no initial
sales charge, but will be subject to a CDSC of 1.00% on redemptions made within
12 months of purchase. The $500,000 investment may be met by adding the pur-
chase to the net asset value of all Class A shares offered with a sales charge
held in funds sponsored by Smith Barney listed under "Exchange Privilege."
Class A share purchases also may be eligible for a reduced initial sales
charge. See "Purchase of Shares." Because the ongoing expenses of Class A
shares may be lower than those for Class B and Class C shares, purchasers eli-
gible to purchase Class A shares at net asset value or at a reduced sales
charge should consider doing so.
 
 Smith Barney Financial Consultants may receive different compensation for
selling different Classes of shares. Investors should understand that the pur-
pose of the CDSC on the Class B and Class C shares is the same as that of the
initial sales charge on the Class A shares.
 
 See "Purchase of Shares" and "Management of the Concert Series" for a complete
description of the sales charges and service and distribution fees for each
Class of shares and "Valuation of Shares," "Dividends, Distribution and Taxes"
and "Exchange Privilege" for other differences between the Classes of shares.
 
SMITH BARNEY 401(K) AND EXECCHOICE(TM) PROGRAMS Investors may be eligible to
participate in the Smith Barney 401(k) Program, which is generally designed to
assist plan sponsors in the creation and operation of retirement plans under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
as well as other types of participant directed, tax-qualified employee benefit
plans. Investors may also be eligible to participate in the Smith Barney
ExecChoice(TM) Program. Class A and Class C shares are available as investment
alternatives under both of these programs. See "Purchase of Shares--Smith Bar-
ney 401(k) and ExecChoice(TM) Programs."
 
PURCHASE OF SHARES Shares may be purchased through a brokerage account main-
tained with Smith Barney. Shares may also be purchased through a broker that
clears securities transactions through Smith Barney on a fully disclosed basis
(an "Introducing Broker") or an investment dealer in the selling group. In
addition, certain investors, including qualified retirement plans and certain
other institutional investors, may purchase shares directly from the Concert
Series through the Series' transfer agent, First Data Investor Services Group,
Inc. ("First Data"). See "Purchase of Shares."

INVESTMENT MINIMUMS Investors in Class A, Class B and Class C shares may open
an account by making an initial investment of at least $1,000 for each account
in each class (except for Systematic Investment Plan accounts), or $250 for an
individual retirement account ("IRA") or a Self-Employed Retirement Plan.
Investors in Class Y shares may open an account for an initial investment of
$15,000,000. Subsequent investments of at least $50 may be made for all Clas-
ses. For participants in retirement plans qualified under Section 403(b)(7) or
Section 401(a) of the Code, the minimum initial investment requirement for
Class A, Class B and Class C shares and the subsequent investment requirement
for all Classes is $25. The minimum investment requirements for purchases of
Portfolio Shares through the Systematic Investment Plan are described below.
See "Purchase of Shares." 
 
SYSTEMATIC INVESTMENT PLAN Each Portfolio offers shareholders a Systematic
Investment Plan under which they may authorize the automatic placement of a
purchase order each month or quarter for Portfolio shares. The minimum initial
investment requirement for Class A, Class B and Class C shares and the subse-
quent investment requirement for all Classes for shareholders purchasing shares
through the Systematic Investment Plan on a monthly basis is $25 and on a quar-
terly basis is $50. See "Purchase of Shares."
 
4
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares" and "Re-
demption of Shares."

MANAGEMENT OF EACH PORTFOLIO MMC serves as each Portfolio's investment manager.
MMC is a wholly owned subsidiary of Salomon Smith Barney Holdings Inc. ("Hold-
ings"). Holdings is a wholly owned subsidiary of Travelers Group Inc. ("Travel-
ers"), a diversified financial services holding company engaged, through its
subsidiaries, principally in four business segments: Investment Services,
including Asset Management, Consumer Finance Services, Life Insurance Services
and Property & Casualty Insurance Services. 

 MMC serves as the investment adviser of each of the Underlying Smith Barney
Funds (other than Smith Barney Premium Total Return Fund and Smith Barney Small
Cap Blend Fund Inc). SBSA, a wholly owned subsidiary of MMC, serves as
investment adviser to Smith Barney Premium Total Return Fund and TIMCO, a
wholly owned subsidiary of Holdings, serves as investment adviser to Smith Bar-
ney Small Cap Blend Fund, Inc. See "Management of the Concert Series." 
 
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
Class of certain other Smith Barney Mutual Funds, including the Underlying
Smith Barney Funds held by the Portfolios, at the respective net asset values
next determined. See "Exchange Privilege."
 
VALUATION OF SHARES Net asset value of each Portfolio for the prior day gener-
ally will be quoted daily in the financial section of most newspapers and is
also available from a Smith Barney Financial Consultant. See "Valuation of
Shares."

DIVIDENDS AND DISTRIBUTIONS The Concert Series intends to pay dividends from
net investment income monthly on shares of the Income Portfolio, quarterly on
shares of the Conservative Portfolio and the Balanced Portfolio and annually on
shares of the High Growth Portfolio, the Global Portfolio and the Growth Port-
folio. Distributions of net realized capital gains, if any, are paid annually
for each Portfolio. See "Dividends, Distributions and Taxes." 
 
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a Class
will be reinvested automatically, unless otherwise specified by an investor, in
additional shares of the same Class at current net asset value. Shares acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution rein-
vestments will become eligible for conversion to Class A shares on a pro rata
basis. See "Dividends, Distributions and Taxes."

RISK FACTORS AND SPECIAL CONSIDERATIONS The assets of each Portfolio are
invested in certain Underlying Smith Barney Funds, so each Portfolio's invest-
ment performance is directly related to the investment performance of the
Underlying Smith Barney Funds held. The ability of each Portfolio to meet its
investment objective is directly related to the ability of the Underlying Smith
Barney Funds held to meet their objectives as well as the allocation among
those Underlying Smith Barney Funds by MMC. There can be no assurance that the
investment objective of any Portfolio or any Underlying Smith Barney Fund will
be achieved. 
 
 The value of the Underlying Smith Barney Funds' investments, and thus the net
asset value of both those Underlying Smith Barney Funds' and the Portfolios'
shares, will fluctuate in response to changes in market and economic condi-
tions, as well as the financial condition and prospects of issuers in which the
Underlying Smith Barney Funds invest. For a description of the risks involved
in an investment in the Portfolios, see "Investment Objectives and Management
Policies," "Description of the Underlying Smith Barney Funds" and the Appendix
to this Prospectus.
 
                                                                               5
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
EACH PORTFOLIO'S EXPENSES The following expense tables list the costs and
expenses an investor will incur as a shareholder of each Portfolio, based on
the maximum sales charge or maximum CDSC that may be incurred at the time of
purchase or redemption and, unless otherwise noted, each Portfolio's operating
expenses for its most recent fiscal year:
 
<TABLE>
<CAPTION>
                              APPLICABLE TO THE HIGH GROWTH PORTFOLIO,
                            THE GLOBAL PORTFOLIO(+), THE GROWTH PORTFOLIO
                                     AND THE BALANCED PORTFOLIO
                           --------------------------------------------------------
                             CLASS A        CLASS B        CLASS C        CLASS Y
-------------------------------------------------------------------------------------
<S>                        <C>            <C>            <C>            <C>
SHAREHOLDER TRANSACTION
EXPENSES
 Maximum sales charge
 imposed on purchases (as
 a percentage of offering
 price)                            5.00%          None           None           None
 Maximum CDSC (as a
 percentage of original
 cost or redemption
 proceeds, whichever is
 lower)                            None*          5.00%          1.00%          None
-------------------------------------------------------------------------------------
ANNUAL PORTFOLIO
OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET
ASSETS)
 Management fee                    0.35%          0.35%          0.35%          0.35%
 12b-1 fee**                       0.25           1.00           1.00            --
 Other expenses***                 None           None           None           None
-------------------------------------------------------------------------------------
TOTAL PORTFOLIO OPERATING
EXPENSES                           0.60%          1.35%          1.35%          0.35%
-------------------------------------------------------------------------------------
<CAPTION>
                              APPLICABLE TO THE CONSERVATIVE PORTFOLIO
                                      AND THE INCOME PORTFOLIO
                           --------------------------------------------------------
                             CLASS A        CLASS B        CLASS C        CLASS Y
-------------------------------------------------------------------------------------
<S>                        <C>            <C>            <C>            <C>
SHAREHOLDER TRANSACTION
EXPENSES
 Maximum sales charge
 imposed on purchases (as
 a percentage of offering
 price)                            4.50%          None           None           None
 Maximum CDSC (as a
 percentage of original
 cost or redemption
 proceeds, whichever is
 lower)                            None*          4.50%          1.00%          None
-------------------------------------------------------------------------------------
ANNUAL PORTFOLIO
OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET
ASSETS)
 Management fee                    0.35%          0.35%          0.35%          0.35%
 12b-1 fee**                       0.25           0.75           0.70            --
 Other expenses***                 None           None           None           None
-------------------------------------------------------------------------------------
TOTAL PORTFOLIO OPERATING
EXPENSES                           0.60%          1.10%          1.05%          0.35%
-------------------------------------------------------------------------------------
</TABLE>
  * Purchases of Class A shares of $500,000 or more will be made at net asset
    value with no sales charge, but will be subject to a CDSC of 1.00% on
    redemptions made within 12 months of purchase.
 
 ** Upon conversion of Class B shares to Class A shares, such shares will no
    longer be subject to a distribution fee. Class C shares do not have a con-
    version feature and, therefore, are subject to an ongoing distribution fee.
    As a result, long-term shareholders of Class C shares may pay more than the
    economic equivalent of the maximum front-end sales charge permitted by the
    National Association of Securities Dealers, Inc.

*** Under the Asset Allocation and Administration Agreement with each Portfo-
    lio, MMC bears all expenses of each Class of each Portfolio other than the
    management fee, the 12b-1 fee and extraordinary expenses. 

(+) The total Portfolio operating expenses for the Global Portfolio are esti-
    mated since no shares were outstanding during the Series' most recent fis-
    cal year. 

 Class A shares of the Concert Series purchased through the Smith Barney
AssetOne Program will be subject to an annual asset-based fee, payable quarter-
ly, in lieu of the initial sales charge. The fee will vary to a maximum of
1.50%, depending on the amount of assets held through the Program. For more
information, please call your Smith Barney Financial Consultant. 

 The sales charges and CDSCs set forth in the above tables are the maximum
charges imposed on purchases or redemptions of each of the Portfolios' shares
and investors may actually pay lower or no charges, depending on the amount
purchased and, in the case of Class B, Class C and certain Class A shares, the
length of time the shares are held and whether the shares are held through the
Smith Barney 401(k) and ExecChoice(TM) Programs. See "Purchase of Shares" and
"Redemption of Shares." Smith Barney receives an annual 12b-1 service fee of
0.25% of the value of average daily net assets of Class A shares of each Port-
folio. Smith Barney also receives with respect to Class B and Class C shares of
the High Growth Portfolio, the Growth Portfolio, the Global Portfolio and the
Balanced Portfolio an annual 12b-1 fee of 1.00% of the value of average daily
net assets of the respective Classes, consisting of a 0.75% distribution fee
and a 0.25% service fee. For Class B shares of the Conservative Portfolio and
the Income Portfolio, Smith Barney receives an annual 12b-1 fee of 0.75% of the
value of average daily net assets of that Class, consisting of a 0.50% distri-
bution fee and a 0.25% service fee. For Class C shares of the Conservative
Portfolio and the Income Portfolio, Smith Barney receives an annual 12b-1 fee
of 0.70% of the value of average daily net assets of that Class, consisting of
a 0.45% distribution fee and a 0.25% service fee. 
 
 The Portfolios will invest only in Class Y shares of the Underlying Smith Bar-
ney Funds and, accordingly, will not pay any sales load or 12b-1 service or
distribution fees in connection with their investments in shares of the Under-
lying Smith Barney Funds. The Portfolios, however, will indirectly bear their
pro rata share of the fees and expenses incurred by the Underlying Smith Barney
Funds that are applicable to Class Y shareholders. The investment returns of
each Portfolio, therefore, will be net of the expenses of the Underlying
 
6
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
Smith Barney Funds in which it is invested. The following chart shows the
expense ratios applicable to Class Y shareholders of each Underlying Smith Bar-
ney Fund held by a Portfolio, based on operating expenses for its most recent
fiscal year:
 
<TABLE>
<CAPTION>
UNDERLYING SMITH BARNEY FUND                          EXPENSE RATIO
-------------------------------------------------------------------
<S>                                                   <C>
Smith Barney Aggressive Growth Fund Inc.                  0.84%
Smith Barney Appreciation Fund Inc.                       0.59
Smith Barney Equity Funds
 Smith Barney Large Cap Blend Fund                        0.69
Smith Barney Fundamental Value Fund Inc.                  0.78
Smith Barney Funds, Inc.
 Large Cap Value Fund                                     0.60
 Short-Term U.S. Treasury Securities Fund                 0.50
Smith Barney Income Funds
 Smith Barney High Income Fund                            0.73
 Smith Barney Balanced Fund                               0.67
 Smith Barney Premium Total Return Fund                   0.76
 Smith Barney Convertible Fund                            0.85
 Smith Barney Diversified Strategic Income Fund           0.70
Smith Barney Investment Funds Inc.
 Concert Peachtree Growth Fund                            1.10
 Smith Barney Hansberger Global Value Fund*               1.35
 Smith Barney Hansberger Global Small Cap Value Fund*     1.45
 Smith Barney Contrarian Fund                             0.90
 Smith Barney Special Equities Fund                       0.80
 Smith Barney Government Securities Fund                  0.58
 Smith Barney Investment Grade Bond Fund                  0.69
Smith Barney Investment Trust
 Smith Barney Large Capitalization Growth Fund            0.82
Smith Barney Managed Governments Fund Inc.                0.62
Smith Barney Money Funds, Inc.
 Cash Portfolio                                           0.43
Smith Barney Natural Resources Fund Inc.*                 1.26
Smith Barney Small Cap Blend Fund, Inc.                   1.11
Smith Barney World Funds, Inc.
 International Equity Portfolio                           0.94
 Emerging Markets Portfolio*                              1.86
 European Portfolio*                                      1.55
 Pacific Portfolio*                                       3.12
 International Balanced Portfolio                         1.24
 Global Government Bond Portfolio                         0.89
</TABLE>
 
--------------------------------------------------------------------------------

* Operating expenses of Class Y shares for Smith Barney Investment Funds Inc.--
  Smith Barney Hansberger Global Value Fund and Smith Barney Hansberger Global
  Small Cap Value Fund, Smith Barney Natural Resources Fund Inc. and Smith Bar-
  ney World Funds, Inc.--Emerging Markets Portfolio, European Portfolio and
  Pacific Portfolio are estimated because no Class Y shares were outstanding
  during each Fund's most recent fiscal year. 

 Based on a weighted average of the Class Y expense ratios of Underlying Smith
Barney Funds in which a particular Portfolio is expected to invest during the
current fiscal year, the approximate expense ratios are expected to be as fol-
lows: High Growth Portfolio, Class A 1.49%, Class B 2.24%, Class C 2.24% and
Class Y 1.24%; Growth Portfolio, Class A 1.40%, Class B 2.15%, Class C 2.15%
and Class Y 1.15%; Global Portfolio, Class A 1.89%, Class B 2.64%, Class C
2.64% and Class Y 1.64%; Balanced Portfolio, Class A 1.35%, Class B 2.10%,
Class C 2.10% and Class Y 1.10%; Conservative Portfolio, Class A 1.31%, Class B
1.81%, Class C 1.76% and Class Y 1.06%; and Income Portfolio, Class A 1.25%,
Class B 1.75%, Class C 1.70% and Class Y 1.00%. The expense ratios may be
higher or lower depending on the allocation of the Underlying Smith Barney
Funds within a Portfolio. 
 
                                                                               7
<PAGE>
 
PROSPECTUS SUMMARY (CONTINUED)
 
 
EXAMPLE The following example is intended to assist an investor in understand-
ing the various costs that an investor in each of the Portfolios will bear
directly or indirectly. The example assumes payment by each Portfolio of oper-
ating expenses at the levels set forth in the table above and of its pro rata
share of the Class Y expenses of the Underlying Smith Barney Funds (also as set
forth above) in which a Portfolio is expected to invest during the current fis-
cal year. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN ABOVE.
 
<TABLE>
<CAPTION>
            AN INVESTOR WOULD PAY THE       AN INVESTOR WOULD PAY THE
             FOLLOWING EXPENSES ON A        FOLLOWING EXPENSES ON THE
         $1,000 INVESTMENT, ASSUMING (1)  SAME INVESTMENT, ASSUMING THE
             5.00% ANNUAL RETURN AND           SAME ANNUAL RETURN
          (2) REDEMPTION AT THE END OF   BUT WITHOUT A REDEMPTION AT THE
                EACH TIME PERIOD:           END OF EACH TIME PERIOD:
         ------------------------------- -------------------------------
         1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------
<S>      <C>    <C>     <C>     <C>      <C>    <C>     <C>     <C>
High Growth Portfolio
 Class A  $64     $95    $127     $219    $64     $95    $127     $219
 Class B   73     100     130      239     23      70     120      239
 Class C   33      70     120      257     23      70     120      257
 Class Y   13      39      68      150     13      39      68      150
Growth Portfolio
 Class A   64      92     123      210     64      92     123      210
 Class B   72      97     125      229     22      67     115      229
 Class C   32      67     115      248     22      67     115      248
 Class Y   12      37      63      140     12      37      63      140
Global Portfolio
 Class A   68     106     147      260     68     106     147      260
 Class B   77     112     150      279     27      82     140      279
 Class C   37      82     140      297     27      82     140      297
 Class Y   17      52      89      194     17      52      89      194
Balanced Portfolio
 Class A   63      91     120      204     63      91     120      204
 Class B   71      96     123      224     21      66     113      224
 Class C   31      66     113      243     21      66     113      243
 Class Y   11      35      61      134     11      35      61      134
Conservative Portfolio
 Class A   58      85     114      196     58      85     114      196
 Class B   63      87     108      200     18      57      98      200
 Class C   28      55      95      207     18      55      95      207
 Class Y   11      34      58      129     11      34      58      129
Income Portfolio
 Class A   57      83     111      189     57      83     111      189
 Class B   63      85     105      193     18      55      95      193
 Class C   27      54      92      201     17      54      92      201
 Class Y   10      32      55      122     10      32      55      122
------------------------------------------------------------------------
</TABLE>
 
8
<PAGE>
 
FINANCIAL HIGHLIGHTS

 The following information has been audited by KPMG Peat Marwick LLP, indepen-
dent auditors, whose report thereon appears in the Concert Series' annual
report dated January 31, 1998. The information set out below should be read in
conjunction with the financial statements and related notes that also appear in
the Concert Series' Annual Report to Shareholders, which is incorporated by
reference into the Statement of Additional Information. No information is pre-
sented for the Global Portfolio and Class Y shares of each Portfolio because no
Class Y shares of each Portfolio and no shares of Global Portfolio were out-
standing for the years shown. 

FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:

<TABLE>
<CAPTION>
                            CLASS A SHARES         CLASS B SHARES        CLASS C SHARES
                          -------------------    -------------------    ------------------
HIGH GROWTH PORTFOLIO       1998    1997(/1/)      1998    1997(/1/)     1998    1997(/1/)
--------------------------------------------------------------------------------------------
<S>                       <C>       <C>          <C>       <C>          <C>      <C>
NET ASSET VALUE,
BEGINNING OF YEAR         $  12.41  $  11.40     $  12.41  $  11.40      $12.42    $11.40
--------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
 Net investment
 income(/2/)                  0.11      0.20         0.03      0.08        0.03      0.08
 Net realized and
 unrealized gain              0.91      1.05         0.89      1.04        0.89      1.05
--------------------------------------------------------------------------------------------
Total Income from
Operations                    1.02      1.25         0.92      1.12        0.92      1.13
--------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
 Net investment income       (0.13)    (0.20)       (0.05)    (0.07)      (0.05)    (0.07)
 Net realized gains          (0.33)    (0.04)       (0.33)    (0.04)      (0.33)    (0.04)
--------------------------------------------------------------------------------------------
Total Distributions          (0.46)    (0.24)       (0.38)    (0.11)      (0.38)    (0.11)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR                      $  12.97  $  12.41     $  12.95  $  12.41     $ 12.96   $ 12.42
--------------------------------------------------------------------------------------------
TOTAL RETURN                  8.25%    11.04%++      7.44%     9.91%++     7.44%    10.00%++
--------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000S)                    $259,212  $154,069     $230,142  $141,241     $27,845   $19,340
--------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS:
 Expenses                     0.60%     0.60%+       1.35%     1.35%+      1.35%     1.35%+
 Net investment income        1.00      2.79+        0.25      2.04+       0.25      2.04+
--------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE         39%        0%          39%        0%         39%        0%
--------------------------------------------------------------------------------------------
</TABLE>

FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:

<TABLE>
<CAPTION>
                            CLASS A SHARES         CLASS B SHARES        CLASS C SHARES
                          -------------------    -------------------    ------------------
GROWTH PORTFOLIO            1998    1997(/1/)      1998    1997(/1/)     1998    1997(/1/)
--------------------------------------------------------------------------------------------
<S>                       <C>       <C>          <C>       <C>          <C>      <C>
NET ASSET VALUE,
BEGINNING OF YEAR         $  12.32  $  11.40     $  12.33  $  11.40     $ 12.33   $ 11.40
--------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
 Net investment
 income(/2/)                  0.31      0.33         0.22      0.23        0.22      0.24
 Net realized and
 unrealized gain              1.14      0.92         1.12      0.94        1.12      0.93
--------------------------------------------------------------------------------------------
Total Income From
Operations                    1.45      1.25         1.34      1.17        1.34      1.17
--------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
 Net investment income       (0.32)    (0.31)       (0.21)    (0.22)      (0.21)    (0.22)
 Net realized gains          (0.46)    (0.02)       (0.46)    (0.02)      (0.46)    (0.02)
--------------------------------------------------------------------------------------------
Total Distributions          (0.78)    (0.33)       (0.67)    (0.24)      (0.67)    (0.24)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR                      $  12.99  $  12.32     $  13.00  $  12.33     $ 13.00   $ 12.33
--------------------------------------------------------------------------------------------
TOTAL RETURN                 11.82%    11.08%++     10.93%    10.32%++    10.92%    10.32%++
--------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S)                   $279,842  $161,026     $343,474  $211,434     $42,983   $31,279
--------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS:
 Expenses:                    0.60%     0.60%+       1.35%     1.35%+      1.35%     1.35%+
 Net investment income        2.77      4.79+        1.96      4.04+       1.81      4.04+
--------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE         41%        0%          41%        0%         41%        0%
--------------------------------------------------------------------------------------------
</TABLE>
 
 (1) For the period from February 5, 1996 (inception date) to January 31,
     1997. 
 
 (2) Net investment income per share includes short-term capital gain distri-
     butions from Underlying Funds. 
 
 ++Total return is not annualized, as it may not be representative of the
   total return for the year. 
 
 + Annualized. 
 
                                                                               9
<PAGE>
 

FINANCIAL HIGHLIGHTS (CONTINUED) 

 FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:

<TABLE>
<CAPTION>
                            CLASS A SHARES        CLASS B SHARES        CLASS C SHARES
                          -------------------   -------------------    ------------------
BALANCED PORTFOLIO          1998    1997(/1/)     1998    1997(/1/)     1998    1997(/1/)
-------------------------------------------------------------------------------------------
<S>                       <C>       <C>         <C>       <C>          <C>      <C>
NET ASSET VALUE,
BEGINNING OF YEAR         $  12.14   $ 11.40    $  12.14  $  11.40     $ 12.14   $ 11.40
-------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
 Net investment
 income(/2/)                  0.58      0.45        0.48      0.37        0.46      0.37
 Net realized and
 unrealized gain              0.80      0.74        0.80      0.74        0.82      0.74
-------------------------------------------------------------------------------------------
Total Income From
Operations                    1.38      1.19        1.28      1.11        1.28      1.11
-------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
 Net investment income       (0.54)    (0.45)      (0.45)    (0.37)      (0.45)    (0.37)
 Net realized gains          (0.36)       --       (0.36)       --       (0.36)       --
-------------------------------------------------------------------------------------------
Total Distributions          (0.90)    (0.45)      (0.81)    (0.37)      (0.81)    (0.37)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR                      $  12.62   $ 12.14    $  12.61  $  12.14     $ 12.61   $ 12.14
-------------------------------------------------------------------------------------------
TOTAL RETURN                 11.59%    10.64%++    10.67%     9.90%++    10.67%     9.90%++
-------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S)                   $166,806   $90,938    $193,791  $111,918     $27,473   $19,968
-------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS:
 Expenses                     0.60%     0.60%+      1.35%     1.35%+      1.35%     1.35%+
 Net investment income        4.79      4.88+       3.96      4.14+       3.69      4.14+
-------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE         23%        0%         23%        0%         23%        0%
-------------------------------------------------------------------------------------------
 
 FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:
 
<CAPTION>
                            CLASS A SHARES        CLASS B SHARES        CLASS C SHARES
                          -------------------   -------------------    ------------------
CONSERVATIVE PORTFOLIO      1998    1997(/1/)     1998    1997(/1/)     1998    1997(/1/)
-------------------------------------------------------------------------------------------
<S>                       <C>       <C>         <C>       <C>          <C>      <C>
NET ASSET VALUE,
BEGINNING OF YEAR         $  11.90   $ 11.46    $  11.89  $  11.46     $ 11.89   $ 11.46
-------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
 Net investment
 income(/2/)                  0.73      0.53        0.66      0.48        0.69      0.48
 Net realized and
 Unrealized gain              0.63      0.43        0.64      0.42        0.62      0.42
-------------------------------------------------------------------------------------------
Total Income From
Operations                    1.36      0.96        1.30      0.90        1.31      0.90
-------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
 Net investment income       (0.69)    (0.52)      (0.63)    (0.47)      (0.64)    (0.47)
 Net realized gains          (0.40)       --       (0.40)       --       (0.40)       --
-------------------------------------------------------------------------------------------
Total Distributions          (1.09)    (0.52)      (1.03)    (0.47)      (1.04)    (0.47)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR                      $  12.17   $ 11.90    $  12.16  $  11.89     $ 12.16   $ 11.89
-------------------------------------------------------------------------------------------
TOTAL RETURN                 11.70%     8.57%++    11.21%     8.03%++    11.25%     8.08%++
-------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S)                   $ 51,233   $30,478    $ 48,584  $ 28,297     $ 5,386   $ 4,129
-------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS:
 Expenses                     0.60%     0.60%+      1.10%     1.10%+      1.05%     1.05%+
 Net investment income        6.17      5.66+       5.67      5.16+       5.72      5.21+
-------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE         28%        0%         28%        0%         28%        0%
-------------------------------------------------------------------------------------------
</TABLE>

(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
    
(2) Net investment income per share includes short-term capital gain
    distributions from Underlying Funds. 

++Total return is not annualized, as it may not be representative of the total
  return for the year. 

+ Annualized. 

10
<PAGE>
 

FINANCIAL HIGHLIGHTS (CONTINUED) 

 FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:

<TABLE>
<CAPTION>
                           CLASS A SHARES       CLASS B SHARES       CLASS C SHARES
                          ------------------   ------------------   -----------------
INCOME PORTFOLIO           1998    1997(/1/)    1998    1997(/1/)    1998   1997(/1/)
--------------------------------------------------------------------------------------
<S>                       <C>      <C>         <C>      <C>         <C>     <C>
NET ASSET VALUE,
BEGINNING OF YEAR         $ 11.53   $ 11.46    $ 11.53   $ 11.46    $11.53   $11.46
--------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
 Net investment
 income(/2/)                 0.76      0.63       0.70      0.58      0.71     0.59
 Net realized and
 unrealized gain             0.52      0.07       0.52      0.07      0.52     0.07
--------------------------------------------------------------------------------------
Total Income From
Operations                   1.28      0.70       1.22      0.65      1.23     0.66
--------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
 Net investment income      (0.77)    (0.63)     (0.70)    (0.58)    (0.71)   (0.59)
 Net realized gains         (0.29)       --      (0.29)       --     (0.29)      --
--------------------------------------------------------------------------------------
Total Distributions         (1.06)    (0.63)     (0.99)    (0.58)    (1.00)   (0.59)
--------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR                      $ 11.75   $ 11.53    $ 11.76   $ 11.53    $11.76   $11.53
--------------------------------------------------------------------------------------
TOTAL RETURN                11.44%     6.39%++   10.93%     5.89%++  10.98%    5.94%++
--------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S)                   $29,574   $17,817    $26,563   $17,800    $3,568   $2,113
--------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS:
 Expenses                    0.60%     0.60%+     1.10%     1.10%+    1.05%    1.05%+
 Net investment income       6.62      6.32+      6.12      5.82+     6.17     5.87+
--------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE        28%        0%        28%        0%       28%       0%
--------------------------------------------------------------------------------------
</TABLE>

(1) For the period from February 5, 1996 (inception date) to January 31, 1997.
    
(2) Net investment income per shares 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. 

                                                                              11
<PAGE>
 
WHY INVEST IN THE CONCERT SERIES
 
 The proliferation of mutual funds over the last several years has left many
investors in search of a simple means to manage their long-term investments.
With new investment categories emerging each year and with each mutual fund
reacting differently to political, economic and business events, many investors
are forced to make complex investment decisions in the face of limited experi-
ence, time and personal resources. The Portfolios are designed to meet the
needs of investors who prefer to have their asset allocation decisions made by
professional money managers, are looking for an appropriate core investment for
their retirement portfolio and appreciate the advantages of broad diversifica-
tion. The Portfolios may be most appropriate for long-term investors planning
for retirement, particularly investors in tax-advantaged retirement accounts
including IRAs, 401(k) corporate employee savings plans, 403(b) non-profit
organization savings plans, profit-sharing and money-purchase pension plans,
and other corporate pension and savings plans.

 Each of the Portfolios invests in a select group of Underlying Smith Barney
Funds suited to the Portfolio's particular investment objective. The allocation
of assets among Underlying Smith Barney Funds within each Portfolio is deter-
mined by MMC according to fundamental and quantitative analysis. Because the
assets will be adjusted only periodically and only within pre-determined ranges
that will attempt to ensure broad diversification, there should not be any sud-
den large-scale changes in the allocation of a Portfolio's investments among
Underlying Smith Barney Funds. The Concert Series is not designed as a market
timing vehicle, but rather as a simple and conservative approach to helping
investors meet retirement and other long-term goals. 
 
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

 The Concert Series is an open-end, non-diversified, management investment com-
pany that currently offers eleven managed investment portfolios, six of which
are offered by this Prospectus. Each Portfolio seeks to achieve its investment
objective by investing within specified ranges among Underlying Smith Barney
Funds, as well as in repurchase agreements. Initially, each Portfolio will
invest in the Underlying Smith Barney Funds listed below. 

 The investment manager for each Portfolio, MMC, will allocate investments for
each Portfolio among Underlying Smith Barney Funds based on its outlook for the
economy, financial markets and the relative performance of the Underlying Smith
Barney Funds. The allocation among the Underlying Smith Barney Funds will be
made within investment ranges established by the Board of Directors of the
Concert Series which designates minimum and maximum percentages for each of the
Underlying Smith Barney Funds. 

 The High Growth Portfolio's investment objective is to seek capital apprecia-
tion. The Growth Portfolio's investment objective is to seek long-term growth
of capital. The Global Portfolio's investment objective is to seek capital
appreciation. The Balanced Portfolio's investment objective is to seek a bal-
ance of growth of capital and income. The Conservative Portfolio's investment
objective is to seek income and, secondarily, long-term growth of capital. The
Income Portfolio's investment objective is to seek high current income. Each
Portfolio's investment objective is fundamental and may be changed only with
the approval of a majority of the Portfolio's outstanding shares. There can be
no assurance that any Portfolio's investment objective will be achieved. 
 
 In investing in Underlying Smith Barney Funds, the Portfolios seek to maintain
different allocations between equity funds and fixed income funds (including
money market funds) depending on a Portfolio's investment objective. Allocating
investments between equity funds and fixed income funds permits each Portfolio
to attempt to optimize performance consistent with its investment objective.
The tables below illustrate the initial equity/fixed income fund allocation
targets and ranges for each Portfolio:
 
   Equity/Fixed Income Fund Range (Percentage of Each Portfolio's Net Assets)
 
<TABLE>
<CAPTION>
TYPE OF FUND            TARGET  RANGE
---------------------------------------
<S>                     <C>    <C>
High Growth Portfolio
 Equity                   90%  80%-100%
 Fixed Income             10%   0%- 20%
Growth Portfolio
 Equity                   70%  60%- 80%
 Fixed Income             30%  20%- 40%
Global Portfolio
 Equity                  100%  80%-100%
 Fixed Income              0%   0%- 20%
Balanced Portfolio
 Equity                   50%  40%- 60%
 Fixed Income             50%  40%- 60%
Conservative Portfolio
 Equity                   30%  20%- 40%
 Fixed Income             70%  60%- 80%
Income Portfolio
 Equity                   10%   0%- 20%
 Fixed Income             90%  80%-100%
---------------------------------------
</TABLE>
 
 
12
<PAGE>
 
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES (CONTINUED)
 
 The Portfolios invest their assets in the Underlying Smith Barney Funds listed
below within the ranges indicated.
 
          Investment Range (Percentage of Each Portfolio's Net Assets)
 
<TABLE>
<CAPTION>
UNDERLYING SMITH BARNEY   HIGH GROWTH  GROWTH    GLOBAL   BALANCED  CONSERVATIVE  INCOME
FUND                       PORTFOLIO  PORTFOLIO PORTFOLIO PORTFOLIO  PORTFOLIO   PORTFOLIO
------------------------------------------------------------------------------------------
<S>                       <C>         <C>       <C>       <C>       <C>          <C>
Smith Barney Aggressive
Growth Fund Inc.             10-30%     0-15%      0-20%     --          --          --
Smith Barney
Appreciation Fund Inc.        0-20%     0-30%      0-10%    0-20%       0-15%       0-10%
Smith Barney Equity
Funds:
 Smith Barney Large Cap
 Blend Fund                   0-20%     0-20%      0-20%    5-20%        --          --
Smith Barney Fundamental
Value Fund Inc.               0-20%     0-30%      0-10%    0-20%       0-15%       0-10%
Smith Barney Funds,
Inc.:
 Large Cap Value Fund         0-20%     0-20%      0-20%    5-20%       0-20%       0-15%
 Short-Term U.S.
 Treasury Securities
 Fund                          --       0-15%       --      0-20%       0-20%       5-30%
Smith Barney Income
Funds:
 Smith Barney High
 Income Fund                  0-20%     5-20%       --      0-15%       0-20%       0-25%
 Smith Barney Balanced
 Fund                          --       0-20%       --      0-20%       0-20%       0-15%
 Smith Barney Premium
 Total Return Fund             --        --         --      5-20%       5-25%       0-15%
 Smith Barney
 Convertible Fund              --        --         --      5-20%       5-15%       0-15%
 Smith Barney
 Diversified Strategic
 Income Fund                   --        --         --      5-25%      10-30%      10-30%
Smith Barney Investment
Funds Inc.:
 Concert Peachtree
 Growth Fund                  0-20%     0-20%      0-20%    0-15%        --          --
 Smith Barney Hansberger
 Global Small Cap Value
 Fund                         0-20%     0-10%      5-20%     --          --          --
 Smith Barney Hansberger
 Global Value Fund            0-25%     0-20%     15-35%    0-15%       0-10%        --
 Smith Barney Contrarian
 Fund                         0-20%     0-30%      0-10%    0-15%        --          --
 Smith Barney Special
 Equities Fund               10-30%     0-15%      0-20%     --          --          --
 Smith Barney Government
 Securities Fund              0-15%     0-20%       --      0-20%       5-20%       5-20%
 Smith Barney Investment
 Grade Bond Fund              0-15%     0-15%       --       --          --         0-15%
Smith Barney Investment
Trust
 Smith Barney Large
 Capitalization Growth
 Fund                         0-20%     0-20%      0-20%    0-15%        --          --
Smith Barney Managed
Governments Fund Inc.          --       0-15%       --      5-20%       5-25%       5-30%
Smith Barney Money
Funds, Inc.:
 Cash Portfolio               0-20%     0-20%      0-20%    0-25%       0-30%       0-30%
Smith Barney Natural
Resources Fund Inc.           0-10%     0-10%      0-15%    0-10%        --          --
Smith Barney Small Cap
Blend Fund, Inc.              0-25%     0-20%      0-20%    0-15%        --          --
Smith Barney World
Funds, Inc.:
 International Equity
 Portfolio                    5-25%     0-20%     10-35%    0-15%       0-10%       0-10%
 Emerging Markets
 Portfolio                    0-20%      --        0-20%     --          --          --
 European Portfolio            --        --        0-15%     --          --          --
 Pacific Portfolio             --        --        0-15%     --          --          --
 International Balanced
 Portfolio                    0-15%     0-10%       --      0-10%       0-10%       0-10%
 Global Government Bond
 Portfolio                    0-15%     0-15%       --      0-15%       0-20%       0-20%
------------------------------------------------------------------------------------------
</TABLE>

 The Underlying Smith Barney Funds have been selected to represent a broad
spectrum of investment options for the Portfolios. The equity/fixed income
ranges and the investment ranges are based on the degree to which the Under-
lying Smith Barney Funds selected are expected in combination to be appropriate
for a Portfolio's particular investment objective. If, as a result of apprecia-
tion or depreciation, the percentage of a Portfolio's assets invested in an
Underlying Smith Barney Fund exceeds or is less than the applicable percentage
limitations set forth above, MMC will consider, in its discretion, whether to
reallocate the assets of the Portfolio to comply with the foregoing percentage
limitations. THE PARTICULAR UNDERLYING SMITH BARNEY FUNDS IN WHICH EACH PORTFO-
LIO MAY INVEST, THE EQUITY/FIXED INCOME FUND TARGETS AND RANGES AND THE INVEST-
MENT RANGES APPLICABLE TO EACH UNDERLYING SMITH BARNEY FUND MAY BE CHANGED FROM
TIME TO TIME BY THE CONCERT SERIES' BOARD OF DIRECTORS WITHOUT THE APPROVAL OF
THE PORTFOLIO'S SHAREHOLDERS. 
 
 Each Portfolio can invest a certain portion of its cash reserves in repurchase
agreements. Each Portfolio may also invest its cash reserves in the Cash Port-
folio of Smith Barney Money Funds, Inc. A reserve position provides flexibility
in meeting redemptions, expenses and the timing of new investments, and serves
as a short-term defense during periods of unusual volatility.
 
 For information about the investment objectives of each of the Underlying
Smith Barney Funds and the investment techniques and the risks involved in the
Underlying Smith Barney Funds, please refer to "Description of the Underlying
Smith Barney Funds," the Appendix to this Prospectus, the Statement of Addi-
tional Information and the prospectus for each of the Underlying Smith Barney
Funds.

 Year 2000. The investment management services provided to the Series by MMC
and the services provided to shareholders by Smith Barney, the Series' Distrib-
utor, depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot recognize the year 2000, but revert to
1900 or some other date, due to the manner in which dates were encoded and cal-
culated. That failure could have a negative impact on the Series' operations,
including the handling of securities trades, pricing and account services. MMC
and Smith Barney have advised the Series that they have been reviewing all of
their computer systems and actively working on necessary changes to their sys-
tems to prepare for the year 2000 and expect that their systems will be compli-
ant 
 
                                                                              13
<PAGE>
 

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES (CONTINUED) 

before that date. In addition, MMC has been advised by the Series' custodian,
transfer agent and accounting service agent that they are also in the process
of modifying their systems with the same goal. There can, however, be no assur-
ance that MMC, Smith Barney or any other service provider will be successful,
or that interaction with other non-complying computer systems will not impair
Series services at that time. 
 
RISK FACTORS AND SPECIAL CONSIDERATIONS
 
 
 Non-Diversified Investment Company. The Concert Series is a "non-diversified"
investment company for purposes of the Investment Company Act of 1940, as
amended (the "1940 Act"), because it invests in the securities of a limited
number of mutual funds. However, the Underlying Smith Barney Funds themselves
are diversified investment companies (with the exception of the Global Govern-
ment Bond Portfolio, the International Balanced Portfolio and the Emerging Mar-
kets Portfolio). The Concert Series intends to qualify as a diversified invest-
ment company for the purposes of Subchapter M of the Code.

 Investing in Underlying Smith Barney Funds. The investments of each Portfolio
are concentrated in the Underlying Smith Barney Funds, so each Portfolio's
investment performance is directly related to the investment performance of the
Underlying Smith Barney Funds held by it. The ability of each Portfolio to meet
its investment objective is directly related to the ability of the Underlying
Smith Barney Funds to meet their objectives as well as the allocation among
those Underlying Smith Barney Funds by MMC. There can be no assurance that the
investment objective of any Portfolio or any Underlying Smith Barney Fund will
be achieved. 

 Affiliated Persons. MMC, the investment manager of the Portfolios, and the
officers and directors of the Concert Series presently serve as investment
adviser, officers and directors, respectively, of many of the Underlying Smith
Barney Funds. Therefore, conflicts may arise as these persons fulfill their
fiduciary responsibilities to the Portfolios and the Underlying Smith Barney
Funds. 
 
 Investment Practices of Underlying Smith Barney Funds. In addition to their
principal investments, certain Underlying Smith Barney Funds may invest a por-
tion of their assets in foreign securities; enter into forward currency trans-
actions; lend their portfolio securities; enter into stock index, interest
rate, currency and gold futures contracts, and options on such contracts;
engage in options transactions; make short sales; purchase zero coupon bonds
and payment-in-kind bonds; purchase restricted and illiquid securities; enter
into forward roll transactions; purchase securities on a when-issued or delayed
delivery basis; enter into repurchase or reverse repurchase agreements; borrow
money; and engage in various other investment practices.

 High Yield Securities. Certain Portfolios also may invest in an Underlying
Smith Barney Fund that invests primarily in high yield, high risk securities,
commonly referred to as "junk bonds". As a result, those 
Portfolios may be subject
to some of the risks resulting from high yield investing. Further, each of the
Portfolios may invest in Underlying Smith Barney Funds that invest in medium
grade bonds. If these bonds are downgraded, the Portfolios will consider
whether to increase or decrease their investment in the affected Underlying
Smith Barney Fund. Lower quality debt instruments generally offer a higher cur-
rent yield than that available from higher grade issues, but typically involve
greater risk. Lower rated and comparable unrated securities are especially sub-
ject to adverse changes in general economic conditions, to changes in the
financial condition of their issuers, and to price fluctuation in response to
changes in interest rates. During periods of economic downturn or rising inter-
est rates, issuers of these instruments may experience financial stress that
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default. Further information on these invest-
ment policies and practices can be found under "Description of the Underlying
Smith Barney Funds," in the Appendix to this Prospectus and in the Statement of
Additional Information as well as the prospectus of each Underlying Smith Bar-
ney Fund. 

 Market and Economic Factors. The Portfolios' share prices and yields will
fluctuate in response to various market and economic factors related to both
the stock and bond markets. All Portfolios may invest in mutual funds that in
turn invest in international securities and thus are subject to additional
risks of these investments, including changes in foreign currency exchange
rates and political risk.
 
14
<PAGE>
 

PORTFOLIO TURNOVER 

 Under certain market conditions, a Portfolio may experience high portfolio
turnover as a result of its investment strategies. A Portfolio may purchase or
sell securities to: (a) accommodate purchases and sales of its shares; (b)
change the percentages of its assets invested in each of the Underlying Smith
Barney Funds in response to market conditions; and (c) maintain or modify the
allocation of its assets between equity and fixed income funds and among the
Underlying Smith Barney Funds within the percentage limits described above.

 The turnover rates of the Underlying Smith Barney Funds have ranged from 1%
to 367% during their most recent fiscal years. There can be no assurance that
the turnover rates of these funds will remain within this range during subse-
quent fiscal years. Higher turnover rates may result in higher expenses being
incurred by the Underlying Smith Barney Funds. 

DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS
 
 
 The following is a concise description of the investment objectives and prac-
tices for each of the Underlying Smith Barney Funds in which the Portfolios
may invest. There can be no assurance that the investment objectives of the
Underlying Smith Barney Funds will be met. Additional information regarding
the investment practices of the Underlying Smith Barney Funds is located in
the Appendix to this Prospectus, in the Statement of Additional Information
and in the prospectus of each of the Underlying Smith Barney Funds. No offer
is made in this Prospectus of any of the Underlying Smith Barney Funds.
 
EQUITY FUNDS The following Underlying Smith Barney Funds are funds that invest
primarily in equity securities.

 Smith Barney Aggressive Growth Fund Inc. seeks capital appreciation by
investing primarily in common stock of companies MMC believes are experienc-
ing, or have the potential to experience, growth in earnings that exceed the
average earnings growth rate of companies whose securities are included in the
Standard & Poor's Daily Price Index of 500 Common Stocks (the "S&P 500"), a
weighted index that measures the aggregate change in market value of 400
industrials, 60 transportation stocks and utility companies and 40 financial
issues. MMC focuses its stock selection for the Fund on a diversified group of
small- or medium-sized emerging growth companies that have passed their
"start-up" phase and show positive earnings and the prospect of achieving sig-
nificant profit gains in the two to three years after the Fund acquires their
stocks. These companies generally may be expected to benefit from new technol-
ogies, techniques, products or services or cost-reducing measures, and may be
affected by changes in management, capitalization or asset deployment, govern-
ment regulations or other external circumstances. 

 Although MMC anticipates that the assets of the Fund ordinarily will be
invested primarily in common stocks of U.S. companies, the Fund may invest in
convertible securities, preferred stocks, securities of foreign issuers, war-
rants and restricted securities. The Fund also is authorized to borrow up to
33 1/3% of its total assets less liabilities for leveraging purposes. Securi-
ties of the kinds of companies in which the Fund invests may be subject to
significant price fluctuation and above average risk. 
 
 Smith Barney Appreciation Fund Inc. seeks long-term appreciation of share-
holders' capital. The Fund attempts to achieve its investment objective by
investing primarily in equity securities (consisting of common stocks, pre-
ferred stocks, warrants, rights and securities convertible into common stocks)
that are believed to afford attractive opportunities for investment apprecia-
tion. The core holdings of the Fund are blue chip companies that are dominant
in their industries; however, at the same time, the Fund may hold securities
of companies with prospects of sustained earnings growth and/or companies with
a cyclical earnings record if it is felt these offer attractive investment
opportunities. Typically, the Fund invests in middle- and larger-sized compa-
nies, though it does invest in smaller companies whose securities may reasona-
bly be expected to appreciate. The Fund's investments are spread broadly among
different industries. The Fund may hold issues traded over-the-counter as well
as those listed on one or more national securities exchanges, and the Fund may
make investments in foreign securities although management intends to limit
such investments to 10% of the Fund's assets.

 Smith Barney Fundamental Value Fund Inc.'s investment objective is long-term
capital growth. Current income is a secondary objective. The Fund seeks to
achieve its primary objective by investing in a diversified portfolio of com-
mon stocks and common stock equivalents and, to a lesser extent, in bonds and
other debt instruments. The Fund's investment emphasis is on securities that
are undervalued in the marketplace and, accordingly, have above-average poten-
tial for capital growth. In general, the Fund invests in securities of compa-
nies that are temporarily unpopular among investors but which MMC regards as
possessing favorable prospects for earnings growth and/or improvements in the
value of their assets and, consequently, as having a reasonable likelihood of
experiencing a recovery in market price. 

 Smith Barney Special Equities Fund, an investment portfolio of Smith Barney
Investment Funds Inc., seeks long-term capital appreciation by investing in
equity securities (common stocks or securities that are convertible into or
exchangeable for such stocks, including warrants) that MMC believes to have
superior appreciation potential. The Fund invests primarily in equity securi-
ties of secondary growth companies, generally not within the S&P 500, as iden-
tified by MMC. These companies may not have reached a fully mature 
 
                                                                             15
<PAGE>
 
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)

stage of earnings growth, since they may still be in the developmental stage,
or may be older companies that appear to be entering a new stage of more rapid
earnings progress due to factors such as management change or development of
new technology, products or markets. A significant number of these companies
may be in technology areas, including health care related sectors, and may have
annual sales of less than $300 million. The Fund may also choose to invest in
some relatively unseasoned stocks, i.e., securities issued by companies whose
market capitalization is under $100 million. The Fund also may invest in small
capitalization companies representative of the benchmarks against which the
Fund's performance is frequently judged by utilizing an actively managed quan-
titative investment strategy to isolate securities that are believed to have a
high probability of outperforming their respective industry/sector peer groups.
In implementing this strategy MMC is supported by investment professionals,
including a team that is quantitatively oriented. Investing in smaller, newer
issuers generally involves greater risk than investing in larger, more estab-
lished issuers. 

 Smith Barney Contrarian Fund, an investment portfolio of Smith Barney Invest-
ment Funds Inc., has as its investment objective long term growth of capital.
The Fund attempts to achieve its objective by investing primarily in underval-
ued or out of favor common stock and other securities, including debt securi-
ties that are convertible into common stock and that are currently price
depressed. Such securities might typically be valued at the low end of their
52-week trading range. Although under normal circumstances the Fund's portfolio
will primarily consist of these securities, the Fund may also invest in pre-
ferred stocks and warrants when MMC perceives an opportunity for capital growth
from such securities. The Fund may from time to time enter into futures con-
tracts, write call options and purchase put options. 

 The Large Cap Value Fund, an investment portfolio of Smith Barney Funds, Inc.,
seeks current income and long-term growth of capital. The Fund invests primar-
ily in common stocks of companies having a market capitalization of at least $5
billion that are considered by MMC (i) to be undervalued by the marketplace,
(ii) to offer potential opportunities not yet recognized by the marketplace, or
(iii) to have been out of favor in the marketplace but that are poised to turn
around because of a new management team, product or business strategy. Tempo-
rary defensive investments or a higher percentage of debt securities may be
held when deemed advisable by MMC. In the selection of common stock invest-
ments, emphasis is generally placed on issues with established dividend records
as well as potential for price appreciation. From time to time, however, a por-
tion of the assets may be invested in non-dividend paying stocks. The Fund may
make investments in foreign securities, though management currently intends to
limit such investments to 5% of the Fund's assets, and an additional 10% of its
assets may be invested in American Depository Receipts ("ADRs") representing
shares in foreign securities that are traded in U.S. securities markets. 

 Smith Barney Large Cap Blend Fund, an investment portfolio of Smith Barney
Equity Funds, seeks long-term capital growth by investing primarily in the
equity securities of large capitalization companies with market
capitalizations greater than $5 billion
at the time of investment that exhibit growth and/or
value attributes. When selecting stocks with growth potential,
MMC will evaluate the specific financial characteristics of the
issuer such as historical and forecasted earnings growth, sales
growth, profitability and return on equity.  When
selecting stocks with value characteristics, MMC will typically be looking
at companies that are perhaps growing more slowly but whose valuation
may be below average relative to earnings and/or assets.
The Fund may also invest up to 20% in the securities of foreign
issuers, including ADRs or European Depository Receipts ("EDRs"). Under normal
market conditions, the Fund will invest substantially all, but not less than
65%, of its assets in equity securities. 

 Smith Barney Large Capitalization Growth Fund, an investment portfolio of
Smith Barney Investment Trust, seeks long term growth of capital by investing
in equity securities of companies with large market capitalizations. The Fund
attempts to achieve its investment objective by investing primarily in equity
securities consisting of common stocks which are believed to afford attractive
opportunities for investment growth. The core holdings of the Fund are large
capitalization companies that are dominant in their industries, global in scope
and have a long history of performance. The Fund normally invests at least 65%
of its total assets in these securities. The Fund does have the flexibility,
however, to invest the balance in companies with other market capitalizations.
The Fund defines large market capitalization companies as those having $5 bil-
lion or more market capitalization at the time of the Fund's investment. Compa-
nies whose capitalization falls below this level after purchase will continue
to be considered large market capitalization companies for purposes of the 65%
policy. 

 Under normal market conditions, the majority of the Fund's portfolio will con-
sist of common stocks, securities convertible into common stock and rights to
subscribe for common stock. The Fund may also contain money market instruments
for cash management purposes such as U.S. government securities, repurchase
agreements, and time deposits. 

 Concert Peachtree Growth Fund seeks an investment objective of capital appre-
ciation by investing in securities believed to have above average potential for
capital appreciation. In attempting to achieve the Fund's investment objective,
the Fund will use a disciplined approach to identify equity securities of com-
panies having prospects of strong, sustainable earnings growth and that are
believed to afford attractive opportunities for stock price appreciation. This
disciplined approach involves computer-aided, quantitative analysis supported
by fundamental research. The Fund selects stocks for the portfolio by sorting a
universe of 1500 stocks into deciles based on 
 
16
<PAGE>
 
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)

earnings and other valuation characteristics. Those stocks sorted into the top
two deciles are further analyzed quantitatively and fundamentally to determine
if they are attractive investments. In addition to determining which stocks may
be attractive investments for the

Fund, this analysis is used to determine if a particular stock held in the
Fund's portfolio continues to be an attractive investment and stocks appearing
in the bottom two deciles are sold. Although the Fund may invest in the stocks
of smaller capitalized companies, the Fund's assets will be invested primarily
in the stock of mid- and larger-capitalized companies. 

 MMC uses a flexible management style to select what it believes to be unusu-
ally attractive growth investments on an individual company basis. Such securi-
ties will typically be issued by small capitalization companies, larger compa-
nies with established records of growth in sales or earnings, and companies
with new products, new services, or new processes. The Fund may also invest in
companies in cyclical industries during periods when their securities appear
overly depressed and therefore attractive for capital appreciation. In addition
to common stocks of companies, they may invest in securities convertible into
or exchangeable for common stocks, such as convertible preferred stocks or con-
vertible debentures, and warrants. 

 Smith Barney Small Cap Blend Fund, Inc. seeks long term capital appreciation
by investing primarily (at least 65% of its total assets) in the common stocks
of U.S. companies with relatively small market capitalizations at the time of
investment. Companies with relatively small market capitalization are defined
as those which fall in the lowest 25% of market capitalization of publicly
traded companies in the U.S. with market values above $100 million. TIMCO, the
investment manager to the Fund, will select stocks based on a disciplined quan-
titative screening process that seeks a combination of attractive relative
value and earnings growth. 

 In order to provide consistent relative performance, the Fund will hold a
portfolio that is comparable to the Russell 2500 Stock Index in terms of over-
all risk, economic sector weightings, and market capitalization. The Russell
2500 is a broad based index of the smaller cap segment of the U.S. stock mar-
ket. By linking its investment strategy to the Russell 2500 Stock Index, the
Fund will provide diversified exposure to the universe of stocks that comprise
the lowest 25% of market capitalization of publicly traded companies in the
U.S. with market values of greater that $100 million. However, the Fund is not
an index fund and is not limited to investing in the stocks that comprise the
Russell 2500 Stock Index. Over time, the Fund is expected to exhibit perfor-
mance volatility that is similar to that of the Russell 2500 Stock Index. Of
course, there can be no assurance that the Fund's total return, before or after
expenses, will match or exceed that of the Russell 2500 Stock Index. 

 Smith Barney Natural Resources Fund Inc. seeks long-term capital appreciation
by investing primarily in "Natural Resource Investments." Natural Resource
Investments are defined as equity and debt securities of issuers which: (1) own
or process natural resources, such as precious metals, other minerals, water,
timberland, agricultural commodities and forest products; (2) own or produce
sources of energy such as oil, natural gas, coal, uranium, geothermal, oil
shale and biomass; (3) participate in the exploration and development, trans-
portation, distribution and/or processing of natural resources; (4) own or con-
trol oil, gas, or other mineral leases, rights or royalties; (5) provide
related services or supplies, such as drilling, well servicing, chemicals,
parts and equipment; (6) develop or participate in energy-efficient technolo-
gies; and (7) are involved in the upgrading or processing of raw commodities
into intermediate products. The Fund may also invest in gold bullion and gold
coins. (A company is considered a "Natural Resources Investment" when it
derives at least 50% of its total revenue from a business or activity described
above.) 
 
 Under normal market conditions, the Fund will invest at least 65% of its
assets in Natural Resource Investments. Up to 35% of the Fund's assets may be
invested in companies not in the natural resources area, investment grade cor-
porate debt securities, U.S. Government securities and, for cash management
purposes, money market instruments. For temporary defensive purposes, the Fund
may invest in excess of 35% in money market instruments.
 
 The Fund may utilize up to 10% of its assets to purchase put options on secu-
rities it owns and up to an additional 10% of its assets to purchase call
options on securities it may acquire in the future. The Fund may purchase only
put options that are traded on a regulated exchange. It also may purchase and
write put and call options on domestic and foreign stock indexes to hedge
against risks of market-wide movements affecting that portion of its assets
invested in the country whose stocks are subject to the hedges.

 The composition of the portfolio of the Fund will vary depending on the deter-
mination of MMC, of how best to achieve long-term capital appreciation. Equity
securities in which the Fund may invest include common stocks, preferred
stocks, convertible securities and warrants. Debt securities the Fund may
acquire include bonds, notes and debentures of companies and governments. The
Fund may invest in debt securities when MMC believes they will enhance the
Fund's ability to achieve long-term capital appreciation. The Fund may invest
in fixed-income securities that are rated as low as B by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P") or if
unrated, are deemed by MMC to be of comparable quality. The medium- and lower-
rated securities in which the Fund may invest, some of which have speculative
characteristics, may be subject to greater market fluctuation and greater risk
of loss of income or principal than higher rated securities. 

 Because issuers of Natural Resource Investments often are located outside the
United States, a significant portion of the Fund's investments may consist of
securities of foreign issuers. The percentage of assets invested in particular
countries or regions will change from time to time in accordance with the judg-
ment of MMC, which may be based on, among other things, consideration of the
political stability and economic outlook of these countries or regions. 
 
                                                                              17
<PAGE>
 
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
 
 
 Smith Barney Premium Total Return Fund, an investment portfolio of Smith Bar-
ney Income Funds, seeks to provide shareholders with total return, consisting
of long-term capital appreciation and income, by investing primarily in a
diversified portfolio of dividend-paying common stocks. The Fund also purchases
put and call options and writes covered put and call options on securities it
holds and on stock indexes primarily as a hedge to reduce investment risk.
Because the Fund seeks total return by emphasizing investments in dividend-
paying common stocks, it will not have as much investment flexibility as total
return funds that may pursue their objective by investing in both income and
equity stocks without such an emphasis. The Fund also may invest up to 10% of
its assets in: (a) securities rated less than investment grade by Moody's or
S&P or unrated securities of comparable quality; (b) interest-paying debt secu-
rities, such as U.S. government securities; and (c) other securities, including
convertible bonds, convertible preferred stock and warrants.

 Smith Barney Hansberger Global Value Fund, seeks long-term capital growth by
investing primarily in equity securities of companies in any country including
the United States, which in the opinion of MMC and Hansberger Global Investors,
Inc. ("Hansberger") are undervalued. Income will be an incidental considera-
tion. The Fund seeks to invest in companies whose securities are trading at the
greatest discount to future earnings, cash flow and/or net asset value and
Hansberger utilizes proprietary valuation screens, internal and external
research sources and other fundamental analysis to identify those securities
that appear to be undervalued. Under normal market conditions, the Fund will
invest its assets in at least three countries, which may include the United
States. 

 Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities, rated or unrated, such as con-
vertible bonds selling at a discount, when Hansberger believes the potential
for appreciation will equal or exceed that available from investments in common
stock. The Fund may also invest in warrants or rights to subscribe to or pur-
chase such securities and sponsored or unsponsored ADRs, EDRs, Global Deposi-
tory Receipts ("GDRs") and other depository receipts. 

 Smith Barney Hansberger Global Small Cap Value Fund, seeks long term capital
growth by investing primarily in equity securities of U.S. and foreign issuers
with relatively small market capitalizations which in the opinion of MMC and
Hansberger are undervalued. Income will be an incidental consideration. Under
normal market conditions, the Fund will invest at least 65% of the value of its
total assets in (1) companies located in developing countries with individual
market capitalizations of less than $750 million U.S. dollars (at the time of
purchase) and (2) companies located in developed countries with individual mar-
ket capitalizations of less than $1.5 billion U.S. dollars (at the time of pur-
chase). Under normal market conditions the Fund will invest its assets in at
least three countries, which may include the United States. 

 Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities, rated or unrated, such as con-
vertible bonds selling at a discount, when Hansberger believes the potential
for appreciation will equal or exceed that available from investments in common
stock. The Fund may also invest in warrants or rights to subscribe to or pur-
chase such securities and sponsored or unsponsored ADRs, EDRs, GDRs and other
depository receipts. 

 The Emerging Markets Portfolio, an investment portfolio of Smith Barney World
Funds, Inc., seeks long term capital appreciation on its assets through a port-
folio invested primarily in securities of emerging country issuers (consisting
of dividend and non-dividend paying common stocks, preferred stocks, convert-
ible securities and rights and warrants to such securities). The Fund will also
invest in debt securities having a high potential for capital appreciation,
especially in countries where direct equity investment is not permitted. Under
normal conditions, at least 70% of the Fund's assets will be invested in equity
securities. For purposes of its investment objective, the Fund considers as
"emerging" all countries other than the United States, Canada, Ireland, the
United Kingdom, Sweden, Norway, Finland, Denmark, Holland, Germany, Switzer-
land, Belgium, France, Italy, Spain, Japan, Australia, Austria and Luxembourg.
The Fund is a non-diversified portfolio, but will generally invest its assets
broadly among countries and will normally have at least 65% of its assets
invested in issuers in not less than three different countries. 
 
 The Fund also may invest in debt securities of issuers in countries having
smaller capital markets. Capital appreciation in debt securities may arise as a
result of a favorable change in relative foreign exchange rates, in relative
interest rate levels, or in the creditworthiness of issuers. The Fund will not
seek to benefit from anticipated short-term fluctuations in currency exchange
rates. The Fund may invest in debt securities with relatively high yields (as
compared to other debt securities meeting the Fund's investment criteria), not-
withstanding that the Fund may not anticipate that such securities will experi-
ence substantial capital appreciation. The Fund also may invest in debt securi-
ties issued or guaranteed by foreign governments (including foreign states,
provinces and municipalities) or their agencies and instrumentalities, issued
or guaranteed by supranational organizations or issued by foreign corporations
or financial institutions.
 
 The International Equity Portfolio, an investment portfolio of Smith Barney
World Funds, Inc., seeks a total return on its assets from growth of capital
and income. Under normal market conditions, the Fund invests at least 65% of
its assets in a diversified portfolio of equity securities consisting of divi-
dend and non-dividend paying common stock, preferred stock, convertible debt
and rights and warrants to such securities and up to 35% of the Fund's assets
in bonds, notes and debt securities (consisting of securities issued in the
Eurocurrency markets or obligations of the U.S. or foreign governments and
their political subdivisions) of established non-U.S. issuers.
 
18
<PAGE>
 
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
 
Investments may be made for capital appreciation or for income or any combina-
tion of both for the purpose of achieving a higher overall return than might
otherwise be obtained solely from investing for growth of capital or for
income. There is no limitation on the percent or amount of the Fund's assets
that may be invested for growth or income and, therefore, from time to time the
investment emphasis may be placed solely or primarily on growth of capital or
solely or primarily on income. The Fund may borrow up to 25% of the value of
its assets for investment purposes, which involves certain risk considerations.
 
 The Fund will generally invest its assets broadly among countries and will
normally have represented in the portfolio business activities in not less than
three different countries. The Fund will normally invest at least 65% of its
assets in companies organized or governments located in any area of the world
other than the U.S. However, under unusual economic or market conditions as
determined by the investment adviser, for defensive purposes the Fund may tem-
porarily invest all or a major portion of its assets in U.S. government securi-
ties or in debt or equity securities of companies incorporated in and having
their principal business activities in the U.S.

 European Portfolio, an investment portfolio of Smith Barney World Funds, Inc.
seeks long-term capital appreciation by investing primarily in the equity secu-
rities of issuers based in European countries including countries located in
Western Europe ( France, Germany and the United Kingdom) and Eastern Europe
(Czech Republic, Poland and the countries of the former Soviet Union). The Fund
seeks to identify countries and industries with above-average growth rates, the
assessment of currency factors and the identification of companies in those
countries and industries with above-average growth in earnings. In addition to
investing up to 65% of its assets in equity securities, the Fund may invest up
to 35% of its assets in other kinds of securities such as convertible bonds,
warrants, Samurai and Yankee bonds, ADRs and money market securities. 

 Pacific Portfolio, an investment portfolio of Smith Barney World Funds, Inc.
seeks long-term capital appreciation through investing primarily in equity
securities of companies in Australia, Hong Kong, India, Indonesia, Japan,
Malaysia, New Zealand, Pakistan, the People's Republic of China, Singapore,
Thailand, and Taiwan ("Asian Pacific Countries"). The Fund's investments will
consist primarily of 1) securities traded principally on stock exchanges in
Asia Pacific Countries, 2) securities of companies that derive 50% or more of
their total revenue from either goods produced, sales made, or services per-
formed in the Asia Pacific Countries, and 3) securities (including ADRs) of
companies organized under the laws of an Asia Pacific Country that are publicly
traded on recognized securities exchanges outside of the Asia Pacific Coun-
tries. 
 
FIXED INCOME FUNDS The following Underlying Smith Barney Funds invest primarily
in fixed income securities, including the money market fund in which each Port-
folio may invest and which may serve as the cash reserve portion of each Port-
folio.

 Smith Barney High Income Fund, an investment portfolio of the Smith Barney
Income Funds, seeks to provide shareholders with high current income. Although
growth of capital is not an investment objective of the Fund, MMC may consider
potential for growth as one factor, among others, in selecting investments for
the Fund. The Fund will seek high current income by investing, under normal
circumstances, at least 65% of its assets in high risk, high-yielding corporate
bonds, debentures and notes denominated in U.S. dollars or foreign currencies.
Up to 40% of the Fund's assets may be invested in fixed-income obligations of
foreign issuers, and up to 20% of its assets may be invested in common stock or
other equity-related securities, including convertible securities, preferred
stock, warrants and rights. Securities purchased by the Fund generally will be
rated in the lower rating categories of recognized rating agencies, as low as
Caa by Moody's or D by S&P, or in unrated securities that MMC deems of compara-
ble quality. The lower-rated bonds are commonly known as "junk bonds". Bonds of
this type are subject to a greater risk of loss of principal and interest. How-
ever, the Fund will not purchase securities rated lower than B by both Moody's
and S&P unless, immediately after such purchase, no more than 10% of its total
assets are invested in such securities. The Fund may hold securities with
higher ratings when the yield differential between low-rated and higher-rated
securities narrows and the risk of loss may be reduced substantially with only
a relatively small reduction in yield. The Fund also may invest in higher-rated
securities when MMC believes that a more defensive investment strategy is
appropriate in light of market or economic conditions. 
 
 Smith Barney Investment Grade Bond Fund, an investment portfolio of Smith Bar-
ney Investment Funds Inc., seeks to provide as high a level of current income
as is consistent with prudent investment management and preservation of capi-
tal. Except when in a temporary defensive investment position, the Fund intends
to maintain at least 65% of its assets invested in bonds. The Fund seeks to
achieve its objective by investing in any of the following securities: corpo-
rate bonds rated Baa or better by Moody's or BBB or better by S&P; U.S. govern-
ment securities; commercial paper issued by domestic corporations and rated
Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P, or, if not rated, issued by
a corporation having an outstanding debt issue rated Aa or better by Moody's or
AA or better by S&P; negotiable bank certificates of deposit and bankers'
acceptances issued by domestic banks (but not their foreign branches) having
total assets in excess of $1 billion; and high-yielding common stocks and war-
rants. A reduction in the rating of a security does not require the sale of the
security by the Fund.
 
 Smith Barney Government Securities Fund, an investment portfolio of Smith Bar-
ney Investment Funds Inc., seeks high current return by investing in obliga-
tions of, or guaranteed by, the U.S. government, its agencies or instrumentali-
ties (including, without limitation,
 
                                                                              19
<PAGE>
 
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
 
Treasury bills and bonds, mortgage participation certificates issued by the
Federal Home Loan Mortgage Corporation ("FHLMC") and mortgage-backed securities
issued by the Government National Mortgage Association ("GNMA"). The Fund may
invest up to 5% of its net assets in U.S. government securities for which the
principal repayment at maturity, while paid in U.S. dollars, is determined by
reference to the exchange rate between the U.S. dollar and the currency of one
or more foreign countries. In addition, the Fund may borrow money (up to 25% of
its total assets) to increase its investments, thereby leveraging its portfolio
and exaggerating the effect on net asset value of any increase or decrease in
the market value of the Fund's securities. Except when in a temporary defensive
investment position, the Fund intends to maintain at least 65% of its assets
invested in U.S. government securities (including futures contracts and options
thereon and options relating to U.S. government securities).

 The Short-Term U.S. Treasury Securities Fund, an investment portfolio of Smith
Barney Funds, Inc., seeks current income, preservation of capital and liquidi-
ty. The Fund seeks to achieve its objective by investing its assets in U.S.
Treasury securities backed by the full faith and credit of the U.S. government.
Shares of the Fund are not issued, insured or guaranteed, as to value or yield,
by the U.S. government or its agencies or instrumentalities. In an effort to
minimize fluctuations in market value of its portfolio securities, the Fund is
expected to maintain a dollar-weighted average maturity of approximately three
years. Pending direct investment in U.S. Treasury debt securities, the Fund may
enter into repurchase agreements secured by such securities in an amount up to
10% of the value of its total assets. The Fund may, to a limited degree, engage
in short-term trading to attempt to take advantage of short-term market varia-
tions, or may dispose of a portfolio security prior to its maturity if it
believes such disposition advisable or it needs to generate cash to satisfy
redemptions. 

 The Board of Directors of Smith Barney Funds, Inc. has approved of changes in
the investment policies of the Fund and a related name change. It is antici-
pated that these changes will become effective on or about July 2, 1998. 

 The name of the Fund will change to "Short-Term High Grade Bond Fund." The
Fund's investment objective will remain current income, preservation of capital
and liquidity; however, the Fund will be authorized to invest in investment-
grade corporate debt securities, bank obligations and a variety of U.S. Govern-
ment Securities (including mortgage-backed securities and other U.S. government
agency securities) in seeking to achieve its objective. 
 
 Smith Barney Managed Governments Fund Inc. seeks high current income consis-
tent with liquidity and safety of capital. The Fund invests substantially all
of its assets in U.S. government securities and, under normal circumstances,
the Fund is required to invest at least 65% of its assets in such securities.
The Fund's portfolio of U.S. government securities consists primarily of mort-
gage-backed securities issued or guaranteed by GNMA, the Federal National Mort-
gage Association ("FNMA") and FHLMC. Assets not invested in such mortgage-
backed securities are invested primarily in direct obligations of the United
States Treasury and other U.S. government securities. The weighted average
maturity of the Fund's portfolio will vary from time to time and the Fund may
invest in U.S. government securities of all maturities: short-term, intermedi-
ate-term and long-term. The Fund may invest without limit in securities of any
issuer of U.S. government securities, and may invest up to an aggregate of 15%
of its total assets in securities with contractual or other restrictions on
resale and other instruments that are not readily marketable (such as repur-
chase agreements with maturities in excess of seven days). The Fund may invest
up to 5% of its net assets in U.S. government securities for which the princi-
pal repayment at maturity, while paid in U.S. dollars, is determined by refer-
ence to the exchange rate between the U.S. dollar and the currency of one or
more foreign countries.

 Smith Barney Diversified Strategic Income Fund, an investment portfolio of
Smith Barney Income Funds, seeks high current income primarily through invest-
ment in fixed-income securities. The Fund attempts to achieve its objective by
allocating and reallocating its assets primarily among various types of fixed-
income securities selected by MMC based on its analysis of economic and market
conditions and the relative risks and opportunities of particular securities.
The types of fixed-income securities among which the Fund's assets will be pri-
marily allocated are: obligations issued or guaranteed as to principal and
interest by the United States government; mortgage-related securities issued by
various governmental and non-governmental entities; domestic and foreign corpo-
rate securities; and foreign government securities. Under normal conditions, at
least 65% of the Fund's assets will be invested in fixed-income securities,
which includes non-convertible preferred stocks. The Fund generally will invest
in intermediate- and long-term fixed-income securities with the result that,
under normal market conditions, the weighted average maturity of the Fund's
securities is expected to be between five and 12 years. 

 Mortgage-related securities in which the Fund may invest include mortgage
obligations collateralized by mortgage loans or mortgage pass-through certifi-
cates. Mortgage-related securities held by the Fund generally will be rated no
lower than Aa by Moody's or AA by S&P or, if not rated, of equivalent invest-
ment quality as determined by MMC. The Fund may invest up to 35% of its assets
in corporate fixed-income securities of domestic issuers rated Ba or lower by
Moody's or BB or lower by S&P or in nonrated securities deemed by MMC to be of
comparable quality. The Fund may invest in fixed-income securities rated as low
as Caa by Moody's or CCC by S&P. 
 
 In general, the Fund may invest in debt securities issued by foreign govern-
ments or any of their political subdivisions that are considered stable by
Smith Barney Global Capital Management, Inc., the Fund's subadviser. Up to 5%
of the Fund's assets may be
 
20
<PAGE>
 
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
 
invested in foreign securities issued by countries with developing economies.
The Fund may also invest in securities issued by supranational organizations.

 The Global Government Bond Portfolio, an investment portfolio of Smith Barney
World Funds, Inc., seeks as high a level of current income and capital appreci-
ation as is consistent with its policy of investing principally in high quality
bonds of the U.S. and foreign governments. Under normal market conditions, the
Fund invests at least 65% of its total assets in bonds issued or guaranteed by
the U.S. or foreign governments (including foreign states, provinces, cantons
and municipalities) or their agencies, authorities or instrumentalities denomi-
nated in various currencies, including U.S. dollars, or in multinational cur-
rency units, such as the European Currency Unit. Except with respect to govern-
ment securities of less developed countries, the Fund invests in foreign gov-
ernment securities only if the issue or the issuer thereof is rated in the two
highest rating categories by Moody's or S&P, or if unrated, are of comparable
quality in the determination of MMC. 

 Under normal circumstances, the Fund may invest up to 35% of its total assets
in debt obligations (including debt obligations convertible into common stock)
of U.S. or foreign corporations and financial institutions and supranational
entities. Any non-governmental investment would be limited to issues that are
rated A or better by Moody's or S&P, or if not rated, determined to be of com-
parable quality. 

 The Fund is a non-diversified portfolio and currently contemplates investing
primarily in obligations of the U.S. and of developed nations (i.e., industri-
alized countries) that MMC believes to pose limited credit risks. These coun-
tries currently are Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, the United Kingdom and Germany. Invest-
ments may be made from time to time in government securities, including loan
assignments and loan participations, of less developed countries. Such coun-
tries currently include Argentina, Brazil, Bulgaria, Czech Republic, Ecuador,
Hungary, Indonesia, Lithuania, Malaysia, Mexico, Peru, Philippines, Poland,
Russia, Slovakia, South Africa, Thailand, Turkey, Uruguay and Venezuela. Coun-
tries may be added to or deleted from this list as economic and political con-
ditions warrant. Historical experience indicates that the markets of less
developed countries have been more volatile than the markets of the more mature
economies of developed countries; however, such markets often provide rates of
return to investors commensurate with the credit and market risks. MMC does not
intend to invest more than 10% of the Fund's assets in the government securi-
ties of less developed countries and will not invest more than 5% of the Fund's
assets in the government securities of any one such country. Such investments
may be unrated or rated below investment grade or may be in default. Securities
rated below investment grade (and comparable unrated securities) are the equiv-
alent of high yield, high risk bonds. Such securities are regarded as predomi-
nantly speculative with respect to the issuer's capacity to pay interest and
repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse business, financial, economic, and political
conditions, whether or not occurring within the issuers' borders. Under normal
market conditions the Fund invests at least 65% of its assets in issues of not
less than three different countries; issues of any one country (other than the
United States) will represent no more than 45% of the Fund's total assets. 
 
 The Cash Portfolio is an investment portfolio of Smith Barney Money Funds,
Inc., a money market fund that seeks maximum current income and preservation of
capital. The Fund may invest in domestic and foreign money market securities
consisting of bank obligations and high quality commercial paper, corporate
obligations and municipal obligations, in addition to U.S. government obliga-
tions and related repurchase agreements. The Fund intends to maintain at least
25% of its total assets invested in obligations of domestic and foreign banks.
Shares of the Fund are not insured or guaranteed by the U.S. government.
 
 The Fund has adopted certain investment policies to assure that, to the extent
reasonably possible, the Fund's price per share will not change from $1.00,
although no assurance can be given that this goal will be achieved on a contin-
uous basis. In order to minimize fluctuations in market price, the Fund will
not purchase a security with a remaining maturity of greater than 13 months or
maintain a dollar-weighted average portfolio maturity in excess of 90 days (se-
curities used as collateral for repurchase agreements are not subject to these
restrictions).

 The Fund's investments are limited to U.S. dollar-denominated instruments that
have received the highest rating from the "Requisite NRSROs," securities of
issuers that have received such rating with respect to other short-term debt
securities and comparable unrated securities. "Requisite NRSROs" means (a) any
two nationally recognized statistical ratings organizations ("NRSROs") that
have issued a rating with respect to a security or class of debt obligations of
an issuer, or (b) one NRSRO, if only one NRSRO has issued such a rating at the
time that the Fund acquires the security. The NRSROs currently designated as
such by the SEC are S&P, Moody's, Duff and Phelps Credit Rating Co., Fitch
IBCA, Inc. and Thomson BankWatch. 

 For purposes of the equity/fixed income fund allocation targets and ranges
applicable to each Portfolio (see page 12 above), each of the following Under-
lying Smith Barney Funds is considered to be an equity fund with respect to 50%
of a Portfolio's investment in such Fund and an income fund with respect to the
remaining 50% of such Portfolio's investment. 
 
 The Smith Barney Convertible Fund, an investment portfolio of Smith Barney
Income Funds, seeks current income and capital appreciation by investing in
convertible securities and in combinations of nonconvertible fixed-income secu-
rities and warrants or call
 
                                                                              21
<PAGE>
 
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)

options that together resemble convertible securities ("synthetic convertible
securities"). Under normal circumstances, the Fund will invest at least 65% of
its assets in convertible securities, but is not required to sell securities
to conform to this limitation and may retain on a temporary basis securities
received upon the conversion or exercise of such securities. The Fund will not
invest in fixed-income securities that are rated lower than B by Moody's or
S&P or, if unrated, deemed by MMC to be comparable to securities rated lower
than B. The Fund may invest up to 35% of its assets in synthetic convertible
securities and in equity and debt securities that are not convertible into
common stock and, for temporary defensive purposes, may invest in these secu-
rities without limitation. 

 The Smith Barney Balanced Fund, an investment portfolio of Smith Barney
Income Funds, seeks income and capital appreciation by investing approximately
60% of its assets in equity securities and approximately 40% of its assets in
fixed income securities. 

 The equity portion of the Fund will purchase common stocks, preferred stocks,
warrants and securities convertible into common stocks, which are deemed to
afford attractive opportunities for capital appreciation and income. The Fund
may invest in securities of companies with attractive relative valuations
based on underlying assets or earnings potential, as well as the securities of
companies with favorable growth prospects. In analyzing securities for invest-
ment, MMC will consider many factors including, but not limited to, historical
and future earnings and growth potential, current market valuation, management
strategy and economic and financial factors that may affect the price of the
securities. The Fund will invest in a broadly diversified portfolio across a
wide range of industries consisting of middle to large capitalization compa-
nies, though it may on occasion invest in smaller capitalized companies when,
in the opinion of MMC, such companies offer attractive capital appreciation
opportunities. 

 The fixed-income portion of the Fund will invest in a diversified portfolio
of debt and other fixed-income securities, which are believed to afford oppor-
tunities for income and capital appreciation. Fixed-income securities in which
the Fund will invest include obligations of the U.S. government, its agencies
and instrumentalities, corporate securities (including bonds, notes, preferred
and convertible issues), mortgage backed and asset-backed securities. The
fixed-income management strategies will be driven by the shape of the yield
curve and yield spread analysis. There are no maturity restrictions on the
fixed- income securities in which the Fund invests. Under normal market condi-
tions the weighted average portfolio maturity for the fixed-income portfolio
will be in the 5 to 15 year range. 

 The Fund may invest up to 25% of its total assets in fixed-income securities
rated below investment grade by a nationally recognized statistical rating
organization. Such securities are commonly referred to as "junk bonds." The
Fund may also hold, from time to time, securities rated Caa by Moody's or CCC
by S&P or, if unrated or rated by other nationally recognized statistical rat-
ing organizations, securities of comparable quality as determined by MMC.
While this portion of the securities held by the Fund is expected to provide
greater income and, possibly, opportunity for greater gain than investments in
more highly rated securities, it may be subject to greater risk of loss of
income and principal and is more speculative in nature. 

 The International Balanced Portfolio, an investment portfolio of Smith Barney
World Funds, Inc., seeks a competitive total return on its assets from growth
of capital and income through a portfolio invested primarily in securities of
established non-U.S. issuers. The Fund may borrow up to 15% of the value of
its assets for investment purposes, which involves certain risks. Under normal
market conditions, the Fund will invest its assets in an international portfo-
lio of equity securities (consisting of dividend and non-dividend paying com-
mon stocks, preferred stocks, convertible securities, ADRs and rights and war-
rants to such securities) and debt securities (consisting of corporate debt
securities, sovereign debt instruments issued by governments or governmental
entities, including supranational organizations and U.S. and foreign money
market instruments). The Fund attempts to achieve a balance between equity and
debt securities. However, the proportion of equity and debt held by the Fund
at any one time will depend on MMC's views on current market and economic con-
ditions. Under normal conditions, no more than 70%, nor less than 30%, of the
Fund's assets will be invested in either equity or debt securities; however,
there is no limitation on the percentage or amount of the Fund's assets that
may be invested for growth or income. 
 
 The Fund is a non-diversified portfolio but will generally invest its assets
broadly among countries and will normally have at least 65% of its assets
invested in business activities in not less than three different countries
outside of the U.S. The Fund will invest in a broad range of industries and
sectors and will mainly invest in securities issued by companies with market
capitalization of at least $50,000,000. The Fund may invest in companies orga-
nized or governments located in any area of the world. However, under unusual
economic or market conditions as determined by the investment adviser, for
defensive purposes the Fund may temporarily invest all or a major portion of
its assets in U.S. government securities, debt or equity securities of compa-
nies incorporated in and having their principal business activities in the
U.S. or in U.S. as well as foreign money market instruments and equivalents.

 The debt securities in which the Fund invests generally range in maturity
from two to ten years. Debt securities of developed foreign countries must be
rated as investment grade (or deemed by MMC to be of comparable quality) at
the time of purchase. Debt securities of emerging market countries may be
rated below investment grade and could include securities that are in default
as to payments of principal or interest. Up to 25% of the total assets of the
Fund may be invested in securities of emerging market countries. 
 
22
<PAGE>
 
DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED)
 
 
 PERFORMANCE OF UNDERLYING SMITH BARNEY FUNDS

 The following chart shows the average annual total returns (unaudited) for the
longest outstanding class of shares for each of the Underlying Smith Barney
Funds in which the Portfolios may invest (other than the Cash Portfolio of
Smith Barney Money Funds, Inc.) for the most recent one-, five- and ten-year
periods (or since inception if shorter and giving effect to the maximum appli-
cable sales charges) and the 30-day yields for income-oriented funds, in each
case for the period ended December 31, 1997. 
 
<TABLE>
<CAPTION>
                                                                   AVERAGE ANNUAL
                                                                    TOTAL RETURNS
                                                                       THROUGH                 30-DAY
                               NET ASSETS OF ALL                  DECEMBER 31, 1997          YIELD FOR
                                 CLASSES AS OF                   ----------------------     PERIOD ENDED
                               DECEMBER 31, 1997 INCEPTION        ONE     FIVE    TEN       DECEMBER 31,
 UNDERLYING SMITH BARNEY FUND      ($000'S)        DATE    CLASS  YEAR    YEARS  YEARS          1997
--------------------------------------------------------------------------------------------------------
<S>                            <C>               <C>       <C>   <C>      <C>    <C>        <C>
Smith Barney Aggressive
 Growth Fund Inc.                  $ 798,659     10/24/83    A    22.01 %  9.38%  15.64 %        --
Smith Barney Appreciation
 Fund Inc.                         4,188,695     03/10/70    A    19.95   14.69   14.64          --
Smith Barney Equity
 Funds:
 Smith Barney Large Cap
  Blend Fund                         429,560     11/06/92     A   16.57   13.49   13.26 (+)      --
Smith Barney Fundamental
 Value Fund Inc.                   1,569,046     11/12/81    A     9.49   15.29   14.99          --
Smith Barney Funds, Inc.:
 Large Cap Value Fund              1,010,052     01/01/72    A    21.45   15.87   14.22          --
 Short-Term U.S. Treasury
  Securities Fund                    100,885     11/11/91    A     6.73    5.20    5.67 (+)     5.41%
Smith Barney Income
 Funds:
 Smith Barney High Income
  Fund                             1,390,837     09/02/86    B     7.97   10.79    9.68         7.35
 Smith Barney Balanced
  Fund                             1,160,422     03/28/88    B    15.30    9.81    9.91 (+)      --
 Smith Barney Premium
  Total Return Fund                4,094,715     09/16/85    B    19.55   15.72   16.38          --
 Smith Barney Convertible
  Fund                               134,833     09/02/86    B    10.88   10.08   10.26         2.83
 Smith Barney Diversified
  Strategic Income Fund            2,941,695     12/28/89    B     2.60    7.90    7.48 (+)     5.98
Smith Barney Investment
 Funds Inc.:
 Concert Peachtree Growth
  Fund                               224,049     06/30/95    A    (0.10)    --    11.26 (+)      --
 Smith Barney Hansberger
  Global Value Fund                   53,405     12/19/97    A      --      --    (3.51)(+)      --
 Smith Barney Hansberger
  Global Small Cap Value
  Fund                                17,162     12/19/97    A      --      --    (4.72)(+)      --
 Smith Barney Contrarian
  Fund                               960,180     06/30/95    A     7.99     --    10.21 (+)      --
 Smith Barney Special
  Equities Fund                      566,177     12/13/82    B   (11.06)  11.81   10.81          --
 Smith Barney Government
  Securities Fund                    574,256     03/20/84    B     6.32    6.32    8.19         5.91
 Smith Barney Investment
  Grade Bond Fund                    550,179     01/04/82    B    11.94   10.55   10.82         6.43
Smith Barney Investment
 Trust
 Smith Barney Large
  Capitalization Growth
  Fund                               433,696     08/29/97    A      --      --     0.16 (+)      --
Smith Barney Managed
 Governments Fund Inc.               550,549     09/04/84    A     4.54    5.74    7.72         6.36
Smith Barney Natural
 Resources Fund Inc.                 101,818     12/24/86    A   (14.37)   9.06    0.33          --
Smith Barney Small Cap
 Blend Fund, Inc.                    164,253     01/23/90    A    21.81   13.60   10.83 (+)      --
Smith Barney World Funds,
 Inc.:
 International Equity
  Portfolio                        1,260,845     02/18/86    A    (3.18)   9.46   10.59          --
 European Portfolio                   42,421     02/07/94    A    (3.29)    --     9.67 (+)      --
 Pacific Portfolio                     7,325     02/07/94    A   (33.04)    --   (13.37)(+)      --
 Emerging Markets
  Portfolio                           31,835     05/12/95    A   (13.75)    --    (2.16)(+)      --
 International Balanced
  Portfolio                           65,501     08/25/94    A   (11.13)    --     3.00 (+)      --
 Global Government Bond
  Portfolio                          141,191     07/22/91    A     3.31     --     8.19 (+)     4.34
-----------
</TABLE>
+ inception (less than 10 years)
--------------------------------------------------------------------------------

 For the seven-day period ended December 31, 1997, the yield for the Cash Port-
folio of Smith Barney Money Funds, Inc. was 5.09% and the effective yield was
5.22%. 
 
 The performance data relating to the Underlying Smith Barney Funds set forth
above is not, and should not be viewed as, indicative of the future performance
of either the Underlying Smith Barney Funds or the Concert Series. The perfor-
mance reflects the impact of sales charges and other distribution related
expenses that will not be incurred by the Class Y shares of the Underlying
Smith Barney Funds in which the Portfolios will invest.
 
 INVESTMENT POLICIES AND STRATEGIES OF THE UNDERLYING SMITH BARNEY FUNDS
 
 In pursuing their investment objectives and programs, each of the Underlying
Smith Barney Funds is permitted to engage in a wide range of investment poli-
cies. The Underlying Smith Barney Funds' risks are determined by the nature of
the securities held and the investment strategies used by the Funds' adviser.
Certain of these policies are described below and further information about the
investment policies and strategies of the Underlying Smith Barney Funds in
which the Portfolios may invest is contained in the Appendix to this Prospectus
and in the Statement of Additional Information as well as the prospectuses of
the Underlying Smith Barney Funds. Because each Portfolio invests in the Under-
lying Smith Barney Funds, shareholders of each Portfolio will be affected by
these investment policies in direct proportion to the amount of assets each
Portfolio allocates to the Underlying Smith Barney Funds pursuing such poli-
cies.
 
 Securities of Non-U.S. Issuers. The Portfolios will each invest in certain
Underlying Smith Barney Funds that invest all or a portion of their assets in
securities of non-U.S. issuers. These include non-dollar denominated securities
traded outside the U.S. and dollar-denominated securities traded in the U.S.
(such as ADRs). Such investments involve some special risks such as fluctua-
tions in foreign exchange rates, future political and economic developments,
and the possible imposition of exchange controls or other foreign govern-
 
                                                                              23
<PAGE>
 

DESCRIPTION OF UNDERLYING SMITH BARNEY FUNDS (CONTINUED) 
 
mental laws or restrictions. In addition, with respect to certain countries,
there is the possibility of expropriation of assets, repatriation, confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in those countries. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing, and financial
reporting standards and requirements comparable to or as uniform as those of
U.S. companies. Non-U.S. securities markets, while growing in volume, have, for
the most part, substantially less volume than U.S. markets, and securities of
many foreign companies are less liquid and their prices more volatile than
securities of comparable U.S. companies. Transaction costs on non-U.S. securi-
ties markets are generally higher than in the U.S. There is generally less gov-
ernment supervision and regulation of exchanges, brokers and issuers than there
is in the U.S. An Underlying Smith Barney Fund might have greater difficulty
taking appropriate legal action in non-U.S. courts. Dividend and interest
income from non-U.S. securities will generally be subject to withholding taxes
by the country in which the issuer is located and may not be recoverable by the
Underlying Smith Barney Fund or a Portfolio investing in such Fund.
 
 Options and Futures. Certain of the Underlying Smith Barney Funds may enter
into stock index, interest rate and currency futures contracts (or options
thereon, including swaps, caps, collars and floors) as a hedging device, or as
an efficient means of regulating their exposure to various markets. Certain of
the Underlying Smith Barney Funds may also purchase and sell call and put
options. Futures (a type of potentially high-risk derivative) are often used to
manage risk because they enable the investor to buy or sell an asset at a pre-
determined price in the future. The Underlying Smith Barney Funds may buy and
sell futures and options contracts for a number of reasons including: to manage
their exposure to changes in interest rates, stock and bond prices, and foreign
currencies; as an efficient means of adjusting their overall exposure to cer-
tain markets; to adjust the portfolio's duration; to enhance income; and to
protect the value of the portfolio securities. Certain of the Underlying Smith
Barney Funds may purchase, sell or write call and put options on securities,
financial indices, and foreign currencies. Options and futures can be volatile
investments, and involve certain risks. If the adviser to the Underlying Smith
Barney Fund applies a hedge at an inappropriate time or judges market condi-
tions incorrectly, options and futures strategies may lower the Underlying
Smith Barney Fund's return. Further losses could also be experienced if the
options and futures positions held by an Underlying Smith Barney Fund were
poorly correlated with its other investments, or if it could not close out its
positions because of an illiquid secondary market.

 The Smith Barney Natural Resources Fund Inc. may also enter into futures con-
tracts for the purchase and sale of gold, purchase put and call options on
those future contracts and write call options on those futures contracts. The
Smith Barney Natural Resources Fund Inc. will purchase or write options on gold
futures only on a regulated domestic or foreign exchange approved for such pur-
pose by the Commodities Futures Trading Commission. 
 
 Debt Securities. Certain of the Underlying Smith Barney Funds may be affected
by general changes in interest rates, which will result in increases or
decreases in the market value of the debt securities held by the Funds. The
market value of the fixed-income obligations in which the Underlying Smith Bar-
ney Funds may invest can be expected to vary inversely in relation to the
changes in prevailing interest rates and also may be affected by other market
and credit factors.
 
 Certain of the Underlying Smith Barney Funds may invest only in high-quality,
high-grade or investment-grade securities. High quality securities are those
rated in the two highest categories by Moody's (Aaa or Aa) or S&P (AAA or AA).
High-grade securities are those rated in the three highest categories by
Moody's (Aaa, Aa or A) or S&P (AAA, AA or A). Investment-grade securities are
those rated in the four highest categories by Moody's (Aaa, Aa, A or Baa) or
S&P (AAA, AA, A or BBB). Securities rated Baa or BBB have speculative charac-
teristics and changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity of their issuers to make principal and
interest payments than is the case with higher grade securities.
 
 Certain Underlying Smith Barney Funds may invest in securities that are rated
below investment-grade; that is, rated below Baa by Moody's or BBB by S&P.
Securities rated below investment grade (and comparable unrated securities) are
the equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Such securities are regarded as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations and involve major risk exposure to adverse business,
financial, economic or political conditions. See the Appendix to the Statement
of Additional Information for additional information on the bond ratings by
Moody's and S&P.
 
VALUATION OF SHARES
 
 Each Portfolio's net asset value per share is determined as of the close of
regular trading on the NYSE on each day that the NYSE is open, by dividing the
value of the Portfolio's net assets attributable to each Class by the total
number of shares of the Class outstanding. The value of each Underlying Smith
Barney Fund will be its net asset value at the time of computation. Short-term
investments that have a maturity of more than 60 days are valued at prices
based on market quotations for securities of similar type, yield and maturity.
Short-term investments that have a maturity of 60 days or less are valued at
amortized cost unless conditions dictate otherwise.
 
24
<PAGE>
 

DIVIDENDS, DISTRIBUTIONS AND TAXES 
 
 DIVIDENDS AND DISTRIBUTIONS

 The Income Portfolio declares and pays monthly dividends from its net invest-
ment income. The Balanced Portfolio and Conservative Portfolio declare and pay
quarterly dividends from net investment income. The Global Portfolio, Growth
Portfolio and High Growth Portfolio declare and pay annual dividends from net
investment income. Dividends from net realized capital gains, if any, in each
of the separate Portfolio's will be distributed annually. Each separate Portfo-
lio may also pay additional dividends shortly before December 31 from certain
amounts of undistributed ordinary income and capital gains realized, in order
to avoid a Federal excise tax liability. 

 If a shareholder does not otherwise instruct, dividends and capital gain dis-
tributions paid will automatically reinvest in additional shares of the same
Class at net asset value, with no additional sales charge or CDSC. A share-
holder may change the option at any time by notifying his or her Smith Barney
Financial Consultant. Shareholders whose accounts are held directly by First
Data should notify First Data in writing, requesting a change to this automatic
reinvestment option. 

 The per share amounts of dividends from net investment income on Classes B and
C may be lower than that of Classes A and Y, mainly as a result of the distri-
bution fees applicable to Class B and C shares. Similarly, the per share
amounts of dividends from net investment income on Class A shares may be lower
than that of Class Y, as a result of the service fee attributable to Class A
shares. Capital gain distributions, if any, will be the same amount across all
Classes of Series shares (A, B, C and Y). 
 
 TAXES

 The following is a summary of the material federal tax considerations affect-
ing the separate Portfolios and their shareholders, please refer to the State-
ment of Additional Information for further discussion. In addition to the con-
siderations described below and in the Statement of Additional Information,
there may be other federal, state, local, and/or foreign tax applications to
consider. Because taxes are a complex matter, prospective shareholders are
urged to consult their tax advisors for more detailed information with respect
to the tax consequences of any investment. 

 Each Portfolio of the Concert Series will be treated as a separate entity for
tax purposes. The Portfolios intend to qualify, as in prior years, under
Subchapter M of the Code for tax treatment as regulated investment companies.
In each taxable year that the separate Portfolios qualify, so long as such
qualification is in the best interests of its shareholders, the Portfolio will
pay no federal income tax on its net investment company taxable income and
long-term capital gain that is distributed to shareholders. 

 Dividends paid from net investment income and net realized short-term securi-
ties gain, are subject to federal income tax as ordinary income. Distributions,
if any, from net realized long-term securities gains, derived from the sale of
securities held by the Portfolio for more than one year, are taxable as long-
term capital gains, regardless of the length of time a shareholder has owned
Portfolio shares. 

 Shareholders are required to pay tax on all taxable distributions, even if
those distributions are automatically reinvested in additional shares. A por-
tion of the dividends paid may qualify for the corporate dividends received
deduction. Dividends consisting of interest from U.S. government securities may
be exempt from state and local income taxes. Shareholders will be informed of
the source and tax status of all distributions promptly after the close of each
calendar year. 

 A shareholders's gain or loss on the disposition of Portfolio shares (whether
by redemption, sale or exchange), generally will be a long-term or short-term
gain or loss depending on the length of time the shares had been owned at dis-
position. Losses realized by a shareholder on the disposition of Portfolio
shares owned for six months or less will be treated as a long-term capital loss
to the extent a capital gain dividend has been distributed on such shares. 

 The Series is required to withhold ("backup withholding") 31% of all taxable
dividends, capital gain distributions, and the proceeds of any redemption,
regardless of whether gain or loss is realized upon the redemption, for share-
holders who do not provide the Series with a correct taxpayer identification
number (social security or employer identification number). Withholding from
taxable dividends and capital gain distributions also is required for share-
holders who otherwise are subject to backup withholding. Any tax withheld as a
result of backup withholding does not constitute an additional tax, and may be
claimed as a credit on the shareholders' federal income tax return. 

 Prior to investing in shares of a Portfolio, investors should consult with
their tax advisors concerning the Federal, state and local tax consequences of
such an investment. 

PURCHASE OF SHARES 
 
 
 GENERAL

 Each Portfolio offers four Classes of shares. Class A shares are sold to
investors with an initial sales charge and Class B and Class C shares are sold
without an initial sales charge but are subject to a CDSC payable upon certain
redemptions. Class Y shares are sold without an initial charge or CDSC and are
available only to investors investing a minimum of $15,000,000. Each Portfolio
also offers a fifth class of shares: Class Z shares, which are offered without
a sales charge, CDSC, service fee or distribution fee, exclusively to tax-
exempt employee benefit and retirement plans of Smith Barney and its affili-
ates. Investors meeting these criteria who are interested in 
 
                                                                              25
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
acquiring Class Z shares should contact a Smith Barney Financial Consultant for
a Class Z Prospectus. See "Prospectus Summary--Alternative Purchase Arrange-
ments" for a discussion of factors to consider in selecting which Class of
shares to purchase.
 
 Purchases of Portfolio shares must be made through a brokerage account main-
tained with Smith Barney, Introducing Broker or an investment dealer in the
selling group. In addition, certain investors, including qualified retirement
plans and certain other institutional investors, may purchase shares directly
from the Concert Series through First Data. When purchasing shares of a Portfo-
lio, investors must specify whether the purchase is for Class A, Class B, Class
C or Class Y shares. Smith Barney and other broker/dealers may charge their
customers an annual account maintenance fee in connection with a brokerage
account through which an investor purchases or hold shares. Accounts held
directly at First Data are not subject to a maintenance fee.

 Investors in Class A, Class B and Class C shares may open an account by making
an initial investment of at least $1,000 for each account in each class (except
for Systematic Investment Plan accounts), or $250 for an IRA or a Self-Employed
Retirement Plan in a Portfolio. Investors in Class Y shares may open an account
by making an initial investment of $15,000,000. Subsequent investments of at
least $50 may be made for all Classes. For participants in retirement plans
qualified under Section 403(b)(7) or Section 401(a) of the Code, the minimum
initial investment requirement for Class A, Class B and Class C shares and the
subsequent investment requirement for all Classes in a Portfolio is $25. For
shareholders purchasing shares of a Portfolio through the Systematic Investment
Plan on a monthly basis, the minimum initial investment requirement for Class
A, Class B and Class C shares and the subsequent investment requirement for all
Classes is $25. For shareholders purchasing shares of a Portfolio through the
Systematic Investment Plan on a quarterly basis, the minimum initial investment
requirement for Class A, Class B and Class C shares and the subsequent invest-
ment requirement for all Classes is $50. There are no minimum investment
requirements in Class A shares for employees of Travelers and its subsidiaries,
including Smith Barney, Directors or Trustees of any Travelers-affiliated
funds, including the Smith Barney Mutual Funds, and their spouses and children.
The Concert Series reserves the right to waive or change minimums, to decline
any order to purchase its shares and to suspend the offering of shares from
time to time. Shares purchased will be held in the shareholder's account by the
Concert Series' transfer agent, First Data. Share certificates are issued only
upon a shareholder's written request to First Data. 
 
 The minimum initial and subsequent investment requirements in a Portfolio for
accounts established through a payroll deduction program offered by Travelers
Group Diversified Distribution Services Inc. is $50 per month.

 Purchases of Class A shares also may be made at net asset value without a
sales charge by employees of employers participating in payroll deduction pro-
grams offered by Travelers Group Diversified Distribution Services Inc. Such
employees may purchase sales charge waived Class A shares through payroll
deductions or a lump-sum, direct payment initial investment. All other pur-
chases of Class A shares will be subject to applicable sales charges in accor-
dance with the terms of the Prospectus.
 
 Purchase orders received by the Concert Series or Smith Barney prior to the
close of regular trading on the NYSE, on any day a Portfolio calculates its net
asset value, are priced according to the net asset value determined on that day
(the "trade date"). Orders received by dealers or Introducing Brokers prior to
the close of regular trading on the NYSE on any day a Portfolio calculates its
net asset value, are priced according to the net asset value determined on that
day, provided the order is received by the Concert Series or Smith Barney prior
to Smith Barney's close of business. For shares purchased through Smith Barney
or an Introducing Broker that transmits its orders to Smith Barney, payment for
Portfolio shares is due on the third business day after the trade date. In all
other cases, payment must be made with the purchase order.
 
 SYSTEMATIC INVESTMENT PLAN
 
 Shareholders may make additions to their accounts at any time by purchasing
shares through a service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, Smith Barney or First Data is authorized through
preauthorized transfers of at least $25 on a monthly basis or at least $50 on a
quarterly basis to charge the regular bank account or other financial institu-
tion indicated by the shareholder on a monthly or quarterly basis to provide
systematic additions to the shareholder's Portfolio account. A shareholder who
has insufficient funds to complete the transfer will be charged a fee of up to
$25 by Smith Barney or First Data. The Systematic Investment Plan also autho-
rizes Smith Barney to apply cash held in the shareholder's Smith Barney broker-
age account or redeem the shareholder's shares of a Smith Barney money market
fund to make additions to the account. Additional information is available from
the Concert Series or a Smith Barney Financial Consultant.
 
26
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
 
 INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES

 The sales charges applicable to purchases of Class A shares of the High Growth
Portfolio, the Global Portfolio, the Growth Portfolio and the Balanced Portfo-
lio are as follows: 
 
<TABLE>
<CAPTION>
                               SALES CHARGE
                      ------------------------------      DEALERS'
  AMOUNT OF                % OF           % OF       REALLOWANCE AS % OF
  INVESTMENT          OFFERING PRICE AMOUNT INVESTED   OFFERING PRICE
------------------------------------------------------------------------
  <S>                 <C>            <C>             <C>
  Less than $ 25,000       5.00%          5.26%             4.50%
  $ 25,000 -  49,999       4.00           4.17              3.60
    50,000 -  99,999       3.50           3.63              3.15
   100,000 - 249,999       3.00           3.09              2.70
   250,000 - 499,999       2.00           2.04              1.80
   500,000 and over         *               *                 *
------------------------------------------------------------------------
</TABLE>
 
 The sales charges applicable to purchases of Class A shares of the Conserva-
tive Portfolio and the Income Portfolio are as follows:
 
<TABLE>
<CAPTION>
                               SALES CHARGE
                      ------------------------------      DEALERS'
  AMOUNT OF                % OF           % OF       REALLOWANCE AS % OF
  INVESTMENT          OFFERING PRICE AMOUNT INVESTED   OFFERING PRICE
------------------------------------------------------------------------
  <S>                 <C>            <C>             <C>
  Less than $25,000        4.50%          4.71%             4.00%
  $ 25,000 - 49,999        4.00           4.17              3.60
    50,000 - 99,999        3.50           3.63              3.15
   100,000 - 249,999       2.50           2.56              2.25
   250,000 - 499,999       1.50           1.52              1.35
   500,000 and over         *               *                 *
------------------------------------------------------------------------
</TABLE>
* Purchases of Class A shares of $500,000 or more will be made at net asset
  value without any initial sales charge, but will be subject to a CDSC of
  1.00% on redemptions made within 12 months of purchase. The CDSC on Class A
  shares is payable to Smith Barney, which compensates Smith Barney Financial
  Consultants and other dealers whose clients make purchases of $500,000 or
  more. The CDSC is waived in the same circumstances in which the CDSC applica-
  ble to Class B and Class C shares is waived. See "Deferred Sales Charge
  Alternatives" and "Waivers of CDSC."
 
 Members of the selling group may receive up to 90% of the sales charge and may
be deemed to be underwriters of the Concert Series as defined in the Securities
Act of 1933, as amended.
 
 The reduced sales charges shown above apply to the aggregate of purchases of
Class A shares of a Portfolio made at one time by "any person," which includes
an individual and his or her immediate family, or a trustee or other fiduciary
of a single trust estate or single fiduciary account.
 
 INITIAL SALES CHARGE WAIVERS

 Purchases of Class A shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales of Class A shares to (i) Board
Members and employees of Travelers and its subsidiaries and any of the Smith
Barney Mutual Funds (including retired Board Members and employees); the imme-
diate families of such persons or other funds affiliated with Travelers (in-
cluding the surviving spouse of a deceased Board Member or employee) and to a
pension, profit-sharing or other benefit plan for such persons and (ii) employ-
ees of members of the National Association of Securities Dealers, Inc., pro-
vided such sales are made upon the assurance of the purchaser that the purchase
is made for investment purposes and that the securities will not be resold
except through redemption or repurchase; (b) offers of Class A shares to any
other investment company to effect the combination of such company with the
Portfolio by merger, acquisition of assets or otherwise; (c) purchases of Class
A shares by any client of a newly employed Smith Barney Financial Consultant
(for a period up to 90 days from the commencement of the Financial Consultant's
employment with Smith Barney), on the condition the purchase of Class A shares
is made with the proceeds of the redemption of shares of a mutual fund which
(i) was sponsored by the Financial Consultant's prior employer, (ii) was sold
to the client by the Financial Consultant and (iii) was subject to a sales
charge; (d) purchases by shareholders who have redeemed Class A shares in a
Portfolio (or Class A shares of another fund of the Smith Barney Mutual Funds
that are sold with a sales charge) and who wish to reinvest their redemption
proceeds in the Portfolio, provided the reinvestment is made within 60 calendar
days of the redemption; (e) purchases by accounts managed by registered invest-
ment advisory subsidiaries of Travelers; (f) direct rollovers by plan partici-
pants of distributions from a 401(k) plan enrolled in the Smith Barney 401(k)
Program (Note: subsequent investments will be subject to the applicable sales
charge); (g) purchases by separate accounts used to fund certain unregistered
variable annuity contracts; (h) purchases by investors participating in a Smith
Barney fee based arrangement; and (i) purchases of Class A shares of a Portfo-
lio by Section 403(b) or Section 401(a) or (k) accounts associated with Cope-
land Retirement Programs. In order to obtain such discounts, the purchaser must
provide sufficient information at the time of purchase to permit verification
that the purchase would qualify for the elimination of the sales charge. 
 
                                                                              27
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
 
 RIGHT OF ACCUMULATION
 
 Class A shares of a Portfolio may be purchased by "any person" (as defined
above) at a reduced sales charge or at net asset value determined by aggregat-
ing the dollar amount of the new purchase and the total net asset value of all
Class A shares of the Portfolio and of funds sponsored by Smith Barney that are
offered with a sales charge listed under "Exchange Privilege" then held by such
person and applying the sales charge applicable to such aggregate. In order to
obtain such discount, the purchaser must provide sufficient information at the
time of purchase to permit verification that the purchase qualifies for the
reduced sales charge. The right of accumulation is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
 
 GROUP PURCHASES
 
 Upon completion of certain automated systems, a reduced sales charge or pur-
chase at net asset value will also be available to employees (and partners) of
the same employer purchasing as a group, provided each participant makes the
minimum initial investment required. The sales charge applicable to purchases
by each member of such a group will be determined by the table set forth above
under "Initial Sales Charge Alternative--Class A Shares," and will be based
upon the aggregate sales of Class A shares of Smith Barney Mutual Funds offered
with a sales charge to, and share holdings of, all members of the group. To be
eligible for such reduced sales charges or to purchase at net asset value, all
purchases must be pursuant to an employer- or partnership-sanctioned plan meet-
ing certain requirements. One such requirement is that the plan must be open to
specified partners or employees of the employer and its subsidiaries, if any.
Such plan may, but is not required to, provide for payroll deductions, IRAs or
investments pursuant to retirement plans under Sections 401 or 408 of the Code.
Smith Barney may also offer a reduced sales charge or net asset value purchase
for aggregating related fiduciary accounts under such conditions that Smith
Barney will realize economies of sales efforts and sales related expenses. An
individual who is a member of a qualified group may also purchase Class A
shares at the reduced sales charge applicable to the group as a whole. The
sales charge is based upon the aggregate dollar value of Class A shares offered
with a sales charge that have been previously purchased and are still owned by
the group, plus the amount of the current purchase. A "qualified group" is one
that (a) has been in existence for more than six months, (b) has a purpose
other than acquiring Portfolio shares at a discount and (c) satisfies uniform
criteria that enable Smith Barney to realize economies of scale in its costs of
distributing shares. A qualified group must have more than 10 members, must be
available to arrange for group meetings between representatives of the Portfo-
lio and the members, and must agree to include sales and other materials
related to the Portfolio in its publications and mailings to members at no cost
to Smith Barney. In order to obtain such reduced sales charge or to purchase at
net asset value, the purchaser must provide sufficient information at the time
of purchase to permit verification that the purchase qualifies for the reduced
sales charge. Approval of group purchase reduced sales charge plans is subject
to the discretion of Smith Barney.
 
 LETTER OF INTENT
 
 Class A Shares. A Letter of Intent for amounts of $50,000 or more provides an
opportunity for an investor to obtain a reduced sales charge by aggregating
investments over a 13-month period, provided that the investor refers to such
Letter when placing orders. For purposes of a Letter of Intent, the "Amount of
Investment" as referred to in the preceding sales charge table includes pur-
chases of all Class A shares of each Portfolio and other Smith Barney Mutual
Funds offered with a sales charge over a 13-month period based on the total
amount of intended purchases plus the value of all Class A shares previously
purchased and still owned. An alternative is to compute the 13-month period
starting up to 90 days before the date of execution of a Letter of Intent. Each
investment made during the period receives the reduced sales charge applicable
to the total amount of the investment goal. If the goal is not achieved within
the period, the investor must pay the difference between the sales charges
applicable to the purchases made and the charges previously paid, or an appro-
priate number of escrowed shares will be redeemed. Please contact a Smith Bar-
ney Financial Consultant or First Data to obtain a Letter of Intent applica-
tion.

 Class Y Shares. A Letter of Intent may also be used as a way for investors to
meet the minimum investment requirement for Class Y shares. Such investors must
make an initial minimum purchase of $5,000,000 in Class Y shares of a Portfolio
and agree to purchase a total of $15,000,000 of Class Y shares of the same
Portfolio within 13 months from the date of the Letter. If a total investment
of $15,000,000 is not made within the 13-month period, all Class Y shares pur-
chased to date will be transferred to Class A shares, where they will be sub-
ject to all fees (including a service fee of 0.25%) and expenses applicable to
such Portfolio's Class A shares, which may include a CDSC of 1.00%. Please con-
tact a Smith Barney Financial Consultant or First Data for further information.

 DEFERRED SALES CHARGE ALTERNATIVES
 
 CDSC Shares are sold at net asset value next determined without an initial
sales charge so that the full amount of an investor's purchase payment may be
immediately invested in a Portfolio. A CDSC, however, may be imposed on certain
redemptions of these shares. "CDSC Shares" are: (a) Class B shares; (b) Class C
shares; and (c) Class A shares that were purchased without an initial sales
charge but subject to a CDSC.
 
28
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
 
 Any applicable CDSC will be assessed on an amount equal to the lesser of the
original cost of the shares being redeemed or their net asset value at the time
of redemption. CDSC Shares that are redeemed will not be subject to a CDSC to
the extent that the value of such shares represents: (a) capital appreciation
of Portfolio assets; (b) reinvestment of dividends or capital gain distribu-
tions; (c) with respect to Class B shares, shares redeemed more than five years
after their purchase; or (d) with respect to Class C shares and Class A shares
that are CDSC Shares, shares redeemed more than 12 months after their purchase.
 
 Class C shares and Class A shares that are CDSC Shares are subject to a 1.00%
CDSC if redeemed within 12 months of purchase. In circumstances in which the
CDSC is imposed on Class B shares, the amount of the charge will depend on the
number of years since the shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of determining the number of
years since a purchase payment, all purchase payments made during a month will
be aggregated and deemed to have been made on the last day of the preceding
Smith Barney statement month. The following table sets forth the rates of the
charge for redemptions of Class B shares by shareholders, except in the case of
purchases by Participating Plans, as described below. See "Purchase of Shares--
Smith Barney 401(k) and ExecChoice(TM) Programs."
 
<TABLE>
<CAPTION>
                             CDSC APPLICABLE TO
                           HIGH GROWTH PORTFOLIO,          CDSC
                             GLOBAL PORTFOLIO,        APPLICABLE TO
  YEARS SINCE PURCHASE      GROWTH PORTFOLIO AND  CONSERVATIVE PORTFOLIO
  PAYMENT WAS MADE           BALANCED PORTFOLIO    AND INCOME PORTFOLIO
------------------------------------------------------------------------
  <S>                      <C>                    <C>
    First                           5.00%                  4.50%
    Second                          4.00                   4.00
    Third                           3.00                   3.00
    Fourth                          2.00                   2.00
    Fifth                           1.00                   1.00
    Sixth and thereafter            0.00                   0.00
------------------------------------------------------------------------
</TABLE>
 
 Class B shares will convert automatically to Class A shares eight years after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fees. There will also be converted at that time such pro-
portion of Class B Dividend Shares owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number
of outstanding Class B shares (other than Class B Dividend Shares) owned by the
shareholder. See "Prospectus Summary--Alternative Purchase Arrangements--Class
B Shares Conversion Feature."
 
 In determining the applicability of any CDSC or the conversion feature
described above, it will be assumed that a redemption is made first of shares
representing capital appreciation, next of shares representing the reinvestment
of dividends and capital gain distributions and finally of other shares held by
the shareholder for the longest period of time. The length of time that CDSC
Shares acquired through an exchange have been held will be calculated from the
date that the shares exchanged were initially acquired in one of the other
Smith Barney Mutual Funds, and Portfolio shares being redeemed will be consid-
ered to represent, as applicable, capital appreciation or dividend and capital
gain distribution reinvestments in such other funds. For Federal income tax
purposes, the amount of the CDSC will reduce the gain or increase the loss, as
the case may be, on the amount realized on redemption. The amount of any CDSC
will be paid to Smith Barney.
 
 To provide an example, assume an investor purchased 100 Class B shares at $10
per share for a cost of $1,000. Subsequently, the investor acquired 5 addi-
tional shares through dividend reinvestment. During the fifteenth month after
the purchase, the investor decided to redeem $500 of his or her investment.
Assuming at the time of the redemption the net asset value had appreciated to
$12 per share, the value of the investor's shares would be $1,260 (105 shares
at $12 per share). The CDSC would not be applied to the amount that represents
appreciation ($200) and the value of the reinvested dividend shares ($60).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 4.00% (the applicable rate for Class B shares) for a total
deferred sales charge of $9.60.
 
 WAIVERS OF CDSC
 
 The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less than 1.00% per month of
the value of the shareholder's shares at the time the withdrawal plan commences
(see "Automatic Cash Withdrawal Plan"); (c) redemptions of shares within twelve
months following the death or disability of the shareholder; (d) redemption of
shares made in connection with qualified distributions from retirement plans or
IRAs upon the attainment of age 59 1/2; (e) involuntary redemptions; and (f)
redemptions of shares to effect a combination of the Portfolio with any invest-
ment company by merger, acquisition of assets or otherwise. In addition, a
shareholder who has redeemed shares from other funds of the Smith Barney Mutual
 
                                                                              29
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
Funds may, under certain circumstances, reinvest all or part of the redemption
proceeds within 60 days and receive pro rata credit for any CDSC imposed on the
prior redemption.
 
 CDSC waivers will be granted subject to confirmation (by Smith Barney in the
case of shareholders who are also Smith Barney clients or by First Data in the
case of all other shareholders) of the shareholder's status or holdings, as the
case may be.
 
 SMITH BARNEY 401(K) AND EXECCHOICE(TM) PROGRAMS
 
 Investors may be eligible to participate in the Smith Barney 401(k) Program or
the Smith Barney ExecChoice(TM) Program. To the extent applicable, the same
terms and conditions, which are outlined below, are offered to all plans par-
ticipating ("Participating Plans") in these programs.
 
 Each of the Portfolios offers to Participating Plans Class A and Class C
shares as investment alternatives under the Smith Barney 401(k) and
ExecChoice(TM) Programs. Class A and Class C shares acquired through the Par-
ticipating Plans are subject to the same service and/or distribution fees as
the Class A and Class C shares acquired by other investors; however, they are
not subject to any initial sales charges or CDSC. Once a Participating Plan has
made an initial investment in a Portfolio, all of its subsequent investments in
the Portfolio must be in the same Class of shares, except as otherwise
described below.
 
 Class A Shares. Class A shares of a Portfolio are offered without any sales
charge or CDSC to any Participating Plan that purchases $1,000,000 or more of
Class A shares of one or more Smith Barney Mutual Funds.
 
 Class C Shares. Class C shares of a Portfolio are offered without any sales
charge or CDSC to any Participating Plan that purchases less than $1,000,000 of
Class C shares of one or more Smith Barney Mutual Funds.
 
 401(k) and ExecChoice(TM) Plans Opened On or After June 21, 1996. At the end
of the fifth year after the date the Participating Plan enrolled in the Smith
Barney 401(k) Program or Smith Barney ExecChoice(TM) Program, if its total
Class C holdings in all non-money market Smith Barney Mutual Funds equal at
least $1,000,000, it will be offered the opportunity to exchange all of its
Class C shares for Class A shares of a Portfolio. (For Participating Plans that
were originally established through a Smith Barney retail brokerage account,
the five year period will be calculated from the date the retail brokerage
account was opened.) Such Participating Plans will be notified of the pending
exchange in writing within 30 days after the fifth anniversary of the enroll-
ment date and, unless the exchange offer has been rejected in writing, the
exchange will occur on or about the 90th day after the fifth anniversary date.
If the Participating Plan does not qualify for the five year exchange of Class
A shares, a review of the Participating Plan's holdings will be performed each
quarter until either the Participating Plan qualifies or the end of the eighth
year.
 
 401(k) Plan Opened Prior to June 21, 1996. In any year after the date a Par-
ticipating Plan enrolled in the Smith Barney 401(k) Program, if its total Class
C holdings in all non-money market Smith Barney Mutual Funds equal at least
$500,000 as of the calendar year-end, the Participating Plan will be offered
the opportunity to exchange all of its Class C shares for Class A shares of a
Portfolio. Such Plans will be notified in writing within 30 days after the last
business day of the calendar year and, unless the exchange offer has been
rejected in writing, the exchange will occur on or about the last business day
of the following March.
 
 Any Participating Plan in the Smith Barney 401(k) or ExecChoice(TM) Programs
whether opened before or after June 21, 1996 that has not previously qualified
for an exchange into Class A shares will be offered the opportunity to exchange
all of its Class C shares for Class A shares of a Portfolio, regardless of
asset size, at the end of the eighth year after the date the Participating Plan
enrolled in the Smith Barney 401(k) or ExecChoice(TM) Program. Such Plans will
be notified of the pending exchange in writing approximately 60 days before the
eighth anniversary of the enrollment date and, unless the exchange has been
rejected in writing, the exchange will occur on or about the eighth anniversary
date. Once an exchange has occurred, a Participating Plan will not be eligible
to acquire additional Class C shares of the Portfolio, but instead may acquire
Class A shares of the Portfolio. Any Class C shares not converted will continue
to be subject to the distribution fee.
 
 Participating Plans wishing to acquire shares of a Portfolio through the Smith
Barney 401(k) Program or the Smith Barney ExecChoice(TM) Program must purchase
such shares directly from First Data. For further information regarding these
Programs, investors should contact a Smith Barney Financial Consultant.
 
 Existing 401(k) Plans Investing in Class B Shares. Class B shares of the Smith
Barney Mutual Funds are not available for purchase by Participating Plans
opened on or after June 21, 1996, but may continue to be purchased by any Par-
ticipating Plan in the Smith Barney 401(k) Program opened prior to such date
and originally investing in such Class. Class B shares acquired are subject to
a CDSC of 3.00% of redemption proceeds, if the Participating Plan terminates
within eight years of the date the Participating Plan first enrolled in the
Smith Barney 401(k) Program.
 
30
<PAGE>
 
PURCHASE OF SHARES (CONTINUED)
 
 
 At the end of the eighth year after the date the Participating Plan enrolled
in the Smith Barney 401(k) Program, it will be offered the opportunity to
exchange all of its Class B shares for Class A shares of a Portfolio. Such Par-
ticipating Plan will be notified of the pending exchange in writing approxi-
mately 60 days before the eighth anniversary of the enrollment date and, unless
the exchange has been rejected in writing, the exchange will occur on or about
the eighth anniversary date. Once the exchange has occurred, a Participating
Plan will not be eligible to acquire Class B shares of the Portfolio but
instead may acquire Class A shares of the Portfolio. If the Participating Plan
elects not to exchange all of its Class B Shares at that time, each Class B
share held by the Participating Plan will have the same conversion features as
Class B shares held by other investors. See "Purchase of Shares--Deferred Sales
Charge Alternatives" in the Prospectus.
 
 No CDSC is imposed on redemptions of Class B shares to the extent that the net
asset value of the shares redeemed does not exceed the current net asset value
of the shares purchased through reinvestment of dividends or capital gain dis-
tributions, plus the current net asset value of Class B shares purchased more
than eight years prior to the redemption, plus increases in the net asset value
of the shareholder's Class B shares above the purchase payments made during the
preceding eight years. Whether or not the CDSC applies to the redemption by a
Participating Plan depends on the number of years since the Participating Plan
first became enrolled in the Smith Barney 401(k) Program, unlike the applica-
bility of the CDSC to redemptions by other shareholders, which depends on the
number of years since those shareholders made the purchase payment from which
the amount is being redeemed.
 
 The CDSC will be waived on redemptions of Class B shares in connection with
lump-sum or other distributions made by a Participating Plan as a result of:
(a) the retirement of an employee in the Participating Plan; (b) the termina-
tion of employment of an employee in the Participating Plan; (c) the death or
disability of an employee in the Participating Plan; (d) the attainment of age
59 1/2 by an employee in the Participating Plan; (e) hardship of an employee in
the Participating Plan to the extent permitted under Section 401(k) of the
Code; or (f) redemptions of shares in connection with a loan made by the Par-
ticipating Plan to an employee.
 
EXCHANGE PRIVILEGE
 
 Except as otherwise noted below, shares of each Class may be exchanged for
shares of the same Class in any other Portfolio of the Concert Series, as well
as in the following Smith Barney Mutual Funds, to the extent shares are offered
for sale in the shareholder's state of residence. Exchanges of Class A, Class B
and Class C shares are subject to minimum investment requirements and all
shares are subject to the other requirements of the fund into which exchanges
are made.
 
 FUND NAME
 
 Growth Funds
        
     Concert Peachtree Growth Fund 
     Smith Barney Aggressive Growth Fund Inc.
     Smith Barney Appreciation Fund Inc.
     Smith Barney Fundamental Value Fund Inc.
     
     Smith Barney Large Cap Blend Fund 
     
     Smith Barney Large Capitalization Growth Fund 
     
     Smith Barney Contrarian Fund 
     Smith Barney Natural Resources Fund Inc.
     Smith Barney Small Cap Blend Fund, Inc.
     Smith Barney Special Equities Fund
     
 Growth and Income Funds
     Concert Social Awareness Fund
     Smith Barney Convertible Fund
     
     Smith Barney Funds, Inc.-- Large Cap Value Fund 
    
     Smith Barney Premium Total Return Fund
     
     Smith Barney Balanced Fund 
 
 Taxable Fixed-Income Funds
     ** Smith Barney Adjustable Rate Government Income Fund
     Smith Barney Diversified Strategic Income Fund
     
     Smith Barney Funds, Inc.--Short-Term U.S. Treasury Securities Fund 
     
     Smith Barney Funds, Inc.--U.S. Government Securities Fund 
     Smith Barney Government Securities Fund
     Smith Barney High Income Fund
 
                                                                              31
<PAGE>
 
EXCHANGE PRIVILEGE (CONTINUED)
 
     Smith Barney Investment Grade Bond Fund
     Smith Barney Managed Governments Fund Inc.
     
     Smith Barney Total Return Bond Fund 
 
 Tax-Exempt Funds
     Smith Barney Arizona Municipals Fund Inc.
     Smith Barney California Municipals Fund Inc.
     * Smith Barney Intermediate Maturity California Municipals Fund
     * Smith Barney Intermediate Maturity New York Municipals Fund
     Smith Barney Managed Municipals Fund Inc.
     Smith Barney Massachusetts Municipals Fund
     Smith Barney Muni Funds--Florida Portfolio
     Smith Barney Muni Funds--Georgia Portfolio
     * Smith Barney Muni Funds--Limited Term Portfolio
     Smith Barney Muni Funds--National Portfolio
     Smith Barney Muni Funds--New York Portfolio
     Smith Barney Muni Funds--Pennsylvania Portfolio
     Smith Barney New Jersey Municipals Fund Inc.
     Smith Barney Oregon Municipals Fund
     
     Smith Barney Municipal High Income Fund 
 
 Global--International Funds 
     
     Smith Barney Hansberger Global Small Cap Value Fund 
     
     Smith Barney Hansberger Global Value Fund 
     Smith Barney World Funds, Inc.--Emerging Markets Portfolio
     Smith Barney World Funds, Inc.--European Portfolio
     Smith Barney World Funds, Inc.--Global Government Bond Portfolio
     Smith Barney World Funds, Inc.--International Balanced Portfolio
     Smith Barney World Funds, Inc.--International Equity Portfolio
     Smith Barney World Funds, Inc.--Pacific Portfolio
 
 Money Market Funds
     + Smith Barney Exchange Reserve Fund
     ++ Smith Barney Money Funds, Inc.--Cash Portfolio
     ++ Smith Barney Money Funds, Inc.--Government Portfolio
     *** Smith Barney Money Funds, Inc.--Retirement Portfolio
     +++ Smith Barney Municipal Money Market Fund, Inc.
     +++ Smith Barney Muni Funds--California Money Market Portfolio
     +++ Smith Barney Muni Funds--New York Money Market Portfolio
--------------------------------------------------------------------------------
  * Available for exchange with Class A, Class C and Class Y shares of each
    Portfolio.
 ** Available for exchange with Class A and Class B shares of each Portfolio.
    In addition, shareholders who own Class C shares of a Portfolio through the
    Smith Barney 401(k) Program may exchange those shares for Class C shares of
    this fund.
*** Available for exchange with Class A shares of each Portfolio.
  + Available for exchange with Class B and Class C shares of each Portfolio.
 ++ Available for exchange with Class A and Class Y shares of each Portfolio.
    In addition, Participating Plans opened prior to June 21, 1996 and invest-
    ing in Class C shares may exchange Portfolio shares for Class C shares of
    this fund.
+++ Available for exchange with Class A and Class Y shares of each Portfolio.
 
 Class B Exchanges. In the event a Class B shareholder wishes to exchange all
or a portion of his or her shares into any of the funds imposing a higher CDSC
than that imposed by a Portfolio, the exchanged Class B shares will be subject
to the higher applicable CDSC. Upon an exchange, the new Class B shares will be
deemed to have been purchased on the same date as the Class B shares of the
Portfolio that have been exchanged.
 
 Class C Exchanges. Upon an exchange, the new Class C shares will be deemed to
have been purchased on the same date as the Class C shares of the Portfolio
that have been exchanged.
 
 Class A and Class Y Exchanges. Class A and Class Y shareholders of each Port-
folio who wish to exchange all or a portion of their shares for shares of the
respective Class in any of the funds identified above may do so without imposi-
tion of any charge.
 
32
<PAGE>
 
EXCHANGE PRIVILEGE (CONTINUED)
 
 Additional Information Regarding the Exchange Privilege. Although the exchange
privilege is an important benefit, excessive exchange transactions can be det-
rimental to a Portfolio's performance and its shareholders. The Concert Series
may determine that a pattern of frequent exchanges is excessive and contrary to
the best interests of each Portfolio's other shareholders. In this event, the
Concert Series may, at its discretion, decide to limit additional purchases
and/or exchanges by the shareholder. Upon such a determination, the Concert
Series will provide notice in writing or by telephone to the shareholder at
least 15 days prior to suspending the exchange privilege and during the 15 day
period the shareholder will be required to (a) redeem his or her shares in the
Portfolio or (b) remain invested in the Portfolio or exchange into any of the
funds of the Smith Barney Mutual Funds ordinarily available, which position the
shareholder would be expected to maintain for a significant period of time. All
relevant factors will be considered in determining what constitutes an abusive
pattern of exchanges.
 
 Certain shareholders may be able to exchange shares by telephone. See "Redemp-
tion of Shares--Telephone Redemption and Exchange Program." Exchanges will be
processed at the net asset value next determined. Redemption procedures dis-
cussed below are also applicable for exchanging shares, and exchanges will be
made upon receipt of all supporting documents in proper form. If the account
registration of the shares of the fund being acquired is identical to the reg-
istration of the shares of the fund exchanged, no signature guarantee is
required. A capital gain or loss for tax purposes will be realized upon the
exchange, depending upon the cost or other basis of shares redeemed. Before
exchanging shares, investors should read the current prospectus describing the
shares to be acquired. Each Portfolio reserves the right to modify or discon-
tinue exchange privileges upon 60 days' prior notice to shareholders.
 
REDEMPTION OF SHARES
 
 The Concert Series is required to redeem the shares of each Portfolio tendered
to it, as described below, at a redemption price equal to their net asset value
per share next determined after receipt of a written request in proper form at
no charge other than any applicable CDSC. Redemption requests received after
the close of regular trading on the NYSE are priced at the net asset value next
determined.
 
 If a shareholder holds shares in more than one Class, any requests for redemp-
tion must specify the Class being redeemed. In the event of a failure to spec-
ify which Class, or if the investor owns fewer shares of the Class than speci-
fied, the redemption request will be delayed until the Concert Series' transfer
agent receives further instructions from Smith Barney or if the shareholder's
account is not with Smith Barney, from the shareholder directly. The redemption
proceeds will be remitted on or before the third business day following receipt
of proper tender, except on any days on which the NYSE is closed or as permit-
ted under the 1940 Act in extraordinary circumstances. Generally, if the
redemption proceeds are remitted to a Smith Barney brokerage account, these
funds will not be invested for the shareholder's benefit without specific
instruction and Smith Barney will benefit from the use of temporarily
uninvested funds. Redemption proceeds for shares purchased by check, other than
a certified or official bank check, will be remitted upon clearance of the
check, which may take up to ten days or more.
 
 Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than those
held by Smith Barney as custodian may be redeemed through an investor's Finan-
cial Consultant, Introducing Broker or dealer in the selling group or by sub-
mitting a written request for redemption to:
 
  Smith Barney Concert Allocation Series Inc.
  Class A, B, C or Y (please specify)
  c/o First Data Investor Services Group, Inc.
  P.O. Box 5128
  Westborough, Massachusetts 01581-5128

 A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are regis-
tered. If the shares to be redeemed were issued in certificate form, the cer-
tificates must be endorsed for transfer (or be accompanied by an endorsed stock
power) and must be submitted to First Data together with the redemption
request. Any signature required in connection with a redemption request in
excess of $10,000 must be guaranteed by an eligible guarantor institution, such
as a domestic bank, savings and loan institution, domestic credit union, member
bank of the Federal Reserve System or member firm of a national securities
exchange. Written redemption requests of $10,000 or less do not require a sig-
nature guarantee unless more than one such redemption is made in any 10-day
period. First Data may require additional supporting documents for redemptions
made by corporations, executors, administrators, trustees or guardians. A
redemption request will not be deemed properly received until First Data
receives all required documents in proper form. Redemption proceeds will be
mailed to the shareholder's address of record. 
 
                                                                              33
<PAGE>
 
REDEMPTION OF SHARES (CONTINUED)
 
 
 TELEPHONE REDEMPTION AND EXCHANGE PROGRAM
 
 Shareholders who do not have a Smith Barney brokerage account may be eligible
to redeem and exchange Portfolio shares by telephone. To determine if a share-
holder is entitled to participate in this program, he or she should contact
First Data at (800) 451-2010. Once eligibility is confirmed, the shareholder
must complete and return a Telephone/Wire Authorization Form, including a sig-
nature guarantee, that will be provided by First Data upon request. (Alterna-
tively, an investor may authorize telephone redemptions on the new account
application with a signature guarantee when making his/her initial investment
in the Concert Series.)
 
 Redemptions. Redemption requests of up to $10,000 of any Class or Classes of
a Portfolio's shares may be made by eligible shareholders by calling First
Data at (800) 451-2010. Such requests may be made between 9:00 a.m. and 5:00
p.m. (New York City time) on any day the NYSE is open. Redemptions of shares
(i) by retirement plans or (ii) for which certificates have been issued are
not permitted under this program.

 A shareholder will have the option of having the redemption proceeds mailed
to his/her address of  record or wired to a bank account predesignated by the
shareholder. Generally, redemption proceeds will be mailed or wired, as the
case may be, on the next business day following the redemption request. In
order to use the wire procedures, the bank receiving the proceeds must be a
member of the Federal Reserve System or be a correspondent of a member bank.
The Concert Series reserves the right to charge shareholders a nominal fee for
each wire redemption. Such charges, if any, will be assessed against the
shareholder's Portfolio account from which shares were redeemed. In order to
change the bank account designated to receive redemption proceeds, a share-
holder must complete a new Telephone/Wire Authorization Form and, for the pro-
tection of the shareholder's assets, will be required to provide a signature
guarantee and certain other documentation. 
 
 Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of the shares of the fund being acquired is identical to
the registration of the shares of the fund exchanged. Such exchange requests
may be made by calling First Data at (800) 451-2010 between 9:00 a.m. and 5:00
p.m. (New York City time) on any day on which the NYSE is open.

 Additional Information regarding Telephone Redemption and Exchange Program.
Neither the Concert Series nor its agents will be liable for following
instructions communicated by telephone that are reasonably believed to be gen-
uine. The Concert Series and its agents will employ procedures designed to
verify the identity of the caller and legitimacy of instructions (for example,
a shareholder's name and account number will be required and phone calls may
be recorded). The Concert Series reserves the right to suspend, modify or dis-
continue the telephone redemption and exchange program or to impose a charge
for this service at any time following at least seven (7) days prior notice to
shareholders. 
 
 AUTOMATIC CASH WITHDRAWAL PLAN
 
 Each Portfolio offers shareholders an automatic cash withdrawal plan, under
which shareholders who own shares with a value of at least $10,000 may elect
to receive cash payments of at least $50 monthly or quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal plans only where the
shareholder is eligible to receive qualified distributions and has an account
value of at least $5,000. The withdrawal plan will be carried over on
exchanges between funds or Classes of a Portfolio. Any applicable CDSC will
not be waived on amounts withdrawn by a shareholder that exceed 1.00% per
month of the value of the shareholder's shares subject to the CDSC at the time
the withdrawal plan commences. For further information regarding the automatic
cash withdrawal plan, shareholders should contact a Smith Barney Financial
Consultant.
 
MINIMUM ACCOUNT SIZE
 
 The Concert Series reserves the right to involuntarily liquidate any share-
holder's account in a Portfolio if the aggregate net asset value of the shares
held in that Portfolio account is less than $500. (If a shareholder has more
than one account in a Portfolio, each account must satisfy the minimum account
size.) The Concert Series, however, will not redeem shares based solely on
market reductions in net asset value. Before the Concert Series exercises such
right, shareholders will receive written notice and will be permitted 60 days
to bring accounts up to the minimum to avoid involuntary liquidation.
 
PERFORMANCE

 From time to time, a Portfolio may include its total return, average annual
total return, yield and current dividend return in advertisements and/or other
types of sales literature. These figures are computed separately for Class A,
Class B, Class C and Class Y shares of each Portfolio. These figures are based
on historical earnings and are not intended to indicate future performance.
Total return is computed for a specified period of time assuming deduction of
the maximum sales charge, if any, from the initial amount 
 
34
<PAGE>
 
PERFORMANCE (CONTINUED)
invested and reinvestment of all income dividends and capital gain distribu-
tions on the reinvestment dates at prices calculated as stated in this Prospec-
tus, then dividing the value of the investment at the end of the period so cal-
culated by the initial amount invested and subtracting 100%. The standard aver-
age annual total return, as prescribed by the SEC is derived from this total
return, which provides the ending redeemable value. Such standard total return
information may also be accompanied with nonstandard total return information
for differing periods computed in the same manner but without annualizing the
total return or taking sales charges into account. The yield of a Portfolio's
Class refers to the net investment income earned by investments in the Class
over a 30-day period. This net investment income is then annualized, i.e., the
amount of income earned by the investments during that 30-day period is assumed
to be earned each 30-day period for twelve periods and is expressed as a per-
centage of the investments. The yield is calculated according to a formula pre-
scribed by the SEC to facilitate comparison with yields quoted by other invest-
ment companies. The Balanced Portfolio and the Conservative Portfolio calculate
current dividend return for each of their Classes by annualizing the most
recent quarterly dividend and dividing by the net asset value or the maximum
public offering price (including sales charge) on the last day of the period
for which current dividend return is presented. The Income Portfolio calculates
current dividend return for each of its Classes by annualizing the most recent
monthly distribution and dividing by the net asset value or the maximum public
offering price (including sales charge) on the last day of the period for which
current dividend return is presented. Each Class' current dividend return may
vary from time to time depending on market conditions, the composition of the
investment portfolio and its operating expenses. These factors and possible
differences in the methods used in calculating current dividend return should
be considered when comparing current return of a Class to yields published for
other investment companies and other investment vehicles. Each Portfolio may
also include comparative performance information in advertising or marketing
its shares. Such performance information may include data from Lipper Analyti-
cal Services, Inc. and other financial publications.
 
MANAGEMENT OF THE CONCERT SERIES
 
 
 BOARD OF DIRECTORS

 Overall responsibility for management and supervision of the Concert Series
rests with the Concert Series' Board of Directors. A majority of the Concert
Series' directors are non-interested persons as defined in Section 2(a)(19) of
the 1940 Act. However, the directors and officers of the Concert Series also
serve in similar positions with many of the Underlying Smith Barney Funds.
Thus, if the interests of a Portfolio and the Underlying Smith Barney Funds
were ever to become divergent, it is possible that a conflict of interest could
arise and affect how the directors and officers of the Concert Series fulfill
their fiduciary duties to that Portfolio and the Underlying Smith Barney Funds.
The directors of the Concert Series believe they have structured each Portfolio
to avoid these concerns. However, conceivably a situation could occur where
proper action for the Concert Series or a Portfolio separately could be adverse
to the interests of an Underlying Smith Barney Fund, or the reverse could
occur. If such a possibility arises, the directors and officers of the Concert
Series, the affected Underlying Smith Barney Funds and MMC will carefully ana-
lyze the situation and take all steps they believe reasonable to minimize and,
where possible, eliminate the potential conflict. Moreover, limitations on
aggregate investments in the Underlying Smith Barney Funds have been adopted by
the Concert Series to minimize this possibility, and close and continuous moni-
toring will be exercised to avoid, insofar as is possible, these concerns. The
Statement of Additional Information contains background information regarding
each director and executive officer of the Concert Series. 
 
 INVESTMENT MANAGER

 MMC, the investment manager to each Portfolio, is a registered investment
adviser whose principal offices are located at 388 Greenwich Street, New York,
New York 10013. MMC (through its predecessor entities) has been in the invest-
ment counseling business since 1968. MMC renders investment advice to a wide
variety of investment company clients that had aggregate assets under manage-
ment as of March 31, 1998 in excess of $100 billion. Subject to the supervision
and direction of the Concert Series' Board of Directors, MMC will determine how
each Portfolio's assets will be invested in the Underlying Smith Barney Funds
and in repurchase agreements pursuant to the investment objective and policies
of each Portfolio set forth in this Prospectus and make recommendations to the
Board of Directors concerning changes to (a) the Underlying Smith Barney Funds
in which the Portfolios may invest, (b) the percentage range of assets that may
be invested by each Portfolio in any one Underlying Smith Barney Fund and (c)
the percentage range of assets of any Portfolio that may be invested in equity
funds and fixed income funds (including money market funds). The directors of
the Concert Series will periodically monitor the allocations made and the basis
upon which such allocations were made or maintained. MMC also furnishes each
Portfolio with bookkeeping, accounting and administrative services, office
space and equipment, and the services of the officers and employees of the Con-
cert Series. Under the Asset Allocation and Administration Agreement with each
Portfolio, MMC has agreed to bear all expenses of the Concert Series other than
the management fee, the fees payable pursuant to the plan adopted pursuant to
Rule 12b-1 under the 1940 Act and extraordinary expenses. For the services ren-
dered and expenses borne for each Portfolio's last fiscal year, each Portfolio,
except the Global Portfolio, paid MMC a monthly fee at the annual rate of 0.35%
of the value of its average daily net assets. The Global Portfolio anticipates
to pay MMC a monthly fee at the annual rate of 0.35% of the value of its aver-
age daily net assets during the current fiscal year. 
 
                                                                              35
<PAGE>
 
MANAGEMENT OF THE CONCERT SERIES (CONTINUED)

 MMC also serves as investment adviser to each of the Underlying Smith Barney
Funds in which the Portfolios may invest (other than the Smith Barney Premium
Total Return Fund and Smith Barney Small Cap Blend Fund, Inc.) and is
responsible for the selection and management of each of the Underlying Smith
Barney Fund's investments. SBSA, located at 388 Greenwich Street, New York, New
York 10013, serves as investment adviser to Smith Barney Premium Total Return
Fund. SBSA has been in the investment counseling business since 1968 and is a
wholly owned subsidiary of MMC. SBSA renders investment advice to investment
companies that had aggregate assets under management as of March 31, 1998 in
excess of $4.7 billion. TIMCO, located at One Tower Square, Hartford,
Connecticut 06183, serves as investment adviser to Smith Barney Small Cap Blend
Fund, Inc. TIMCO has been in the investment counseling business since 1967 and
is a wholly-owned subsidiary of Holdings. TIMCO renders investment advice to
investment companies that had aggregate assets under management as of March 31,
1998 in excess of $400 million. 
 
 Each Portfolio, as a shareholder in the Underlying Smith Barney Funds, will
indirectly bear its proportionate share of any investment management fees and
other expenses paid by the Underlying Smith Barney Funds. The effective manage-
ment fee of each of the Underlying Smith Barney Funds in which the Portfolios
may invest is set forth below as a percentage rate of the Fund's annual net
assets:
 
<TABLE>
<CAPTION>
                                                     MANAGEMENT
UNDERLYING SMITH BARNEY FUND                            FEES
---------------------------------------------------------------
<S>                                                  <C>
Smith Barney Aggressive Growth Fund Inc.                0.80%
Smith Barney Appreciation Fund Inc.                     0.59%
Smith Barney Equity Funds
 Smith Barney Large Cap Blend Fund                      0.65%
Smith Barney Fundamental Value Fund Inc.                0.75%
Smith Barney Funds, Inc.
 Large Cap Value Fund                                   0.58%
 Short-Term U.S. Treasury Securities Fund               0.45%
Smith Barney Income Funds
 Smith Barney High Income Fund                          0.70%
 Smith Barney Balanced Fund                             0.65%
 Smith Barney Premium Total Return Fund                 0.75%
 Smith Barney Convertible Fund                          0.70%
 Smith Barney Diversified Strategic Income Fund         0.65%
Smith Barney Investment Funds Inc.
 Concert Peachtree Growth Fund                          1.00%
 Smith Barney Hansberger Global Small Cap Value Fund    1.05%
 Smith Barney Hansberger Global Value Fund              0.95%
 Smith Barney Contrarian Fund                           0.85%
 Smith Barney Special Equities Fund                     0.75%
 Smith Barney Government Securities Fund                0.55%
 Smith Barney Investment Grade Bond Fund                0.65%
Smith Barney Investment Trust
Smith Barney Large Capitalization Growth Fund           0.75%
Smith Barney Managed Governments Fund Inc.              0.65%
Smith Barney Money Funds, Inc.
 Cash Portfolio                                         0.38%
Smith Barney Natural Resources Fund Inc.                0.75%
Smith Barney Small Cap Blend Fund Inc.                  0.65%
Smith Barney World Funds, Inc.
 International Equity Portfolio                         0.85%
 European Portfolio                                     0.85%
 Pacific Portfolio                                      0.85%
 Emerging Markets Portfolio                             1.00%
 International Balanced Portfolio                       0.85%
 Global Government Bond Portfolio                       0.75%
---------------------------------------------------------------
</TABLE>
 
 PORTFOLIO MANAGEMENT

 Thomas B Stiles II and R. Jay Gerken, both Managing Directors of Smith Barney,
are responsible for the day-to-day operations of the Concert Series, making all
of the investment decisions since the Series commenced operations in 
February 1996. Prior to joining Smith Barney in 1993, both Mr. Stiles and 
Mr. Gerken were Managing Directors of Shearson Lehman Brothers Inc. 

 Management's discussion and analysis and additional performance information
regarding the Concert Series during the fiscal year ended January 31, 1998 is
included in the Annual Report dated January 31, 1998. A copy of the Annual
Report may be obtained upon request and without charge from a Smith Barney
Financial Consultant or by writing or calling the Concert Series at the address
or phone number listed on page one of this Prospectus. 
 
36
<PAGE>
 
MANAGEMENT OF THE CONCERT SERIES (CONTINUED)

 On April 6, 1998, Travelers announced that it had entered into a Merger Agree-
ment with Citicorp. The transaction, which is expected to be completed during
the third quarter of 1998, is subject to various regulatory approvals, includ-
ing approval by the Federal Reserve Board. The transaction is also subject to
approval by the stockholders of each of Travelers and Citicorp. Upon consumma-
tion of the merger, the surviving corporation would be a bank holding company
subject to regulation under the Bank Holding Company Act of 1956 (the "BHCA"),
the requirements of the Glass-Steagall Act and certain other laws and regula-
tions. Although the effects of the merger of Travelers and Citicorp and compli-
ance with the requirements of the BHCA and the Glass-Steagall Act are still
under review, MMC does not believe that its compliance with applicable law fol-
lowing the merger of Travelers and Citicorp will have a material adverse effect
on its ability to continue to approve the Series with the same level of invest-
ment advisory services that it currently receives. 

DISTRIBUTOR 

 Smith Barney, located at 388 Greenwich Street, New York, New York 10013, dis-
tributes shares of each Portfolio as principal underwriter and as such conducts
a continuous offering pursuant to a best efforts arrangement requiring Smith
Barney to take and pay for only such securities as may be sold to the public.
Pursuant to the services and distribution plan adopted by each Portfolio under
Rule 12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid a service fee
with respect to Class A, Class B and Class C shares of each Portfolio at the
annual rate of 0.25% of the average daily net assets attributable to these
Classes. Smith Barney is also paid a distribution fee with respect to Class B
shares and Class C shares of the High Growth Portfolio, the Growth Portfolio,
the Global Portfolio and the Balanced Portfolio at the annual rate of 0.75% of
the average daily net assets attributable to those Classes. Smith Barney is
paid a distribution fee with respect to Class B and Class C shares of the Con-
servative Portfolio and the Income Portfolio at the annual rate of 0.50% and
0.45%, respectively, of the average daily net assets attributable to those
Classes. Class B shares that automatically convert to Class A shares eight
years after the date of original purchase will no longer be subject to a dis-
tribution fee. The fees are used by Smith Barney to pay its Financial Consul-
tants for servicing shareholder accounts and, in the case of Class B and Class
C shares, to cover expenses primarily intended to result in the sale of those
shares. These expenses include: advertising expenses; the cost of printing and
mailing prospectuses to potential investors; payments to and expenses of Smith
Barney Financial Consultants and other persons who provide support services in
connection with the distribution of shares; interest and/or carrying charges;
and indirect and overhead costs of Smith Barney associated with the sale of
Portfolio shares, including lease, utility, communications and sales promotion
expenses. 
 
 The payments to Smith Barney Financial Consultants for selling shares of a
Class include a commission or fee paid by the investor or Smith Barney at the
time of sale and, with respect to Class A, Class B and Class C shares, a con-
tinuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
 
 Actual distribution expenses for Class B and Class C shares of each Portfolio
for any given year may exceed the fees received pursuant to the Plan and will
be carried forward and paid by each Portfolio in future years so long as the
Plan is in effect. Interest is accrued monthly on such carryforward amounts at
a rate comparable to that paid by Smith Barney for bank borrowings.
 
ADDITIONAL INFORMATION

 The Concert Series, an open-end, non-diversified investment company, was
incorporated in Maryland on August 11, 1995. The Concert Series commenced oper-
ations on February 5, 1996 under the name Smith Barney Concert Series Inc. The
Select Portfolios of Concert Series commenced operations on February 5, 1997.
On February 24, 1997, the Concert Series changed its name to Smith Barney Con-
cert Allocation Series Inc. The Concert Series has authorized capital of
5,500,000,000 shares with a par value of $.001 per share. The Board of Direc-
tors has authorized the issuance of eleven series of shares, each representing
shares in one of eleven separate Portfolios and may authorize the issuance of
additional series of shares in the future. The assets of each Portfolio are
segregated and separately managed and a shareholder's interest is in the assets
of the Portfolio in which he or she holds shares. Class A, Class B, Class C,
Class Y and Class Z shares of a Portfolio represent interests in the assets of
that Portfolio and have identical voting, dividend, liquidation and other
rights (other than conversion) on the same terms and conditions except that
expenses related to the distribution of each Class of shares are borne solely
by each Class and each Class of shares has exclusive voting rights with respect
to provisions of the Concert Series' Rule 12b-1 distribution plan that pertain
to a particular Class. As described under "Voting" in the Statement of Addi-
tional Information, the Concert Series ordinarily will not hold shareholder
meetings; however, shareholders have the right to call a meeting upon a vote of
10% of the Concert Series' outstanding shares and the Concert Series will
assist shareholders in calling such a meeting as required by the 1940 Act.
Shares do not have cumulative voting rights or preemptive rights and are fully
paid, transferable and non-assessable when issued for payment as described in
this Prospectus. 
 
                                                                              37
<PAGE>
 
ADDITIONAL INFORMATION (CONTINUED)
 
 On matters submitted for consideration by shareholders of any Underlying Smith
Barney Fund, a Portfolio will vote its shares in proportion to the vote of all
other holders of shares of that Fund or, in certain limited instances, the
Portfolio will vote its shares in the manner indicated by a vote of holders of
shares of the Portfolio.
 
 PNC Bank, National Association, located at 17th and Chestnut Streets, Phila-
delphia, Pennsylvania 19103 serves as custodian of the Portfolio's investments.
 
 First Data, located at Exchange Place, Boston, Massachusetts 02109, serves as
the Concert Series' transfer agent.
 
 The Concert Series intends to send its shareholders a semi-annual report and
an audited annual report, which will include listings of the investment securi-
ties held by the Concert Series at the end of the period covered. In an effort
to reduce the Concert Series' printing and mailing costs, the Concert Series
plans to consolidate the mailing of its semi-annual and annual reports by
household. This consolidation means that a household having multiple accounts
with the identical address of record will receive a single copy of each report.
Shareholders who do not want this consolidation to apply to their account
should contact their Smith Barney Financial Consultant or the Concert Series'
transfer agent.
 
38
<PAGE>
 
APPENDIX
 
 DESCRIPTIONS OF CERTAIN RISKS RELATED TO VARIOUS SECURITIES INVESTED IN, AND
 INVESTMENT STRATEGIES EMPLOYED BY, THE UNDERLYING SMITH BARNEY FUNDS IN WHICH
 THE PORTFOLIOS MAY INVEST
 
 Repurchase Agreements. Repurchase agreements, as utilized by an Underlying
Smith Barney Fund or a Portfolio of the Concert Series, could involve certain
risks in the event of default or insolvency of the other party, including pos-
sible delays or restrictions upon the ability of an Underlying Smith Barney
Fund or a Portfolio to dispose of the underlying securities, the risk of a pos-
sible decline in the value of the underlying securities during the period in
which an Underlying Smith Barney Fund or a Portfolio seeks to assert its rights
to them, the risk of incurring expenses associated with asserting those rights
and the risk of losing all or part of the income from the agreement.
 
 Reverse Repurchase Agreements. Certain of the Underlying Smith Barney Funds
may engage in reverse repurchase agreement transactions with banks, brokers and
other financial institutions. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Underlying Smith Barney
Fund may decline below the repurchase price of the securities.
 
 Lending of Portfolio Securities. The risks in lending portfolio securities,
like those associated with other extensions of secured credit, consist of pos-
sible delays in receiving additional collateral or in the recovery of the secu-
rities or possible loss of rights in the collateral should the borrower fail
financially. Loans will be made to firms deemed by the adviser to the Under-
lying Smith Barney Fund to be of good standing and will not be made unless, in
the judgment of the adviser, the consideration to be earned from such loans
would justify the risk.
 
 When-Issued Securities and Delayed-Delivery Transactions. The purchase of
securities on a when-issued or delayed-delivery basis involves the risk that,
as a result of an increase in yields available in the marketplace, the value of
the securities purchased will decline prior to the settlement date. The sale of
securities for delayed delivery involves the risk that the prices available in
the market on the delivery date may be greater than those obtained in the sale
transaction.
 
 Non-Diversified Funds. Certain of the Underlying Smith Barney Funds are
classified as non-diversified investment companies under the 1940 Act. Since,
as a non-diversified fund, such an Underlying Smith Barney Fund is permitted to
invest a greater proportion of its assets in the securities of a smaller number
of issuers, each such Fund may be subject to greater risk with respect to its
individual portfolio than a Fund that is more broadly diversified.
 
 Securities of Unseasoned Issuers. Securities in which certain of the Under-
lying Smith Barney Funds may invest may have limited marketability and, there-
fore, may be subject to wide fluctuations in market value. In addition, certain
securities may lack a significant operating history and be dependent on prod-
ucts or services without an established market share.
 
 Convertible Securities and Synthetic Convertible Securities. While convertible
securities generally offer lower yields than non-convertible debt securities of
similar quality, their prices may reflect changes in the value of the under-
lying common stock. Convertible securities entail less credit risk than the
issuer's common stock.
 
 Synthetic convertible securities are created by combining non-convertible
bonds or preferred stocks with warrants or stock call options. Synthetic con-
vertible securities differ from convertible securities in certain respects,
including that each component of a synthetic convertible security has a sepa-
rate market value and responds differently to market fluctuations. Investing in
synthetic convertible securities involves the risks normally involved in hold-
ing the securities comprising the synthetic convertible security.
 
 Securities of Developing Countries. A developing country generally is consid-
ered to be a country that is in the initial stages of its industrialization
cycle. Investing in the equity and fixed-income markets of developing countries
involves exposure to economic structures that are generally less diverse and
mature, and to political systems that can be expected to have less stability,
than those of developed countries. Historical experience indicates that the
markets of developing countries have been more volatile than the markets of the
more mature economies of developed countries; however, such markets often have
provided higher rates of return to investors.
 
 Sovereign Debt Obligations. Sovereign debt of developing countries may involve
a high degree of risk, and may be in default or present the risk of default.
Governmental entities responsible for repayment of the debt may be unable or
unwilling to repay principal and interest when due, and may require renegoti-
ation or rescheduling of debt payments. In addition, prospects for repaying of
principal and interest may depend on political as well as economic factors.
Although some sovereign debt, such as Brady Bonds, is collateralized by U.S.
government securities, repayment of principal and interest is not guaranteed by
the U.S. government.
 
 Restrictions on Foreign Investment. Some countries prohibit or impose substan-
tial restrictions on investments in their capital markets, particularly their
equity markets, by foreign entities. As illustrations, certain countries
require governmental approval prior to investments by foreign persons, or limit
the amount of investment by foreign persons in a particular company, or limit
the investment
 
A-1
<PAGE>
 
APPENDIX (CONTINUED)
 
by foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for pur-
chase by nationals or limit the repatriation of funds for a period of time.
 
 Smaller capital markets, while often growing in trading volume, have substan-
tially less volume than U.S. markets, and securities in many smaller capital
markets are less liquid and their prices may be more volatile than securities
of comparable U.S. companies. Brokerage commissions, custodial services, and
other costs relating to investment in smaller capital markets are generally
more expensive than in the U.S. Such markets have different clearance and set-
tlement procedures, and in certain markets there have been times when settle-
ments have been unable to keep pace with the volume of securities transactions,
making it difficult to conduct such transactions. Further, satisfactory custo-
dial services for investment securities may not be available in some countries
having smaller capital markets, which may result in an Underlying Smith Barney
Fund incurring additional costs and delays in transporting and custodying such
securities outside such countries. Delays in settlement could result in tempo-
rary periods when assets of a Fund are uninvested and no return is earned
thereon. The inability of an Underlying Smith Barney Fund to make intended
security purchases due to settlement problems could cause such Fund to miss
attractive investment opportunities. Inability to dispose of a portfolio secu-
rity due to settlement problems could result either in losses to the Fund due
to subsequent declines in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible liabil-
ity to the purchaser. There is generally less government supervision and regu-
lation of exchanges, brokers and issuers in countries having smaller capital
markets than there is in the U.S.
 
 Mortgage-Related Securities. To the extent that an Underlying Smith Barney
Fund purchases mortgage-related securities at a premium, mortgage foreclosures
and prepayments of principal by mortgagors (which may be made at any time with-
out penalty) may result in some loss of the Fund's principal investment to the
extent of the premium paid. The Underlying Smith Barney Fund's yield may be
affected by reinvestment of prepayments at higher or lower rates than the orig-
inal investment. In addition, like other debt securities, the values of mort-
gage-related securities, including government and government-related mortgage
pools, generally will fluctuate in response to market interest rates.
 
 Non-Publicly Traded and Illiquid Securities. The sale of securities that are
not publicly traded is typically restricted under the Federal securities laws.
As a result, an Underlying Smith Barney Fund may be forced to sell these secu-
rities at less than fair market value or may not be able to sell them when the
Fund's adviser believes it desirable to do so. Investments by an Underlying
Smith Barney Fund in illiquid securities are subject to the risk that should
the Fund desire to sell any of these securities when a ready buyer is not
available at a price that the Fund's adviser deems representative of its value,
the value of the Underlying Smith Barney Fund's net assets could be adversely
affected.
 
 Short Sales. Possible losses from short sales differ from losses that could be
incurred from a purchase of a security, because losses from short sales may be
unlimited, whereas losses from purchases can equal only the total amount
invested.
 
 Forward Roll Transactions. Forward roll transactions involve the risk that the
market value of the securities sold by an Underlying Smith Barney Fund may
decline below the repurchase price of the securities. Forward roll transactions
are considered borrowings by a Fund. Although investing the proceeds of these
borrowings in repurchase agreements or money market instruments may provide an
Underlying Smith Barney Fund with the opportunity for higher income, this
leveraging practice will increase a Fund's exposure to capital risk and higher
current expenses. Any income earned from the securities purchased with the
proceeds of these borrowings that exceeds the cost of the borrowings would
cause a Fund's net asset value per share to increase faster than would
otherwise be the case; any decline in the value of the securities purchased
would cause a Fund's net asset value per share to decrease faster than would
otherwise be the case.
 
 Leverage. Certain of the Underlying Smith Barney Funds may borrow from banks,
on a secured or unsecured basis, in order to leverage their portfolios. Lever-
age creates an opportunity for increased returns to shareholders of an Under-
lying Smith Barney Fund but, at the same time, creates special risk considera-
tions. For example, leverage may exaggerate changes in the net asset value of a
Fund's shares and in a Fund's yield. Although the principal or stated value of
such borrowings will be fixed, the Fund's assets may change in value during the
time the borrowing is outstanding. Leverage will create interest or dividend
expenses for the Fund that can exceed the income from the assets retained. To
the extent the income or other gain derived from securities purchased with bor-
rowed funds exceeds the interest or dividends the Fund will have to pay in
respect thereof, the Fund's net income or other gain will be greater than if
leverage had not been used. Conversely, if the income or other gain from the
incremental assets is not sufficient to cover the cost of leverage, the net
income or other gain of the Fund will be less than if leverage had not been
used. If the amount of income for the incremental securities is insufficient to
cover the cost of borrowing, securities might have to be liquidated to obtain
required funds. Depending on market or other conditions, such liquidations
could be disadvantageous to the Underlying Smith Barney Fund.
 
 Floating and Variable Rate Income Securities. Floating and variable rate
income securities include securities whose rates vary inversely with changes in
market rates of interest. Such securities may also pay a rate of interest
determined by applying a multiple to
 
                                                                             A-2
<PAGE>
 
APPENDIX (CONTINUED)
 
the variable rate. The extent of increases and decreases in the value of secu-
rities whose rates vary inversely with changes in market rates of interest gen-
erally will be larger than comparable changes in the value of an equal princi-
pal amount of a fixed rate security having similar credit quality, redemption
provisions and maturity.
 
 Zero Coupon, Discount and Payment-in-Kind Securities. Zero coupon securities
generally pay no cash interest (or dividends in the case of preferred stock) to
their holders prior to maturity. Payment-in-kind securities allow the lender,
at its option, to make current interest payments on such securities either in
cash or in additional securities. Accordingly, such securities usually are
issued and traded at a deep discount from their face or par value and generally
are subject to greater fluctuations of market value in response to changing
interest rates than securities of comparable maturities and credit quality that
pay cash interest (or dividends in the case of preferred stock) on a current
basis.
 
 Premium Securities. Premium securities are income securities bearing coupon
rates higher than prevailing market rates. Premium securities are typically
purchased at prices greater than the principal amounts payable on maturity. If
securities purchased by an Underlying Smith Barney Fund at a premium are called
or sold prior to maturity, the Fund will recognize a capital loss to the extent
the call or sale price is less than the purchase price. Additionally, the Fund
will recognize a capital loss if it holds such securities to maturity.
 
 Yankee Bonds. Yankee bonds are U.S. dollar-denominated bonds sold in the U.S.
by non-U.S. issuers. As compared with bonds issued in the U.S., such bond
issues normally carry a higher interest rate but are less actively traded.
 
 Swap Agreements. As one way of managing its exposure to different types of
investments, certain of the Underlying Smith Barney Funds may enter into inter-
est rate swaps, currency swaps, and other types of swap agreements such as
caps, collars, and floors. Swap agreements can be highly volatile and may have
a considerable impact on a Fund's performance. Swap agreements are subject to
risks related to the counterparty's ability to perform, and may decline in
value if the counterparty's creditworthiness deteriorates. A Fund may also suf-
fer losses if it is unable to terminate outstanding swap agreements or reduce
its exposure through offsetting transactions.
 
 Indexed Securities. Certain of the Underlying Smith Barney Funds may invest in
indexed securities, including inverse floaters, whose value is linked to cur-
rencies, interest rates, commodities, indices, or other financial indicators.
Indexed securities may be positively or negatively indexed (i.e., their value
may increase or decrease if the underlying instrument appreciates), and may
have return characteristics similar to direct investments in the underlying
instrument or to one or more options on the underlying instrument. Indexed
securities may be more volatile than the underlying instrument itself.

A-3
<PAGE>
 

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                                                                    SMITH BARNEY

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