1 9 9 4
ANNUAL
REPORT
Smith Barney Shearson
SHORT-TERM
WORLD
INCOME FUND
APRIL 30, 1994
INVESTMENT OBJECTIVE
Smith Barney Shearson Short-Term World Income Fund's investment
objective is to maximize current income while protecting the
principal investment. To achieve this objective the Fund invests
in high quality debt securities of less than four years maturity,
denominated in U.S. dollars and foreign currencies. A cross-
currency hedging strategy is also employed.
PERFORMANCE
Class A and Class B shares had annual distribution rates of 5.25%
and 4.75%, respectively, up until November 1993 and 5% and 4.5%,
respectively, for the remainder of the fiscal year ended April
30, 1994. During the fiscal year ended April 30, 1994, the Fund's
net asset value (NAV) fell from $6.85 to $6.39, generating total
returns for Class A and Class B shares of (1.63%) and (2.26%),
respectively.
STRATEGY
On February 1, 1994, the Fund's maximum maturity restriction was
extended from three to four years and the one year average maturity
limitation was lifted. These guideline changes were proposed in order
to reduce the Fund's dependence on cross-hedging strategies by allowing the
Fund to benefit from increased exposure to fully hedged bonds. The ability
to purchase longer bonds increases the yield received from markets with
positive yield curves. As well as this potential income gain, a capital
gain can be received during bond rallies.
While longer maturity bonds have been purchased since the guidelines were
amended, the Fund has not extended duration to the full extent permitted
as bonds have fallen globally since February. The Fund has concentrated
its longest bond exposure in Europe while holding only short maturity
bonds in the United States. This tactic has proved appropriate since the
U.S. bond market has underperformed European bonds year-to-date. The pro-
posed distribution of cross and fully-hedged investments under the new
guidelines has been attained. Approximately 50% of foreign investments
held by the Fund are cross-hedged, 25% are fully hedged, and 25% remain
invested in the United States.
INVESTMENT ENVIRONMENT
Currency tensions within Europe have disappeared since the forced exit of
Britain and Italy from the Exchange Rate Mechanism (ERM) in September 1992
and the emergency widening of fluctuation bands to +/- 15% last August. By
deterring speculators, wider bands have reinforced currency stability.
There has been no official move to return to the old +/- 2.25% bands al-
though the French franc, Belgian franc and the Danish kroner have all
since strengthened above their old support levels.
Although ERM currencies, with the exception of the Dutch guilder (which
remains within the narrower band) are now effectively free-floating, mone-
tary policy is still conducted with the aim of shadowing the deutschemark.
Consequently, the timing of interest rate cuts remains dependent on
Bundesbank policy. The key German repurchase rate has fallen from 7.75% to
5.46% in the last year. The series of cuts that make up this total reduc-
tion in rates has proceeded gradually since the Bundesbank has been wait-
ing for money supply to fall. However, due to special domestic factors,
German money supply has been distorted upwards. Real rates in other ERM
countries have consequently been held at levels which are inappropriate
for economies in recession. Those countries with the weakest economies,
typically those with high yields, have also had the weakest currencies.
Since the cross-hedging strategy relies on hedging high-yielding curren-
cies with lower yielding currencies, typically deutschemark bloc, the NAV
of the Fund has fallen.
Recently the weak U.S. dollar has compounded this unfavorable impact on
Fund performance from German monetary policy. The dollar fell by 5.5%
against the deutschemark in the first four months of this year. A falling
dollar tends to strengthen the deutschemark relative to other European
currencies as DM/US$ is the most traded exchange rate. Other dollar bloc
investments that the Fund has held, specifically the Australian, New
Zealand and Canadian dollars, have suffered alongside the U.S. dollar.
There are several reasons why the U.S. dollar depreciated. The trade dis-
agreement between the U.S. and Japan caused the dollar to fall against the
yen in February and stirred up anti-dollar sentiment that spilled over
into European exchange rates against the dollar. Disappointing U.S. growth
in the first quarter of 1994 and stop-loss triggers by hedge funds con-
tributed to dollar weakness.
European bond markets have generally fallen since the start of 1994, while
North American bonds started to fall three months earlier. The opportunity
to extend investment maturities after the introduction of the new guide-
lines in February has therefore not as yet been profitable.
The Northern American bond markets have fallen on the back of inflationary
fears after strong economic growth in the last quarter of 1993. The three
25 basis point increases to 3.75% since February 4, 1994 in the Federal
Funds rate have proved insufficient to comfort market participants. In
contrast, the initial European bond sell-off was based on sentiment and
technicalities, rather than negative fundamental factors. Subsequently,
however, the back-up in bond yields has fed fears of stronger than antici-
pated growth in Europe. These concerns, along with German money supply
growth that continues to be above target, have led the markets to price in
an unduly pessimistic scenario on German short-term rates and bond yields.
Apart from these broad themes that have impacted the Fund's performance, a
number of events have shaken individual markets over the last year. Poli-
tics have formed a powerful influence over several markets. The Italian
General Election on March 27th and March 28th was preceeded by bond and
currency weakness and followed by strong corrections in both markets on
the news that the right-wing Freedom Alliance was victorious. The Fund
maintained some unhedged bond exposure throughout. In Spain, a series of
scandals surrounding Prime Minister Gonzalez's government continued to
rock the markets. And at the end of 1993, the hung parliament result in
the New Zealand elections caused the New Zealand dollar to temporarily
fall. These events and others caused a great divergence in currency per-
formances over the last year. The yen has been the strongest currency,
rising by 9% against the U.S. dollar and at the other end of the spectrum
is the Spanish peseta which fell by 14% against the dollar.
OUTLOOK
We believe that the recent rise in European bond yields represents a cor-
rection in a continuing bond rally. Inflation expectations are low and
falling, economies are depressed and unemployment remains high. Europe's
authorities will use the leeway offered by the wide ERM bands to cut
interest rates as German rates fall, with the potential existing in a num-
ber of countries for further interest rate convergence. Furthermore, Euro-
pean bond yields are now at much higher levels than at the start of the
year. This adds incremental value to the Fund in terms of generated income
and also adds support to our bullish bond view. However, turbulence in the
U.S. bond market is likely to persist until interest rates are hiked to a
level which is interpreted by the markets as a neutral policy stance. In-
terest rate differentials therefore continue to favor an appreciating dol-
lar -- to the Fund's benefit.
SUMMARY
The change in the Fund's guidelines was designed to reduce the reliance on
the cross-hedging strategy that has proved difficult in recent periods.
The main reason for the capital losses from this strategy has been cur-
rency strength in the low yielding deutschemark bloc which is used to
hedge the Fund's investments. This trend has continued in the last fiscal
year as the long-awaited German interest rate cuts have been slow to
occur.
The opportunity to offset some of these losses by greater participation in
bond rallies, permitted by the introduction of longer maturity limits, has
not arisen in 1994 to date due to falling bond markets.
A shareholder meeting is scheduled for July 5, 1994 to consider the pro-
posed reorganization of the Fund whereby it would be acquired by Smith
Barney Shearson Global Bond Fund, a sub-trust of Smith Barney Shearson In-
come Funds.
Sincerely,
Heath B. McLendon Alan J. Brown
Chairman of the Board and Vice President
Investment Officer and Investment Officer
April 30, 1994
PORTFOLIO HIGHLIGHTS (UNAUDITED) APRIL 30, 1994
DESCRIPTION OF PIE CHART IN SHAREHOLDER REPORT
INDUSTRY BREAKDOWN
Pie chart depicting the allocation of the Short-Term World Income Fund's
investment securities held at April 30, 1994 by industry classification.
The pie is broken in pieces representing industries in the following per-
centages:
<TABLE>
<CAPTION>
INDUSTRY
PERCENTAGE
<S> <C>
FINANCE 16.4%
BANKING AND FINANCE 23.7%
FINANCIAL SERVICES 19.9%
OTHER INDUSTRIES, REPURCHASE AGREEMENT, TIME
DEPOSITS AND NET OTHER ASSETS AND LIABILITIES 16.1%
COMMERCIAL PAPER 10.1%
GOVERNMENT BONDS 13.8%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Percentage
of
Security Net Assets
<S> <C>
WORLD BANK, 12.450% DUE 2/9/98 6.7%
GENERAL ELECTRIC CAPITAL CORPORATION, 11.875% DUE 7/11/96 6.5
DENMARK BULLET, 9.000% DUE 11/15/95 6.4
SWEDISH EXPORT CREDIT, 12.000% DUE 2/24/98 5.5
ABB FINANCE INC., 10.500% DUE 6/20/96 5.4
WORLD BANK, 8.625% DUE 10/1/95 5.0
METROPOLIS OF TOKYO, 9.250% DUE 6/28/94 4.9
CREDIT LOCALE, 7.750% DUE 5/23/94 4.8
ABBEY NATIONAL, 4.750% DUE 4/25/96 4.7
GUINESS FINANCE B.V., 9.750% DUE 3/28/96 4.5
</TABLE>
HISTORICAL PERFORMANCE -- CLASS A SHARES
<TABLE>
<CAPTION>
Year Ended Net Asset Value Return of Capital Dividends Total
April 30 Beginning Ending Capital Gains Paid Paid
Return*
<S> <C> <C> <C> <C> <C> <C>
5/22/90-4/30/91 $7.76 $7.62 -- -- $0.77 8.34%
1992 $7.62 $7.44 -- -- $0.60 5.69%
1993 $7.44 $6.85 $0.01 -- $0.38
(2.76)%
1994 $6.85 $6.39 $0.34 $0.01 --
(1.63)%
Total $0.35 $0.01 $1.75
Cumulative Total Return -- (5/22/90 through 4/30/94) 9.53%
<FN>
* Figures assume reinvestment of all dividends and capital gains
distributions at net asset value and do not assume deduction of the
front-end sales charge (maximum 3.0%).
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS MONTHLY
AND CAPITAL GAINS, IF ANY, ANNUALLY.
AVERAGE ANNUAL TOTAL RETURN** -- CLASS A SHARES
<TABLE>
<CAPTION>
Without Sales Charge With Sales Charge***
With Fee Without With Fee Without
Waiver Fee Waiver Waiver Fee Waiver
<S> <C> <C> <C> <C>
Year Ended 4/30/94 (1.63)% (1.95)% (4.58)% (4.89)%
Inception 5/22/90
through 4/30/94 2.34% 2.09% 1.55% 1.30%
<FN>
** All average annual total return figures shown reflect reinvestment of
dividends and capital gains at net asset value. The Fund commenced op-
erations May 22, 1990. The Fund waived investment advisory, adminis-
tration, custodian, distributor and transfer agent fees from May 22,
1990 to April 30, 1994. A shareholder's actual return for periods dur-
ing which waivers were in effect would be the greater of the two num-
bers shown.
*** Average annual total return figures shown assume the deduction of the
maximum 3.0% front-end sales charge.
NOTE: On November 6, 1992, existing shares of the Fund were desig-
nated Class A shares. Class A shares are subject to a maximum 3.0%
front-end sales charge and a service fee of 0.25% of the value of the
average daily net assets attributable to that class. The Fund's annual
rates of return would have been lower had service fees been in effect
prior to November 6, 1992.
</TABLE>
GROWTH OF $10,000 INVESTED IN CLASS A SHARES OF
SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND+
May 22, 1990 -- April 30, 1994
DESCRIPTION OF MOUNTAIN CHART IN SHEARSON REPORT (CLASS A)
A line graph depicting the total growth (including reinvestment of divi-
dends and capital gains) of a hypothetical investment of $10,000 in Short-
Term World Income Fund's Class A shares on May 22, 1990 through April 30,
1994 as compared with the growth of a $10,000 investment in Salomon Broth-
ers Currency-Hedged World Government Bond 1-3 Year Index. The plot points
used to draw the line graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTED IN THE
SALOMON BROTHERS
GROWTH OF $10,000 CURRENCY-HEDGED
WORLD
INVESTED IN CLASS A GOVERNMENT BOND
MONTH ENDED SHARES OF THE FUND 1-3 YEAR INDEX
<S> <C> <C>
05/22/90 $9,700 -
05/90 $9,700
$10,000
06/90 $9,937
$10,090
09/90 $10,201
$10,265
12/90 $10,412
$10,592
03/91 $10,453
$10,839
06/91 $10,543
$11,018
09/91 $10,812
$11,344
12/91 $10,899
$11,671
03/92 $11,018
$11,720
06/92 $11,196
$11,989
09/92 $10,688
$12,280
12/92 $10,657
$12,392
03/93 $10,769
$12,620
06/93 $10,832
$12,815
09/93 $10,754
$12,994
12/93 $10,785
$13,156
03/94 $10,596
$13,086
04/94 $10,624
$13,070
</TABLE>
+ Illustration of $10,000 invested in Class A shares on May 22, 1990 as-
suming deduction of the maximum 3.0% front-end sales charge at the time
of investment and reinvestment of dividends and capital gains at net
asset value through April 30, 1994.
SALOMON BROTHERS CURRENCY-HEDGED WORLD GOVERNMENT BOND 1-3 YEAR INDEX --
Consists of worldwide fixed-rate government bonds with one-to-three
years to maturity. Index returns assume reinvestment of dividends and,
unlike the Fund's returns, do not reflect any fees or expenses.
Index information is available at month-end only; therefore the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here and on the following pages represent past
performance of the Fund and do not guarantee future results of Class A
shares.
FOR A GLOSSARY OF TERMS, PLEASE TURN TO THE END OF THIS REPORT.
HISTORICAL PERFORMANCE -- CLASS B SHARES
<TABLE>
<CAPTION>
Year Ended Net Asset Value Return of Capital Dividends Total
April 30 Beginning Ending Capital Gains Paid Paid
Return*
<S> <C> <C> <C> <C> <C> <C>
11/6/92-4/30/93 $7.02 $6.85 $0.00** -- $0.14
(0.38)%
1994 $6.85 $6.39 $0.30 $0.01 --
(2.26)%
Total $0.30 $0.01 $0.14
Cumulative Total Return -- (11/6/92 through 4/30/94)
(2.63)%
<FN>
* Figures assume reinvestment of all dividends and capital gains
distributions at net asset value and do not assume deduction of the
contingent deferred sales charge (``CDSC'').
** Represents a number less than one cent per Class B share.
</TABLE>
AVERAGE ANNUAL TOTAL RETURN** -- CLASS B SHARES
<TABLE>
<CAPTION>
Without CDSC With CDSC***
With Fee Without With Fee Without
Waiver Fee Waiver Waiver Fee Waiver
<S> <C> <C> <C> <C>
Year Ended 4/30/94 (2.26)% (2.54)% (5.06)%
(5.33)%
Inception 11/6/92
through 4/30/94 (1.79)% (2.08)% (3.04)%
(3.32)%
<FN>
** All average annual total return figures shown reflect reinvestment of
dividends and capital gains at net asset value.
*** Average annual total return figures shown assume the deduction of the
maximum applicable CDSC which is described in the prospectus. The Fund
waived investment advisory, administration, custodian, distributor and
transfer agent fees from November 6, 1992 to April 30, 1994. A share-
holder's actual return for periods during which waivers were in effect
would be the greater of the two numbers shown.
NOTE: The Fund began offering Class B shares on November 6, 1992.
Class B shares are subject to a maximum 3.0% CDSC and service and dis-
tribution fees of 0.25% and 0.50%, respectively, of the value of the
average daily net assets attributable to that class.
</TABLE>
GROWTH OF $10,000 INVESTED IN CLASS B SHARES OF
SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND+
November 6, 1992 -- April 30, 1994
DESCRIPTION OF MOUNTAIN CHART IN SHEARSON REPORT (CLASS B)
A line graph depicting the total growth (including reinvestment of divi-
dends and capital gains) of a hypothetical investment of $10,000 in Short-
Term World Income Fund's Class B shares on November 6, 1992 through April
30, 1994 as compared with the growth of a $10,000 investment in Salomon
Brothers Currency-Hedged World Government Bond 1-3 Year Index. The plot
points used to draw the line graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTED IN THE
SALOMON BROTHERS
GROWTH OF $10,000 CURRENCY-HEDGED
WORLD
INVESTED IN CLASS A GOVERNMENT BOND
MONTH ENDED SHARES OF THE FUND 1-3 YEAR INDEX
<S> <C> <C>
10/31/92 - $10,000
11/10/92 $10,000 -
11/92 $9,828 $9,998
12/92 $9,851 $10,066
03/93 $9,938 $10,252
06/93 $9,981 $10,410
09/93 $9,894 $10,556
12/93 $9,906 $10,687
03/94 $9,716 $10,630
04/94 $9,555 $10,617
<FN>
+ Illustration of $10,000 invested in Class B shares on November 6, 1992
assuming deduction of the maximum CDSC at the time of redemption and
reinvestment of dividends and capital gains at net asset value through
April 30, 1994.
++ Value does not assume deduction of applicable CDSC.
+++ Value assumes deduction of applicable CDSC (assuming redemption on
April 30, 1994).
SALOMON BROTHERS CURRENCY-HEDGED WORLD GOVERNMENT BOND 1-3 YEAR INDEX
-- Consists of worldwide fixed-rate government bonds with one-to-three
years to maturity. Index returns assume reinvestment of dividends and,
unlike the Fund's returns, do not reflect any fees or expenses.
Index information is available at month-end only; therefore, the clos-
est month-end to inception date of the Fund has been used.
NOTE: All figures cited here and on the other pages represent past
performance of the Fund and do not guarantee future results of Class B
shares.
</TABLE>
FOR A GLOSSARY OF TERMS, PLEASE TURN TO THE END OF THIS REPORT.
PORTFOLIO OF INVESTMENTS APRIL 30, 1994
<TABLE>
<CAPTION>
MARKET VALUE
FACE VALUE (NOTE 1)
<S> <C>
UNITED STATES DOLLAR BONDS -- 19.4%
Abbey National,
US$ 3,000,000 4.750% due 4/25/96 $ 2,925,300
Credit Locale,
3,000,000 7.750% due 5/23/94 3,004,800
Metropolis of Tokyo,
3,000,000 9.250% due 6/28/94 3,020,100
World Bank,
3,000,000 8.625% due 10/1/95 3,120,531
TOTAL UNITED STATES DOLLAR BONDS
(Cost $12,156,620) 12,070,731
SWEDISH KRONA BONDS -- 17.5%
ABB Finance Inc.,
SEK 25,000,000 10.500% due 6/20/96 3,380,567
Deutsche Bank,
20,000,000 10.250% due 2/24/97 2,723,652
Eurofima,
15,000,000 10.250% due 3/3/97 2,028,144
Staten Bostads,
19,000,000 12.500% due 1/23/97 2,718,308
TOTAL SWEDISH KRONA BONDS (Cost $10,669,996) 10,850,671
ITALIAN LIRA BONDS -- 16.3%
General Electric Capital Corporation,
ITL6,000,000,000 11.875% due 7/11/96 4,012,646
LKB Baden Wurtenburg,
4,000,000,000 13.000% due 3/22/96 2,689,428
Swedish Export Credit,
5,000,000,000 12.000% due 2/24/98 3,421,498
TOTAL ITALIAN LIRA BONDS (Cost $9,722,320) 10,123,572
SPANISH PESETA BONDS -- 14.3%
European Investment Bank,
ESP300,000,000 11.400% due 11/14/97 2,386,238
Interamerican Development Bank,
300,000,000 10.750% due 4/9/97 2,352,941
World Bank,
500,000,000 12.450% due 2/9/98 4,134,295
TOTAL SPANISH PESETA BONDS (Cost $8,738,766) 8,873,474
FRENCH FRANC BONDS -- 7.5%
Finland (Republic of),
FRF 10,000,000 9.000% due 4/15/97 $1,883,911
Guiness Finance B.V.,
15,000,000 9.750% due 3/28/96 2,796,691
TOTAL FRENCH FRANC BONDS (Cost $4,541,864) 4,680,602
DANISH KRONE BONDS -- 6.4% (Cost $3,931,432)
Denmark Bullet,
DKK 25,000,000 9.000% due 11/15/95 3,991,464
COMMERCIAL PAPER -- 10.1%
Ford Motor Credit Corporation,
USD 3,146,000 3.520%+ due 5/2/94 3,146,000
General Electric Capital Corporation,
3,146,000 3.550%+ due 5/2/94 3,146,000
TOTAL COMMERCIAL PAPER (Cost $6,292,000) 6,292,000
TIME DEPOSITS -- 2.0%
Westpac,
ITL1,000,000,000 7.875% DUE 5/4/94 628,547
Unibank,
1,001,531,250 7.875% DUE 5/9/94 629,510
TOTAL TIME DEPOSITS (Cost $1,251,574) 1,258,057
REPURCHASE AGREEMENT -- 3.6% (Cost $2,139,000)
US$ 2,139,000 Agreement with Union Bank of Switzerland, 2,139,000
3.250% dated 4/29/94 to be repurchased at
$2,139,579 on 5/2/94, collateralized by
$2,260,000 U.S. Treasury Bills Zero Coupon
due 1/12/95
TOTAL INVESTMENTS (Cost $59,443,572*) 97.1% $60,279,571
OTHER ASSETS AND LIABILITIES (NET) 2.9 1,785,494
NET ASSETS 100.0% $62,065,065
<FN>
+ Rate represents annualized yield to maturity (unaudited).
* Aggregate cost for Federal tax purposes.
</table}
SCHEDULE OF FORWARD FOREIGN EXCHANGE CONTRACTS APRIL 30, 1994
</TABLE>
<TABLE>
<CAPTION>
CONTRACT
VALUE MARKET VALUE
DATE (NOTE 1)
<S> <C> <C>
FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
9,150,000 Australian Dollars 6/20/94 $ 6,531,320
66,000,000 Austrian Schillings 5/9/94 5,679,552
115,000,000 Belgian Francs 5/26/94 3,359,083
39,000,000 Danish Krone 5/25/94 5,977,184
26,000,000 Finnish Markka 6/15/94 4,828,731
11,500,000 French Francs 6/21/94 2,019,189
2,700,000 Irish Punts 5/13/94 3,965,561
1,270,000,000 Japanese Yen 5/9/94 12,460,845
1,400,000 Netherland Guilders 6/30/94 749,976
6,000,000 New Zealand Dollars 6/15/94 3,454,092
1,280,000,000 Portuguese Escudos 6/9/94 7,436,118
TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
(Contract amount $55,389,001) $56,461,651
FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL
187,000,000 Austrian Schillings 5/9/94 $(16,092,065)
115,000,000 Belgian Francs 5/26/94 (3,359,083)
40,900,000 French Francs 6/21/94 (7,181,288)
11,100,000 German Marks 6/30/94 (6,668,189)
2,700,000 Irish Punts 5/13/94 (3,965,561)
3,100,000,000 Italian Lira 5/16/94 (1,944,670)
1,270,000,000 Japanese Yen 5/9/94 (12,460,845)
25,000,000 Netherland Guilders 6/30/94 (13,392,424)
24,500,000 Norwegian Krone 6/30/94 (3,395,270)
1,280,000,000 Portuguese Escudos 6/9/94 (7,436,119)
1,745,000 Spanish Pesos 5/24/94 (12,872,904)
50,000,000 Swedish Kronas 5/18/94 (6,517,393)
4,700,000 Swiss Francs 6/30/94 (3,334,745)
TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL
(Contract Amount $94,977,151) $(98,620,556)
</TABLE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1994
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (Cost $59,443,572) (Note 1)
See accompanying schedule
$60,279,571
Receivable for forward foreign exchange contracts
to sell
94,977,151
Forward foreign exchange contracts to buy, at
value
(Contract cost $55,471,082) (Note 1)
See accompanying schedule
56,461,651
Receivable for investment securities matured
3,287,983
Receivable for investment securities sold
3,242,580
Interest receivable
1,828,374
Unamortized organization costs (Note 7)
55,313
TOTAL ASSETS
220,132,623
LIABILITIES:
Forward foreign exchange contracts to sell, at
value
(Contract cost $95,226,610) (Note 1)
See accompanying schedule $98,620,556
Payable for forward foreign exchange contracts to
buy 55,389,001
Due to custodian 2,879,954
Payable for investment securities purchased 629,510
Payable for Fund shares redeemed 277,324
Dividends payable 105,160
Custodian fees payable (Note 2) 31,724
Transfer agent fees payable (Note 2) 21,240
Investment advisory fee payable (Note 2) 14,573
Service fees payable (Note 3) 13,248
Distribution fee payable (Note 3) 8,798
Accrued Trustees' fees and expenses (Note 2) 6,338
Administration fee payable (Note 2) 5,299
Accrued expenses and other payables 64,833
TOTAL LIABILITIES 158,067,558
NET ASSETS $62,065,065
NET ASSETS CONSIST OF:
Distributions in excess of net investment income
$(2,232,440)
Accumulated net realized loss on securities
transactions, foward foreign exchange contracts
and foreign currency transactions
(66,200)
Net unrealized depreciation of securities trans-
actions, foward foreign exchange contracts, for-
eign currencies and net other assets
(1,507,025)
Par value 9,719
Paid-in capital in excess of par value 65,861,011
TOTAL NET ASSETS $62,065,065
NET ASSETS:
CLASS A SHARES:
NET ASSET VALUE and redemption price per share
($41,840,380 / 6,552,197 shares of beneficial in-
terest outstanding) $6.39
Maximum offering price per share ($6.39 / 0.97)
(based on a sales charge of 3.0% of the offer-
ing price on April 30, 1994) $6.59
CLASS B SHARES:
NET ASSET VALUE and offering price per share+
($20,224,685 / 3,166,833 shares of beneficial in-
terest outstanding) $6.39
<FN>
+ Redemption price per share is equal to Net Asset Value less any applica-
ble contingent deferred sales charge.
</TABLE>
See Notes to Financial Statements
STATEMENT OF OPERATIONS FOR THE YEAR ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest
$4,902,603
EXPENSES:
Investment advisory fee (Note 2) $ 526,433
Service fees (Note 3) 240,122
Administration fee (Note 2) 191,430
Distribution fee (Note 3) 169,313
Transfer agent fees (Notes 2 and 4) 164,551
Custodian fees (Note 2) 147,042
Legal and audit fees 105,800
Amortization of organization costs (Note 7) 36,000
Trustees' fees and expenses (Note 2) 28,719
Other 151,620
Fees waived by investment adviser and administrator
(Note 2) (358,932)
TOTAL EXPENSES
1,402,098
NET INVESTMENT INCOME
3,500,505
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(NOTES 1 AND 5):
Net realized loss on:
Securities transactions
(9,165,055)
Forward foreign exchange contracts
(200,816)
Foreign currency transactions
(555,869)
Net realized loss on investments during the year
(9,921,740)
Net change in unrealized appreciation of:
Securities 4,090,896
Forward foreign exchange contracts 809,698
Foreign currencies and net other assets 97,422
Net unrealized appreciation of investments during the
year 4,998,016
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(4,923,724)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(1,423,219)
</TABLE>
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
4/30/94 4/30/93
<S> <C> <C>
Net investment income $ 3,500,505 $9,496,246
Net realized loss on securities transactions,
foward foreign exchange contracts and foreign
currency transactions during the year (9,921,740)
(4,014,558)
Net unrealized appreciation/(depreciation) of
securities, forward foreign exchange contracts,
foreign currencies and net other assets during
the year 4,998,016
(10,885,654)
Net decrease in net assets resulting from opera-
tions (1,423,219)
(5,403,966)
Distributions to shareholders from net invest-
ment income:
Class A --
(9,393,559)
Class B --
(1,182,153)
Distributions from net realized gains:
Class A (130,445) --
Class B (63,078) --
Distribution to shareholders from capital:
Class A (3,164,718)
(223,984)
Class B (1,530,349)
(28,188)
Net increase/(decrease) in net assets from Fund
share transactions (Note 6):
Class A (42,099,020)
(181,264,369)
Class B (27,419,163) 50,472,473
Net decrease in net assets (75,829,992)
(147,023,746)
NET ASSETS:
Beginning of year 137,895,057 284,918,803
End of year (including distributions in excess
of net investment income of $2,232,440 at April
30, 1994) $ 62,065,065 $137,895,057
</TABLE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR
PERIOD
ENDED ENDED ENDED
ENDED
4/30/94# 4/30/93 4/30/92
4/30/91*
<S> <C> <C> <C>
<C>
Net Asset Value, beginning of year $6.85 $7.44 $7.62
$7.76
Income from investment operations:
Net investment income+ 0.44 0.34 0.63
0.77
Net realized and unrealized loss on in-
vestments (0.55) (0.54) (0.21)
(0.14)
Total from investment operations (0.11) (0.20) 0.42
0.63
Distributions:
Dividends from net investment income -- (0.38) (0.60)
(0.77)
Distributions from net realized gains (0.01) -- --
- - --
Distributions from capital (0.34) (0.01) --
- - --
Total distributions (0.35) (0.39) (0.60)
(0.77)
Net Asset Value, end of year $6.39 $6.85 $7.44
$7.62
Total return++ (1.63)% (2.76)% 5.69 %
8.34 %
Ratios/supplemental data:
Net assets, end of year (in 000's) $41,840 $88,304 $284,919
$527,832
Ratio of operating expenses to average
net assets+++ 1.29% 1.40% 1.26%
1.22%**
Ratio of net investment income to aver-
age net assets 3.86% 4.83% 8.33%
10.23%**
Portfolio turnover rate 332% 57% 63%
267%
<FN>
* The Fund commenced operations on May 22, 1990. Any shares in existence
prior to November 6, 1992 were designated as Class A shares.
** Annualized.
+ Net investment income before waiver of fees by investment adviser, ad-
ministrator, and/or custodian, distributor, and transfer agent for the
years ended April 30, 1994, 1993 and 1992, and for the period ended
April 30, 1991 were $0.40, $0.32, $0.62 and $0.76, respectively.
++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any applicable sales charges.
+++ Annualized expense ratios before waiver of fees by investment adviser,
administrator, and/or custodian, distributor, and transfer agent for
the years ended April 30, 1994, 1993 and 1992 and for the period ended
April 30, 1991 were 1.67%, 1.67%, 1.31% and 1.28%, respectively.
# The per share amounts have been calculated using the monthly average
shares method, which more appropriately presents per share data for
this period since use of the undistributed method did not
accord with results of operations.
</TABLE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
4/30/94#
4/30/93*
<S> <C> <C>
Net Asset Value, beginning of period $6.85 $7.02
Income from investment operations:
Net investment income+ 0.41 0.15
Net realized and unrealized loss on investments (0.56) (0.18)
Total from investment operations (0.15) (0.03)
Distributions:
Dividends from net investment income --
(0.14)
Distributions from net realized gains (0.01) --
Distributions from capital (0.30) 0.00**
Total distributions (0.31) (0.14)
Net Asset Value, end of period $6.39 $6.85
Total return++ (2.26)%
(0.38)%
Ratios/supplemental data:
Net assets, end of period (in 000's) $20,225 $49,861
Ratio of operating expenses to average net as-
sets+++ 1.80% 1.75%***
Ratio of net investment income to average net
assets 3.36% 4.48%***
Portfolio turnover rate 332% 57%
<FN>
* The Fund commenced selling Class B shares on November 6, 1992.
** Represents a number less than one cent per Class B share.
*** Annualized.
+ Net investment income before waiver of fees by investment adviser,
administrator, and/or custodian, distributor, and transfer agent for
the year ended April 30, 1994 and for the period ended April 30, 1993
were $0.36 and $0.14, respectively.
++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any applicable sales charges.
+++ Annualized expense ratios before waiver of fees by investment ad-
viser, administrator, and/or custodian, distributor, and transfer
agent for the year ended April 30, 1994 and for the period ended
April 30, 1993 were 2.18% and 2.02%, respectively.
# The per share amounts have been calculated using the monthly average
shares method, which more appropriately presents per share data for
this period since use of the undistributed method did not accord with
results of operations.
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Shearson Short-Term World Income Fund (the "Fund") was orga-
nized under the laws of the Commonwealth of Massachusetts on March 13,
1990 as an entity commonly known as a "Massachusetts business trust." The
Fund is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a non-
diversified, open-end management investment company. The Fund commenced
operations on May 22, 1990. As of November 6, 1992, the Fund began offer-
ing two classes of shares: Class A and Class B shares. Class A shares are
sold with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge ("CDSC"). Class B shares will automati-
cally convert to Class A shares eight years after the original purchase
date. Each class of shares has identical rights and privileges except with
respect to the effect of the respective sales charges, the distribution
and/or service fees borne by each class, expenses allocable exclusively to
each class, voting rights on matters affecting a single class, the ex-
change privilege of each class and the conversion feature of Class B
shares. The following is a summary of significant accounting policies con-
sistently followed by the Fund in the preparation of its financial state-
ments.
Portfolio valuation: Generally, the Fund's investments are valued at
market value or, in the absence of a market value, at fair value as deter-
mined by or under the direction of the Fund's Board of Trustees. A secu-
rity which is traded primarily on a United States or foreign stock ex-
change is valued at the last sale price on that exchange or, if there were
no sales during the day, at the current quoted bid price. Portfolio secu-
rities which are traded primarily on foreign securities exchanges are gen-
erally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the
time that a value was so established is likely to have changed such value,
then the fair value of those securities will be determined by consider-
ation of other factors by or under the direction of the Fund's Board of
Trustees or its delegates. Debt securities (other than government securi-
ties and short-term obligations) are valued by The Boston Company Advi-
sors, Inc. ("Boston Advisors") after consultation with independent pricing
services approved by the Fund's Board of Trustees. Investments in govern-
ment securities (other than short- term securities) are valued at the av-
erage of the quoted bid and asked prices in the over-the-counter market.
Short-term investments that mature in 60 days or less are valued at amor-
tized cost.
Repurchase agreements: The Fund may engage in repurchase agreement trans-
actions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of
the seller to repurchase, and the Fund to resell, the obligation at an
agreed- upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding pe-
riod. The value of the collateral is at least equal at all times to the
total amount of the repurchase obligations, including interest. In the
event of counterparty default, the Fund has the right to use the collat-
eral to offset losses incurred. There is potential loss to the Fund in the
event the Fund is delayed or prevented from exercising its rights to dis-
pose of the collateral securities, including the risk of a possible de-
cline in the value of the underlying securities during the period while
the Fund seeks to assert its rights. The Fund's investment adviser, or ad-
ministrator or sub-administrator, acting under the supervision of the
Board of Trustees, reviews the value of the collateral and the creditwor-
thiness of those banks and dealers with which the Fund enters into repur-
chase agreements to evaluate potential risks.
Foreign currency: The books and records of the Fund are maintained in
United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange
rates prevailing at the end of the period, and purchases and sales of in-
vestment securities, income and expenses are translated on the respective
dates of such transactions. Unrealized gains and losses which result from
changes in foreign currency exchange rates have been included in the unre-
alized appreciation/ (depreciation) of investments and net other assets.
Net unrealized foreign currency gains and losses resulting from changes in
exchange rates include foreign currency gains and losses between trade
date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest
and dividends recorded on the books of the Fund and the amount actually
received. The portion of foreign currency gains and losses related to
fluctuation in exchange rates between the initial purchase trade date and
subsequent sale trade date is included in realized gains and losses on in-
vestment securities sold.
Forward foreign exchange contracts: Forward foreign exchange contracts
are valued at the forward rate and are marked-to-market daily. The change
in market value is recorded by the Fund as an unrealized gain or loss. The
difference between the forward rate and the spot rate at the inception of
the contract is amortized or accreted to income over the life of the for-
ward contract on the straight line method and is included in interest in-
come in the accompanying Statement of Operations. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the cost of the contract as adjusted for accretion or amortization
and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctua-
tions in the underlying prices of the Fund's portfolio securities, but it
does establish a rate of exchange that can be achieved in the future. Al-
though forward foreign exchange contracts limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential
gain that might result should the value of the currency increase. In addi-
tion, the Fund could be exposed to risks if the counterparties to the con-
tracts are unable to meet the terms of their contracts.
Securities transactions and investment income: Securities transactions
are recorded as of the trade date. Interest income is recorded on the ac-
crual basis. Realized gains and losses from securities transactions are
recorded on the identified cost basis. Investment income and realized and
unrealized gains and losses are allocated based upon relative net assets
of each class.
Dividends and distributions to shareholders: Dividends from net invest-
ment income, if any, are determined on a class level, declared daily and
paid on the last business day of the Smith Barney Inc. ("Smith Barney")
statement month. Distributions of any net short-term and long-term capital
gains earned by the Fund, if any, are determined on a Fund level and will
be declared and paid annually after the close of the fiscal year in which
they are earned. Additional distributions of net investment income and
capital gains may be made at the discretion of the Board of Trustees in
order to avoid the application of a 4% nondeductible excise tax on certain
undistributed amounts of ordinary income and capital gains.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatment of income and gains on various investment secu-
rities held by the Fund, timing differences and differing characterization
of distributions made by the Fund as a whole. Permanent differences in-
curred during the year ended April 30, 1994, due to different book and tax
accounting of various securities transactions.
Federal income taxes: It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment com-
panies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income tax provision is required.
Foreign income taxes: Investment income received by the Fund from sources
within foreign countries may be subject to foreign income taxes withheld
at the source.
Reclassifications: During the current period, the Fund adopted Statement
of Position 93-2 "Determination, Disclosure, and Financial Statement Pre-
sentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies." Accordingly, certain reclassifications have been
made to the components of capital in the Statement of Net Assets to con-
form with the accounting and reporting guidelines of this statement. Dis-
tributions in excess of book basis accumulated realized gains or undis-
tributed net investment income that were the result of permanent book and
tax accounting differences have been reclassified to paid-in capital. In
addition, amounts distributed in excess of undistributed net investment
income as determined for financial statement purposes but as distributions
from net investment income or accumulated net realized gains for tax pur-
poses, previously reported as distributions from paid-in capital, have
been reclassified to reflect the tax characterization. Accordingly,
amounts as of April 30, 1993 have been restated to reflect a decrease in
paid-in capital and a decrease in accumulated net realized loss of
$38,936,805, respectively. The Statement of Changes in Net Assets and Fi-
nancial Highlights for prior periods have not been restated to reflect
this change in presentation. Net investment income, net realized gains,
and net assets on a book and tax basis were not affected by this change.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE
AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advi-
sory Agreement") with PanAgora Asset Management Limited ("PanAgora
U.K."). Fifty percent of the outstanding voting stock of PanAgora U.K.
is owned by Nippon Life Insurance Company and fifty percent is owned
by Lehman Brothers Inc., which is a wholly owned subsidiary of Lehman
Brothers Inc. ("Holdings"). Under the Advisory Agreement, the Fund
pays a monthly fee at the annual rate of .55% of the value of its av-
erage daily net assets.
Prior to April 20, 1994, the Fund was party to an administration agreement
dated May 21, 1993 with Boston Advisors, an indirect wholly owned subsid-
iary of Mellon Bank Corporation ("Mellon"). Under the Administration
Agreement, the Fund paid a monthly fee at the annual rate of .20% of the
value of its average daily net assets.
As of the close of business on April 21, 1994, Smith, Barney Advisers,
Inc. ("Smith Barney Advisers"), which is controlled by Holdings, succeeded
Boston Advisors as the Fund's administrator. The new administration agree-
ment contains substantially the same terms and conditions, including the
level of fees, as the predecessor agreement.
As of the close of business on April 21, 1994, the Fund also entered into
a sub-administration agreement ("Sub-Administration Agreement") with Bos-
ton Advisors. Under the Sub-Administration Agreement, Boston Advisors is
paid a portion of the fee paid by the Fund to Smith Barney Advisers at a
rate agreed upon from time to time between Smith Barney Advisers and Bos-
ton Advisors.
From time to time, PanAgora U.K. and Smith Barney Advisers may waive a
portion or all of their respective fees otherwise payable to them. PanAg-
ora U.K. and Boston Advisors, the Fund's prior administrator, voluntarily
waived fees of $263,217 and $95,715, respectively, for the year ended
April 30, 1994.
For the year ended April 30, 1994, Smith Barney received $1,515 from in-
vestors representing commissions (sales charges) on sales of Class A
shares.
A CDSC is generally payable by a shareholder in connection with the
redemption of Class B shares within three years after the date of pur-
chase. In circumstances in which the charge is imposed, the amount of the
charge ranges between 3% and 1% of net asset value depending on the number
of years since the date of purchase. For the year ended April 30, 1994,
Smith Barney received from shareholders $43,403 in CDSCs on the redemption
of Class B shares.
No officer or director, or employee of Smith Barney, PanAgora U.K. or any
of their affiliates, received any compensation from the Fund for serving
as a Trustee or officer of the Fund. The Fund pays each Trustee who is not
an officer, director or employee of Smith Barney, PanAgora U.K. or any of
their affiliates $3,000 per annum plus $500 per meeting attended and reim-
burses such Trustees for travel and out-of-pocket expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary
of Mellon, serves as the Fund's custodian. The Shareholder Services Group,
Inc., a subsidiary of First Data Corporation, serves as the Fund's trans-
fer agent.
3. DISTRIBUTION AGREEMENT
Smith Barney acts as distributor of the Fund's shares pursuant to a ser-
vices and distribution agreement with the Fund, and sells shares of the
Fund through Smith Barney or its affiliates.
Pursuant to Rule 12b-1 under the 1940 Act, as amended, the Fund has
adopted a Services and Distribution Plan (the "Plan"). Effective November
6, 1992, under this Plan, the Fund compensates Smith Barney for servicing
shareholder accounts for Class A and Class B shareholders, and covers ex-
penses incurred in distributing Class B shares. Smith Barney is paid a
service fee with respect to Class A and Class B shares of the Fund at the
annual rate of .25% of the value of the average daily net assets of each
respective class of shares. Smith Barney is also paid a distribution fee
with respect to Class B shares at the annual rate of .50% of the value of
the average daily net assets attributable to Class B shares. For the year
ended April 30, 1994, the Fund incurred $154,214 and $85,908 in service
fees for Class A and Class B shares, respectively. For the year ended
April 30, 1994, the Fund incurred $169,313 in distribution fees for Class
B shares.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any
class of shares are prorated among the classes based upon the relative net
assets of each class of shares. Operating expenses directly attributable
to a class of shares are charged to that class' operations. In addition to
the above servicing and distribution fees, class specific operating ex-
penses for the year ended April 30, 1994 included transfer agent fees of
$105,082 and $59,469 for Class A and Class B shares, respectively.
5. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding short-
term obligations, during the year ended April 30, 1994, were $107,604,441
and $122,674,239, respectively.
At April 30, 1994, aggregate gross unrealized appreciation for all securi-
ties in which there was an excess of value over tax cost was $931,663, and
aggregate unrealized depreciation for all securities in which there was an
excess of tax cost over value was $95,664.
6. SHARES OF BENEFICIAL INTEREST
The Fund may issue an unlimited number of shares of beneficial interest
with a par value of $.001 per share divided into two classes: (Class A and
Class B).
Changes in shares of beneficial interest outstanding were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR
ENDED
4/30/94
4/30/93
CLASS A SHARES: Shares Amount Shares
Amount
<S> <C> <C> <C>
<C>
Sold 74,260 $ 497,562 332,668
$ 2,410,013
Issued as reinvestment of
dividends 307,155 2,040,959 869,029
6,238,953
Redeemed (6,685,024) (44,637,541) (26,645,851)
(189,913,335)
Net decrease (6,303,609) $(42,099,020) (25,444,154)
$(181,264,369)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD
ENDED
4/30/94 4/30/93*
CLASS B SHARES: Shares Amount Shares
Amount
<S> <C> <C> <C>
<C>
Sold 78,574 $ 515,541 25,874
$ 176,898
Issued as reinvestment of
dividends 164,303 1,092,456 117,598
808,124
Issued in exchange for
shares of Short-Term Glo-
bal Income Fund (Note 10) -- -- 11,391,236
78,714,071
Redeemed (4,359,679) (29,027,160) (4,251,073)
(29,226,620)
Net increase/(decrease) (4,116,802) $(27,419,163) 7,283,635 $
50,472,473
<FN>
* The Fund commenced selling Class B shares on November 6, 1992. Any
shares outstanding prior to November 6, 1992 were designated Class A
shares.
</TABLE>
7. ORGANIZATION COSTS
All costs in connection with the organization of the Fund, including the
fees and expenses of registering and qualifying its shares for distribu-
tion under Federal and state securities regulations, are being amortized
on the straight- line method over a period of sixty months from May 22,
1990, the date that the Fund commenced operations. In the event that any
of the initial shares ofthe Fund are redeemed during such amortization pe-
riod, the Fund will be reimbursed for any unamortized costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares outstanding at the time of redemption.
8. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments in-
volves special risks and considerations not typically associated with in-
vesting in U.S. companies and the United States government. These risks
include revaluation of currencies and future adverse political and eco-
nomic developments. Moreover, securities of many foreign companies and
foreign governments and their markets may be less liquid and their prices
more volatile than those of securities of comparable U.S. companies and
the United States government.
9. LINE OF CREDIT
The Fund and several affiliated entities participate in a $50 million line
of credit provided by Continental Bank N.A. under an Amended and Restated
Line of Credit Agreement (the "Agreement") dated April 30, 1992, primarily
for temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of securi-
ties. The Fund may generally borrow up to the lesser of $25 million or 15%
of its net assets. Interest is payable either at the bank's Money Market
Rate or the London Interbank Offered Rate (LIBOR) plus .375% on an annual-
ized basis. The Fund and the other affiliated entities are charged an ag-
gregate commitment fee of $125,000 which is allocated equally among each
of the participants. The Agreement requires, among other provisions, each
participating fund to maintain a ratio of net assets (not including funds
borrowed pursuant to the Agreement) to aggregate amount of indebtedness
pursuant to the Agreement of no less than 5 to 1. During the year ended
April 30, 1994, the Fund did not borrow under the Agreement.
10. REORGANIZATION
On November 20, 1992, the Fund ("Acquiring Fund") acquired the assets and
certain liabilities of the Short-Term Global Income Fund, a series of the
Shearson Lehman Brothers Income Funds ("Acquired Fund"), in exchange for
the shares of the Acquiring Fund, pursuant to a plan of reorganization ap-
proved by the Acquired Fund's shareholders on October 13, 1992. Total
shares issued by the Acquiring Fund and total net assets of the Acquired
Fund and the Acquiring Fund are as follows:
<TABLE>
<CAPTION>
SHARES TOTAL NET
TOTAL NET
ISSUED BY ASSETS OF
ASSETS OF
ACQUIRING ACQUIRED ACQUIRING ACQUIRED
ACQUIRING
FUND FUND FUND FUND
FUND
<S> <C> <C> <C>
<C>
The Fund Short-Term Global Income Fund 11,391,236 $78,714,071
$140,486,876
</TABLE>
The total net assets of the Acquired Fund before acquisition included un-
realized depreciation of $837,536. The total net assets of the Acquiring
Fund immediately after the acquisition were $219,200,947.
On March 29, 1994, the Board of Trustees of the Fund approved a proposed
reorganization pursuant to which all or substantially all of the assets of
the Fund would be acquired by Smith Barney Shearson Global Bond Fund, a
sub-trust of Smith Barney Shearson Income Funds. The proposed reorganiza-
tion is subject to the approval of shareholders of the Fund at a Special
Meeting to be held on July 5, 1994.
11. TAX AND BOOK REPORTING DIFFERENCES
Net investment income (commonly referred to as "book income") is reported
in the accompanying statements under generally accepted accounting princi-
ples. Differences between book and tax accounting may result for a variety
of reasons, including the marking-to-market of certain financial instru-
ments and the deferral of certain losses for tax purposes. The following
is a reconciliation of net investment income to taxable income and long
term capital gains represent a tax basis return of capital.
<TABLE>
<CAPTION>
<S> <C>
Investment income $6,430,476
Expenses
(1,402,098)
Net investment income 5,028,378
Realized loss on forward foreign exchange contracts
(1,590,698)
Foreign currency realized loss
(555,869)
Foreign currency loss deferred 2,721,764
Foreign currency loss on securities
(9,497,355)
Forward contract payables mark to market loss
(1,084,714)
Forward contract receivables mark to market gain 263,984
Prior year mark to market reversal 2,130,593
Net income tax basis
(2,583,917)
Long term capital gains tax basis $193,523
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF
SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND:
We have audited the accompanying statement of assets and liabilities of
Smith Barney Shearson Short-Term World Income Fund, including the schedule
of portfolio investments, as of April 30, 1994, and the related statement
of operations for the year then ended, the statement of changes in net as-
sets for each of the two years in the period then ended and the financial
highlights for each of the three years in the period ended April 30, 1994
and for the period from May 22, 1990 (commencement of operations) to April
30, 1991. These financial statements and financial highlights are the re-
sponsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Smith Barney Shearson Short-Term World Income Fund as of April 30,
1994, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended and
the financial highlights for each of the three years in the period ended
April 30, 1994 and for the period from May 22, 1990 (commencement of oper-
ations) to April 30, 1991, in conformity with generally accepted account-
ing principles.
Coopers & Lybrand
Boston, Massachusetts
June 14, 1994
TAX INFORMATION (UNAUDITED) YEAR ENDED APRIL 30, 1994
The amount of long term capital gain for the fiscal year ended April 30,
1994 was as follows:
The Fund ............................................... $193,523
The above figure may differ from that cited elsewhere in this report due
to differences in the calculations of income and capital gains for Securi-
ties and Exchange Commission (book) purposes and Internal Revenue Service
(tax) purposes.
PARTICIPANTS
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
PanAngora Asset Management Limited
3 Finsbury Avenue
London, England EC2M 2PA
ADMINISTRATOR
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services
Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit
and Trust Company
One Boston Place
Boston, Massachusetts 02108
GLOSSARY OF COMMONLY USED MUTUAL FUND TERMS
CAPITAL GAIN (OR LOSS) This is the increase (or decrease) in the market
value (price) of a security in your portfolio. If a stock or bond appreci-
ates in price, there is a capital gain; if it depreciates, there is a cap-
ital loss. A capital gain or loss is "realized" upon the sale of a secu-
rity; if net capital gains exceed net capital losses, there may be a capi-
tal gain distribution to shareholders.
CONTINGENT DEFERRED SALES CHARGE
(CDSC) One kind of back-end load, a CDSC is imposed if shares are re-
deemed during the first few years of ownership. The CDSC may be expressed
as a percentage of either the original purchase price or the redemption
proceeds. Most CDSCs decline over time, and some will not be charged if
shares are redeemed after a certain period of time.
DIVIDEND This is income generated by securities in a portfolio and dis-
tributed after expenses to shareholders.
FRONT-END SALES CHARGE This is the sales charge applied to an investment
at the time of initial purchase.
NET ASSET VALUE (NAV) Net Asset Value is the total market value of all
securities held by a fund, minus any liabilities, divided by the number of
shares outstanding. It is the value of a single share of a mutual fund on
a given day. The total value of your investment would be the NAV multi-
plied by the number of shares you own.
TOTAL RETURN Total return measures a fund's performance, taking into ac-
count the combination of dividends paid and the gain or loss in the value
of the securities held in the portfolio. It may be expressed on an average
annual basis or cumulative basis (total change over a given period). In
addition, total return may be expressed with or without the effects of
sales charges or the reinvestment of dividends and capital gains.
Whenever a fund reports any type of performance, it must also report the
average annual total return according to the standardized calculation de-
veloped by the SEC. The SEC average annual total return calculation in-
cludes the effects of all fees and sales charges and assumes the reinvest-
ment of all dividends and capital gains.
SHORT-TERM
WORLD
INCOME
FUND
TRUSTEES
Paul R. Ades
Herbert Barg
Allan R. Johnson
Heath B. McLendon
Ken Miller
John F. White
OFFICERS
Heath B. McLendon
Chairman of the Board
Stephen J. Treadway
President
Richard P. Roelofs
Executive Vice President
Alan J. Brown
Vice President and
Investment Officer
Paul F. Duncombe
Vice President and
Investment Officer
Lewis E. Daidone
Treasurer
Christina T. Sydor
Secretary
This report is submitted for the
general information of the shareholders of Smith Barney Shearson Short-
Term World Income Fund. It is not authorized for distribution to prospec-
tive investors unless accompanied or preceded by an effective Prospectus
for the Fund, which contains information concerning the Fund's investment
policies, fees, and expenses as well as other pertinent information.
SMITH BARNEY SHEARSON
MUTUAL FUNDS
Two World Trade Center
New York, New York 10048
Fund 135, 191
FD2218 F4
